Chandigarh Estate Office caused ₹9-crore loss by ignoring rent rules for leased shops: CAG

Audit reveals the Estate Office failed to follow annual increase in rent of shops as prescribed by Chandigarh administration’s 2000 scheme

Pointing out more irregularities in the working of UT administration’s departments, the audit by the Comptroller and Auditor General (CAG) of India has revealed that the Estate Office failed to follow prescribed stages for increase in rent of leased shops, causing a loss of ₹9.37 crore to the government exchequer.

The report detailing the anomalies in financial statements of various departments was submitted to Chandigarh administrator Banwarilal Purohit on March 6. (Getty Images/iStockphoto)

The report detailing the anomalies in financial statements of various departments was submitted to UT administrator Banwarilal Purohit on March 6.

As per the report, the UT administration had leased out various shops/SCOs/booths in the 1960s and 1970s for five years and the lease was renewable every five years with 20% increase in rent. In 1992, the rent was increased to ₹14,000 per month.

Eventually, in 2000, the administration framed the “Leasing Out of Government Shops/Booths on Monthly Rental Basis in Chandigarh Scheme”, applicable from 1992.

As per the new regulations, the base rent has to be annually increased by 7.5% for the first five years.

After the expiry of the first five-year period, a fresh lease deed for another five years needs to be executed, with further increase of 50% in the base rent. Thereafter, the rent may be enhanced by 37.5% after every subsequent five years.

“UT administration had leased out government-built shops/booths in Sector 17-E in 1960s and 1970s for a period of five years. The lease so granted was renewable after every five years with increase in rent. The rent of these SCOs was then increased to ₹14,000 per month in 1992. Further, rent of five booths formed out of three SCOs was fixed on pro rata basis. This was challenged by the lessees in the Punjab and Haryana high court and Supreme Court. The apex court in 1999 had ordered that the rent of the said SCOs/booths shall not be further enhanced without framing rules. As per the directions of the court, the administration had framed the scheme for leasing out shops and notified it on April 19, 2000. Thereafter, rents were to be fixed with effect from March 1992 in accordance with the scheme,” the CAG specified.

“But while conducting audit of the records of the Estate Office, it was noticed that while re-assessing the rent in case of 18 shops and five booths in Sector 17-E , the office fixed the rent contrary to instructions by ignoring the prescribed stages for increase in rent and revised the lease by directly applying 50% increase on the base rent that is ₹14,000, resulting in loss of ₹9.37 crore,” the report added.