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TMI Blog2024 (2) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent herein ('the assessee'), thereby holding that the assessee is exempt from payment of property tax under the provisions of the UP Municipal Corporation Adhiniyam, 1959 (hereinafter referred to as "Act of 1959", for brevity sake). Bird's Eye View of the Controversy: 3. Whether statutory vesting of property termed as enemy property under the provisions of the Enemy Property Act, 1968 (hereinafter referred to as "the Act" for the sake of convenience) amounts to expropriation which leads to the change of its status inasmuch as its ownership is transferred to the Union of India, is a question that has arisen in the present appeal. If there is a transfer of ownership by its statutory vesting in the Custodian for Enemy Property, whether the Union within the meaning of Article 285 of the Constitution of India would be entitled to exemption from payment of property or other local taxes to Municipal Corporation under the provision of the Act of 1959 is another question that has arisen in the present appeal. Further, despite becoming the property of the Union, whether, clause (2) of Article 285 enables the appellant herein to impose property or other local taxes on the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian citizen, had been actively seeking the release of enemy properties owned by his late father. He contended that these properties should no longer be vested with the Custodian after his father's demise as they were now vested in him, an Indian citizen. While the Government had agreed to release 25% of these properties, it had not yet acted upon this commitment. In response, Raja Mohammed Amir Mohammad Khan approached the Bombay High Court by way of filing WP No.1524 of 1997. The High Court ruled in his favor, directing the Custodian to surrender possession of the properties to him. Being aggrieved with this decision, the Union of India approached this Court by way of filing SLP (C) No.22452 of 2001, which was converted to Civil Appeal No.2501 of 2002. This Court by its judgment dated 21.10.2005 reported in Union of India vs. Raja Mohammad Amir Mohammad Khan, (2005) 8 SCC 696 ('Amir Mohammad Khan'), dismissed the appeal preferred by the Union of India and directed the Union of India to get the buildings (residence or offices) vacated from such officers and handover the possession to Raja Mohammed Amir Mohammad Khan within eight weeks. The Court further directed that the office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) issue a writ of certiorari or a writ, order or direction in the nature of certiorari quashing the impugned bills/recovery notice dated 28.5.2011, issued by the opposite party no.2, contained in Annexure Number 2 to the writ petition; and (d) issue a writ of mandamus or a writ, order or direction in the nature of mandamus commanding _the respondent numbers 1 to 3 to refund the amount of Rs.7,29,7461- and Rs.2 lacs deposited by the petitioner along with interest at the rate of 18% per annum and within such time as may kindly be stipulated by this Hon'ble Court" 4.9 During the pendency of the said proceedings, appellants' counsel conceded that, as per the provisions of the Constitution of India, the appellants could not levy taxes on property belonging to the Government of India or Union properties. However, the appellants reserved the right to demand applicable fees for services rendered, such as water and sewerage charges. 4.10 By virtue of the impugned judgment and order dated 29.03.2017, the High Court allowed the writ petition and quashed the recovery notice dated 28.05.2011 on the ground that this case pertained exclusively to taxes, namely House Tax and Water ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... management of the enemy property; c) that for the Union Government to claim ownership of enemy property, it must follow the tenets of Article 300-A of the Constitution of India as well as other relevant provisions of the Constitution, which allow the acquisition of private properties only on payment of a fair compensation. This constitutional right is available to all persons and not just to citizens of India. Being aware of the aforesaid position that enemy properties do not become properties of the Union of India, the legislature has under Section 8(2)(vi) of the Act permitted the Custodian for Enemy Property to deposit Municipal Taxes vis-à-vis enemy property vested in him; d) that even though the Union of India may have overarching control over Enemy Properties, the status of the Union or Central Government is not that of an owner. The Custodian is a statutory authority in whom there is vesting of enemy property, which is different from having ownership over the same. The fact that the Custodian can sell properties to third parties is akin to the powers available to a Receiver or a Liquidator who can exercise similar powers of sale [vide Delhi Administration vs. Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent No.1 to pay the pending bills of Water Tax/Sewer Tax/Water price of Rs. 7,57,239/- by 31.03.2011; i) that it is settled law that the exemption from state taxation of property of the Union Government is only against property taxes and not against all taxes including the commercial taxes and services by local administration/authorities. However, the High Court in its final Judgment and Order dated 29.03.2017, erroneously equated the commercial tenancy of a private person in Enemy Property with the property of the Central Government and accordingly, has quashed the recovery notice dated: 28.05.2011; j) that the Enemy Property occupied by private persons for private business interests is not synonymous with the interest of the State and is starkly in contrast to the objectives and scheme of the Constitution. Accordingly, it was contended that the interest or property of a private person i.e. respondent No.1 is not exempted from property taxes under Article 285 of the Constitution of India; k) that the Custodian under the Act is empowered to realize from occupants all taxes, fees and charges and pay to the local authority. In the present case, it is admitted by