Lease period in respect of certain shop rooms – Municipality


The Commissioner and Director of Municipal Administration, Hyderabad has submitted proposal for enhancement of the lease period of certain shops in Proddutur Municipality for (6) years with an enhancement of 33 1/3%for a period of (3) years.

The matte has been examined and the C&DMA and all the Municipal Commissioners in the State are informed that, the Rule 12(1) of Andhra Pradesh Municipalities (Regulation of Receipts & Expenditure Rules 1968 reads as follows;

shop rooms Lease located in Municipalities of Andhra Pradesh

“Provided further that in the case of the properties referred to in clause(e), the Municipal Council may renew the lease for a period of three years at a time and with the prior sanction of the Government for a period exceeding three years and not exceeding twenty five years without conducting public auction, if the present lessee agrees to renew the lease in his favour at an amount which will be at 33 1/3% above the earlier rent or the prevailing market value of shops situated in the vicinity, whichever is higher.”

Further, it is also informed that, in Government Memo 1st read above, the C&DMA and all the Municipal Commissioners in the State were informed that the Hon’ble High Court of A.P. in its Judgment Dt.25.08.2009, while disposing the W.P.No.6354/2009 has observed that “it is a trite principle under a constitutional order that all public properties are public assets administered by State actors or instrumentalities in a fiduciary capacity and enjoined to be administered in conformity with fiduciary principles. All discretion conferred on public authorities is a public trust and consecrated for the purpose of its employment in public interest. Certain executive choices may involve balancing of a plurality of public interest choices that where as in the present case the property of a public authority – the Nalgonda Municipality is intended to be leased out, the sole and exclusive public policy choice is for ensuring the augmentation of the revenues of the Municipality. All other considerations must be excluded”. It is also observed that “the Municipality may not propose or recommend nor the Government accord sanction for renewal of a lease of a Municipal property, beyond a period of 25 years without conducting public auction”. Hence, the Commissioner and Director of Municipal Administration and all the Commissioners in the State were requested to apprise the above orders of the Hon’ble High Court to their respective Chairpersons/ Councils / Municipal Commissioners and go for public auction of all Municipal properties after completion of lease period of 25 years.

In spite of above rule provisions and instructions, the proposals vide reference 2nd cited are submitted for extension of lease period in respect of shops located at Sivalayam Centre and K.K.Street of Proddutur Municipality duly stating that the lease period of 25 years was already completed by 2004 and lease holders are still in occupation and again requesting to enhance the lease period for a period of (6) years with an enhancement of 33 1/3% for every (3) years.

The Commissioner and Director of Municipal Administration, Hyderabad is therefore directed to put the lease of all shops for public auction which have completed 25 years of lease period and furnish compliance report to Government within one month.

Further, the Commissioner and Director of Municipal Administration / all the Municipal Commissioners in the State are once again instructed not to propose / furnish proposals for renewal of lease after completion of 25 years and go for public auction, as per the provisions of Act and orders of High Court.
MUNICIPAL ADMINISTRATION AND URBAN DEVELOPMENT (J1) DEPARTMENT

G.O.Ms.No. 120 Dated:31-03-2011.Read the following:-
O R D E R :

1. Govt.Memo.No.18823/J1/2009-1, M.A. & U.D.(J1) Department, Dt:17.11.2009
2. From the C&DMA, Hyderabad, Lr.Roc.No.14583/09/N1, Dt.28.10.2009 and 18.01.2011.

THE HON’BLE MR JUSTICE GODA RAGHURAM AND THE HON’BLE MR JUSTICE RAMESH RANGANATHAN

WRIT PETITION No.6354 OF 2009 ORDER: (Per Hon’ble Mr. Justice Goda Raghuram) Petitioner is a Councillor of Nalgonda Municipality.

The writ petition is filed aggrieved that the respondent Nos.3 and 4 have failed to take possession of premises bearing Municipal building No.3-1-1 (Jubilee Hall) at which New Prem Cinema Talkies (PVN Cinema) Nalgonda town managed by the 6th respondent is operated. The failure of the official respondents in ensuring that this premises is leased only by public auction and by the conduct of the official respondents in failing to evict the unauthorized continuance in occupation by the 6th respondent premises, even though the term of its lease is expired, is also the grievance.

