Sri Nagurur Sivarama Krishna vs. Government Of Andhra Pradesh

Held

The Court held that for the period 2016-19, the petitioners' conduct, including the letter dated January 19, 2016, agreeing to a 33 1/3% enhancement and the subsequent payment and acceptance of this enhanced rent, estops them from claiming the proposal was not accepted or that payments were made under protest. The Court found consensus by virtue of the parties' conduct. For the period 2019-22, the Court held that there is no statutory power vested in the municipality to enhance rent retrospectively, especially without a formal agreement or a clause permitting such enhancement. The Court also found no statutory or other rule justifying retrospective fixation of rent. Regarding interest, the Court held that it can only be charged if there is a statutory provision, contractual condition, custom, or a statutory notice under the Interest Act, 1978. In this case, no such basis was established, and the delay was attributed to the respondents. Therefore, the demand for interest was deemed untenable. Similarly, for penalty, the Court found no breach or fault on the part of the petitioners to justify the levy, nor any rule or provision of law supporting it, and thus set aside the demand for penalty. The Court directed that the municipality is entitled to enhance rent at 33 1/3% for 2016-19, payable with applicable GST. The demand for 2019-22 was set aside. If petitioners consent to lease extension, rents are to be recalculated as per G.O. Ms.No.56. The demands for interest and penalty were set aside.

Facts

A batch of writ petitions were filed by tenants of a complex owned by the Prodduturu Municipality, challenging rent increases for the periods 2016-19 and 2019-22. The petitioners, lawful tenants since 2013, received notices in July and October 2020 demanding enhanced rent, interest, and penalty for these periods. The first demand, dated July 4, 2020, pertained to the period April 1, 2016, to March 31, 2019, and was to be paid within fifteen days. The second demand, dated October 7, 2020, covered the period April 1, 2019, to October 31, 2020. The petitioners argued that the retrospective enhancement and demands for interest and penalty were legally untenable due to lack of prior notice and statutory power.

Key Issues

1. Whether the retrospective enhancement of rent for the period 2016-19 is legally tenable, considering the petitioners' contention that the proposal was not accepted within a reasonable time and payments were made under protest, and the respondent's argument that an undertaking letter in January 2016 agreed to the enhancement. 2. Whether the retrospective enhancement of rent for the period 2019-22 is legally tenable, given the absence of statutory power for retrospective enhancement and a formal agreement. 3. Whether the demand for interest on delayed payment is legally tenable, considering the petitioners' argument of no statutory power and the respondent's claim of default. 4. Whether the demand for penalty is legally tenable, given the petitioners' argument of no statutory power and the respondent's claim of breach. The petitioners argued that retrospective rent enhancement is not legally tenable without prior notice and that the power to enhance rent, as per Rule 12(1) of the A.P. Municipalities (Regulation of Receipts and Expenditure) Rules-1968, must be exercised before the expiry of the rental period. They also contended that interest and penalty can only be levied if there is statutory power, which they claim is absent. The respondent municipality argued that the petitioners are defaulters and that Rule 12(1) and 12(4) grant the municipality the power to enhance rent by 33 1/3%. They also asserted that the petitioners provided an undertaking letter agreeing to the enhancement for 2016-19 and that their possession is illegal without a formal lease, questioning their locus standi. The respondent also argued that the petitioners' conduct estops them from questioning the demands and that interest and penalty are due to gross delay.