the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be covered by the judgment in Amir Mohammad Khan. Accordingly, the respondent No.1 has continued to be in possession. b) Reliance was placed on the Amendment Act, 2017 as per which the enemy property vested in the Custodian will remain vested in the Custodian regardless of change in circumstances such as the death of the enemy; the extinction of the enemy status; the winding up of business or a change in nationality of the legal heir and successor. The Act further clarifies that "enemy property vested in the Custodian" includes all rights, titles, and interests in or benefits arising from such property. It includes the right of expropriation of the enemy property, in exercise of the police powers of the State. Also, the principles of acquisition or requisition and payment of compensation will not apply to such a legislation. c) that the property in question unequivocally belongs to the Central Government, specifically the Custodian; Enemy Property is thus 'property of the Union.' The assessee is merely a tenant of the Custodian of the Enemy Property and therefore, no taxes can be levied on this property. d) that Article 285 of the Constitution provides exemption from Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed before the High Court nor in any pleading before this Court and is a clear afterthought raised for the first time during oral replies; i) in the alternative, this Court may balance the equities to make the demand prospective considering the grave hardship that the demand of entire past amount would cause to respondent No.1 in case this Court holds against respondent No.1. With the aforesaid submissions, it was prayed that the present appeal be dismissed as being devoid of any merit and the impugned order of the High Court be affirmed. Submissions of the respondent No. 2 : 7. Learned counsel Sri Rupesh Kumar, appearing on behalf of the Custodian of the subject Enemy Property, respondent No.2 herein, submitted as under: a) that the subject property belongs to a Pakistani National namely, Raja of Mahmudabad and therefore, the property is vested in the Custodian of Enemy Property for India under the Act as amended by the Amendment Act, 2017 and is an undisputed enemy property; b) that the property belonging to the Union Government is exempted from state taxation under article 285(1) of the Constitution of India. However, there is no such exemption in respect of fee/servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Act does not make such properties as properties owned by the Central Government or Union properties. In this connection, reference was made to the observations of this Court in Amir Mohammad Khan, which shall be discussed later in the judgment. In light of the aforesaid submissions, it was urged that the view taken by the Hon'ble High Court in the impugned judgment and order needs to be set aside. Points for consideration : 9. Having heard learned senior counsel and learned counsel for the respective parties, the following points would arise for our consideration: 1. Whether statutory vesting of enemy property including the subject property in the Custodian amounts to expropriation and transfer of ownership so as to confer ownership of such enemy property on the Custodian? 2. Consequently, if the ownership of such enemy property is conferred on the Custodian for Enemy Property, whether such property becomes Union property within the meaning of Article 285 of the Constitution and therefore, it is exempt from payment of property or other local taxes to the appellant-Municipal Corporation under the provisions of the Act of 1959? 3. Whether despite such enemy prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1962, and Subrule 4 of Rule 138 of Defence of India Rules, 1971 implying that the enemy property is only held and managed by the Custodian for a specific purpose. We ought to appreciate that the Statement of Objects and Reasons of the Enemy Property Act, 1968 intend to continue the vesting and maintenance of the properties by the Custodian of Enemy Property until the Government of India arrives at a settlement with the Governments of enemy countries. The intent of the Parliament is further illuminated by the Tashkent Declaration by India and Pakistan dated January 10, 1966, which included a clause stating that the two countries would discuss the return of the properties and assets taken over by either side in connection with the conflict. Legal framework : Provisions of the Act : 10. The Parliament has enacted the said Act to provide for the continued vesting of enemy property vested in the Custodian of Enemy Property for India under the Defence of India Rules, 1962 and the Defence of India Rules, 1971 and for matters connected therewith. 10.1 Part IV of the Defence of India Rules, 1962 deals inter alia with restriction of movements and activities of persons. While Part XIV- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nationality or an enemy firm, including its succeeding firm whether or not partners or members of such succeeding firm are citizen of India or the citizen of a country which is not an enemy or such firm which has changed its nationality, as the case may be, under the Defence of India Act, 1962, and the Defence of India Rules, 1962 or the Defence of India Act, 1971 (42 of 1971) and the Defence of India Rules, 1971, does not include a citizen of India other than those citizens of India, being the legal heir and successor of the "enemy" or "enemy subject" or "enemy firm"; (c) "enemy property" means any property for the time being belonging to or held or managed on behalf of an enemy, an enemy subject or an enemy firm: Provided that where an individual enemy subject dies in the territories to which this Act extends, or dies in the territories to which the Act extends or dies in any territory outside India, any property which immediately before his death, belonged to or was held by him or was managed on his behalf, may, notwithstanding his death, continue to be regarded as enemy property for the purposes of this Act;" 10.4 Section 3 of the Act deals with appointment of Custodian o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mediately before the