On 19.12.1977, one P. Satyanarayana, the Managing Partner of the 6th respondent represented to the Government that the 6th respondent partnership had obtained lease of the schedule premises and is continuing in its occupation for more than 30 years; that the building therein is in a dilapidated condition; that the Collector, Nalgonda was insisting on modernising the cinema hall; that the management desires to remodel the theatre if the building is leased out for 25 years on the existing rent of Rs.200/- per month. The representation also stated that the 6th respondent is agreeable to handover the building (to be constructed at the cost of Rs.2,00,000/-), after the end of the lease period of 25 years, if it is not proposed to extend the lease further. This representation was been recommended by the 4th respondent, by the Director of Municipal Administration and by the 3rd respondent. Eventually, the first respondent in G.O.Ms. No.1044, Housing Municipal Administration & Urban Development Department dated 18.12.1978 passed orders in purported exercise of the powers under Rule 12(1) of the A.P. Municipalities (Regulation of Receipts and Expenditure) Rules, 1968 (hereinafter referred to as ‘1968 Rules’) read with Rule 5 of A.P. Municipalities (Acquisition and Transfer of Immovable properties) Rules, 1967 (hereinafter referred to as ‘1967 Rules’), granting sanction to enable the Municipal Council, Nalgonda Municipality to grant lease to the 6th respondent for a period of twenty five years and permitting the Municipality to grant the 6th respondent permission for remodelling the building. It is the agreed position that the lease entered into between the Municipality and the 6th respondent pursuant to the 1st respondent order in G.O.Ms. No.1044 dated 18.12.1978 enured upto 31.12.2005.

The Nalgonda Municipality on 31.07.2006 extended the lease for a further period of three years in favour of the 6th respondent. The lease amount payable by the 6th respondent pursuant to the lease entered into in 1979 consequent on the orders in G.O.Ms. No.1044 was Rs.267/-. After renewal on 31.07.2006, the lease amount was increased by 331/3% to Rs. 356. The extent of the schedule property is 3750 square yards.

On 13.08.2007, the 4th respondent addressed the
1st respondent forwarding the resolution of the Municipal Council, Nalgonda dated 31.07.2007 proposing further renewal of the lease of the schedule property in favour of the 6th respondent for twenty five years i.e., beyond 31.12.2008, when the earlier three year renewal granted by the Municipal Council expired. The 4th respondent while referring to certain objections recorded by some of the Municipal Councillors (to the proposal for further extension), however failed to record his own remarks as to the propriety or public interest concerns involved in the Municipal Council resolution for renewing the lease for a further period of twenty five years (beyond the period of twenty eight years already granted to the petitioner). At this stage is the writ petition filed, impeaching what is alleged to be the incessant patronage by the Municipality and the Government to the 6th respondent, in subversion of public interest. The inaction of the official respondents in evicting the 6th respondent from the schedule premises even though he is now in unauthorised occupation and the abdication of fiduciary obligations by the State actors to act in furtherance of public interest, in the matter of lease of the schedule property is also challenged.

It requires to be noticed that the order of the
1st respondent in G.O.Ms. No.1044 was issued in purported exercise of the powers under Rule 12(1) of 1968 Rules read with Rule 5 of the 1967 Rules. The renewal of three years granted by the Municipality to the 6th respondent for a period 01.01.2006 to 31.12.2008 under proceedings dated 08.01.2007 pursuant to a Municipal Council resolution No. 211 dated 31.07.2006 also appears to be in purported exercise of the powers under the second proviso to Rule 12(1).

In the context of the competing interpretations placed on the Rule, one by the learned Counsel for the petitioner and the other in the conjoint submissions by the learned Counsel for respondent Nos.1, 4, 5 and 6, the provisions of the relevant Rules to the extent relevant and material for the purpose of this writ petition are referred to.

