TMI Blog2003 (7) TMI 706X X X X Extracts X X X X X X X X Extracts X X X X ..... ike of the textile workers in Bombay affected financial position of all the textile mills in Mumbai and a policy decision was taken by the Government of Maharashtra to permit construction of residences in the industrial zone in the Bombay Metropolitan Region. As a result of the newly adopted policy, textile mills which had extensive land, and were hitherto not permitted to build thereupon, were granted permission to demolish old structures upon the land and construct residential buildings and sell them on condition that the finances thereby generated would be utilized for paying off the dues of the textile employees. Taking advantage of this liberalised industrial policy, the respondent company demolished some of the old structures standing on a part of its land in or about June, 1995 and got plans approved for construction of a new building complex thereupon consisting of three wings A. B and C. On 31st January, 19%, the Investigating Officer of the appellant - Corporation made a Tabulated Ward Report (TWR) No. 441 proposing a revision of the assessable value of the respondent's property. The appellant was of the view that the land under the demolished structures forms a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.3.1998 passed in Complaint No. 140 of 1996/97 fixing the rateable value w.e.f 1.10.1996. Municipal Appeal No. 370 of 1998 was directed against the order of the Investigating Officer dated 12.2 1998. The Small Causes Court heard the appeals and by a common judgment In Id that the appellant - Corporation was not entitled to revise the rateable value by adopting the market rate. It was also held that the Investigating Officer had failed to follow the principle laid down by this Court in the case of the Municipal Corporation of Greater Bombay v. M/s. Polychem Ltd., [ I974] 2 SCC 198, that the rate adopted by the Investigating Officer was excessive and exorbitant, and that the proper rate of assessment should be ₹ 654 per sq. mtr. After setting aside the order of the Investigating Officer dated 11.3 1998, the Small Causes Court determined the rateable value of wing 'A' at ₹ 26,96,355 w.e.f. 1.10.1996, and for wing'B' 'C'(as vacant land) at ₹ 89,396, w.e.f. the same date. The appellants were directed to issue fresh bills accordingly with a direction to refund the excess amount paid alter adjusting against taxes due. The appellant - Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itory Ltd. was using and occupying 4th and 5th floors of 'A' wing on ownership basis. The learned counsel contends that the judgment of this Court in Polychem (supra) merely holds that when a building on land, previously rated, is demolished, and new construction is commenced, the land upon which the construction is being made, should continue to be rated as vacant land. However, this Court has not laid down that its rateable value should be the same as prior to the demolition of the building. It is contended that even if the rateable value of a building is to be held limited to the standard rent, and the assessment of the rateable value has to be done on the said basis, the evidence on record clearly shows that the building was being assessed for the first time and, therefore, the actual letting value of the premises has to be taken as the basis for working out the rateable value irrespective of the fact that it was styled as 'leave and license compensation'. The actual amount paid by the National Stock Exchange India Limited and National Securities Depository Limited must be taken as the basis for working out the rateable value of the land under construction from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rent Act the standard rent of premises always remains fixed (iii) As the standard rent (of premises land or building) remains fixed under the Bombay Rent Act, the Corporation could not have revised the rateable value of land under construction, even if it is treated as vacant land under the ratio of the judgment in Polychem case, on the basis of the current market value of the land or the current market value of the building. to- According to the learned counsel for the respondent, Polychem holds that once the building is demolished and reconstruction is commenced on the land, the land must be treated as vacant land for the purpose of rateable value and its rating has to remain frozen at what it was earlier unless there has been additional investment or improvement therein. In the instant case, what was being assessed for rateable value was subject to the limit of standard rent applicable under the Bombay Rent Act and merely because the land had building potential, The Corporation was not entitled to revise the rateable value. Both sides cited a large number of authorities in support of their respective cases which we shall presently notice. Law: Under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. AIR (1962) SC 151, Corpn. of Calcutta v. Padma Debi. We are, fortunately, spared the effort of having to analyse these judgments in detail and ascertain their ratios, as two judgments of this Court have already anticipated and carried out this task for us. In East India Commercial Co. (P) Ltd. v. Corpn of Calcutta, [ 1998] 4 SCC 368 all these judgments were analysed by this Court and the position in law was neatly summed up as under: From the aforesaid decisions, the principle which is deducible is that when the Municipal Act requires the determination of the annual value, that Act has to be read along with Rent Restriction Act which provides for the determination of fair rent or standard rent. Reading the two Acts together the rateable value cannot be more than the lair or standard rent which can be fixed under the Rent Control Act. I he exception to this rule is that whenever any Municipal Act itself provides the mode of determination of the annual letting value like the Central Bank of India case relating to Ahmedabad or contains a non obstante clause as in Ratnaprabha case then the determination of the annual letting value has to be according to the terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roup of municipal laws, the cases in Ratnaprabha case, AGM, Central Bank of India case. East India Commercial Co. case, Balbir Singh case, Indian Oil Corpn. Case and Srikant case deal with the second group. As already noticed, this Court in LIC case dealt with the first category as in Section 168 of the Calcutta Municipal Corporation Act, there existed no non obstante clause. The observations of the Bench of this Court which dealt with the case on 10.10.2001 cannot be taken in isolation. It was further observed (vide paragraph 23): As already noticed even without specific determination, the standard rent was held to have been statutorily determined under Section 2(10) (b) of the Rent Act. Upon analysis of the various municipal laws and the judgments of this Court it is held that in cases where the municipal laws exclude the applicability of the Rent Acts by incorporating non obstante clause in the taxing statute, the powers of the authorities under the Municipal Acts are not circumscribed by the limits indicated in Padma Debi case and followed in that group of cases. In cases where the fair rent payable by the tenant has been determined and there is no justification for ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified, particularly in view of the fact that Section 7 of the Bombay Rent Act makes it illegal to claim of any rent or any licence fee in excess of the standard rent. Thus, in determining what would be the amount of the annual rent for which such land or building might reasonably be expected to let from 'ear to year for the premises, meaning thereby land or building, since both are included in the definition of the premises in Section 2 (3) (g), one has to I eep in mind that determining anything contrary to law could not be reasonable as a hypothetical tenant would hardly be inclined to pay a rent in excess of the standard rent, though, on account of circumstances which may be peculiar to the property, the reasonable rent which may be offered by the hypothetical tenant could even be less than the standard rent. Mr. Singhvi, learned counsel for the appellant, urged that this contention cannot be accepted for several reasons. First, he urged that such a contention was never raised at any stage of the proceedings either before the Investigating Officer, Small Causes Court, or even before the High Court. He contends that 'standard rent' is a pure question of fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for it as reasonable rent. If Mr. Singhvi's argument that Section 6(1) of the Mumbai Rent Act makes the provisions of Part-II inapplicable to such premises is accepted, then no taxes would be payable by any owner for self-occupied property. We, therefore, reject this contention. It is next contended by Mr. Singhvi that Bombay Municipal Corporation Act, 1888 is a complete code for determination of the rateable value and is not subject to the provisions in the Bombay Rent Act, 1947. Our attention was drawn to the fasciculus of Sections 139, 140, 146, 147, 154, 155. 