commencement of the Enemy Property (Amendment) Act, 1977 (40 of 1977) shall, as from such commencement, vest in the Custodian. (3) The enemy property vested in the Custodian shall, notwithstanding that the enemy or the enemy subject or the enemy firm has ceased to be an enemy due to death, extinction, winding up of business or change of nationality or that the legal heir and successor is a citizen of India or the citizen of a country which is not an enemy, continue to remain, save as otherwise provided in this Act, vested in the Custodian. Explanation. - For the purposes of this sub-section, "enemy property vested in the Custodian" shall include and shall always be deemed to have been included all rights, titles, and interest in, or any benefit arising out of, such property vested in him under this Act." 10.5 Section 5A and Section 5B were inserted with retrospective effect from 07.01.2016 and 10.07.1968 by Act 3 of 2017. They read as under: "5A. Issue of certificate by Custodian. -The Custodian may, after making such inquiry as he deems necessary, by order, declare that the property of the enemy or the enemy subject or the enemy firm described in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any benefit arising out of such property) over the said property vested or deemed to have been vested in the Custodian." 10.7 Section 7 deals with payment to Custodian of money otherwise payable to an enemy, enemy subject or enemy firm, the same reads as under: "7. Payment to Custodian of money otherwise payable to an enemy, enemy subject or enemy firm. - (1) Any sum payable by way of dividend, interest, share profits or otherwise to or for the benefit of an enemy or an enemy subject or an enemy firm shall, unless otherwise ordered by the Central Government, be paid by the person by whom such sum would have been payable but for the prohibition under the Defence of India Rules, 1962 or the Defence of India Rules, 1971, as the case may be, to the Custodian or such person as may be authorised by him in this behalf and shall be held by the Custodian or such person subject to the provisions of this Act. (2) In cases in which money would, but for the prohibition under the Defence of India Rules, 1962 or the Defence of India Rules, 1971, as the case may be, be payable in a foreign currency to or for the benefit of an enemy or an enemy subject or an enemy firm (other than cases in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vii) transfer by way of sale, mortgage or lease or otherwise dispose of any of the properties; (viii) invest any moneys held by him on behalf of enemies for the purchase of Treasury Bills or such other Government securities as may be approved by the Central Government for the purpose; (ix) make payments to the enemy and his dependents; (x) make payments on behalf of the enemy to persons other than those who are enemies, of dues outstanding on the 25th October, 1962 or on the 3rd December, 1971; and (xi) make such other payments out of the funds of the enemy as may be directed by the Central Government." 10.9 Section 8A deals with sale of property by Custodian which has been inserted with retrospective effect from 07.01.2016 while Section 10A deals with power to issue certificate of sale. The same are extracted as under: "8A. Sale of property by Custodian.-(1) Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority or any law for the time being in force, the Custodian may, within such time as may be specified by the Central Government in this behalf, dispose of whether by sale or otherwise, as the case may be, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nemy immovable property vested in him, to any person, he may on receipt of the sale proceeds of such property, issue a certificate of sale in favour of such person and such certificate of sale shall, notwithstanding the fact that the original title deeds of the property have not been handed over to the transferee, be valid and conclusive proof of ownership of such property by such person. (2) Notwithstanding anything contained in any law for the time being in force, the certificate of sale, referred to in sub-section (1), issued by the Custodian shall be a valid instrument for the registration of the property in favour of the transferee and the registration in respect of enemy property for which such certificate of sale had been issued by the Custodian, shall not be refused on the ground of lack of original title deeds in respect of such property or for any such other reason." 10.10 Section 9 states that all enemy property vested in the Custodian under this Act shall be exempt from attachment, seizure or sale in execution of a decree of a civil court or orders of any other authority. The same is extracted as under: "9. Exemption from attachment, etc. - All enemy property ves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of moneys paid to him; (b) the proceeds of the sale or transfer of any property which has been vested in him under this Act; and (c) the value of the residual property, if any, at the time of its transfer to the original owner or other person specified by the Central Government under section 18: Provided that in the case of an enemy whose property is allowed by the Custodian to be managed by some person specially authorised in that behalf, there shall be levied a fee of five per centum of the gross income of the enemy or such less fee as may be specifically fixed by the Central Government after taking into consideration the cost of direct management incurred by that Government, the cost of superior supervision and any risks that may be incurred by that Government in respect of the management: Provided further that the Central Government may, for reasons to be recorded in writing, reduce or remit the fees leviable under this sub-section in any special case or class of cases. Explanation.