Rule 5 of 1967 Rules deals with transfer of lease of immovable property belonging to a Municipal Council.
Sub-rule (1) of Rule 5 as amended by G.O.Ms. No.383 (M.A.) dated 19.07.1988 reads thus:

A Municipal Council may lease out any immovable property belonging to it for a period of three years at any one time and if it is for a period exceeding three years but not exceeding twenty five years at a time if may lease out, after obtaining the prior sanction of the Government.

Rule 8(2)(3) enjoins that in cases of leases inter alia under Rule 5, notices should be published giving full particulars of the property to be leased, the consideration for the rent reserved under the lease and the period of the lease, in the Municipal office and other public places; that in every case where such transfer or lease is to be by public auction a notice of the proposed transfer in Form – A, appended to the Rules with full particulars of the property to be leased shall be published including in the District Gazette and in one or two prominent local newspapers circulated within the jurisdiction of the Municipal Council if the consideration for the transfer exceeds Rs.1,000/- or if the rent reserved under the lease exceeds Rs.500/- per annum and also by beat of drum in suitable places and by local sensitisation.

On a true and fair construction of the provisions of the 1967 Rules read in the context of the fact that leases of Municipal properties are presumptively and in this case undisputably for the exclusive purpose of augmenting the revenues of the municipality, the lease ought textually and conceptually be by a public auction so as to ensure that the maximum revenue is generated for the benefit of the Municipality.

Rule 12 of the 1968 Rules deals with a raft of transactions pertaining to Municipal assets. Sub-rule (e) of Rule 12 enumerates inter alia leases of buildings and of lands belonging to the Municipal Council the rents of which are expected to exceed Rs.2,000/- per annum. The first proviso to Rule 12 enjoins that in case of leases of properties referred to in clause (e), if a public auction is held and the bid is found to be lower than that obtained in the previous year and if the previous year’s lessee desires the continuance of the lease at the old rate, the concerned authority may notwithstanding the public auction grant the lease to him. This proviso is a pointer to the statutory value choice i.e., a concern for ensuring maximization of revenue for the Municipality and that such public interest is not subverted.

The second proviso to Rule 12(1) on which competing interpretations are presented reads thus:

Provided further that in case of the properties referred to in clause (e), the Municipal Council may renew the lease for a period of three years at a time and with the prior sanction of the government for a period exceeding three years and not exceeding twenty five years without conducting public auction, if the present lessee agrees to renew the lease in his favour at an amount which will be at 33 1/3% above the earlier rent or the prevailing market value of such shops situated in the vicinity, whichever is higher.

On behalf of the petitioner it is contended that the second proviso to Rule 12(1) enjoins an outer limit of twenty five years for renewal of lease including after obtaining sanction of the Government, if it is otherwise than by public auction. On behalf of respondent Nos.1, 4, 5 and 7 it is strenuously contended that the proviso enables the Municipal Council to grant renewals of a lease in instalments of three years at a time for eternity and with the prior sanction of the Government in instalments of a maximum of twenty five years at a time, again in eternity. In the considered view of this Court the interpretation presented on behalf of the respondents does not commend acceptance by this Court.
It is a trite principle under a constitutional order that all public properties are public assets administered by State actors or instrumentalities in a fiduciary capacity and enjoyned to be administered in conformity with fiduciary principles. All discretion conferred on public authorities is a public trust and consecrated for the purpose of its employment in public interest. Certain executive choices may involve balancing of a plurality of public interest choices but whereas in the present case the property of a public authority-the Nalgonda Municipality is intended to be leased out, the sole and exclusive public policy choice is for ensuring the augmentation of the revenues of the Municipality.
All other considerations must be excluded. If the second proviso to Rule 12(1) be impregnated with this public policy and law concerns as it must, the construction is compelling that while a Municipal Council may renew a lease for a period of three years at a time, the prior sanction of the Government is required if the renewal is intended for a period in excess of three years, so however that no renewal may be granted for a period exceeding twenty five years, without conducting a public auction. No renewal of lease is therefore permitted even with the sanction of the Government for a period beyond twenty five years without conducting public auction.
The phraseology of the second proviso is not ambiguous and in any event this statutory rule must be read consistent with public interest concerns. The construction suggested on behalf of the respondents would expose the second proviso to the risk of conferral of arbitrary discretion with no discernible public policy underpinnings. A construction which invalidates a statutory Rule must be avoided even if its language is ambiguous. This is a settled principle of statutory construction.

