JUDGMENT : This writ petition is filed by the petitioner seeking to quash Ext. P4 order issued by the Sulthan Bathery Grama Panchayat bearing No.A2-18874/2015 dated 20.08.2015, whereby the petitioner was directed to pay an amount of Rs. 838880/-, which apparently is an amount due on the basis of the remission granted to petitioner’s husband and herself to the lease amount from the year 2006-2007 to 2014-2015, and for a further direction to the respondents to keep in abeyance all penal and recovery proceedings pertaining to Exts.P4 and P5 against the petitioner. Ext. P5 is the relevant portion of the audit report incorporating the details with respect to the additional rent to be collected from the occupants of the building complex of the local body for the period from 2006-2007 to 2014-2015. 2. At the outset, it is pointed out that even though Ext. P4 impugned notice is issued by the Sulthan Bathery Grama Panchayat, later the Panchayat was upgraded as a Municipality and that is how the second respondent Municipality is made a party to the proceedings. 3. Brief material facts for the disposal of the writ petition are as follows: The petitioner is a widow, who is conducting a tourist home in the premises let out by the Panchayat in the first and second floor of a shopping complex presently owned by the Sulthan Bathery Municipality. In fact, the tourist home was run by the petitioner's husband from the year 1994 and till his death in the year 2010. After his death, the lease agreement was transferred in the name of the petitioner as per Exhibit P3 resolution of the Panchayat. 4. The tourist home is conducted in a three storied shopping complex constructed by the Sulthan Bathery Grama Panchayat in 1976. According to the petitioner, right from the beginning of the lease period, the petitioner's husband and thereafter, the petitioner were carrying out the repair and maintenance of the building and the Panchayat has not conducted any sort of maintenance in the building at any point of time. 5. According to the petitioner, right from the beginning of the lease period, the petitioner's husband and thereafter, the petitioner were carrying out the repair and maintenance of the building and the Panchayat has not conducted any sort of maintenance in the building at any point of time. 5. While so, during the year 2004-2005, on account of the shortage of tourist inflow and also due to the old style of the building, the occupancy of the tourist home became nominal and the business suffered huge loss and the payment of stipulated monthly rent of Rs.23,023/- with 5% annual increase was found to be unaffordable and according to the petitioner, most of the other occupants of the trade centre faced similar adverse situations. Thereupon, the occupants of the building, including the husband of the petitioner, submitted a representation to the then Panchayat committee requesting remission and refixation of the monthly rent fixed for their respective commercial spaces. 6. On receipt of the representation, the matter was placed before the Panchayat committee, which after having discussion on the issue, appointed a sub committee, which conducted an enquiry into the matter and after affording an opportunity of personal hearing to all the traders, submitted a common report to the Panchayat with recommendations to grant remission. Thereafter, the report was placed before the Panchayat Committee meeting held on 07.12.2004 and the committee, after due deliberation and consideration of the issue, decided to reduce the existing monthly rental of the occupants by 20%, evident from Ext. P2 minutes dated 07.12.2004. 7. The case projected by the petitioner is that it is quite clear and evident from Ext. P2 minutes that the decision was taken for reducing 20% based on the old age of the building, non maintenance of the rooms by the Panchayat and also on account of the low occupancy in the tourist home. Anyhow, on the basis of the decision of the Grama Panchayat committee, the then Secretary of the Panchayat issued orders refixing the monthly rent reducing 20% from the existing rent with effect from December, 2004 onwards. In fact, the lease was transferred in favour of the petitioner consequent to the death of her husband as per a decision of the Panchayat Committee dated 01.03.2011, evident from Ext. P3. 8. In fact, the lease was transferred in favour of the petitioner consequent to the death of her husband as per a decision of the Panchayat Committee dated 01.03.2011, evident from Ext. P3. 8. According to the petitioner, the petitioner was paying the rent without any default and there were no arrears of rent on the part of the petitioner as well as her husband. Anyhow, during the month of August, 2015, the petitioner was served with Ext. P4 order by the Secretary of the then Sulthan Bathery Grama Panchayat demanding an amount of Rs. 8,38,880/- as arrears of rent from the period 2006-2007 and 2014-2015. Apparently, the reasons stated for the demand was an audit objection, which according to the petitioner, was never communicated to the petitioner or any of the occupiers of the shop rooms. 9. On receipt of Ext. P4 notice dated 20.08.2015, the petitioner submitted a petition under the Right to Information Act and accordingly, the photocopy of the audit objection was given to the petitioner, evident from Ext. P5. On receipt of the information, the petitioner has submitted a representation before the 2nd respondent - the Sulthan Bathery Municipality, since the Panchayat was upgraded as a Municipality. 