-In this sub-section "gross income of the enemy" means income derived out of the properties of the enemy vested in the Custodian under this Act. (2) The value of any property fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the said Act, had been in force at all material times; (b) any enemy property divested from the Custodian to any person under the provisions of this Act, as it stood immediately before the commencement of the Enemy Property (Amendment and Validation) Act, 2017, shall stand transferred to and vest or continue to vest, free from all encumbrances, in the Custodian in the same manner as it was vested in the Custodian before such divesting of enemy property under the provisions of this Act, as if the provisions of this Act, as amended by the aforesaid Act, were in force at all material times; (c) no suit or other proceedings shall, without prejudice to the generality of the foregoing provisions, be maintained or continued in any court or tribunal or authority for the enforcement of any decree or order or direction given by such court or tribunal or authority directing divestment of enemy property from the Custodian vested in him under section 5 of this Act, as it stood before the commencement of the Enemy Property (Amendment and Validation) Act, 2017, and such enemy property shall continue to vest in the Custodian under section 5 of this Act, as amended by the aforesaid Act, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process for divestment of an enemy property vested in the Custodian, to the owner thereof or to such other person. (2) An officer of the rank of Joint Secretary or above in the Government of India shall be the Chairperson of the proceedings for divestment of the enemy property under this rule. (3) The Chairperson shall give thirty days' notice to all concerned including the Custodian, requiring them to submit a reply, produce all documentary evidence and appear in person or through authorised representative: Provided that if any party fails to appear on the date fixed for hearing, then a second and final notice shall be served through registered post and if he again fails to appear after the second notice, then the proceedings shall be heard ex parte: Provided further that the Chairperson shall record the reasons for such ex parte proceedings. (4) The notices shall be served on all concerned parties before each hearing. (5) The presenting officer who has been engaged for presentation of the case on behalf of the Central Government, shall examine such witnesses and documentary evidences in respect of the property as he thinks fit. (6) On completion of the procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Government of India or the Government of a State shall, according as the purposes for which it was then used or held were purposes of the Union or of a State, vest in the Union or in that State. Explanation: In this article, the expressions "Ruler" and "Indian State" have the same meanings as in article 363. x x x 300-A. Persons not to be deprived of property save by authority of law.- No person shall be deprived of his property save by authority of law." 12. The Uttar Pradesh Municipalities Act, 1916 (hereinafter referred to as "Act of 1916") consolidates and amends the law relating to Municipalities in the erstwhile United Provinces and presently State of Uttar Pradesh. The city of Lucknow was a municipality and later was constituted as Nagar Nigam or Corporation under the Act of 1959 and till then the Act of 1916 was applicable. Hence, the relevant provisions of the Act of 1916 are extracted as under: "128. Taxes which may be imposed.- (1) Subject to any general rules or special order of the State Government in this behalf, the taxes which a Municipality may impose in the whole or part of a municipality are,- (i) a tax on the annual value of building or lands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by Parliament. (i) A tax on the annual value of buildings or lands or both; (ii) A water tax on the annual value of buildings or lands or both; (iii) A drainage tax on the annual value of buildings leviable on such buildings as are situated within a distance, to be fixed by rules in this behalf for each municipality from the nearest sewer lines; (iv) A conservancy tax for the collection, removal and disposal of excrementious and polluted matter from privies, urinals, cesspools; (2) x x x (3) The municipal taxes shall be assessed and levied in accordance with the provisions of this Act and the rules and bye-laws framed thereunder. (4) Nothing in this section shall authorize the imposition of any tax which the State Legislature has no power to impose in the State under the Constitution: Provided that a Municipality which immediately before the commencement of the Constitution was lawfully levying any such tax under this section as then in force, may continue to levy that tax until provisions to the contrary is made by the Parliament. x x x 129-A. Levy of tax on annual value of buildings or lands or both.- The Tax on annual value of buildings or lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f "Annual Value" - "Annual value" means - (a) in the case of railway stations, colleges, schools, hostels, factories, commercial buildings, and other non-residential buildings, a proportion not below 5 per cent, to be fixed by rule made in this behalf of the sum obtained by adding the estimated present cost of erecting the building, less depreciation at a rate to be fixed by rules, to the estimated value of the land appurtenant thereto; and (b) in the case of a building or land not falling within the provisions of clause (a), the gross annual rent for which such building exclusive of furniture or machinery therein, or such land is actually let, or where the building or land is not let or in the opinion of the assessing authority is let for a sum less than its fair letting value, might reasonably be expected to be let from year to year. Provided that where the annual value of any building would, by reason of exceptional circumstances, in the opinion of the Corporation, be excessive if calculated in the aforesaid manner, the Corporation may fix the annual value at any less amount which appears to it equitable. Provided further that where the Corporation so resolves, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et from the superior lessor; (c) if the property is unlet from the person in whom the right to let the same vests. (d) if the property is let in pursuance of an order under the Uttar Pradesh Urban Buildings (Regulations of Letting, Rent and Eviction) Act, 1972, from the tenant. (3) On failure to recover any sum due on account of such tax from the person primarily liable, the Mukhya Nagar Adhikari may recover from the occupier of any part of the buildings or lands in respect of which it is due that portion thereof which bears to the whole amount due the same ratio as the rent annually payable by such occupier bears to the aggregate amount of rent payable in respect of the whole of the said building or lands, or to the aggregate amount of the letting value thereof in the authenticated assessment list. (4) An occupier who makes any payment for which he is not primarily liable under the foregoing provisions shall, in the absence of any contract to the contrary, be entitled to be reimbursed by the person primarily liable. 