ORDER : S. Vimala, J. “All power is a trust - that we are accountable for its exercise - that, from the people, and for the people, all springs, and all must exist." Discretion becomes a duty when the beneficiary brings home the circumstances for its benign exercise....” - Municipal Council, Ratlam v. Vardichand, (1980) 4 SCC 162 . 1.1. When the duty to obey the law is a fundamental duty and when the statutory authority has the opportunity to discharge the duty in accordance with law, whether it is open to the statutory authority to act otherwise than in accordance with law. In other words, whether the observations made in the Municipal Council, Ratlam's case would apply to the respondent herein. 1.2. When there are dual protections available to a tenant, i.e., (i) protection from eviction and (ii) protection from exploitation of excess rent, is it not enjoined upon the statutory authority, i.e., the respondent, from following the statute in dealing with the tenants? These are the issues raised in these cases. 2. Question of law and question of facts raised is common in all these cases and hence, the common order. 3. These writ petitions have been filed, seeking to quash the impugned order dated 27.10.2016, by which, a) enhancement of rent has been ordered with effect from 01.11.2016 b) the petitioners have been directed to pay 12 months rent as advance and for consequential direction to the respondent to fix the fair rent as per Tamil Nadu Buildings (Lease and Rent Control) Act. 4. Brief facts: i. The Kovilpatti Municipal Daily Market was established in the year 1970. At the time of inception, there was neither infrastructure nor amenities. There was no facility for cleaning. ii. 347 shops were functioning in daily market. In order to provide better facilities for the shopkeepers and public, some of the shopkeepers joined together and formed an Association, by name, Kovilpatti Nagaratchi Dhinasari Sandhai Viyabarigal Sangam, which was registered under Societies Registration Act, 1860. The Society was periodically submitting returns to the Registrar. The Society provided security, sanitation and water facilities to the public. iii. Depending upon the extent of occupation, each of the occupant of the shop was paying rent, ranging from Rs. 12/-. The Municipal Council proposed to enhance the rent by 400% to 450%. The Society was periodically submitting returns to the Registrar. The Society provided security, sanitation and water facilities to the public. iii. Depending upon the extent of occupation, each of the occupant of the shop was paying rent, ranging from Rs. 12/-. The Municipal Council proposed to enhance the rent by 400% to 450%. The resolution to that effect was brought into the council, but, later on, it was passed with modification of enhancement by 300% to 350%. The Society sent objections, but, there was no response. iv. The respondent passed an order dated 20.03.2013, enhancing the daily rent from Rs. 12/- to Rs. 40/-; from Rs. 15/- to Rs. 45/-; from Rs. 20/- to Rs. 60/-; Rs. 25/- to Rs. 75/-; Rs. 30/- to Rs. 90/- and from Rs. 35/- to Rs. 120/-. When it was challenged, this Court granted an order of injunction. Thereafter, there was a peace committee meeting. The respondent agreed for enhancement of rent at 60%. But, resolution was passed enhancing the rent by 240% to 290%. v. The society filed a writ petition in W.P. No. 8413 of 2013, seeking to quash the resolution, wherein, stay was granted on 16.05.2013. Therefore, the rent is collected as per the earlier rate and the said writ petition is pending. vi. Pending the writ petition, this impugned order dated 27.10.2016 was passed, imposing enhancement of daily rent by 750% to 1400%, on all shopkeepers, with effect from 01.11.2016. Later, the writ petition has been withdrawn on 23.11.2016. vii. Government of Tamilnadu, in G.O.Ms. No. 92, dated 03.07.2007 (Municipal Administration and Water Supply Department), provided for renewal of lease of properties once in three years with enhancement of rate at 15%. Contrary to the G.O., the respondent has enhanced the rent. viii. Tamilnadu District Municipalities Act, 1920, and the rules framed thereon are silent about the method of determination of the annual rental value. The Hon'ble Supreme Court of India and other Hon'ble High Courts in a catena of decisions have held Municipalities have to take recourse to the method of fixation of fair rent under the Tamil Nadu Buildings (Lease and Rent Control) Act, for determining the annual rental value. But, the respondent fixed the value without adopting such a scientific and logical basis for fixation of fair rent. ix. But, the respondent fixed the value without adopting such a scientific and logical basis for fixation of fair rent. ix. The impugned order is challenged on the ground that the rent has been enhanced without following the principles of natural justice, without following the procedure prescribed under the provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 and without following the principles laid down in the decision reported in 2008 2 L.W. 219, (pertaining to Pudukottai Municipality.) 