Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2007 Supreme(Mad) 3065

Before the Madurai Bench of Madras High Court
V. RAMASUBRAMANIAN
M.K.M. Geeyavudeen & Others
Versus
Commissioner, Pudukottai Municipality, Pudukkottai
W.P. (MD) Nos. 4420 to 4423 of 2007 and M.P. Nos. 1 of 2007(All W.Ps), W.P. (MD) Nos. 4470 to 4482 of 2007 and M.P. Nos. 1 of 2007 (All W.Ps) and M.P. Nos. 3 of 2007 in W.P.4478 and 4479 of 2007, W.P. (MD) Nos. 4572 to 4577 of 2007 and M.P. Nos. 1 of 2007 (All W.Ps) and M.P. Nos. 2 of 2007 in W.P.4574 and 4576 of 2007, W.P. (MD) Nos. 4585 to 4592 of 2007 and M.P. Nos. 1 of 2007(All W.Ps), W.P. (MD) Nos. 4593 to 4599 of 2007 and M.P. Nos. 1 of 2007(All W.Ps) and M.P. No. 2 of 2007
Decided On : 20-09-2007

Advocates Appeared:
For the Petitioners:R.P. Ramachandran, D. Rajakittu, A.L. Gandhimathi, Advocates.
For the Respondent:P. Srinivas, Advocate.

The main legal principle established is that fair rent for municipal buildings should be determined based on the principles laid down in the Tamil Nadu Buildings (Lease and Rent Control) Act to avoid arbitrariness and ensure uniformity in rent charges.

Headnote:
Rent Enhancement - Municipal Shops - [Tamil Nadu District Municipalities Act, 1920, Section 303(1); Tamil Nadu Buildings (Lease and Rent Control) Act] - The court discussed the arbitrary rent enhancement for municipal shops and referred to various legal provisions and judicial decisions to establish that fair rent for municipal buildings should be determined based on the principles laid down in the Tamil Nadu Buildings (Lease and Rent Control) Act. The court set aside the impugned notices and directed the municipality to determine fair rent for each shop separately by adopting the principles of the Rent Control Act.
Fact of the Case:

The lessees of municipal shops challenged the arbitrary enhancement of monthly rent by the Pudukkottai Municipality for the purpose of lease renewal.
Finding of the Court:

The court found that the rent enhancement was exorbitant and arbitrary, lacking a scientific method of fixation of fair rent for the shops.
Issues: The main issue was the arbitrary enhancement of monthly rent for municipal shops by the Pudukkottai Municipality.
Ratio Decidendi: The court held that fair rent for municipal buildings should be determined based on the principles laid down in the Tamil Nadu Buildings (Lease and Rent Control) Act, to avoid arbitrariness and ensure uniformity in rent charges.
Final Decision: The court allowed all the writ petitions, set aside the impugned notices, and directed the municipality to determine fair rent for each shop separately by adopting the principles of the Rent Control Act. The municipality was also directed to call for objections from the lessees and pass final orders fixing the fair rent.

Judgment :

1. All these writ petitions have been filed by the lessees of various shops owned by the Pudukkottai Municipality, challenging individual communications issued to the petitioners enhancing the monthly rent for the shops, for the purpose of grant of renewal of the leases for a period of 3 years from 1.4.2007.

2. Heard Mr. R.P. Ramachandran, learned counsel for the petitioners in all these writ petitions and Mr. P. Srinivas, learned Standing counsel for the respondent.

3. The enhancement of monthly rent for the shops in question is challenged by the petitioners on the ground that the enhancement is exorbitant and that the fixation has been made in an arbitrary manner in violation of the Government instructions prescribing an increase of 15% over and above the existing rent. The enhancement is sought to be defended by the Municipality on the ground that the Municipal Council passed a resolution on 29.3.2007, resolving to enhance the rent for all the shops whose leases became due for renewal and that the monthly rent was determined on the basis of the market rate of rent prevailing in the area.

4. A perusal of the impugned notices shows two things namely-

(a) that the existing rent has been enhanced manifold; and

(b) that the enhancement has not been made in an uniform pattern for all the shops.

5. The above two facts can be easily appreciated from the following Tabular Form.

6. The rationale behind such steep increase made all of a sudden without any uniformity, is not clear. All that the Municipality says is that the revision was made by the Municipal Council based upon the market rate of rent prevailing in the locality in respect of privately owned buildings.

7. But such a fixation does not appear to be a scientific method of fixation of fair rent for the shops in question. The term "Market Rate" is an abstract entity to which one can infuse life only if it is determined on the basis of several factors such as the value of land in the locality, cost of construction, amenities provided in the building, the accessibility by Public Transport Systems, etc. It appears that the Council fixed the fair rent in respect of the shops in question on the basis of oral enquires made in the locality, which in my considered view could never have formed the basis for fixing the fair rent for the Municipal Shops.

8. Way back in the year 1970 the Supreme Court had an occasion to consider the question relating to the method of assessment of annual value of lands and buildings, in Guntur Municipal Council Vs. Guntur Town Rate Payers Association (AIR 1971 SC 353 : (1970) 2 SCC 803). Though the said case related to the method of assessment of annual value of buildings for the purpose of determining the property tax payable, the said decision gives a clue as to how the Municipality is obliged to determine the fair rent for the buildings for the purpose of deciding the annual value of the buildings. The Supreme Court held in the said judgment as follows:

"Section 82(2) of the Act makes provision for the fixation of annual value of lands and buildings. The test essentially is what rent the premises can lawfully fetch if let out to hypothetical tenant. The municipality is thus not free to assess any arbitrary annual value and has to look to and is bound by the fair or standard rent which would be payable for a particular premises under the Rent Control Act in force during the year of assessment.

There is no distinction between buildings the fair rent of which has actually been fixed by the Rent Controller and those in respect of which no such rent has been fixed. When the controller has not fixed the fair rent, the municipal authorities will have to arrive at their own figure of fair rent in accordance with the principles laid down in the Rent Control Act."

9. The aforesaid decision in Guntur Municipal Council Vs. Guntur Tour Rate Payers Assn. was followed in Dewan Daulat Rai Kapoor Vs. New Delhi Municipal Committee (AIR 1980 SC 541 : (19

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