On the analysis above, we hold that the Municipality may not propose or recommend nor the first respondent accord sanction for renewal of a lease of a Municipal property, beyond a period of twenty five years without conducting public auction.

Further, the mere availability of a discretionary power would not legitimize the specific exercise of discretion unless the exercise is demonstrated to be rational and in public interest. The order of the 1st respondent in G.O.Ms. No.1044 dated 18.12.1978 does not spell out any reasons why the transparent process of public auction was eschewed while renewing the lease for twenty five years in favour of the 6th respondent. This observation of ours becomes pertinent in the context of the fact that as on that date (18.12.1978), the 6th respondent had not invested any amount for the reconstruction or renovation of the building which was in a dilapidated state, a building belonging to and on the site of the said Municipality. The availability of a statutory discretion cannot be a façade to channelise public power to confer patronage, patronage exercised by a State actor.

The 5th respondent is the husband of the Managing partner of the 6th respondent. This is an undisputed position. The 5th respondent is the Chairman of the Municipal Council, Nalgonda Municipality. While in the writ petition, paragraph 6 alleges this fact and that extraneous concerns animadverted the recommendation of the Municipal Council for renewal of the lease for a further period of twenty five years in favour of the 6th respondent, we do not propose to go into this aspect in the present case.

In the considered view of this Court constitutional and public law concerns as well as the provisions of the 1967 and 1968 Rules do not enable further renewal of the lease in favour of the 6th respondent nor enable the official respondent Nos.1 to 4 to avoid the transparent public process of granting lease of the schedule property only by public auction.

The Municipality has ample powers under Section 194 of the A.P. Municipalities Act, 1965 to evict persons in unauthorised occupation of Municipal property. Since the present occupation of the schedule property by the 6th respondent is without lawful entitlement and so since 31.12.2008, the 4th respondent is required to exercise in full measure the plenitude of powers inhering in the
4th respondent under the provisions of the A.P. Municipalities Act to ensure the eviction of the 6th respondent from the schedule premises. It is further required that the official respondents jointly and severally ensure that the lease of the schedule property is granted pursuant to public auction, in the manner enjoined by the Act read with the provisions of the 1967 and the 1968 Rules.

On behalf of the 6th respondent, the locus of the petitioner to maintain this writ petition is challenged on additional grounds as well; (a) that the petitioner has targetted the 6th respondent while failing to exhibit similar public interest concerns in respect of about 15 sites adjoining the schedule property which are also being renewed every three years and indefinitely by the Municipality, at a nominal enhancement of rent by 331/3%; and (b) that the petitioner is a Municipal Councillor. This writ is filed in public interest. We are satisfied that the proposal of the Municipal Council recommending further renewal of the lease for twenty five years in favour of the 6th respondent, the husband of the 5th respondent, the Chairman of the Municipal Council is contrary to the 1967 and the 1968 Rules and is otherwise subversive of the interests of the Municipality and public interest as well. We are not impressed with this contention, which is accordingly rejected.

The 4th respondent has prepared a statement particularizing the prevailing market/rental values of certain shops surrounding the schedule premises which discloses the monthly rental value of about 25 shops which range in areas from 11.18 square metres to 61.50 square metres. The reference of the 6th respondent to incessantly granting renewals to adjacent shops is perhaps to these shops.
Be that as it may.

In any event when gross illegality, irrational exercise of public power and maladministration as in this case apart from fettering away of public interest as is apparent in this case is brought to the notice of this Court, such complaint ought not to be thrown out on the Jejune ground that the petitioner ought to have challenged other transgressions and subversions of public interest by the Municipality. The 6th respondent is at liberty to sensitize the concerned executive agencies or is at liberty to file a litigation in public interest as regards any other transactions or subversions of public interest. The contention therefore does not merit acceptance.

For the aforesaid reasons, the writ petition is allowed in terms of the observations and directions recorded and the
4th respondent is directed to execute the provisions of the Act and 1967 and 1968 Rules. There shall however be no order as to costs.

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