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S. Dharmalingam v. State Of Tamil Nadu And Another

Madras High Court

Nov 1, 2002

Judgment

Subsequent
References

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Structured Summary of the Opinion

Factual and Procedural Background

The petitioners are licensees of shops in Ghani Market, which is owned by the second respondent (the Municipality). By resolution No. 608 dated 14-2-2002, the Municipality increased licence fees for various categories of shops: Rs. 12/- per sq. ft. per month for 8 shops facing Brough Road; Rs. 5/- per sq. ft. per month for 74 shops facing inside the old building; Rs. 12/- per sq. ft. per month for 114 shops in open space; and Rs. 12/- per sq. ft. per month for 13 shops in corridors. The resolution also provided for eviction of occupants who refuse or fail to pay the enhanced licence fee.

The petitioners challenged the enhancement as exorbitant, unreasonable, arbitrary and illegal, and filed writ petitions seeking certiorari and mandamus to quash the resolution insofar as it enhanced rent for their shops and to direct the Municipality to collect rent at the old rate.

Earlier litigation: The petitioners (through an association) had earlier filed O.S. No. 340 of 1986 seeking mandatory relief to obtain allotment of shops as per G.O.Ms No. 615, Rural Development and Local Administration Department, dated 21-4-1984. The Municipality defended that the G.O. applied only to those who had vacated shops when a new building was constructed. The trial court and the District Judge held for the petitioners; the Municipality appealed in Second Appeal No. 1171 of 1989 to this Court. This Court admitted the appeal on the substantial question whether the courts below correctly understood G.O.Ms No. 615, and ultimately allowed the second appeal by judgment dated 18-7-2002, following the decision in Tamil Nadu Municipal Shop Merchants Association v. State of Tamil Nadu (AIR 2000 Mad 393), holding inter alia that public leases granted by auction cannot be equated with tenancy under the Rent Control Act and municipal authorities must consider the larger public interest.

Despite that final decision dated 18-7-2002, the petitioners (by their association) filed O.S. No. 375 of 2002 for declaration that the rent enhancement was unlawful and sought injunctions; interim applications I.A. Nos. 815 and 834 of 2002 were filed for interim relief. The Municipality opposed, relying on powers under Section 260(2) of the Tamil Nadu District Municipalities Act and the need to augment public revenue. The learned Principal District Munsif dismissed both interim applications by a common order dated 19-9-2002; no appeal was taken against that order. The association subsequently withdrew O.S. No. 375 and the petitioners then filed the present writ petitions.

Legal Issues Presented

Whether the impugned resolution dated 14-2-2002 enhancing the licence fee is arbitrary, exorbitant and therefore illegal.
Whether the petitioners were entitled to notice before the passing of the impugned resolution and, relatedly, whether the absence of notice vitiates the resolution on principles of natural justice.
Whether the impugned resolution and conduct violate Articles 19(1)(g) and 21 of the Constitution of India (as contended by the petitioners).

Arguments of the Parties

Petitioners' Arguments

The petitioners contend they were not served with any notice prior to the passing of the impugned resolution dated 14-2-2002.
The enhancement of licence fee by the Municipality is exorbitant and unreasonable; the impugned resolution is arbitrary, illegal and violative of Articles 19(1)(g) and 21 of the Constitution of India.

Respondent (Municipality)'s Arguments

In earlier proceedings the Municipality contended that G.O.Ms No. 615 dated 21-4-1984 applied only to those who had vacated the old market for construction of a new market, and not to persons who remained in possession.
In the interim proceedings the Municipality contended it was empowered under Section 260(2) of the Tamil Nadu District Municipalities Act to allot shops and fix licence fees, and that while exercising such powers it must consider the larger interest of society and augment public revenue.
The resolution itself provided for eviction of those who refuse or fail to pay the enhanced licence fee.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Tamil Nadu Municipal Shop Merchants Association v. State of Tamil Nadu, AIR 2000 Mad 393	The principle that municipal authorities exercising powers of allotment/renewal must consider the larger public interest; bidders at public auction cannot obtain a perpetual renewal right which would fetter municipal property; public lease granted by auction is not equivalent to tenancy under the Tamil Nadu Buildings (Lease and Rent Control) Act.	The Court relied on this decision in allowing Second Appeal No. 1171 of 1989 (judgment dated 18-7-2002) and applied its reasoning to hold that the petitioners could not claim an unqualified right of renewal; the earlier decision is treated as binding on the petitioners in the present proceedings.
Second Appeal No. 1171 of 1989 (this Court) — judgment dated 18-7-2002	Interpreted G.O.Ms No. 615 (21-4-1984) and held that the petitioners (whose claim was based on a public lease through auction) could not, as a matter of law, claim renewal rights akin to tenancy and that municipal authorities must weigh public interest.	The Court treated this judgment as binding on the petitioners; it formed a primary basis for rejecting the petitioners' continued challenges to the licence fee enhancement and for refusing to interfere with the Municipality's exercise of statutory power to revise licence fees.

