Municipality; Vimal alias Thomas Vs. State [Kerala High Court, 22-06-2016]

Kerala Municipality Act, 1994 –¬†Section 4(5) & 215(2) –¬†Enhancement of licence fees at the time of renewal¬†– the power to fix licence fees and charges, is on the Municipality and a licence can be renewed in such terms and conditions as may be fixed at the time of renewal.


IN THE HIGH COURT OF KERALA AT ERNAKULAM

K. VINOD CHANDRAN, J.

W.P.(C) Nos.11101-K, 11151-T, 11153-T, 11164-U, 11176-V, 11177-V, 11210-A, 11211-B, 11265-G, 11290-I, 11291-J, 11295-J, 11333-N, 111356-T, 11381-W, 11415-B, 11419-B, 11954-T, 12014-B, 12614-B, 12022-C, 12630-C, 11355 of 2016-T

Dated this the 22nd day of June, 2016

PETITIONER(S)

VIMAL ALIAS THOMAS

BY ADVS. SRI.BABU JOSEPH KURUVATHAZHA SRI.P.T.ABHILASH

RESPONDENT(S)

1. STATE OF KERALA, REPRESENTED BY ITS SECRETARY, DEPARTMENT OF LOCAL SELF GOVERNMENT, THIRUVANANTHAPURAM 695 001.

2. KOOTHATTUKULAM MUNICIPALITY REPRESENTED BY ITS SECRETARY, KOTHATTUKULAM, ERNAKULAM 686 662.

R1 BY SR. GOVERNMENT PLEADER SRI. MANOJ.P.KUNJACHAN R2 BY ADV. SRI.JAMES ABRAHAM, S.C

J U D G M E N T

The petitioners were aggrieved with the notices issued similar to Ext.P2 as seen from W.P.(C) No.11151 of 2016. The petitioners contend that they were paying nominal licence fees, which stood enhanced to almost four times as is seen from Ext.P2; on an unilateral revision made on account of the Panchayath being constituted as a Municipality.

2. The contention of the petitioners was that the petitioners had been continuing for long in the shopping complex, when the Municipality was earlier a Panchayath. The petitioners were also granted continued lease in the successive years on nominal annual enhanced licence fees of 5%. The petitioners have now been threatened with an arbitrary enhancement as is indicated at Ext.P2 and other similar orders, which allegedly is under

# Section 4(5) of the Kerala Municipality Act, 1994

(for brevity ‘the Act of 1994). The petitioners contend that no such power can be derived by the Municipality from Section 4(5) of the Act of 1994.

3. The learned Counsel for the petitioners would point out that Section 4(5) of the Act of 1994 contemplates a situation when the Village Panchayath area is constituted as a Municipality. From that point the newly constituted Municipality would be entitled to levy all tax fees or other charges levied in that area as leviable under the provisions of the Act of 1994 and rules, regulations and bye-laws made thereunder. The specific power for making such levies is available under Article 243X of the Constitution of India; which has been statutorily permitted. The licence fees payable by the petitioners would not be a levy as contemplated under Article 243X and section 4(5) of the Act of 1994, is the compelling argument. Further, the learned Counsel would also refer to Section 215 of the Act of 1994 to concede that if a proceeding under Section 215 of the Act of 1994 should be initiated, then the petitioners’ lessees would be entitled to make a negotiation with the Municipality and the vice of arbitrariness which visits an unilateral decision would be avoided.

4. The learned Counsel for the respondent Municipality takes me through the counter affidavit filed in W.P.(C) No.11954 of 2016 to contend that the licence fees for identically situated rooms were decided by a Committee of the Municipality as is indicated at Ext.R2(b). Ext.R2(b) is the list prepared by the Committee showing the licence fees applicable to each of the petitioners for the previous and present year ie. 2015-16 and 2016-17. The contention of the Municipality based on Ext.R2(b) is that the intention of the Municipality was to ensure that the levy of licence fees be made uniform based on the extent occupied by the licensees and also considering the location. This measure was adopted also with the additional intention of more income to the Municipality. The recommendation so made had the approval of the Council too.

5. The petitioners herein were persons, who were in possession of certain rooms for long, who had been inducted with very low licence fees, which was enhanced @ 5% in every successive years. However, there were other licensees who were inducted in a public auction, many recently; who were paying more licence fees. Hence the intention of the Municipality was to ensure uniformity of the licence fees and also to augment income for the Municipality by way of enhancement and in instances of enhancement being not agreed to, to lease out by public auction.