180. Liability for payment of other such taxes. - (1) A drainage tax, or a conservancy tax on the annual value of buildings or lands shall be levied fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to all classes of rights, whether proprietary or personal, in rem or in personam, in re propria or in re aliena. Every man is the owner of the rights which he owns. Ownership in its generic sense as a relation in which a person stands to any right vested in him, is opposed to two other possible relations between a person and a right. In the first place, it is opposed to possession. A man has possessory right without owning it or secondly, he may own a right without possessing it. Thirdly, the ownership and possession may be united as they usually are, in the context of de jure and the de facto relation being co-existent or coincident. 14.2 In the first of the above, possession is a de facto relationship while the second is de jure ownership or relationship. In the second sense, the ownership of a right is opposed to the encumbrance of it. The owner of the right is he, in whom the right itself is vested, while the encumbrancer of it is he, in whom, is vested, not the right itself, but some adverse, dominant and limiting right in respect of it. In law, there are no separate names for every distinct kind of encumbrancer. However, an encumbrance is opposite to ownership; every encum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eller professes to transfer to the buyer which subsists and he has power to transfer the same. Proviso thereto further states that, where the sale is made by a person in a fiduciary character, he shall be deemed to contract with the buyer that the seller has done no act whereby the property is encumbered or whereby he is hindered from transferring it. 14.4 Similarly, gift is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee. Such acceptance must be made during the lifetime of the donor and while he is still capable of giving. If the donee dies before acceptance, the gift is void. The donor is the person who gives. Any person who is sui juris can make a gift of his property. Therefore, it is only a person who is the owner of the property, can gift his property and according to the provisions of the Transfer of Property Act. 14.5 In the same vein, an exchange is when an exchange of immovable property takes place when two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two owners being such that one of them is under an obligation to use his ownership for the benefit of the other. The former is called the 'trustee' and his ownership is the 'trust ownership'; the latter is called the 'beneficiary' and his is beneficial ownership. 14.10 The trustee's ownership of any property is a matter of form rather than a substance and nominal rather than real. A trustee is not effectively an owner at all but in essence a mere agent, upon whom the law has conferred the power and imposed the duty of administering the property of another person. The trustee is a person to whom the property, substantially that of someone else is technically attributed by the law on the footing that the rights and powers that it vests under him are to be used by him on behalf of the real owner. As between the trustee and beneficiary, the law recognises that the property belongs to the latter and not to the former. But as between the trustee and the third persons, the fiction prevails, inasmuch as the trustee is clothed with the rights of his beneficiary and personate or represent him in dealings with the world at large. This principle is actuated under various provisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the trustee and all persons beneficially interested in the property, either as owners or encumbrancers. Possession : 14.14 There is another jurisprudential angle to the matter. Under the Act the Custodian takes possession of the enemy property, in as much as, the enemy property vests with the Custodian under the provisions of the Act. What does this entail? 14.15 While discussing on the jurisprudential aspects of vesting or taking possession in the instant case as per the provisions of the Act, it is necessary to reiterate and bear in mind the following aspects: (i) That there are three possible situations: first, the possession usually exists both in law and in fact; secondly, the possession may exist in fact but not in law; thirdly, the possession may exist in law but not in fact. This is also called 'constructive possession'. In the case of the Custodian for Enemy Property, possession exists in law under the provisions of the Act but may be in fact in the hands of a third party such as a tenant or a mortgagee of the owner of such property who is declared an enemy under the Act. (ii) Further, whatever may be owned may be possessed but whatever may be possessed may not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim he makes to it. (v) Thus, possession is acquired whenever the two elements of corpus and animus come into co-existence and it is lost as soon as either of them disappears. (vi) The modes of acquisition of possession are two in number, namely, taking and delivery. Taking is the acquisition of possession without the consent of the previous possessor such as in the case of the Custodian vis-à-vis enemy property. Delivery, on the other hand is the acquisition of possession with the consent and co-operation of the previous possessor. Relation between Possession and Ownership : 14.16 According to Rudolf von Ihering, a jurist "Possession is the objective realisation of ownership". It is in fact what ownership is in right. Ownership is the guarantee of the law, while the possession is the guarantee of the fact. Normally, ownership and possession co-exist but not always. This aspect of the case is crucial for answering the contentions raised by the respective parties. Analysis : Let us apply the aforesaid jurisprudential principles to the provisions of the Act under consideration. 