A. Narayanan vs The State of Tamil Nadu

Jagadeesan, J.—The Petitioners in all these writ petitions have filed the petitions challenging the validity of the order of the Government in

G.O. Ms. No. 67 Local Administration and Water Supply Department dated 2.3.99. As the issues involved in all the writ petitions are one and the

same, with the consent of all the counsel, the writ petitions are taken up for common disposal.

Under the impugned G.O. the Government has prohibited the licensee of the shop belonging to the local authorities from sub-leasing OF

transferring such right to third parties, including the legal representatives of the original licensee. If the original licensee is unable to continue the

business in the licensed place, he has to surrender possession of the shop or the place and if already any transfer had been effected, such transfer

shall stand cancelled as per the terms of the licence conditions or lease conditions and the local authorities have to take steps to bring such shops

for fresh auction. In tact earlier the Corporation of Chennai has passed a resolution dated 30.12.89 to transfer the licence or the lease in favour of

the third parties on receipt of a sum of Rs. 500/-. If the arrears of the licence fee or the lease amount is paid in lump sum, such lease or the licence

can be renewed on an enhancement of 30% of the: existing licence fees or the rent, as the case may be. This resolution was passed taking into

consideration of the fact that factually the original lessees or the licensees are not in enjoyment of the shops or the place and without the permission

and without the knowledge of the local authorities such transfer had been effected. Again on 4.11.98 a resolution was passed to the effect that the

transfer can be made on receipt of ten months rent plus the lump sum payment of the entire licence fee or the lease amount for the whole licence

period or the lease period. Yet another resolution was passed by the Corporation of Chennai on 26.12.1997 to the effect that if any one, other

than the licencee or the lessee runs the shop and if they pay the rent or the licence fee for the entire licence period along with 10 months advance,

the transfer can be made in their name with 10% increase for each year. The Director of Local Administration had issued a circular dated 11.9.95

informing the local authorities that no transfer should be made in favour of any sub-lease or a third party who get the transfer from the original

licensee or the lessee except in favour of the legal heirs. Even such transfer in favour of the legal heirs can be made only after getting the approval

of the Director of Local ? Administration. Instead of renewing the lease or the licence in favour of the existing individual if such right is being

brought to auction, it would fetch a higher income to the local authorities and hence till the Government issues instructions with regard to this the

renewal need not be followed. It is worthwhile to extract the impugned G.O., which is as follows;-

Pursuant to the said Government order, the occupants of the shops of the local authorities were issued notice to vacate. The Petitioners are the

occupants claiming to be a partner with the original licensee or the lessee or claiming to have acquired the right of occupation by virtue of the

dissolution of the partnership earlier formed with the original licensee or allottee.

The above said G.O. was subsequently modified by the Government in and by order G.O. Ms. No. 165 Local Administration and Water

Supply Department dated 29.6.99. By modification, the Government had permitted the original allottee or the licensee to transfer, the lease or the

licence in favour of the legal representatives in case if the original allottee is not in a position to carry on the trade or if the original allottee died

during the subsistence of the lease or the licence. This transfer will be valid, only for the remaining period of licence or the lease and the same shall

not be transferred in favour of any third person for any other reason. The legal representative in whose favour the transfer is sought for ought to

have been mentioned at the time of entering into the lease agreement. If the local authorities had recognised the transfer of the licence or the lease in

favour of the third parties, no steps need be taken to cancel such transfer till the existing licence or lease period is over. After the expiry of the

existing lease or licence period, the right to have the shop by way of lease or licence should be given by way of auction. In view of this amendment,

the writ petitions filed by the legal representatives as well as those in whose favour the transfer of licence or the lease had already been recognised

were dismissed, since the same have become infructuous. Hence at this stage we are concerned only with the rights of those who are in possession

of the shops of the local authorities by way of transfer from the original allottee without obtaining any prior permission from such local authorities.

