Property Cannot Be Auctioned To Recover Property Tax: Madhya Pradesh HC Quashes Municipal Corporation's Notice

The Madhya Pradesh High Court has quashed a demand notice issued by the Khandwa Municipal Corporation threatening to auction a landlord's property for recovery of property tax, despite the Corporation being aware of an earlier High Court ruling on recovery of dues from rented premises.

The earlier ruling had held that the Corporation could not lock rented premises to recover property tax. It also clarified that recovery from a tenant could be effected through attachment of rent due in respect of the property.

Justice Vishal Mishra passed the order on October 30 in a writ petition filed by Hindustan Abhikaran, a registered partnership firm, and another petitioner. They had been tenants of six shops situated on Pandhana Road in Khandwa for around 35 years.

The petitioners challenged a notice dated February 18, 2026, issued to the owner of the premises, threatening attachment and auction for recovery of outstanding property tax.

The Court observed, "Under these circumstances, the stand taken by the counsel for respondents-Corporation is unjustified. They have admitted in the reply that they are aware of the legal provisions and the law laid down in WP No. 17290 of 2024 but despite the same the notice for auctioning of the property of the owner has been issued which could not have been done by the respondents-Corporation. Therefore, the impugned notice becomes unsustainable. No auction of the property could be done for recovery of the property tax. Accordingly, the impugned notice dated 18.02.2026 is hereby quashed."

The notice stated that property tax of ₹2,65,330 was outstanding up to March 2025. A further amount of ₹39,282 was payable for the 2025-26 assessment year, taking the total arrears to ₹3,04,612.

It called upon the owner to deposit the amount within 24 hours. Failing this, the Corporation proposed to initiate recovery proceedings by attaching movable and immovable property under Sections 175 and 177 of the Madhya Pradesh Municipal Corporation Act, 1956.

The petitioners argued that they were tenants of the shops and that no notice had been issued to them before the proposed action. They relied on the High Court's decision in Parkson Decor Galleria Private Limited v. Indore Municipal Corporation, which had followed the ruling in Saleem Mansoori v. Municipal Corporation, reported in 2009 (3) MPLJ 519.

The earlier decisions held that although property tax could be recovered from an occupier in the manner provided by law, recovery from a tenant could be effected through attachment of rent due in respect of the property. They also held that the Corporation had no authority to lock rented premises to recover property tax.

The Corporation, in its reply, admitted that it was aware of the July 5, 2024, order passed in these earlier rulings.

It submitted that it could pursue recovery through modes specifically permissible under the Act, including attachment of rent, wherever statutory conditions were satisfied.

During the hearing, the Court specifically asked the Corporation whether it could issue a notice for auctioning the property to recover property tax.

The Corporation acknowledged the earlier ruling and stated that further proceedings would be taken in accordance with law. The Court, however, noted that the Corporation had failed to explain how it could initiate subsequent recovery proceedings beyond what was mentioned in the notice.

The High Court held that the Corporation's action was unjustified, particularly because it had issued the notice despite being aware of the earlier ruling.

It accordingly quashed the notice dated February 18, 2026, and allowed and disposed of the writ petition.

For Petitioners: Advocate Avinash Zargar

For Respondents: Jubin Prasad, Panel Lawyer for the State; Prakash Kumar Gupta, Advocate for the Corporation