10. The sum and substance of the contention advanced by the petitioner is that the amount demanded as per Ext. P4 is not legally sustainable for more reasons than one, including the limitation prescribed under Section 243 of the Kerala Panchayat Raj Act, 1994 ('Act, 1994' for short). It is also the contention of the petitioner that Ext. P4 is issued by the Panchayat without affording an opportunity of hearing to the petitioner and therefore, it is violative of the principles of natural justice and arbitrary and illegal. So also, it is contended that the petitioner was never informed about any audit objection in regard to the remission of the lease rent and therefore, the entire proceedings now initiated to recover the amounts from the petitioner cannot be sustained under law. It is, thus, challenging the legality and correctness of the notice issued by the Panchayat demanding amounts, the writ petition is filed. 11. The Sulthan Bathery Municipality has filed a detailed counter affidavit inter alia contending that Ext. It is, thus, challenging the legality and correctness of the notice issued by the Panchayat demanding amounts, the writ petition is filed. 11. The Sulthan Bathery Municipality has filed a detailed counter affidavit inter alia contending that Ext. P4 is only a communication issued by the erstwhile Grama Panchayat to the petitioner in terms of the audit report communicated by the Deputy Director of Kerala State Audit Department, Kalpetta, Wayanad District. It is also pointed out that Ext. P5 audit objection had a covering letter issued by the Deputy Director of the Kerala State Audit Department, which was also forwarded to the petitioner. According to the Municipality, as per Section 13 of the Kerala Audit Fund Act, 1994 r/w Rule 18 of the Kerala Local Fund Audit Rules, 1996 (Rules, 1994' for short) and further in compliance of the provisions of Section 215(4) of the Act, 1994, the Deputy Director of Kerala State Audit Department had issued Ext. P5 to take appropriate action as per Rule 23(1) of the Kerala Local Fund Audit Act, 1994. 12. Therefore, according to the Municipality, it was in compliance with the said provisions the Municipality had issued Ext. P4, and therefore, it is highly necessary to implead the Deputy Director of Kerala State Audit Department, Kalpetta in the party array for the proper adjudication of the issue. It is also submitted that as per Rule 4 of the Kerala Panchayat Raj (Granting of Remission to Contractors and Lessees) Rules, 1998 (hereinafter called 'Rules, 1998'), deduction can be given only if the Municipality is satisfied that loss has been caused to the lesser/contractor due to any unforeseen circumstances preventing an occupier from carrying out the contract by reason of the occurrence of some event beyond human control, at the time of making contract, which according to the Municipality, could only be due to the outbreak of any epidemic or riot. So also, it is contended that if Rule 4 does not get attracted, no amount can be deducted. Therefore, it is contended that the relief sought for by the petitioner in this writ petition cannot be granted. 13. I have heard, learned counsel for the petitioner Sri. K.B. Gangesh, learned Special Government Pleader Smt. K.R. Deepa for the State and the Deputy Director of Panchayat, and Sri. Jayakumar Namboodiri, learned Standing Counsel for the Sulthan Bathery Municipality, and perused the pleadings and materials on record. 13. I have heard, learned counsel for the petitioner Sri. K.B. Gangesh, learned Special Government Pleader Smt. K.R. Deepa for the State and the Deputy Director of Panchayat, and Sri. Jayakumar Namboodiri, learned Standing Counsel for the Sulthan Bathery Municipality, and perused the pleadings and materials on record. 14. The learned counsel for the petitioner has addressed arguments based on the discussions made above. The learned Standing Counsel for the Municipality submitted that remission can be given only if the circumstances prescribed in the Rules, 1998 come into play and therefore, the loss in business or less inflow of tourist is not something beyond the human control at the time of making a contract, which could not reasonably have been anticipated, like the outbreak of any pandemic or riot. The learned Standing Counsel further submitted that since the audit authority has found that remission given is bad, the Panchayat and later the Municipality had no other option than to proceed against the petitioner. 15. The learned Special Government Pleader also submitted that since the remission was given not in accordance with the Rules, 1998, the Audit authority had every power to identify as to whether by granting remission loss was caused to the Panchayat and it was accordingly that objections were raised in the audit report and further that the auditor has complied with the procedures prescribed under the Audit Fund Act, 1994 and the Rule, 1996 while conducting the audit and therefore the audit cannot be found fault with. 16. I have evaluated the rival submissions made across the Bar. It is an admitted fact that it was on the basis of the request made by the petitioner's husband and other occupants of the shopping complex that the Sulthan Bathery Grama Panchayat has decided to grant 20% remission of the loss occurred apparently from the year 2004 onwards. Rules, 1998 was constituted as per the provisions of Section 254 of the Act, 1994 solely for the purpose of granting remission to lessees and contractors, if circumstances and situations warrants. 