15. Section 2 (c) of the Act defines enemy property to mean any property for the time be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is vested in the Custodian? Does it mean vesting of the ownership of the rights, titles, and interest in, or any benefit arising out of such enemy property owned by the enemy which becomes vested in the Custodian in the sense that the Custodian becomes the owner of the property; thereby there is a divesting of the ownership or a transfer of ownership of such property from the ownership of the enemy to the Custodian. 15.2 We do not think that such an interpretation can be given for the simple reason that clause (c) of Section 2 clearly states that enemy property means any property for the time being belonging to or held or managed on behalf of an enemy, an enemy subject or an enemy firm being vested in the Custodian. Therefore, the provision of the Act recognises the ownership of the enemy vis-à-vis the enemy property and the enemy property belonging to or held or managed on behalf of an enemy, an enemy subject or an enemy firm being vested in the Custodian. What exactly is vested in the Custodian? The Explanations i.e. Explanation (2) of clause (c) of Section 2 as well as Explanation (2) to sub-section (3) of Section 5 of the Act, being identical state that all rights, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en of a country which is not an enemy country. Explanation (2) thereof states that enemy property shall mean and include and shall be deemed to have always meant and included all rights, titles and interests in, or any benefit arising out of such property. This Explanation gives meaning to the scope of the expressions belonging to, held or managed on behalf of an enemy, an enemy subject or enemy firm. 15.4 If a certificate is issued by the Custodian that the enemy property has vested in him under the Act, the same shall be evidence of the facts stated therein vide Section 5-A of the Act. Section 5-B of the Act begins with a non obstante clause which states that nothing contained in any law for the time being in force relating to succession or any custom or usage governing succession of property shall apply in relation to the enemy property under this Act and no person (including his legal heir and successor) shall have any right and shall be deemed not to have any right (including all rights, titles, and interests or any benefit arising out of such property) in relation to such enemy property. This provision regarding extinction of rights, titles or interests or any benefit arisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act or under the Defence of India Rules, 1962 or 1971 as the case may be. Further, any property vested in the Custodian under the Act shall be dealt with by him as the Central Government may direct. 15.7 What are the powers of the Custodian in respect of property vested in him? This is dealt with in Section 8 of the Act. The Custodian may take or authorise the taking of such measures as he considers necessary or expedient for preserving such property till it is disposed of in accordance with the provisions of the Act. Sub-section (2) of Section 8 speaks of eleven exigencies which a Custodian or such person as may be specifically authorised by him may take. The same are extracted above. A reading of the above clearly indicates that the Custodian or his authorised person can carry on the business of the enemy; fix and collect the rent etc. in respect of enemy property; take action for recovering any money due to the enemy; make any contract and execute any document in the name and on behalf of the enemy; institute or defend any legal proceeding; secure vacant possession of the enemy property; raise on the security of the property such loans as may be necessary; incur out of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion clear. Jurisprudential aspect of vesting : 16. A discussion on the aforesaid provisions under the Act would indicate that the Custodian takes charge of the enemy property which vests in him by operation of law. Then the following questions would arise: (i) Does vesting of enemy property in the Custodian imply that the Custodian assumes ownership rights vis-à-vis enemy property vested in him? (ii) Secondly, whether the vesting of enemy property in the Custodian would imply that it becomes the property of the Union? These are the two crucial questions which are required to be answered in this case in order to decide the matter in all its perspectives. 16.1 The expression 'vest' or 'vesting' has no precise definition and it would depend upon the context in which the expression is used under a particular enactment. This Court has held that the expression 'vest' is of fluid or flexible content and can, if the context so dictates, bear the limited sense of "being in possession and enjoyment". (See: Maharaj Singh vs. State of Uttar Pradesh, (1977) 1 SCC 155) (Para 18)]. In Dr. M. Ismail Faruqui vs. Union of India, (1994) 6 SCC 360 : AIR 1995 SC 605, it was observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ushan Datta vs. Anadinath Datta, AIR 1934 Cal 87, ("Bibhutibhusan Datta"), it was observed that mere transference of management or control of a property, when transfer of proprietary rights is not intended, the requirements of vesting is not satisfied in terms of Section 10 of the Limitation Act. Under the Act under consideration, the vesting of the enemy property in the Custodian is not free from encumbrances but vesting is in accordance with the status of the property as held by the enemy, enemy subject or enemy firm prior to its vesting. Therefore, only when enemy property vests in the Custodian free from all encumbrances it will be a transfer