5. The writ petitioners are occupants of the shops belonging to the respondent Municipality. The rent of Rs. 15/- per shop was fixed about 40 years back. Over a period of time, infrastructure has been provided with permanent structures and the market is no longer a open market. The exercise of fixing the rent for the individual shop were undertaken and a Committee was formed by the respondent to find out the rate of rent and to give a report. The Committee collected various details, like, value of property and also the rate of rent as fixed by the Public Works Department and the private shops in the locality. The rate obtained on the value of the property from the Sub-Registrar was found to be the highest and accordingly, the rates of rent were fixed based on the type of buildings, namely, RCC or AC Sheet Roof or Tiled Roof. Accordingly, per square feet of the shops was fixed and based on the actual extent of shops, the calculation of rent per month was worked out. 5.1. Thereafter, the shop holders were called for a meeting and they were informed about the same. The representatives agreed for the proposal. 5.2. The lease period for all the municipal shops leased out throughout the State lapses with the completion of 9 years from the date of issue of G.O.Ms. No.92 dated 03.07.2007 and thus, the leases if any, that can be inferred in favour of the petitioners have all lapsed as on 02.07.2016 itself. Thereafter, the exercises on fixing the rents have been undertaken, as per the terms of the said Government Order and only if the Lessees consent to the same, they can be permitted to continue their leases. Otherwise, the only option for the respondent is to bring the shops to public auction. 5.3. Thereafter, the exercises on fixing the rents have been undertaken, as per the terms of the said Government Order and only if the Lessees consent to the same, they can be permitted to continue their leases. Otherwise, the only option for the respondent is to bring the shops to public auction. 5.3. In similar circumstances, this Court, in W.P. No.27471 of 2012 as upheld in W.A. No.686 of 2015 dated 24.07.2015, has held that if the existing licensees are willing to accept the offer of the respondent, the respondent may grant licence to them, as otherwise, it is open to the respondent to put the properties in public auction. Before considering the claim of the petitioner, it is necessary to consider the powers and functions of the Municipality with regard to the administration of the property. 6. Municipal corporations are created to aid State Governments in the regulation and administration of local affairs. A municipality is wholly a creature of the legislature and possesses only such powers as are conferred upon it by the legislature. 6.1. For the purpose of executing Governmental powers properly and efficiently, Municipal Corporations are given the power to acquire, hold, and manage the property. The property includes personal and real property. Some municipal corporations are expressly authorised to acquire and hold real and personal property for corporate purposes. Additionally, a municipal corporation can acquire property by gift, deed, or devise. 6.2. Where the property is held by the Municipal Corporation purely as an agent of State in the exercise of its governmental functions, the municipality holds title as trustee for public and governmental purposes. 6.3. The Municipal Corporation has the right to rent its property to private persons, when such right is conferred, either expressly or by necessary implication, by charter or by statute and the necessity of deciding the mode of administering the property has been discussed in the decision reported in AIR 2000 Mad 393 (Tamil Nadu Municipal Shop v. State of Tamil Nadu And Ors. on 6 April, 2000). The relevant portion reads as under: "There are number of Municipalities, Town Panchayats and Corporations. They own buildings, stalls etc. either located in the bus-stand or in the shandy or in other public places, cart-stands etc. Some of the public bodies have their own shopping complexes. The situation is peculiar to each local body. There is no uniformity in the same. They own buildings, stalls etc. either located in the bus-stand or in the shandy or in other public places, cart-stands etc. Some of the public bodies have their own shopping complexes. The situation is peculiar to each local body. There is no uniformity in the same. One cannot expect all the local bodies to have a uniform practise, though it may be desirable to have such uniform practise. The local bodies have to act according to the exigencies of the time, their set up, the situation they have to face and the circumstances that govern them. It cannot be the same for all the local bodies. Some local bodies may have certain peculiar problems in that field. In fact, the learned Senior Counsel Mr. Masilamani at the beginning of his argument submitted that the local bodies are only like private land owners. If they can be equated to private land owners, then, it has to be equally stated that one private land owner need not, will not and does not act as the other private owner and that the approaches will be different. The Local Council being the absolute owners are entitled to decide in what manner they should lease out the property and how to augment their income. Merely because there is no uniform policy, the exercise of power by local bodies cannot be termed arbitrary in nature." 