156 to 167 and 217 of Bombay Municipal Corporation Act in support of the contention. In our view, the contention is unsustainable. No doubt the Bombay Municipal Corporation Act is a legislation for fixing of the rateable value and imposing of property tax, but it nowhere defines what 'rateable value' is, except in general terms under Section 154 (1). If the statute had defined 'rateable value' in specific terms, then the argument may have been sustainable, as sustained in Griha Yajmanule Samkhya and Ors. (supra). It must be remembered that the principle of 'standard rent' has not been invoked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined under the Rent Control Act in respect of a property is binding on the Commissioner. The legislature has wisely not made such a provision because determination of annual rent depends on several criteria . We are, therefore. unable to accept the contention of Shri Singhvi in this regard. It is next contended by Shri Singhvi that Section 5 (10) (b) and Section 11 of the Mumbai Rent Act, 1947 have been declared to be ultra vires Article 14 of the Constitution by this Court in Malpe vishwanath Acharya and Ors. v. State of Maharashtra and Anr., [1998] 2 SCC 1. It is undoubtedly true that this Court held the aforesaid provisions of the Bombay Rent Act to he unreasonable and liable to be struck down as unreasonable and arbitrary. However, this Court refrained from striking down the same in view of the fact that the existing Act was to lapse on 31.3.1998. Hence, this Court made the following directions: We however refrain from striking down the said provisions as the existing Act elapses on 31.3.1998 and we hope that a new Rent Control Act will be enacted with effect from 1.4.1998 keeping in view the observations made in this judgment insofar as fixation of standard rent is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that the land and buildings were rated as a composite unit by the Bombay Municipal Corporation is matter of practice. Placing reliance on the judgment of this Court in AGM, Central Bank of India v. Commr. Municipal Corporation, [1995] 4 SCC 696 it is urged that once the Commissioner of the Corporation has fixed the rateable value, the burden is upon the tenant to show as to what should be the correct rateable value. In the present case the respondent failed to lead any evidence to show why ₹ 3,000 per sq. mtr. was not a reasonable market value, nor did it adduce any evidence to show that ₹ 2500 per sq. mtr. was the reasonable market value. In the circumstances, Shri Singhvi contends that taking the market value at ₹ 3,000 per sq. mtr. was perfectly justified for assessing the rateable value. It is next contended by the appellant that even if we assume that the provisions of Bombay Rent Act apply, 'standard rent' is different y defined by the Bombay Rent Act. Section 5(10) (b) defines standard rent as under: Section 5 (10) (b) - When the standard rent is not so fixed - subject to the provisions of Section 11, (i) the rent at which the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a); or] (e) where there is any dispute between the landlord and the tenant regarding the amount of standard rent. Section - 11(2) - If there is any dispute between the landlord and the tenant regarding the amount of standard rent. Section 11 read with Section 5(10) (b) of the Bombay Municipal Act, 1947 makes it clear that where premises were let before, on or after the first September, 1940 the first letting rate shall be the standard rent subject to the provisions of Section 11. In the present case, as to whether the premises in question were let before first September, 1940, or thereafter, and, if so, what was the first letting rate, is not ascertainable from the record. In the circumstances, Shri Singhvi submits that the other alternative method of finding out the standard rent is contractor's method which has been judicially approved. Under this method the market value of the land has to be ascertained and reasonable return fixed thereupon to determine the standard rent. This is precisely what was done by the assessor and Collector by taking the market value ₹ 3,000 per sq. mtr. as a fair value with a reasonable return of 12% thereupon, in fact, even the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Stock Exchange of India Ltd. and National Security Depository Ltd. and in not disclosing the amounts paid by them. The respondent ought to have disclosed the fact, fairly and fully, and urged the legal contentions open to it based thereupon. These facts would have justified our allowing the appeal fully and restoring the assessment orders made by the appellant officers. However, we are not inclined to do so for the reason that the attention of the parties has not been focused on the core issue, as a result of which, perhaps, there was failure to produce relevant material before the assessor to show what was the standard rent. The interests of justice would require that the issue be reconsidered after giving an opportunity to the respondent to discharge the burden placed upon it under law. In the result, we allow the appeals and set aside the judgments of the High Court and Small Causes Court. The concerned proceedings are restored before the Assessor and Collector who shall hear and dispose the complaints after giving an opportunity to the respondent to produce such material as they may desired in support of their objections to the assessments made by the appellant. In the ..... 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