6. Section 4(5) of the Act of 1994 is extracted hereunder:- S.4(5) Where any village Panchayat area is constituted as, or included in a [Municipality], all taxes, fees or other charges levied in that area under the encatments or regulations then in force shall, from the date of constitution or inclusion, as the case may be, cease to have effect and all such taxes, fees other charges shall be levied in that area in accordance with the provisions of this Act and the rules, regulations and bye-laws made thereunder.

7. This Court is inclined to accept the contention of the petitioners that no enhancement of licence fees can be made under Section 4(5) of the Act of 1994, since it speaks of tax, fees or other charges levied in an area in accordance with the provisions of this Act and the rules, regulations and bye-laws made thereunder. The Municipality does not rely on any statute, rules, regulations or bye-laws to support the enhancement. It is a decision taken at the Council of the Municipality considering the fact that there are other rooms in the very same complex, having identical lie and nature, which have been auctioned out for higher licence fees. A decision taken by the Municipality to enhance such licence fees cannot be said to be a decision taken under Section 4(5) of the Act of 1994 since as noticed above, the levy is not one contemplated thereunder.

8. Licence fees also is one arising from the specific contract between the parties. In that perspective this Court is not impressed with the reliance placed by the learned Counsel for the Municipality, on the decision of the Division Bench of this Court in

# O/E/N Connectors Ltd. v. Chottanikara Grama Panchayath [2007 (4) KLT 342].

The said decision was with respect to the licence fee levied under the Dangerous and Offensive Trades and Factories Rules, 1996. The decision is an authority for the proposition of the licence fee levied under the said Rules having the characteristics of a regulatory fee for which there is no requirement of quid pro quo. The said declaration is not applicable herein since the issue raised is the licence granted to occupy the shopping complex of the Municipality as per the specific terms of an agreement entered into between the Municipality and the licensee; the licence fee being regulated by auction or tender; which definitely partakes the character of quid pro quo.

9. Be that as it may; the reliance of the Municipality on S 4(5) of the Act of 1994, for enhancing the licence fees and this Courts finding as to the provision not sanctioning such enhancement; does not detract from the fact that the Municipality has power to make such enhancement. This Court does not subscribe to the view that on resort to Section 215 of the Act of 1994; a particular procedure for negotiation with the licensees is contemplated. The Municipality at the time of renewal could very well seek for renewal at an enhanced rate; which is the prerogative of the Municipality. Such enhancement as has been pleaded by the Municipality cannot be with sole reference to the fees paid by the licensees in the previous year. It has to be considered with reference to the potential of the rooms to fetch higher rent, as is discernible inter-alia from the licence paid by occupiers of comparable rooms.

10. It is also clear from section 215(2) of the Act of 1994, that the power to fix licence fees and charges, is on the Municipality and a licence can be renewed in such terms and conditions as may be fixed at the time of renewal. In that context, notice issued and impugned in the above writ petitions ought to be considered as a condition imposed by the Municipality for enhancement of licence fees at the time of renewal ie., as on 01.04.2016. If any of the licensees are not ready to concede to the terms now placed before them by the Municipality, suffice it to notice that the Municipality cannot arbitrarily give such rooms to any other person; but the fresh demise would have to be as per the procedure prescribed under Section 215(2)(c) of the Act of 1994; ie: by public auction or tender; wherein the existing licensee could also participate. This would ensure a level playing field where the fees for which the individual premises are demised, would be decided by the persons participating in the auction and the Municipality would also get the benefit of competitive bids.

11. Hence deeming the notices impugned in the above writ petition as an offer made by the Municipality under Section 215 of the Act of 1994, the petitioners could either accept it or reject it. On rejection, necessarily, the petitioners would have to vacate the rooms and the Municipality would be entitled to auction or tender the premises by a public notification. The petitioners would be granted two weeks time to either accept the offer made by the Municipality or reject it and in the event of no offers being made, the Municipality can proceed to evict those licensees and auction the rooms by way of public notification.

12. Though there was a stay granted from eviction at the initial stage, later the order was modified insofar as mandating payment of enhanced licence fees from 01.04.2016. The petitioners shall also be liable to pay the enhanced licence fees from 01.04.2016 till they are evicted, if that is the consequence ensuing after the time stipulated by this Court. Needless to say that the petitioners would be entitled to participate in the public auction or tender. The writ petitions are dismissed with the above reservation. No Costs.

Comments