7. It is also appropriate to cite the rulings and relevant Government orders guiding the municipality. 7.1. In the decision of this Court, reported in (2014) 5 MLJ 129 , (P. Muthusamy v. State of Tamil Nadu), it has quoted the directions mentioned in the Government Order. "The following are the directions, which form part of the said Government Order. 1. Generally the leasing out all the immovable properties of the Municipality and local for the first time, shall be decided by way of public auction................. 2. .............. 3. The lease which is granted for further period of three years, in such manner, will be fixed with the new lease amount. The new lease amount should be fixed on the basis of the market rental value of that area. 2. .............. 3. The lease which is granted for further period of three years, in such manner, will be fixed with the new lease amount. The new lease amount should be fixed on the basis of the market rental value of that area. For such fixation, the facts such as the rental amount of the shops which were let out for lease in the past one year, the level of the private shops or the rent being paid for the private building by the Government companies, for the office facility or any other purpose, shall be taken as base. On the basis of the rental value, which is calculated in this manner, the rent per sq.ft., shall be fixed on that basis, the new lease amount has to be fixed for the shop of the local bodies. Whatsoever it may be, the rent being fixed should be 15% more than the rent of the last year. 4. ........... 5. ........... 6. If the applicant did not come forward to pay the lease amount fixed on the new scale as decided by the Municipality, and within the period of 15 days as fixed for the acceptance of the new lease, that land/shop will be recovered from him and has to be let out on lease. 7. When the new lease is being fixed in the above said manner, the local bodies should not suffer any financial loss." 7.2. In G.O.(Ms). No. 92, Municipal Administration and Water Supply (MA4) Department, dated 03.07.2007, the relevant guidelines of the said Government Order are provided, which are extracted here-under: (i) At the time of leasing out all the immovable assets of Municipalities for the first time, it should be leased out in Public Auction. (ii) After nine years, the lease rent has to be re-assessed. (iii) Priority can be given to extend the lease for a further period of nine years to the existing lessee, subject to condition that the then market value of the lease would be levied. In the event of the proposal not accepted, then the property should be brought in Public Auction. From the above said guidelines also, it is clear that though the intention seems to be the augmentation of higher revenue, still it has to be done subject to certain principles. 8. In the event of the proposal not accepted, then the property should be brought in Public Auction. From the above said guidelines also, it is clear that though the intention seems to be the augmentation of higher revenue, still it has to be done subject to certain principles. 8. The common thread running through almost all Rent Control Acts and legislations is that they are intended to serve two purposes: 1. To protect the tenant from eviction from the house where he is living except for defined reasons and on defined conditions; and 2. To protect him from having to pay more than a fair/standard rent. 9. When questions arose about the method of assessment of annual rental value of buildings, for the purpose of determining the property tax payable, the Hon'ble Supreme Court indicated in a catena of decisions that the local bodies could look up to the provisions of the relevant Rent Control Acts, relating to fixation of fair rent and adopt the same formula. What applies to determination of property tax, applies to determination of rent also. 10. A useful reference may be made in this connection, to the decisions of the Apex Court. 10.1. The decision of the Supreme Court, reported in AIR 1971 SC 353 (Guntur Municipal Council v. Guntur Town Rate Payers' Association) is relied upon in the case of The Municipal Corporation of Greater Mumbai & others v. Dalamal Tower Premises and the relevant observations read as under: "The decision of the Supreme Court in the Guntur Municipal Council v. The Guntur Town Rate Payers' Association, dealt with the issue as to whether before the fixation of a fair rent of any premises, the municipality was bound to make an assessment in the light of the provisions contained in the Rent Control Act. The submission of the municipality was that if the fair rent has not been fixed, the municipality need not be limited or governed by the measure of standard rent in the Rent Act. While rejecting the submission, the judgment of the Supreme Court considered the issue from two perspectives. The first perspective is the test of what rent a hypothetical