Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2020 Supreme(AP) 712

IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
D.V.S.S. Somayajulu, J.
Vitta Venkata Ramanaiah - Appellants
Vs.
Government of Andhra Pradesh and Ors. - Respondent
Writ Petition Nos. 19228, 19536, 19537, 19596, 19617, 19621, 19640, 19649, 19658, 19665, 19667, 19668, 19684, 19712, 19760, 19767, 19799, 19803, 19832, 19903 and 20032 of 2020
Decided On : 08-12-2020

Advocates Appeared:
For the Appellant :T.D. Phani Kumar, Advocate
For the Respondents:N. Ranga Reddy, Advocate

A municipality cannot retrospectively enhance rent without the consent of the tenant, and it cannot claim interest or penalty without a statutory provision, contractual clause, custom or usage of trade, or a statutory notice under Section 3(b) of the Interest Act, 1978.

Headnote:
MUNICIPAL LAW - RENT ENHANCEMENT - RETROSPECTIVE EFFECT - INTEREST - PENALTY - LEGALITY - CONSENT OF TENANT - INTERPRETATION OF RULES AND STATUTES - WRIT PETITION - FACTUAL AND LEGAL ANALYSIS - COURT'S DECISION ON ENHANCEMENT, INTEREST, AND PENALTY DEMANDS.
Fact of the Case:

Traders, tenants of a complex owned by the Prodduturu Municipality, challenged the retrospective enhancement of rent, interest, and penalty demands for the periods 2016-19 and 2019-22. The petitioners argued that the municipality lacked the authority to impose such retrospective increases and that the demands were illegal.
Finding of the Court:

The court found that the petitioners had agreed to a 33 1/3% rent enhancement for the period 2016-19 and had paid the enhanced rent, which was accepted by the municipality. However, the court held that the municipality could not unilaterally impose a retrospective rent increase for the period 2019-22 without the tenants' consent. The court also found that the municipality was not entitled to claim interest or penalty as demanded in the notices, as there was no statutory provision or contractual clause authorizing such charges.
Issues: 1. Whether the municipality had the authority to retrospectively enhance the rent for the period 2019-22 without the tenants' consent. 2. Whether the municipality was entitled to claim interest and penalty as demanded in the notices.
Ratio Decidendi: 1. The court interpreted Rule 12(4) of the A.P. Municipalities (Regulation of Receipts and Expenditure) Rules-1968, which provides for the renewal of leases, and held that the municipality could only enhance the rent with the consent of the lessee. The court found that there was no such consent for the period 2019-22. 2. The court held that the municipality could not claim interest or penalty without a statutory provision, contractual clause, custom or usage of trade, or a statutory notice under Section 3(b) of the Interest Act, 1978. The court found that none of these conditions were met in the present case.
Final Decision: The court partially allowed the writ petition, setting aside the demand for rent enhancement for the period 2019-22 and the demands for interest and penalty. The court directed the municipality to calculate the rents afresh from the date of the order and make a demand for the enhanced rent as per the relevant G.O. The petitioners were directed to convey their willingness or refusal to continue in the premises within two weeks of receiving the order.

ORDER :

D.V.S.S. Somayajulu, J.

1. This batch of Writ Petitions are filed by traders, who are tenants of a complex in Produtturu, which is owned by the respondent-Prodduturu Municipality. They were inducted into the premises as tenants pursuant to a public notice in the year 2013. They have been continuing in possession since then as tenants of the respondent-municipality.

2. The dispute in these cases centers around the "hike/increase" in the rents for the period 2016-19 and 2019-22. There are two hikes in the rent which were intimated in July, 2020 and October, 2020 only to the petitioners. Challenging the same these Writ Petitions were filed.

3. Since common questions of fact and law are involved, learned counsels requested that all the matters should be taken up for hearing and accordingly with the consent of the learned counsels final hearing was completed.

PETITIONERS SUBMISSIONS:

4. Sri T.D. Phani Kumar, learned counsel appearing for the petitioners in all these cases submits that the petitioners are lawful tenants. He questions the manner and method in which the rent has been enhanced in these cases. According to the learned counsel for the petitioners the 1st demand of rent, after the initial rental period expired in 2016, is for the period 2016-19 (01.04.2016 to 31.03.2019). He points out this communication of enhancement was received on 04.07.2020 by which enhanced rent, interest and penalty were determined and also demanded. A fifteen-day period was given for payment of the alleged arrears. Similarly, on 07.10.2020 another communication was sent by which the rent for the period 01.04.2019 to 31.10.2020 was fixed in the said notice. The enhanced rent, interest on the delayed payment and penalty was also demanded by this Notice of 07.10.2020.

5. Sri T.D. Phani Kumar, learned counsel for the petitioners submits that this retrospective enhancement of rent is not legally tenable. He points out that if such an enhancement is to be made; prior notice is to be given to the petitioners. Apart from that he submits that the power to enhance the rent can be traceable to Sub-rule 1 of Rule 12 of the A.P. Municipalities (Regulation of Receipts and Expenditure) Rules-1968, which is reproduced in the writ affidavit. According to the learned counsel for the petitioners this renewal must be done before the period expires and that fixing of the rent from 2016-22 by a notice in July, 2020 is absolutely incorrect and is contrary to the rule. He also submits that interest or penalty can only be levied if there is a breach in the payment and only if there is a statutory power to levy the same. He points out that there is absolutely no statutory power for the Municipality to fall back upon in order to make these demands. He also points out that the petitioners had addressed a letter agreeing to pay the rent from 2016-19 and the petitioners have paid the rents under protest without any default even upto the date of the filing of the Writ Petition. Learned counsel for the petitioners relies upon the judgment in Rane Engine Valve Limited and Ors. v. The Collector and Ors. : 2015-2-LW 63, of a learned single Judge of the Madras High Court, wherein the enhancement of rent with retrospective effect was set aside. He therefore, prays that the entire demand should be set aside.

RESPONDENTS SUBMISSIONS:

6. In reply to this Sri Ranga Reddy, learned standing counsel for the 2nd respondent municipality strenuously argues that the petitioners are defaulters. He states that the rule relied upon by the petitioners themselves gives the power to the municipality to enhance the rent at 33 1/3 %. He submits that if the petitioners are aggrieved by the same they can vacate the premises. It is his contention that the municipality derives substantial income from its immovable properties and the petitioners are making unlawful gain by squatting on the property by paying old rent only. He also submits that the petitioners have given undertaking letter in January, 2016 ag

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2020 Supreme(AP) 712

A municipality cannot retrospectively enhance rent without the consent of the tenant, and it cannot claim interest or penalty without a statutory provision, contractual clause, custom or usage of trade, or a statutory notice under Section 3(b) of the Interest Act, 1978.

Cases Referred (3)