17. Rules, 1998 was constituted as per the provisions of Section 254 of the Act, 1994 solely for the purpose of granting remission to lessees and contractors, if circumstances and situations warrants. 17. Rule 4 of the Rules, 1998 deals with granting of remission and sub-Rule (1) stipulates that no remission shall be granted in the contract amount otherwise than on the ground that the Panchayat is satisfied that loss has been caused to the lessee/contractor as he was prevented from carrying out the contract by reason of the occurrence of some event beyond the human control at the time of making contract, which could not reasonably have been anticipated like the outbreak of any epidemic or riot. Sub-Rule (2) thereto specifies that the amount of remission granted shall be in proportion to the days which the contractor/lessee is prevented from carrying out the contract as per the terms of contract on the grounds stated under sub-rule (1). 18. Rule 5 deals with application for granting of remission and sub-Rule (1) specifies that the lessee/contractor, who is eligible for remission under sub-rule (1) of Rule 4 shall submit an application to the Panchayat explaining the reasons therefore. Sub-Rule (2) specifies that the Secretary shall give report on the application for remission after conducting necessary enquiry and sub-Rule (3) thereto explicitly states that the Panchayat committee shall take decision within thirty days on receipt of the application under sub-Rule (1). Sub-Rule (4) thereto stipulates that the Panchayat shall obtain approval of the Government before granting remission exceeding ten thousand rupees. 19. Ext. P2 minutes of the Panchayat committee, which granted remission, shows that on the basis of the application submitted by the petitioner's husband, a sub Committee was constituted and it was on the basis of the recommendation of the sub committee that the building in question is a very old one, the rooms are not clean, that there is no much tourists occupying the rooms, and therefore 20% remission is to be given to the petitioner's husband, a decision was taken by the Panchayat to grant remission from December, 2004 onwards. 20. Therefore, on an analysis of Ext. P2 minutes of the Panchayat committee, it is clear that it substantially complied with the provisions of the Rules, 1998 before granting remission to the petitioner's husband. 20. Therefore, on an analysis of Ext. P2 minutes of the Panchayat committee, it is clear that it substantially complied with the provisions of the Rules, 1998 before granting remission to the petitioner's husband. It was accordingly that the Secretary of the Grama Panchayat has issued the order granting remission to the petitioner's husband. It is also an admitted fact that the petitioner's husband died on 03.04.2010 and the Panchayat committee has decided to transfer the lease in favour of the petitioner thereafter. 21. Anyhow, the contention of the petitioner that till the issuance of Ext. P4 by the Secretary of the Sulthan Bathery Grama Panchayat directing the petitioner to remit the amounts due consequent to the remission granted the issue was not brought to the notice of the petitioner seems to be genuine because such a specific contention raised is not disputed by the Panchayat in its counter. 22. On a perusal of Ext. P5 audit objection, the finding is that the Panchayat has granted remission in violation of the Rules, 1998 and therefore, the amount was directed to be recovered in the previous audit reports to mitigate the loss, but the Panchayat had not taken any action. But, it is relevant to note that the audit was conducted during the previous years, and thus the alleged anomaly was noted in the audit of the year 2006-2007 and 2008-2009. However, no action was taken to recover the amount from the responsible persons. In this regard, a reference to some of the provisions of the Kerala Audit Fund Act, 1994 and the Rules, 1996 would be appropriate. 23. Section 7 of the Act, 1994, which deals with the manner in which audit is to be conducted, stipulates that the auditor shall conduct the audit annually and at such intervals as may be decided by the Director or may conduct concurrent audit of such of those local authorities as are found necessary under the provisions of any law governing them or as may be decided by the Director in consultation with the Government. Section 9 prescribes the liability of local authorities to prepare and present accounts for audit. Section 9 prescribes the liability of local authorities to prepare and present accounts for audit. Sub-Section (1) thereto specifies that the accounts of a local authority or a local fund included in the Schedule relating to a financial year shall be prepared or caused to be prepared by the Executive authority, in such form and in such manner as may be prescribed, and presented for audit within four months of the close of that financial year. The latter provision of Section 9 makes it clear that if it is not done by the Executive authority, sufficient measures are provided in order to proceed against the defaulting executive authority. 