tenant would pay: "The test essentially is what rent the premises can lawfully fetch if let out to a hypothetical tenant. While rejecting the submission, the judgment of the Supreme Court considered the issue from two perspectives. The first perspective is the test of what rent a hypothetical tenant would pay: "The test essentially is what rent the premises can lawfully fetch if let out to a 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 the standard rent which would be payable for a particular premises under the Rent Act in force during the year of assessment. "The second aspect is that where rent control legislation is in operation, the landlord cannot lawfully expect to get more rent than the fair rent: "It is perfectly clear that the landlord cannot lawfully expect to get more rent than the fair rent which is payable in accordance with the principles laid down in the Act. The assessment of valuation must take into account the measure of fair rent as determinable 10 (1970) 2 SCC 803 11 para 4 at page 805 VBC 14/56 app 801.04 under the Act. It may be that where the Controller has not fixed the fair rent the municipal authorities will have to arrive at their own figure of fair rent but that can be done without any difficulty by keeping in view the principles laid down in Section 4 of the Act for determination of fair rent." The judgment in Guntur Municipal Council consequently held that the standard rent under rent control legislation constitutes an index of what the premises can reasonably be expected to let even if there were no fixation of standard rent under the Rent Act. The aforesaid decision in Guntur Municipal Council's case was followed in Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee, (1980) 1 SCC 685 and later, in Morvi Municipality v. State of Gujarat and others, (1993) 2 SCC 520 . 10.2. The aforesaid decision in Guntur Municipal Council's case was followed in Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee, (1980) 1 SCC 685 and later, in Morvi Municipality v. State of Gujarat and others, (1993) 2 SCC 520 . 10.2. This Court, in the case of Corporation of Calcutta v. Smt Padma Debi, Corporation of Calcutta v. Life Insurance Corporation of India, Guntur Municipal Council v. Guntur Town Rate Payers' Association and Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee, has consistently held that it is not the value of occupation of the property to the tenant, but the rental income from it to the owner which is to be taken into consideration while estimating the reasonable return that a landlord can expect from his property. 10.3. In East India Commercial Co-operative Private Limited v. Corporation of Calcutta ( 1998 4 SCC 368 ), the Supreme Court held that when the Municipal Act requires the determination of the annual value, that Act has to be read along with the Rent Restriction Act, which provides for the determination of fair rent or standard rent. 11. From the aforesaid decisions, the principle, which is deducible, is that when the Municipal Act requires the determination of the annual value, that Act has to be read along with rent Restriction Act, which provides for the determination of fair rent or standard rent. Reading the two Acts together, the referable value cannot be more than the fair or standard rent, which can be fixed under the Rent Control Act. The exception to this rule is that whenever any Municipal Act itself provides the mode of determination of the annual letting value, like, the Central Bank of India's case relating to Ahmedabad or contains a non-obstante clause as in Ratna Prabha's case, then the determination of the annual letting value has to be according to the terms of the Municipal Act. 12. Now, it is relevant to lookout the provisions of Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, (hereinafter referred to as "the Act"). 12.1. Section 4 of the Act reads as under: (Permissible limit of fair rent) "4. Fixation of Fair Rent. 12. Now, it is relevant to lookout the provisions of Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, (hereinafter referred to as "the Act"). 12.1. Section 4 of the Act reads as under: (Permissible limit of fair rent) "4. Fixation of Fair Rent. - (1) The Controller shall on application made by the tenant or the landlord of a building and after holding such enquiry as he thinks fit, fix the fair rent for such building in accordance with the principles set out in the following sub-sections: (2) The fair rent for any residential building shall be nine per cent gross return per annum on the total cost of such building. (3) The fair rent for any non-residential building shall be twelve per cent gross return per annum on the total cost of such building. (4) The total cost referred to in sub-section (2) and sub-Section (3) shall consist of the market value of the site in which the building is constructed, the cost of construction of the building and the cost of provision of anyone or more of the amenities specified in schedule 1 as on the date of application for fixation of fair rent. Provided that while calculating the market value of the site in which the building is constructed, the Controller shall take into