2023 Supreme(Mad) 546

HIGH COURT OF JUDICATURE AT MADRAS
S.M. SUBRAMANIAM, J.
Madras Race Club Rep by its Secretary, Dr.S.M. Karthikeyan Chennai - Appellant
Versus
The Government of Tamil Nadu, Rep. by its Secretary, Chennai & Others - Respondents
W.P. Nos. 29644 to 29646 of 2017 & W.M.P. Nos. 31934 to 31942 of 2017
Decided On : 29-03-2023

A pre-independence lease agreement between the Government and a private party for 99 years without any clause for enhancement of rent is not in the public interest and is against public policy.

Headnote:

The Court held that the pre-independence lease agreement between the Government of Madras and the petitioner for 99 years was not in the public interest and was against public policy. The Court directed the petitioner to pay the arrears of revised rent within one month and in the event of failure, the respondents were directed to evict the petitioners and take possession of the subject property. The Court also directed the respondents to issue demand notices for the accrued arrears of revised rent from 2004 to the date of the order and to initiate appropriate recovery proceedings in case of non-payment.

Fact of the Case:

The petitioner, Madras Race Club, entered into a registered lease deed with the Government of Madras in 1946 for a period of 99 years with a yearly rent of Rs.614.13/-. The lease was for the purpose of fostering recreational activities, games, and sports, especially horse racing. The petitioner had made an advance payment towards the entire lease amount for 99 years. No right was given to either party to revisit the rent determined in the Lease Deed dated 01.04.1946. In 1970, the Government issued a G.O.Ms.No.3947, Revenue Department, stating that the lease rent in Madras City be fixed at 7% with reference to the market value of the land, which is determined on well-defined principles instead of with reference to the instructions in Appendix-XXII to B.S.O, Volume-I. In the case of rich persons, the lease rent should be collected at double the market value of the land. The Tahsildar, Mambalam-Guindy Taluk, relying on the Government order, issued notice to the petitioner to pay a sum of Rs.730,86,81,297/- (Rupees Seven Hundred and Thirty Crores Eighty Six Lakhs Eighty One Thousand Two Hundred and Ninety Seven only) as arrears of lease rent retrospectively for the period from 18.12.1970 to 30.06.2004. The petitioner challenged the demand notice by filing a writ petition in the High Court of Madras. The High Court passed an order on 18.10.2004, setting aside the demand notice with an observation that “if the respondents want to pass orders by demanding a higher rate of rent from the petitioner, it is open to them to do that exercise in accordance with law”. The demand notice was set aside by the High Court on the ground that no show cause notice was issued to the writ petitioner, which is in violation of the principles of natural justice. The State preferred a Writ Appeal in the Division Bench of the High Court, which passed an order on 04.03.2011, remanding the matter back to the Tahsildar to pass orders afresh after hearing the respondent within a period of sixteen weeks from the date of receipt of a copy of the order. The Tahsildar, Mambalam-Guindy Taluk, relying on the above Government order, issued notice dated 27.02.2013 to the petitioner to furnish their views with due justification and records within a period of 21 days from the date of receipt of the notice. The petitioner submitted their views on 21.03.2013. Further notices were issued on account of the trifurcation of Guindy, Mambalam, and Velacherry Taluks. The respective Tahsildars having jurisdiction, issued separate notices to the petitioner Madras Race Club on 13.07.2015 and 15.07.2015. The petitioner submitted a detailed explanation. Not accepting the explanation, a provisional demand notice to pay lease rent arrears was issued by the Tahsildar on 31.08.2017, asking the petitioner Madras Race Club to pay a sum of Rs.730,86,81,297/- towards arrears of lease rent. The petitioner had submitted an explanation on 08.09.2017 and thereafter, the Collector of Chennai passed an order on 09.11.2017, ordering to freeze the Bank Accounts of the Madras Race Club. The Tahsildar addressed a letter to the Chief Manager, Yes Bank, Kilpauk Branch, Chennai – 600 010 for freezing the Bank Accounts of the Madras Race Club. Thereafter, the District Collector, Chennai passed an order on 14.11.2017 to freeze another Bank Account. Thus, the petitioners have challenged the orders dated 06.06.2016 and 08.06.2016 issued by the Tahsildar, revising the lease rent based on the Government Order, which was passed in G.O.Ms.No.3947, Revenue Department dated 18.12.1970.

Finding of the Court:

The Court held that the pre-independence lease agreement between the Government of Madras and the petitioner for 99 years was not in the public interest and was against public policy. The Court directed the petitioner to pay the arrears of revised rent within one month and in the event of failure, the respondents were directed to evict the petitioners and take possession of the subject property. The Court also directed the respondents to issue demand notices for the accrued arrears of revised rent from 2004 to the date of the order and to initiate appropriate recovery proceedings in case of non-payment.

Issues: 1. Whether the pre-independence lease agreement between the Government of Madras and the petitioner for 99 years was in the public interest and in accordance with public policy? 2. Whether the Government was entitled to revise the lease rent in 1970 and demand arrears of revised rent from the petitioner? 3. Whether the petitioner was entitled to challenge the demand notices issued by the Government?

Ratio Decidendi: 1. The Court held that the pre-independence lease agreement between the Government of Madras and the petitioner for 99 years was not in the public interest and was against public policy. The Court observed that the lease agreement was executed without incorporating any clause for enhancement of rent for 99 years, which was against the public policy and would affect the larger interest of the public. The Court further observed that the lease agreement infringed the Constitutional right of “We, the People of India.” 2. The Court held that the Government was entitled to revise the lease rent in 1970 and demand arrears of revised rent from the petitioner. The Court observed that the Government had taken a policy decision to revise the rent of all the Government properties leased out in Madras city and such enhancement of 14% for rich people was prescribed, which was in the interest of public and was the policy of the Government of Tamil Nadu. The Court further observed that the enhancement of rent made by the Government of Tamil Nadu could not be said to be improper or illegal, but was to protect the public interest, which was to be construed as inherent. 3. The Court held that the petitioner was entitled to challenge the demand notices issued by the Government. The Court observed that the petitioner had a right to challenge the validity of the demand notices and the Government’s decision to revise the lease rent.

Final Decision: The Court held that the pre-independence lease agreement between the Government of Madras and the petitioner for 99 years was not in the public interest and was against public policy. The Court directed the petitioner to pay the arrears of revised rent within one month and in the event of failure, the respondents were directed to evict the petitioners and take possession of the subject property. The Court also directed the respondents to issue demand notices for the accrued arrears of revised rent from 2004 to the date of the order and to initiate appropriate recovery proceedings in case of non-payment.