24. Section 10 clearly specifies that the audit of the accounts prepared and presented for audit under section 9 shall be completed by the auditor within six months of the date of its presentation for audit, failing which the officer responsible for the audit shall be liable to be proceeded against under the provisions of the Kerala Civil Services (Classification, Control and Appeal) Rules, 1960. 25. Section 15 deals with the procedure to be followed after getting the report of the Director under section 13. Section 16 deals with the power of the auditor to surcharge illegal payments and loss caused by negligence or misconduct and sub-Section (1) empowers the auditor to disallow any item which appears to him to be contrary to law and surcharge the same against the person making or person or body of persons authorising the making of the illegal payment and may charge against any person responsible therefor, the amount of any deficiency or loss caused by the negligence or misconduct of that person or any sum received which ought to have been, but has not been brought into account by that person and shall, in every such case, certify the amount due from such person. 26. Therefore, it can be seen that if and when the auditor finds any loss caused by negligence or misconduct, the surcharge is to be made against the person responsible in the matter of loss caused by negligence or misconduct. However, that can never be a lessee of the premises of the building owned by the local body. Rules, 1996 prescribes the manner in which the audit is to be done and to call for necessary details for completion of the audit. However, that can never be a lessee of the premises of the building owned by the local body. Rules, 1996 prescribes the manner in which the audit is to be done and to call for necessary details for completion of the audit. Rule 20 thereto stipulates the procedure for charge/surcharge proceedings, which reads thus: “20. Procedure for charge/surcharge proceedings.--(1) The officer authorised to issue the report on the audit of accounts of a local authorities/local funds shall while issuing the further remarks under sub-rule (3) of rule 23 of these rules forward to the Director a proposal for charge/surcharge action in respect of the pending cases of losses pointed out in the audit report concerned. The charge/surcharge proposal shall be in Form VIII appended to these rules. (2) On receipt of the proposals for charge/surcharge proceedings from the officer authorised to issue the auditors report, the Director shall as early as practicable but before the completion of four month from the date of receipt of such proposals, issue, charge/surcharge notices to the officer(s) held responsible for the losses detected by the auditors. (3) The charge/surcharge notices shall be in Form IX and IX(A) appended to these Rules.” 27. As per Rule 21, the auditor has to name the persons responsible for the loss detected and the extent of responsibility of such person. There is no case for the Panchayat that the auditor, in accordance with Rule 21, has named the petitioner and other occupants of the shopping complex of the local body in the audit report. This is exactly the rule position also in sub-sections (5) and (7) and other provisions of Section 215 of the Act, 1994. Subsection (9) therein clearly specifies that the auditor shall give a reasonable opportunity to the person concerned to explain his case before disallowing every item of expenditure incurred contrary to law etc. Above all, subsection (10) thereto stipulates that the auditors shall state in writing the reasons for their decision in respect of every disallowance, surcharge or charge and a copy of such decision shall be served on the person against whom it is made in the manner laid for the service of summons in the code of civil procedure, 1908. There is no case for the Panchayat that such an opportunity was given to the petitioner by the auditors or the Panchayat before raising the demand as per Exhibit P4 notice. There is no case for the Panchayat that such an opportunity was given to the petitioner by the auditors or the Panchayat before raising the demand as per Exhibit P4 notice. So also, on a perusal of Ext. P4 impugned order issued by the Secretary of the Grama Panchayat, it is clear that the auditor has raised objection, since the auditor has found that the Panchayat has granted remission illegally and it was accordingly that the auditor has directed to recover the amount from the responsible persons. As I have pointed out earlier, in order to grant remission, there is a clear rule prescribed as per the Rules, 1998. The Panchayat/Municipality has no case that it was due to any coercion or influence exerted by the petitioner and others that remission was granted. 28. On the other hand, it is clear from Ext. P2 minutes of the Grama Panchayat dated 07.12.2004 that the Panchayat has decided to grant remission, since the building in which the tourist home is conducted by the petitioner is an old, dilapidated and an unclean one, and added to that the inflow of tourist occupying the tourist home was found to be less. When a person submits an application explaining the reasons for securing remission, the Panchayat was at liberty to decide either to grant remission or to decline it. 29. This is a case where the Panchayat decided to grant remission, taking into account various circumstances projected by the petitioner's husband and other occupants of the shopping complex. It is also evident from Ext. P5 audit report that the audit authority has found discrepancy when the audit was conducted in the years 2006-2007, 2007-2008 and 2008-2009. But, the Panchayat did not take any action on the basis of the same against the petitioner or other occupants. Apart from the same, the demand raised by the Panchayat is dated 20.08.2015. 