account only that portion of the site on which the building is constructed and of a portion upto fifty per cent, thereof of the vacant land, if any, appurtenant to such building the excess portion of the vacant land, being treated as amenity; Provided further that the cost of provision of amenities specified in Schedule 1 shall not exceed- (i) in the case of any residential building, fifteen per cent; and (ii) in the case of any non-residential building, twenty-five per cent, of the cost of site in which the building is constructed and the cost of construction of the building as determined under this section." From the principles set out in sub-sections (2) to (4) of Section 4 of the Act, it is apparent that market value of the site, on which, the building is constructed, is an important factor to be taken into consideration for fixing the fair rent of the building. 13. 13. This Court, in the following decisions, held that the fixation of fair rent is done, as per the Tamil Nadu Buildings (Lease and Rent Control) Act. (i) In the case of Dindigul Anna District Tax Payers Sangam v. Government of Tamil Nadu (1995) 2 MLJ 43 ), it has been held as under: "There cannot by any contrary method of assessment by any guidelines while deciding the market value of a building, the Supreme Court has categorically held the procedure allowable in the Tamil Nadu Buildings (Lease and Rent Control) Act with reference to the fixing of fair rent and assessment of market value can be safely taken as the value for the corresponding statutes." (ii) In the case of R.R. Dalavai v. The Government of Tamil Nadu (1978) 1 MLJ 93 ), it has been held as follows: "14. Coming to the third contention that the annual value of the buildings has to be determined only with reference to the fair rent formula provided for in the Madras Buildings (Lease and Rent Control) Act, the petitioner has referred to a series of decisions of the Supreme Court which seems to lay down that the fair rent formula provided for in the Rent Control Act should normally be followed in the determination of the annual value of buildings. In Corporation of Calcutta v. Smt. Padma Debi, it was held that the annual rent could not be fixed higher than the standard rent fixed under the relevant Rent Control Act. In Guntur Municipal Council v. Ratepayers' Association, the Supreme Court again pointed out that for determining the annual value of the buildings under Section 82(2) of the Madras District Municipalities Act, the test essentially to be applied is what rent the premises can lawfully fetch if let out to a hypothetical tenant and that the Municipality is bound by the fair rent which would be payable for a particular premises under the Rent Control Act in force during the year of assessment and is not free to assess the tax on any arbitrary annual value. It was also pointed out in that case that there can be no distinction between buildings for which fair rent has been fixed by the Rent Controller and those in respect of which no such fair rent has been fixed and that when the Rent Controller has not fixed the fair rent, the municipal authorities will have to arrive on their own figure of fair rent in accordance with the principles laid down in the Rent Control Act. Dealing with the plea of inconvenience and procedural difficulties in the application of the principles laid down in the Rent Control Act for fixing fair rent for buildings by the assessing authorities constituted under the District Municipalities Act, the Court said: We are not concerned with the procedural difficulties which may be experienced; we have to declare what the law is and as appears to be well settled the assessment of valuation for the purpose of tax must be made in accordance with and in the light of the provisions of the Rent Control Act which would be in force during the period of assessment. In Delhi Municipality v. M.N. Soi, the Supreme Court again pointed out that the municipal authorities are obliged not to assess at a higher rental value than the standard rent fixed under the Rent Control legislation. In that case, the landlord was receiving a sum of Rs. 1,500 per month as rent in respect of a building and that the said actual rent received was taken as the basis for fixing the annual value of the building ignoring the fair rent of Rs. 170 per month fixed for that building under the Delhi Rent Control Act in 1941. The Court pointed out that the municipal authorities cannot take advantage of the defiance of the law relating to Rent Control Act and treat the rent received by him in defiance of the law as a reasonable rent and that, therefore, the assessing authorities are obliged not to assess at the actual rent received but on the standard rent fixed under the Rent Control Act. In a recent decision in S. Ramaswamy v. The Commissioner, Corporation of Madras, C.R.P. Nos. In a recent decision in S. Ramaswamy v. The Commissioner, Corporation of Madras, C.R.P. Nos. 3275 and 3276 of 1975, this Court after considering the above decisions of the Supreme Court, had observed: Thus the Supreme Court has taken consistently the view that the standard of reasonableness has to be judged not from the expectation of a landlord who takes the risk of prosecution and punishment which the violation of the law involves, but the expectation of the landlord who is prudent enough to abide by the law, and that, therefore, even in cases where the rents actually collected by the landlords are higher than the standard rent the assessment could not be made on the basis of the actual rents received by the landlord but by the fair rent which alone the landlord is entitled to collect legally from the tenants. 