IMPORTANT POINT
The Lok Ayukta lacks jurisdiction to issue binding orders in civil disputes, reaffirming that its role is limited to making recommendations.

JUDGMENT :

Nitin Jamdar, C. J.

The Lok Ayukta on a complaint filed by Respondent No.1 held that deduction of income tax and surcharge by the Appellants – the Branch Manager and Managing Director of the Kerala State Financial Enterprises Ltd., was illegal and directed the Appellants to pay the amount deducted from the monthly rent payable to Respondent No. 1 with interest. This order is confirmed by the learned Single Judge by judgment dated 14 October 2015 in W.P.(C) No.24486 of 2007. The question that is raised in this appeal filed by the Appellants is as to whether the Lok Ayukta could have issued such a mandatory direction upon adjudication.

2. Respondent No.1 E.M. Nazeer, had constructed a shopping complex in his property in Survey No. 107 of Vithura Village by name, N.N. Arcade. The Appellant, Kerala State Financial Enterprises Ltd., had obtained a portion of the building on the first floor for functioning of its branch with carpet area of 2350 square feets at the rate of Rs.3 per sq. ft. on 5 May 2003. Nazeer had executed a power of attorney in favour of his father, as Nazeer was leaving the country to seek employment. The Financial Enterprises treating Nazeer as a Non-Resident Indian (NRI) liable to pay income tax on the rent of Rs.2,64,649/-due from 5 May 2003 to 5 November 2005 for 31 months with interest, paid an amount of Rs.1,46,149/- and deducted the tax at source.

3. Nazeer sent a notice to the Financial Enterprises on 15 December 2005 seeking the balance rent. It was the case of Nazeer that when he approached the Financial Enterprises, its officer demanded illegal gratification for release of the amount.

4. Nazeer approached the Kerala Lok Ayukta, Thiruvananthapuram by Complaint No. 566/2006, contending that the Financial Enterprises has deducted the tax at source illegally and against the terms of the rental agreement between the parties on the premise that Nazeer is an NRI. Nazeer alleged in the complaint that the officers of the Financial Enterprises had demanded illegal gratification for the release of the balance amount.

5. The Financial Enterprises filed a counter statement before the Lok Ayukta and contended that the claim of Nazeer that he was not liable to pay income tax is not correct. The tax was deducted at source correctly and it has also been remitted in the Government treasury. The allegations of illegal gratification were denied.

6. The Lok Ayukta found no merit in the allegations of corruption and demand of illegal gratification. However, the Lok Ayukta proceeded to adjudicate the rival contentions and declared that the deduction of income tax at source by the Financial Enterprises was illegal and unsustainable and that Nazeer can claim refund of the amount and accordingly, directed the Financial Enterprises to pay the amount deducted from the monthly rent payable to Nazeer towards income tax and surcharge on income tax with effect from 5 May 2003 to 5 May 2006 with interest thereon at the market rate prevalent during the relevant period within two months from the date of receipt of the order and to file an action taken report.

7. The Financial Enterprises filed W.P.(C) No.24486 of 2007 in this Court challenging the order passed by the Lok Ayukta in Complaint No. 566/2006 dated 28 June 2007.

8. Before the learned Single Judge the Financial Enterprises advanced twofold contentions. Firstly, the Lok Ayukta did not have jurisdiction to issue a positive mandate and that, the Lok Ayukta could not have entered into an adjudication of disputed questions and determined liability arising from agreement of payment of rent. Secondly, even on merits, the order passed by the Lok Ayukta is entirely incorrect.

9. The learned Single Judge noted the contention of the Financial Enterprises that the direction issued by the Lok Ayukta is beyond the scope of the power vested in it under the statute, however, did not record any specific finding about the same in the impugned judgment. The learned Single Judge also held that in