Property Cannot Be Auctioned to Recover Property Tax: Madhya Pradesh HC [Read Order]

Jabalpur: The Madhya Pradesh High Court at Jabalpur has quashed a property tax recovery notice issued by the Municipal Corporation, Khandwa, which threatened attachment and auction of shops occupied by tenants, observing that the Corporation could not have issued a notice for auctioning the property for recovery of property tax. A Bench of Justice Vishal Mishra passed the order on 30 October 2026 and allowed the writ petition filed by a partnership firm and another tenant.

The petitioners, Hindustan Abhikaran, a registered partnership firm, and another, challenged the notice dated 18.02.2026 issued by respondent No. 4 to the owner of the premises, in so far as it contained a direction for attachment of the petitioners’ shops. The first petitioner is in possession of four shops and the second of two shops at Pandhana Road, Khandwa, which are owned by respondent No. 5. The petitioners stated that they have been tenants for the past 35 years.

The notice, as reproduced in the order, said that a demand notice under Section 174 of the Madhya Pradesh Municipal Corporation Act, 1956 had earlier been served for property tax arrears of ₹2,65,330 up to March 2025, which had not been paid. With the ₹39,282 due for 2025-26, it put the total outstanding at ₹3,04,612. The owner was told to deposit the amount within 24 hours, failing which movable and immovable property would be attached for recovery under Sections 175 and 177 of the Act.

Counsel for the petitioners submitted that the petitioners are tenants and that no notice was issued to them, and that without notice no action can be taken against them. He added that, for recovery of property tax, a notice of auctioning the property should not have been issued. He relied on the High Court’s order dated 05.07.2024 in M/s Parkson Decor Galleria Private Limited v. Indore Municipal Corporation (WP No. 17290 of 2024, Indore Bench).

That order, in turn, relied on the Court’s earlier decisions, including Saleem Mansoori v. Municipal Corporation (2009(3) MPLJ 519), to hold that a municipal corporation has the power to attach rent but no right to seal or lock rented premises for recovery of property tax. It was held that recovery from a tenant-occupier can be effected only by attachment of the rent due.

In its reply, the Corporation stated that it is conscious of the order dated 05.07.2024 and would act in conformity with the binding directions. It added that it can pursue modes of recovery permissible under the Act, including attachment of rent, and that the Commissioner had committed no error in issuing the notice.

The Court put a specific query to the Corporation’s counsel as to whether a notice for auctioning the property can be issued for recovery of property tax. Counsel fairly submitted that they are aware of the law laid down in WP No. 17290 of 2024 and would proceed in accordance with law, and that it was only a notice. Asked to justify how such a notice was issued, he did not do so. The Court also noted that the Corporation had not explained how subsequent recovery proceedings, apart from what is stated in the notice, could be initiated.

The Court held the Corporation’s stand to be unjustified. It noted that the Corporation had admitted in its reply that it is aware of the law, yet the auction notice against the owner’s property had been issued, which it could not have done. The impugned notice, it held, is therefore unsustainable, and “No auction of the property could be done for recovery of the property tax.”

Accordingly, the Court quashed the notice dated 18.02.2026 and allowed and finally disposed of the petition.

Appearances: For the Petitioners: Shri Avinash Zargar, Advocate. For Respondent No. 1/State: Shri Jubin Prasad, Panel Lawyer. For Respondents No. 2, 3 and 4/Corporation: Shri Prakash Kumar Gupta, Advocate.

Case Title: Hindustan Abhikaran, A Registered Partnership Firm and Anr. v. State of Madhya Pradesh and Others, Writ Petition No. 8169 of 2026

[Read Order]