14. The learned counsel appearing for the respondent has relied upon the decision of this court in W.A. No. 686 of 2015, in the case of T.M. Duraiswamy v. State of Tamilnadu - Chennimalai Town Panchayat, contending that the appellant in W.A. No.686 of 2015 filed a writ petition in W.P. No.7416 of 2013, seeking a direction to the respondents to renew the lease of the site for a period of three years and to forbear the respondents from evicting him from the said site, which was disposed of by the learned Single Judge, directing the Town Panchayat to indicate the petitioners the lease rent, which the Town Panchayat proposes to fix, for the shops in question presently occupied by the petitioners and if the petitioners are willing to accept the offer, then the respondent Town Panchayat shall consider the same and grant lease to the petitioners and if the petitioners are not willing, it is open to the respondent Town Panchayat to issue fresh tender-cum-public auction notification and to proceed in accordance with law and the same was upheld by the Honourable Division Bench of this Court in W.A. No.686 of 2015. 14.1. But, the decision relied upon by the learned counsel appearing for the respondent would not apply, in the light of Judgment of the Hon'ble Supreme Court (cited supra). 15. As the owner of the property, the respondent is at liberty to decide the method of administering the property in the best possible ways. 14.1. But, the decision relied upon by the learned counsel appearing for the respondent would not apply, in the light of Judgment of the Hon'ble Supreme Court (cited supra). 15. As the owner of the property, the respondent is at liberty to decide the method of administering the property in the best possible ways. So far as the public auction is concerned, it may be income fetching under certain circumstances. That cannot be denied. But, here is a case, where the petitioners herein are in possession and enjoyment of the property for long number of years. They are the small traders, but in a global village, who had to face the global challenges and global competition when the property is put in public auction. It is said, the globalisation would make the rich the richer, but, the poor the poorer. If it should not happen in the case of the petitioners, the method of public auction may not be the suitable method, having regard to the facts and circumstances. 16. The large number of traders are also part of the public, for whose benefit the respondent function and these small vendors, who started their business in the street/road, will not be able to compete with the Corporate giants, when the property is put in public auction. 17. Under the stated circumstances, the contention that the respondent would be forced to put the property in public auction, if the tenants do not agree for the exorbitant enhanced rent, cannot be accepted. Once the respondent has chosen to adopt the method of leasing out, it is not open to the respondent to state that the property would be put in the public auction, if the lessees do not come to terms. These arbitrary terms would be against law. 18. It is represented that in some cases, the building was put up by the tenants themselves and in some cases, it is put by the Corporation. It is also stated that in some of the cases, buildings are yet to be put up. Under such circumstances, invoking Section 4 of the said Act may present practical difficulties. Applicability would be in question in some cases. 19. Under such circumstances, the impugned orders issued by the respondent shall be treated as show cause notices by each of the petitioners respectively. Under such circumstances, invoking Section 4 of the said Act may present practical difficulties. Applicability would be in question in some cases. 19. Under such circumstances, the impugned orders issued by the respondent shall be treated as show cause notices by each of the petitioners respectively. Each of the petitioners shall submit their written objections and on receipt of such objections, the respondent, after giving sufficient and reasonable opportunity of hearing, shall fix the fair rent by following: (a) Section 4 of the said Act (in cases where building has been build up by the respondent); (b) the basic principles, based upon which Section 4 of the Act has been built up (wherever building has been build up by the petitioner himself); and (c) just and equitable considerations, respectively, depending upon the applicability in each of the cases (where there is no building at all). 20. All the writ petitions stand disposed of, in the above terms. No costs. Consequently, connected miscellaneous petitions are closed.