30. Section 243 of the Panchayat Raj Act, 1994 deals with 'the limitation for the recovery of dues' and it reads thus: “243. Limitation for recovery of dues. Apart from the same, the demand raised by the Panchayat is dated 20.08.2015. 30. Section 243 of the Panchayat Raj Act, 1994 deals with 'the limitation for the recovery of dues' and it reads thus: “243. Limitation for recovery of dues. - (1) No distraint shall be made, no suit shall be instituted and no prosecution shall be commenced in respect of any tax or other sum due to a Panchayat under this Act or any rule or bye-law, or order made under it after the expiration of a period of three years from the date on which the distraint might first have been made, a suit might first have been instituted or the prosecution might first have been commenced, as the case may be, in respect or such tax or sum: [Provided that in the case of assessment under sub-section (2) the above said period of three years shall be computed from the date on which destraint, suit or prosecution might first have been made, instituted or commenced, as the case may be, after making such assessment. (2) Notwithstanding anything contrary to this contained in this Act or the rules made thereunder, where for any reason, a person liable to pay any tax or fees leviable under this Act has escaped assessment, the Secretary may at any time within four years from the date on which such tax should have been assessed, serve on him a notice assessing the tax or fee due and demand the payment within fifteen days from the date of serving such notice and thereupon the provisions of this Act and the rules made thereunder shall apply as if the assessment of such tax or fee was made in time. (3) Where any tax or other amount due to a Panchayat has been barred by limitation under sub-section (1), due to the default of taking steps at the appropriate time and it is found in a lawful enquiry that it was lost due to the default of any officer or offices, the amount so lost to the panchayat shall be realised with twelve percent interest thereon from such officer or officers.” 31. Therefore, it is clear that the amount due from the petitioner's husband from the year 2006-2007 onwards is barred, since the demand raised by the Secretary of the Grama Panchayat itself is after a period of three years, and no recovery action was initiated against the petitioner's husband in a process known to law. It is also quite clear and evident from Ext. P3 proceedings of the Sulthan Bathery Grama Panchayat that it was consequent to the death of the petitioner's husband the Panchayat has decided to execute the lease deed in favour of the petitioner i.e., apparently in the year 2011. Therefore, the lease granted in favour of the petitioner is a lease independent of the lease granted to the petitioner's husband. So also, the Panchayat was vested with power either to grant lease in favour of the petitioner or to decline the grant of lease. Anyhow, I find that the amounts, if any, due from 2011 against the petitioner have also become barred in the year 2014, since at any stretch of imagination, three years' period has exceeded, when Ext. P4 notice was issued on 20.08.2015. 32. Above all, it is clear from Ext. P4 that the objections were raised by the auditor while conducting the audit during the period 2012-2013 also. But, apparently, the Panchayat has not taken any action against the petitioner's husband to recover any amounts. 33. That apart, it can be seen from the Kerala Local Fund Audit Act, 1994 and the Rules, 1996 that the surcharge and other liabilities are to be fastened against the responsible officers of the local body. Thus, taking into account all the above aspects, it can be seen that the amounts cannot be recovered against the petitioner and I find force in the contention advanced by the learned counsel for the petitioner with respect to the limitation occurring in the matter of recovery of amounts. 34. I am also of the view that if at all any amounts were to be recovered on the basis of the remission granted, the Panchayat ought to have given sufficient opportunity to the petitioner to contest the proceedings and then arrive at the conclusions. Such an opportunity was not given to the petitioner. Therefore, the entire action is violative of the principles of natural justice and therefore, arbitrary and illegal. Such an opportunity was not given to the petitioner. Therefore, the entire action is violative of the principles of natural justice and therefore, arbitrary and illegal. Assimilating the facts, circumstances and the law, the writ petition is allowed and thereby I quash Ext. P4 notice of demand issued by the Secretary of the Sulthan Bathery Grama Panchayat, which is presently upgraded as the Sulthan Bathery Municipality, dated 20.08.15, and all other consequential actions, if any taken against the petitioner.