Mr. M. Venkatachalapathy, the learned Counsel appearing on behalf of the Petitioner in W.P.8399/99 contended that the Petitioner is a

transferee from another transferee of the original allottee. The local authorities have received the rent and as such there is an inference that either

the authorities of the local body had recognised the transfer in favour of the Petitioner impliedly or as they had the knowledge of the transfer and

received the rent. It is not open to them now to evict the Petitioner on the ground that the transfer in favour of the Petitioner has not been approved

by the local authorities on the ground of estoppel. In this case, the Petitioner had been evicted before even he approached this Court and hence the

Petitioner is seeking the consequential relief of restoration of possession of the shop on quashing the impugned Government order.

Mrs. Nalini Chidambaram, the learned Senior Counsel appearing on behalf of the Petitioners in W.P-.7228, 7229,8903 to 8905 and 9745 of

1999 contended that in all the cases the original allottee entered into a partnership with the persons who are in possession of the shops, the

Petitioners herein and by virtue of the dissolution of the partnership, the Petitioners herein are in exclusive possession and enjoyment of the shop

owned by the local authorities for their individual trades. The Government having granted exemption under G.O. Ms. No. 165 Local

Administration and Water Supply Department dated 29.6.99 to those in whose favour the transfer has already been recognised and permitted

them to continue the trade for the unexpired period of lease or licence ought to have granted the same relief to all those who are in possession and

enjoyment of the shops owned by the local authorities. The discrimination made by the Government between those whose transfer had already

been recognised and those whose transfer had not been recognised is arbitrary and unreasonable one, as there is no nexus between the

classification and the object that is to be achieved. G.O. Ms. No. 67 has to be read down G.O.165 and the court must hold that all transfers made

by the original allottees is valid for the unexpired period of lease or the licence and thereby permit all the Petitioners to be in possession of the

respective shops for the remaining unexpired period of lease or the licence.

Mr. A.L. Somayajee, the learned Counsel appearing on behalf of the Petitioners in W.P.6914, 7253 to 7256, 7317, 7465 to 7467, 9031 &

9059 of 1999 contended that the genuine partnership entered into between the original allottee and the transferee is also failed to be recognised by

the authorities whereby the transferee is deprived of the benefit of the partnership concerned. As per Section 14 of the Indian Partnership Act, the

lease hold right is also an asset of the partnership and when the partnership gets dissolved by virtue of the arrangements between the partners, the

lease hold right may devolve on any one. Hence by such arrangement whoever gets such lease hold right will become the legal tenants so far as the

landlord is concerned and hence such tenants cannot be deprived of such right by way of administrative orders.

On the contrary, the learned Government pleader contended that it has been brought to the notice of the Government that some under hand

dealings are going on between the original allottee and the transferees. The transfers are being made without obtaining any permission from the

local bodies by receiving huge amounts by the original allottee and thereby the original allottee is making profit out of the transaction at the cost of

the local bodies. Only to prevent such illegal and unauthorised transfers the Government has taken a decision to prohibit the transfer in favour of

any third parties. Since the decision is only to implement the conditions of the lease or the licence, the same cannot be said to be arbitrary or

unreasonable. When a lessee or the licensee enters into an agreement with the local bodies, undertaking that he will not transfer such licence or

lease hold right to third parties, naturally the original allottee is not entitled to transfer the same. There are number of cases where such transfers

were brought to the notice of the local bodies. In order to regularise such unauthorised transfers earlier the Corporation had passed resolutions to

ratify such transfers on certain conditions. When the instances reveal that the original allottees make a huge profit by such transfer, the Government

in order to prevent such unlawful enrichment by the allottees had taken a decision to totally prohibit any transfer, which of course subsequently

modified by permitting the transfer in favour of the legal representatives and the transfer has already been recognised by the local authorities. The

classification made by the Government with regard to those in whose favour the transfer has already been recognised and those who are in

possession pursuant to the unrecognised transfer is a reasonable one, since each forms a distinct class by themselves. Hence all the writ petitions

are liable to be dismissed.