Court's Reasoning and Analysis

The Court's analysis proceeded in the following steps, as reflected in the opinion:

The Court accepted that the Municipality has statutory power under Section 260(2) (and relatedly Sections 260 and 262) of the Tamil Nadu District Municipalities Act to fix licence fees for public/private markets and to make resolutions in that regard; this power was not disputed by the petitioners' counsel.
The Court observed the legal position that a lease/licence granted for a fixed term expires by efflux of time; upon expiry, any right of the licensee to continue in possession or to demand notice from the licensor comes to an end. Consequently, where the license period has expired, the authorities are not obliged to give notice before enhancing licence fees or before evicting persons who decline to pay the enhanced fees.
The Court held that the petitioners' contention that absence of notice vitiates the impugned resolution on principles of natural justice is untenable, because the statutory power to levy licence fees is conferred by statute and the licence/lease had expired.
The Court emphasized that it would not lightly interfere with the Municipality's exercise of statutory powers to fix licence fees, particularly when such decisions were taken to augment public revenue to discharge public duties (maintenance of roads, lights, water, etc.).
Reliance was placed on the Court's prior judgment dated 18-7-2002 in Second Appeal No. 1171 of 1989 (which itself followed the AIR 2000 Mad 393 decision). That earlier decision is binding and precludes the petitioners from relitigating entitlement to continued possession or renewal rights that would undermine public control over municipal properties.
The Court took into account particular factors supporting the fee revision: licence fees had not been revised for decades; the Municipality had an inevitable necessity to augment public revenue to meet civic expenses; and the Municipality is empowered to take appropriate decisions in light of those factors under Section 260(2).
On the basis of the statutory power, the binding earlier decision, and the revenue/public-interest considerations, the Court concluded that the impugned resolution dated 14-2-2002 was within the Municipality's jurisdiction and could not be struck down as arbitrary merely because the petitioners had not challenged the increase by demanding that the shops be brought to public auction.
Finally, exercising equitable discretion, the Court directed that the petitioners be given two weeks from receipt of the copy of the order to pay all arrears and to be permitted to continue in their shops on payment of the enhanced licence fee; failing payment, the Municipality is permitted to evict the petitioners without further notice.

Holding and Implications

Holding: The writ petitions are dismissed. The impugned resolution dated 14-2-2002 increasing the licence fee was held to be within the jurisdiction of the Municipality and not arbitrary in the circumstances set out by the Court.

Direct consequences and directions imposed by the Court:

The petitioners are granted two weeks from the date of receipt of a copy of the order to pay the entire arrears of rent and to pay the enhanced licence fee; upon such payment they are permitted to continue in their respective shops.
If the petitioners fail to pay the arrears and enhanced licence fee within the two-week period, the Municipality is permitted to evict them without any further notice.
No costs were awarded. Connected writ petitions/miscellaneous petitions were also dismissed.

Broader implications:

The opinion relies on and applies prior authority (including this Court's judgment in S.A. No. 1171 of 1989 and the AIR 2000 Mad 393 decision) and treats those decisions as binding on the petitioners. The Court did not purport to lay down any new legal precedent beyond applying existing principles on municipal discretion, the nature of public leases granted by auction, and the statutory power to fix licence fees.

Show all summary ...

1. The writ petitioners are licensees with respect to the shops located at Ghani Market, which are owned by the second respondent-Municipality.

2. The second respondent-Municipality by resolution bearing No. 608, dated 14-2-2002 increased the licence fee as follows:

(a) Rs. 12/- per sq. ft. (per month) for each of the 8 shops in old building facing Brough Road.

(b) Rs. 5/- per sq. ft. (per month) for each of the 74 shops facing inside the old building.

(d) Rs. 12/- per sq. ft. (per month) for each of 13 shops located in the corridors.

