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TMI Blog1972 (11) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the Municipal Corporation of Delhi or the New Delhi Municipal Committee are again governed by the Delhi Rent Control Act, 1958 and were even before 1958 governed by the previous Rent Restriction Acts including the Delhi and Ajmer Rent Control Act, 1952. (3) The facts in the appeals and the writ petition are similar. Standard Rent has not been fixed by the Rent Controller for any of these premises under the Delhi Rent Control Act, 1958, or under the previous Rent Restriction Acts prevailing in Delhi. All the premises have been let out to tenants and admittedly the Municipal Corporation of Delhi, hereinafter referred to as "the Corporation", and the New Delhi Municipal Committee, hereinafter referred to as "the Committee", have assessed the annual value or rateable value on the basis of the actual rent which is being received. These assessments have been challenged on the ground that the Corporation or the Committee should not have taken the actual rent as the basis for assessment but should have proceeded to determine the standard rent of these premises in accordance with the provisions of the Delhi Rent Control Act, 1958 and should have taken such stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been held in Corporation of Calcutta v. Life Insurance Corporation: [1971]1SCR249 . It has also been rightly conceded by the learned counsel that in view of the provisions of the aforesaid Rent Acts, the annual value or rateable value cannot exceed the amount of standard rent if it has been fixed under the provisions of the said Acts by the Rent Controller in proceedings taken for fixation of standard rent or, even without such proceedings, if standard rent has been statutorily determined by the provisions of the Rent Acts. (7) The only contention which has been canvassed before us is whether in the case of premises whose standard rent has not been fixed in either of these two modes, it is open to the Corporation or the Committee to fix the annual value or the rateable value in accordance with the contractual rent in the case of premises which have been let or on the basis of a hypothetical rent which may be paid by a hypothetical tenant in the case of owner-occupied properties. The contention on behalf of the Corporation and the Committee is that it is. The respondents contend that it is not and further that it is incumbent upon the Corporation or the Committee to ascertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 127(a) of the Calcutta Municipal Act, 1923, defined annual value of land and the annual value of any building erected for letting purposes or ordinarily let, to be "the gross annual rent, at which the land or building might at the time of assessment reasonably be expected to be let from year to year, less,. in the case of a building an allowance of ten per cent for the cost of repairs and for all other expenses necessary to maintain the building in a state to command such gross rent." The above quoted words were in the view of the Supreme Court the crucial words. The principal laid down in Secretary of State v. Municipal Commissioners of the City of Madras I.L.R. 10 Madras 38 which was applied in Corporation of Calcutta v. Ashutosh De AIR1927Cal659 was accepted by the Supreme Court and it was held that the value of the property to the owner is the standard in making the assessment under the Municipal Acts. The Supreme Court then observed that the word ."reasonably" in the section threw further light on this interpretation. They observed:- "Abargain between a willing Lesser and a willing lessee uninfluenced by any extraneous circumstances may afford a g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds a guiding test of reasonable letting value; (2) fixation of annual value beyond the Limits of rent fixed by penal Rent Control legislation cannot be considered reasonable and a landlord cannot reasonably be expected to let a building for a rent higher than the standard rent; (3) according to the definition in the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950, standard rent is the rent which has actually been fixed by the Rent Controller under section 9 or at which it would have been fixed if application were made under the said section; and (4) an express prohibition is the Municipal Act like the one contained in section 26 of the Calcutta Municipal Act, 1923, was immaterial because such a prohibition was implicit in the definition of annual value." (16) It is in the light of these principles that we have to decide the matters before us. But before we do so, we will examine some of the other cases which were cited at the bar. Padma Debi's case (supra) was followed in Corporation of Calcutta v. Life Insurance Corporation of India: 1970(2) Supreme Court Cases in this case the tenant had taken the premises in question at a monthly rent of ₹ 2,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court decision is the Guntur Municipal Council v. The Guntur Town Rate Payers Association [1971]2SCR423 where again the view expressed in Padma Debi's case (supra) was held to be incontestable. In this case the Guntur Municipality had effected a general revision of the rental values of houses and buildings within its jurisdiction. Section 82 of the Madras District Municipalities Act, 1920, defined the annual value of lands and buildings to be deemed to be the gross annual rent at which they may reasonably be expected to let from month to month or from year to year less certain deductions. On the general revision being challenged by suits, the District Munsif held that the annual value had to be computed in the context of the rent that was payable under the Rent Control legislation and he granted a decree declaring that the "general revision" by the Guntur Municipality by increasing the rental value of houses to more than the rental value which prevailed on the dates provided in the Rent Control Acts in force at the relevant time was ultra virus and illegal. This view was upheld by the first appellate Court with certain modifications in the decree and the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed rent where the fair rent of a building has not been so fixed. Subsection (3) provides that any stipulation in contravention of sub-section (2) shall be null and void. Then section 29 provides for penalties. inter alias for contravention of clause (a) of sub-sections (1) and (2) of section 7. (20) It appears from the judgment of the Supreme Court that the only argument on which stress was laid on behalf of the Guntur Municipality was "that section 7 of the Act makes it clear that it is only after the fixation of the fair rent of a building that the landlord is debarred from claiming or receiving the payment of any amount in excess of such fair rent." The argument that the Act permitted the landlord to charge the agreed rent without incurring any penalties in cases where fair rent had not been fixed by the Controller and, Therefore, fixing the annual value on the basis of the agreed rent in such cases would be in accordance with the provisions of the Act was not advanced. This was because the general revision by the Guntur Municipality in 1960 was made not on the basis of agreed rent but by increasing the rental value of houses to more than the rental value which p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the