of ownership from the owner of such property to the Custodian. This is because under the Act, Custodian holds or manages the property for and on behalf of the enemy, enemy subject or enemy firm only temporarily and there is no transfer of ownership to the Custodian or the Union of India. Hence, there is no necessity of payment of compensation to the owners of such properties. Under Section 5A of the Act under consideration, when property vests in the Custodian under the provision of the Act, he may issue a certificate to that effect and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stodian would nevertheless be acting as a trustee of the enemy property but under the directions of the Central Government as the Custodian is appointed under the Central Government and he, with the prior approval of the Central Government may dispose of the enemy property for valid reasons. It could be for the reasons that there is no succession to the enemy property or the said property is in a dilapidated condition or, if for any reason, there is litigation or legal or other complications arising which would make it difficult for the Custodian as the trustee of such property to manage the same. In such circumstance, there could be alienation of the said property. On such alienation, the sale proceeds would have to be deposited in the Consolidated Fund of India, as the Custodian, being an officer appointed under the provisions of the Act by the Central Government, would be discharging his duties under the Act. But the power of sale of an enemy property as envisaged under Section 8A of the Act, in our view, would also not imply that the Custodian would be acting as the owner of the property but only as a Custodian of such property. This view is further supported by Section 9 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bound to submit such return within the prescribed period. All such returns shall be recorded in such registers as may be prescribed, which shall be open to inspection subject to reasonable restrictions as may be imposed by the Custodian, if in the opinion of the Custodian, the person seeking inspection is interested in any particular enemy property as a creditor or otherwise. Such being the position of a Custodian, who under the Act, acts as the trustee for the enemy property under the Act and not as the owner of the property, but as a protector of the property vested in him, the Custodian can never be an owner or having any right, title or interest in the enemy property as owner. While Section 5-B states that any law related to succession or any custom or usage governing succession of property shall not apply in relation to enemy property under the Act as no person including a legal heir and successor of an enemy or enemy subject or enemy firm shall be deemed to have any right, title or interest or any benefit arising out of such property in relation to enemy property, this provision does not at the same time confer any right, title and interest or any benefit arising out of ene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of enemy property vested in him and such other actions that he may take vis-à-vis enemy property, would clearly indicate that the Custodian acts at the behest of the Central Government and therefore, the enemy property becomes Union property even though the same is vested in the Custodian who, in any case, is appointed by the Central Government. In order to buttress this submission, our attention was drawn to Section 8-A which begins with a non-obstante clause and which states that the Custodian may, with the approval of the Central Government, dispose of enemy property by sale or otherwise, as the case may be, the enemy property vested in him immediately before the date of commencement of the Amendment Act, 2017, in accordance with the provisions of the Act as amended by the Amendment Act, 2017. Further, the Custodian, on disposal of enemy property, has to deposit the sale proceeds into the Consolidated Fund of India immediately and intimate details thereof to the Central Government. Also, the Custodian has to submit a report of the enemy properties disposed of enclosing details of sale etc. The Central Government may also issue directions and guidelines to the Custodian in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emy or his heirs or descendants. It is for this reason that the original title deeds may remain with the enemy or his family vis-à-vis the enemy property and in lieu of handing over of the title deeds of the property to the vendee or purchaser of the enemy property, a certificate of sale is issued in favour of such person by the Custodian and such certificate of sale is a valid instrument for seeking registration of the property in favour of the transferee. When the registration of the sale is made in favour of the transferee by the Custodian, the latter is acting as a trustee and not as the owner of the enemy property. Therefore, it cannot be accepted that the Custodian is acting as the owner of the property and by that logic the enemy property would become the property of the Union. 17.2 Further, since the Custodian is the trustee of the enemy property, if any monies are due to the enemy or if any order has been made with regard to enemy property vested in the Custodian which are paid or complied with by any person, as the case may be, and a certificate is issued in that regard by the Custodian, such a person, to whom the certificate is issued, shall not be liable to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority within a State. When the aforesaid position of law was discussed during the course of submission and specifically put to Sri Balbir Singh, learned ASG by the Bench, the response was that the enemy property being the property of the Union is exempt from all taxes imposed by a State or by any authority within a State, save insofar as Parliament may by law otherwise provide. That in the instant case, Section 8(2)(vi) authorises the Custodian to make payments out of the enemy property any taxes, dues, cesses or rates to the State Government or to any local authority and therefore, the Parliament has by the said provision authorised the payment of taxes to the State Government or