3. The resolution of the second respondent-Municipality dated 14-2-2002 also provides to evict the petitioners from the respective shops if they refuse or fail to pay the enhanced licence fee/lease amount. The petitioners contending that the enhancement of licence fee as per resolution dated 14-2-2002 of the second respondent-Municipality is exorbitant, unreasonable, arbitrary and therefore illegal, have preferred the above writ petitions for a writ of Certiorarified Mandamus to call for the records of the second respondent-Municipality relating to the resolution bearing No. 608, dated 14-2-2002, insofar as it relates to enhancement of rent for the petitioners' shops, quash the same and to direct the second respondent-Municipality to collect lease amount from the petitioner at the old rate.

4. In this regard, it is relevant to mention that the petitioners, placing reliance on G.O.Ms No. 615, Rural Development and Local Administration Department, dated 21-4-1984, laid a suit O.S No. 340 of 1986 before the learned Subordinate Judge, Erode for a decree to direct the second respondent-Municipality by way of a mandatory injunction to allot the shops in the Ghani Market as per G.O.Ms No. 615, Rural Development and Local Administration Department, dated 21-4-1984, and to restrain the committee members of the second respondent-Municipality by permanent injunction from acting in pursuance of the resolution bearing No. 472 dated 23-7-1986 with respect to the allotment of shops and the proposal to bring shops for public auction.

5. The second respondent-Municipality resisted the said suit, viz., O.S No. 340 of 1986, contending that G.O.Ms No. 615, Rural Development and Local Administration Department, dated 21-4-1984, is applicable only in the case of those who have vacated the old market for the purpose of constructing the new market building, but not in the case of the petitioners who admittedly continue to be in possession of the old market.

6. The learned Subordinate Judge, Erode finding that there is no such qualification prescribed in G.O.Ms No. 615, Rural Development and Local Administration Department, dated 21-4-1984, that only those who had vacated the shops are entitled for the benefit of the said G.O.Ms No. 615, Rural Development and Local Administration Department, dated 21-4-1984 as contended by the second respondent-Municipality, rejected the plea of the second respondent-Municipality and held that the petitioners herein are entitled for allotment of shops as per G.O.Ms No. 615, Rural Development and Local Administration Department, dated 21-4-1984, and the same was confirmed by the learned District Judge, Periyar, by judgment and decree dated 23-9-1988 in A.S No. 138 of 1987, against which the second respondent-Municipality preferred Second Appeal No. 1171 of 1989 before this Court.

7. This Court admitted Second Appeal No. 1171 of 1989 on the following substantial question of law:

“Whether the Courts below have correctly understood G.O.Ms No. 615 Rural Development and Local Administration dated 21-4-1984 marked as Ex. A1?”

and ultimately, allowed the second appeal by judgment dated 18-7-2002 following the decision of this Court in Tamil Nadu Municipal Shop Merchants Association v. State of Tamil Nadu, reported in AIR 2000 Mad 393, and held as follows:

“(Para 8) ….. While exercising such powers, the Municipal Authorities have to take the largest interest of the society into consideration. If certain persons, merely because they bid at the auction and became successful bidders and thereby became entitled to enjoy the right for certain period, are allowed to contend that they must be granted renewal, then there will be no control by the public bodies. If persons let into possession would like to continue as long as possible, then their heirs will be let into possession and it will likewise become a heritable right. Therefore, they cannot be permitted to continue in possession of the shops owned by the Municipality under the guise of right of renewal, and the properties of local bodies cannot be allowed to be fettered by perpetuity.

8. The case of the plaintiffs/respondents herein is also based on a public lease granted, pursuant to a public auction. Therefore, the same cannot be equated to that of a right of tenancy under the Tamil Nadu Buildings (Lease and Rent Control) Act.”

9. In spite of the above final decision of this Court dated 18-7-2002 in S.A No. 1171 of 1989, the petitioners, through their association, laid another suit O.S No. 375 of 2002 before the learned Principal District Munsif, Erode for declaration, declaring the enhancement of monthly rent is too high and unlawful and for consequential injunction to restrain the second respondent-Municipality from evicting the petitioners without due process of law.

10. Pending the above suit, viz., O.S No. 375 of 2002, the said association, on behalf of the petitioners also filed I.A No. 815 of 2002 for an interim injunction to restrain the second respondent-Municipality from evicting the members of the association, namely the petitioners herein from the Ghani Market without due process of law, and also filed I.A No. 834 of 2002 to maintain status-quo with respect to the possession of the respective shops by the petitioners pending disposal of I.A No. 815 of 2002.

11. The second respondent-Municipality contested both the interim applications contending that they are empowered to allot shops, by granting licence, by exercising the powers conferred under Section 260(2) of the Tamil Nadu District Municipalities Act (hereinafter referred to as the ‘Act’), and while exercising such powers, the second respondent-Municipality has to take the largest interest of the society into consideration to augment the public revenue.