On a careful consideration of the arguments, the following issues arise for consideration:

i) Whether the G.O. Ms. No. 67 Local Administration and Water Supply Department dated 2.3.99 is arbitrary and unreasonable?

ii) Whether the classification made by the Government between those who are in possession pursuant to the recognised transfer and the others

who are in possession pursuant to the unrecognised transfer is an unreasonable one and has no nexus between the order and the object that is to

be achieved?

iii) Whether genuine partnership entered into between the original allottee and the transferee is deprived of the benefit of the partnership concern.

From the counter affidavit filed on behalf of the Respondents it is clear that the original lessee/licensee had executed a deed containing the

terms of letting. In accordance with such terms the original lessee/licensee is not entitled to transfer such right to any third person or hand over

possession of the shop to any one. Equally the original lessee did not get the permission of the local bodies before entering into the partnership with

third parties. When it was brought to the notice of the Government that almost in all these shops owned by the local bodies, the original allottees

are not in possession and some third parties are in enjoyment of the shops by having their own business, the Government thought fit to bring an end

to such unauthorised transfers entered into by the original lessees and transferees consequently the impugned G.O. has been passed.

It is an admitted case of the Petitioners also that in no case the Petitioners have obtained the permission from the local bodies before ever they

entered into the partnership agreement with the original lessees or before ever they got into the possession of the shop.

The learned Counsel for the Petitioners advanced an argument that in many cases the transfer had been made in favour of the third parties

much earlier and the lease or the licence had been renewed subsequently and the rent has been received by the authorities from those who are in

possession and enjoyment of the shop and as such an inference has to be drawn with regard to the sanction or recognition of the transfer by the

authorities.

So far as this contention of the learned Counsel for the Petitioners is concerned I am unable to agree. Merely because the receipt has been

issued by a person who is having the right to collect the licence amount or the lease amount or by making the payment at the office of the local

body, it cannot be said that the authorities are aware about the transfer of the lease hold right or the licence in favour of the third person. Unless

such fact of transfer or the knowledge is established by independent evidence, it may not be proper to draw an inference. It is a well known fact

that the employee or licensee who has got the right to collect the rent may receive the same and issue the receipt in favour of the person who paid

the same without any notice as to who is the original lessee or the licensee. Similarly in the cash counter at the local body office the concerned clerk

will receive the money and issue the receipt, unmindful of who is the original allottee or the licensee. Hence by their act, the local bodies cannot be

made to bind themselves as if the transfer had been authorised or sanctioned.

When the original allottee or the licensee has no authority to transfer such right, the transferee will not derive any benefit out of such transfer

and consequently they cannot claim to be in lawful possession and enjoyment of the shop. In majority of cases, the lease amount or the licence fee

has been paid only in the name of the original allottee/licensee and as such the authorities may not be aware that the third parties are in possession

and enjoyment of the shops.

When an illegal transfer takes place, there cannot be any dispute that an element of unlawful payment is involved. The original allottees take

third parties within their fold as partners or as joint venture and within a short period they get themselves relieved by leaving the third party in

exclusive possession of the shop. Hence what cannot be done directly is being carried on indirectly. When the impugned order is to prohibit such

transaction, I do not find any unreasonableness or arbitrariness in the same.

So far as the second issue is concerned, the subsequent G.O. Ms. No. 165 makes a distinction between the recognised lessees or the

licensees and the unrecognised lessees or the licensees. Mrs. Nalini Chidambaram, the learned senior counsel appearing on behalf of the lessees

contended that the classification between the recognised lessees/licensees and the unrecognised lessees/licensees is unreasonable. When the

Government thought fit to safeguard the interest of the lessee or the licensee whose occupation had been recognised by the local bodies by way of

recognition, that distinction is all the more reasonable one, because so far as that occupant is concerned, his occupancy had already been

recognised by the local bodies. Once the occupancy of the third party is recognised, he is deemed to be the authorised tenant or the licensee, as

the case may be. When once the third party, whose occupation had been recognised, becomes the lessee or the licensee of the local body, his

possession can be disturbed only by a procedure known to law and he cannot be termed to be a person who is in unauthorised occupation.