Corporation Act, the Municipal Act and the Delhi Rent Control Act, 1958 hereinafter referred to as "the Delhi Rent Act" to determine the controversy in the matters before us. (23) The Corporation Act provides by sub-section (1) of section 116 that the rateable value of any land or building assessable to property taxes shall be the annual rent at which such land or building might reasonably be expected to let from year to year less certain specified deductions. The second proviso to this sub-section, quoted earlier, provides a ceiling on such rateable value to the extent of the standard rent of any land or building which has been fixed under the Delhi Rent Act. For the purpose of determining the rateable value of any land or building the Commissioner of the Corporation is empowered by sub-section of section 131 of the Corporation Act to require the owner or occupier to furnish (a) the name and place of residence of the owner or occupier or of both (b) the measurements or dimensions of the land or building and the rent obtained for such. land or building and (c) the actual cost or other specified details connected with the determination of the value of such l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted increases; or on the basis of rent fixed under the Delhi and Ajmer-Merwara Rent Control Act, 1947 or the Delhi and Ajmer Rent Control Act, 1952 with specified increases; or on the reasonable cost of construction of the building and the market price of the land with a specified return; or on the basis of first letting in case of premises constructed between June 2, 1951 and June 9, 1955 or after June 9, 1955 or on the basis of rent which the Controller considers reasonable having regard to the situation, locality and condition of the premises or on the basis of the standard rent payable for similar or nearly similar premises in the locality. A summary of the relevant provisions for fixing standard rent is as follows :- (A)Section 6(1)(A)(1) provides the rental before June 2. 1944 as the basis in the case of residential premises with specified increases. (b) Section 6(1)(A)(2) provides for residential premises let after June 2, 1944 and the basis is the rent fixed under the Delhi and Ajmer-Merwara Rent Control Act, 1947 or the Delhi and Ajmer Rent Control Act, 1952, with permitted increases and, in any other case, the rent calculated on the basis of a specified percentage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Controller or statutorily determined cannot be treated as reasonable rent for which the premises can be expected to be let from year to year. At the same time it is clear that under the Delhi Rent Act agreed rent is legally recoverable where standard rent has as not been fixed by the Controller or statutorily determined by the provisions of the Act. In fact section 12 of the Delhi Rent Act provides a period of limitation for making an application to the Controller for fixing inter alia, the standard rent of the premises. If the period of limitation expires in a given case and standard rent cannot be fixed the agreed rent remains legally recoverable. Examining the provisions of the Delhi Rent Act in M.M.Chawla V. J.S.Sethi : [1970]2SCR390 , the Supreme Court observed that:- "the prohibition in sections 4 and 5 operates only after the standard rent of the premises is determined and not till then. So long as the standard rent is not determined by the Controller, the tenant must pay the contractual rent; after the standard rent is determined the landlord becomes disentitled to recover an amount in excess of the standard rent from the date on. which the determination ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o section 116(1) of the Corporation Act and observed that in the context it has to be understood,- "as not merely covering cases where there is any order of fixation by the concerned authority under the provisions of the Delhi and Ajmer Rent Control Act 1952 but also cases where the standard rent has been provided for (fixed) by the provisions of the statute itself-and this is what applies to the present case." (31) With respect, the learned Judge was not correct in his construction of the Second proviso because, as a matter of construction, the Second proviso only contemplates a case where the standard rent has actually been fixed. The disability of the Corporation in fixing the annual value at above the standard rent which is statutorily determined by the provisions of the Delhi Rent Act arises not by reason of the Second proviso to section 116(1) of the Corporation Act but by reason of the dictum of the Supreme Court in the cases referred to earlier, particularly the case of Corporation of Calcutta v. Life Insurance Corporation of India (supra), where it was observed that the existence of the proviso was immaterial. The next case is Vidya Parkash v. Municipal Commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax in 1957 to ₹ 75.60 corresponding to an annual value of ₹ 840. The owner objected to the increase on the ground that even though standard rent had not actually been fixed by the Controller, since the premises were let at a time when the Delhi and Ajmer Rent Control Act, 1952, applied, the standard rent must be taken to have been statutorily determined under the provisions of this Act read with its Second Schedule and, Therefore, the annual value under section 3(1)(b) of the Municipal Act could not exceed the amount of such standard rent. It was observed that the case was governed by the provisions of the Delhi and Ajmer Rent Control Act, 1952, Second Schedule which clearly laid down that the original rent at the time of first letting was itself the standard rent for the purpose of the Act till it was varied by the Controller and the proposed increase in the annual value was struck down. In our view, this case was correctly decided. (34) Respondents strongly rely upon a Division Bench judgment of the Bombay High Court in Filmistan Private Ltd. v. Municipal Commissioner for Greater Bombay : 1970 Maharashtra Law Journal 866 . In this case the Corporation increased the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ror into which the learned Judge has fallen is that he assumed that in the instant case the agreed rent was the measure of the standard rent. No such assumption can be made be- cause what is the standard rent of the particular premises is an issue which has to be decided like any other issue of fact." (36) If agreed rent is not to be taken into consideration at all, we do not see, with respect, the relevancy of this observation. If, however, the learned Judges meant to say that agreed rent, in the absence of fixation of standard rent under the Rent Act, could not be the basis of ascertaining the annual value even though there was no prohibition in the Rent Act against the recovery of such agreed rent, we respectfully disagree with the view expressed. (37) Where there is an actual tenancy, it is as if the hypothetical tenant has materialised in actuality. The rent paid in pursuance of an agreement which is not tainted by fraud, emergency, relationship and such other considerations as are pointed out in Padma Debi's case (supra) is a good measure of the rent for which any particular premises may reasonably be expected to be let within the meaning of the Municipal Act. Such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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