12. Accepting the case of the second respondent-Municipality and finding that the enhancement of licence fee as per the resolution bearing No. 608, dated 14-2-2002 is justified, the learned Principal District Munsif, by a common order dated 19-9-2002 dismissed both the interim applications. The said association, to which all the petitioners herein are admittedly members, had not preferred any appeal against the said common order dated 19-9-2002 in I.A Nos. 815 and 834 of 2002, and therefore, the said order dated 19-9-2002 had become final. However, after withdrawing the said suit O.S No. 375 of 2002 laid by the association, formed by the petitioners, the petitioners have chosen to file the above writ petitions.

13. Mrs. Hema Sampath, learned Counsel for the petitioners, contends that:

(i) the petitioners have not been served with any notice before passing of the impugned resolution dated 14-2-2002.

(ii) the enhancement of the licence fee by the second respondent-Municipality is exorbitant and unreasonable, and therefore, the impugned resolution dated 14-2-2002 is arbitrary, illegal and violative of Articles 19(1)(g) and 21 of the Constitution of India.

14. I am unable to appreciate either of the above contentions of the learned Counsel for the petitioners.

15. The power of the second respondent-Municipality to pass appropriate resolution in the matter of fixing licence fee under Section 260(2) of the Act is not disputed by Mrs. Hema Sampath, learned Counsel for the petitioners. It is well settled in law that the lease/licence expires by efflux of time and immediately after the expiry, the right of the petitioners either to continue in possession of the shops or to seek any notice from the second respondent-Municipality comes to an end, and in which case, they are not entitled for any further notice either for eviction or for passing appropriate resolution for enhancing lease amount/licence fee, as the case may be. In any event, since the power conferred on the second respondent-Municipality to levy fees for granting licence in respect of the public/private market provided under Sections 260 and 262 of the Act respectively is not disputed, the question of giving notice before passing such resolution enhancing the licensing fee does not arise, as such power is conferred on the second respondent-Municipality by statute itself. If that be so, the contention of the learned Counsel for the petitioners that the petitioners have not been given notice before passing of the impugned resolution dated 14-2-2002 and therefore, the same vitiates the principles of natural justice is not tenable in law.

16. Once the power of the second respondent-Municipality to pass appropriate resolution is not disputed, it may not be proper for this Court to interfere with such powers and decision thereon as the same had been taken to augment revenue to the second respondent-Municipality, to meet the expenses to discharge its public duty.

17. That apart, the decision of this Court dated 18-7-2002 made in S.A No. 1171 of 1989 is binding on the petitioners, who are resisting the enhancement of licence fee for decades together by protracting litigations one after another. The conduct of the petitioners in this regard cannot be appreciated. If the petitioners could not pay the enhanced lease amount/licence fee, certainly, the second respondent-Municipality is entitled to evict them without any further notice.

18. In any event, it may not be out of context to take into consideration the following relevant factors which are the basis for the enhancement of licence fee/lease amount:

(i) The licence fee/lease amount fixed for the respective shops of the petitioners has not been revised or increased for decades together.

(ii) On the other hand, necessity of the second respondent-Municipality to augment public revenue has become inevitable to meet the expenses required to provide and maintain civic facilities to the general public, viz., roads, street lights, water, etc.

(iii) the second respondent-Municipality is empowered to take appropriate decision in the light of the above factors by exercising the powers conferred under Section 260(2) of the Act.

19. In my considered opinion, the impugned resolution dated 14-2-2002, therefore is well within the jurisdiction of the second respondent-Municipality to enhance licence fee/lease amount, taking into consideration the above factors that weighed the second respondent-Municipality and consequently, the petitioners cannot complain that the increase of licence fee/lease amount is arbitrary and exorbitant, without testing the same by bringing the shops for public auction, which may fetch even more lease amount/licence fee.

20. At this juncture, the learned Counsel for the petitioners seeks two weeks time for the petitioners to pay the entire arrears and to seek permission to continue in their respective shops by paying enhanced licence fee. If so, while dismissing the above writ petitions, I am obliged to direct the second respondent-Municipality to give two weeks time to the petitioners, from the date of receipt of copy of this order, to pay the entire arrears of rent and to permit them to continue in their respective shops on payment of the enhanced licence fee, failing which the respondents are permitted to evict the petitioners without any further notice.

21. These writ petitions are dismissed with above direction. No costs. Consequently, connected W.P.M.Ps are also dismissed.

22. Petitions dismissed.