Whereas in the case of the unrecognised transfer is concerned, definitely his case stands on a different footing, since he is only a trespasser so far

as the land owner is concerned. Such transfer in favour of such third party is without the prior permission of the landlord/local body. This is not

only without prior permission but also not ratified subsequently and so long as he is in unauthorised occupation, he cannot claim equal right as that

of an authorised lessee or the licensee. Hence the classification made by the Government between the two is quite sensible and reasonable and

there is no unreasonableness.

The purpose of the G.O. is to prohibit the unauthorised transfers made all along and to restore possession to the local bodies. Hence the

authorised or recognised lessees/licensees'' right has to be safeguarded for the remaining, unserved period of the lease or the licence. The object of

the G.O. being to restore possession to the local bodies from the unauthorized occupants, the G.O. contemplates the eviction of the occupants

who are in possession as unrecognised lessee or licensee and hence there is a nexus between the classification and the object that is being

achieved.

The impugned G.O. specifically refers that after restoration of possession the local bodies have to bring the shops for auction so that it may

fetch a higher income. No doubt that by this sort of underhand dealing between the original allottee and those who are in occupation as recognised

lessee or licensee, as already stated, an element of financial transaction is involved at the cost of the local bodies, thereby the local bodies are

deprived of such benefits, and hence the impugned order is only to nullify such transaction. Hence I do not find any merits in this contention also.

So far as the third issue is concerned, Mr. Somayaji learned Senior Counsel advanced the argument with regard to the rights of the genuine

partnership. Admittedly none of the Petitioners had produced any evidence to establish the fact of partnership between the original allottee and

those who are in possession of the shops. A mere entering into a partnership may not be sufficient to establish the partnership business. Necessarily

the: partnership accounts have to be produced to establish the sharing of the profit and loss among the partners viz., the original allottee and the

person who is in possession of the shop. Even in a case of joint venture, some material has to be produced to satisfy the authorities with regard to

the sharing of the profit and loss. Without any material an inference cannot be drawn that there is a genuine partnership existing and those who are

concerned with such genuine partnership are being deprived of the benefit. As rightly contended by the learned senior counsel Mr. Somayaji that

the lease hold right may be an asset of the partnership if there is a genuine partnership and for the dissolution of the partnership, the dissolution

deed is also equally necessary, evidencing the terms and conditions of the partnership as well as the dissolution of such partnership.

Even with regard to the remaining lease/licence period, none of the Petitioners have mentioned about the period of lease. In all the cases,

almost as a matter of right the lease or the licence has been renewed periodically and none of the Petitioners are aware about the period for which

the current lease/licence had been renewed. When once the validity of the G.O. is upheld and the Petitioners are in unauthorised and unrecognised

occupation of the shops owned by the local bodies, I am of the view that their possession cannot be safeguarded for the remaining, unexpired

portion of the lease also.

If any of the Petitioners claimed to have entered into a bona fide partnership, it is open to them to put forth their claim by way of representation

before the concerned authority with necessary documents such as the . partnership deed, account books, evidencing the sharing of profit and loss

from the date of entering into the partnership till the date of dissolution and the document of dissolution to establish the terms of the dissolution of

the assets and liabilities of the firm within one week from today and if any such representation is received within the stipulated time, the local

authorities are directed to consider and dispose of the same within one month and till such time, the possession of the concerned Petitioner need

not be disturbed. Those who claim that their lease or licence has been renewed but till that period has not expired are also at liberty to produce the

communication with regard to the renewal of lease or licence, evidencing the unexpired period and the local bodies are directed to consider such

representation also in similar manner as stated above.

For all the reasons, I do not find any merits in these writ petitions and accordingly all the writ petitions are dismissed.