the local authority such as the appellant herein and hence, there is no exemption from payment of taxes in respect of enemy property which is by that reason Union property. In other words, the contention was premised on the fact that once the enemy property vests in the Custodian, it automatically becomes the property of the Union and having regard to the saving clause in Articles 285(1) of the Constitution, and bearing in mind Section 8(2)(vi) of the Act, there is no exemption from the payment of prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the Custodian who is appointed by the Central Government under the provisions of the Act, which is a Central legislation only discharges his duties and functions under the provisions of the Parliamentary legislation i.e. the Act under consideration. Such discharge of duties and functions, including the payment of taxes vis-à-vis enemy property vested in him would not also by the same logic imply that the Custodian is acting as if the property vested in him has become the Union property. We emphasise again that mere vesting of enemy property in the Custodian does not transfer ownership of the same from the enemy to the Union or to the Central Government; the ownership remains with the enemy but the Custodian only protects and manages the enemy property and in discharging his duties as the Custodian or the protector of enemy property he acts in accordance with the provision of the Act and on the instructions or guidance of the Central Government. The reason as to why the Central Government is empowered to issue guidelines or instructions to the Custodian is because the Custodian is appointed under the Act which is a Parliamentary legislation and the reason why the Parliam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Land Acquisition Act, 1984 or the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, it is always for a public purpose and on payment of compensation to the owner of the said property. The State then possesses the power to take control of the property of the owner thereof for the benefit of the public and when the State so acts it is obliged to compensate the owner upon making just compensation as the owner of the property would lose all his rights vis-à-vis the acquired land. 18.2 However, this position has to be distinguished vis-à-vis the Custodian for Enemy Property under the Act, as he takes possession of the enemy property only for the purpose of managing the same as per the provisions of the Act and does not become the owner of the property inasmuch as the ownership of the property from the enemy or enemy subject or enemy firm does not get transferred to the Custodian. On the other hand, if it is to be recognised that ownership of the property gets transferred from the enemy to the Custodian who takes possession of the property and administers it or manages it and thereby the ownership would then be that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , an exception is provided in clause (2) thereof in that the income derived by a State from trade or business would be taxable, provided a law is made by Parliament in that behalf. Clause (3) is an exception to the exception prescribed in clause (2) which states that the income derived from a particular trade or business may still be immune from Union taxation if Parliament declares that the said trade or business is incidental to the ordinary functions of Government. This Article broadly corresponds to Section 155 of the Government of India Act, 1935 but has certain other conditions thereto. Articles 285 and 289 provide for the immunity of the property of the Union and the State from mutual taxation on the basis of the Federal principle. NDMC is a decision of nine-Judge Bench which dealt with a question whether the properties owned and occupied by various States within the National Capital Territory of Delhi are entitled to be exempted from the levy of taxes under the provision of Delhi Municipal Corporation Act, 1957 and New Delhi Municipal Council Act, 1994 by virtue of the provisions of Article 289(1) of the Constitution. The pertinent question was, whether, by virtue of Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of clause (2) of Article 289. It was held that levy of taxes on property by the Punjab Municipal Act, 1911 (as extended to Part 'C' State (Law) Act, 1950), the Delhi Municipal Corporation Act, 1957 and the New Delhi Municipal Council Act, 1994 (both parliamentary enactments) constitute "Union taxation" within the meaning of Article 289(1). That by virtue of the exemption provided by clause (1), taxes are not leviable on State properties but clauses (1) and (2) of Article 289 go together, form part of one scheme and have to be read together. Therefore, Municipal Laws of Delhi are inapplicable to the properties of State Government to the extent such properties are governed and saved by clause (1) of Article 289 and that insofar as the properties used or occupied for the purpose of a trade or business carried on by the State Government, the ban in clause (1) does not avail to them and the taxes thereon must be held to be valid and effective. It was observed that the levy of the property taxes under the three enactments, namely, the Delhi Municipal Corporation Act, 1957; the New Delhi Municipal Council Act, 1994 and the Punjab Municipal Act, 1911 are valid to the extent the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te from levying any tax on any property of the Union to which such property was immediately before the commencement of the Constitution liable or treated as liable, so long as that tax continues to be levied in that State. Clause (2) of Article 285 is a clause which is transitional in nature and is in the nature of a saving clause intended to save all taxes levied on the property of the Union prior to the commencement of the Constitution so long as the taxes continues to be levied in that State. However, this saving clause is subject to any law that the Parliament may provide otherwise. 21.3 While applying clause (1) of Article 285, two considerations must be taken into account: firstly, whether the tax is claimed in respect of property, and secondly, whether such property is vested in the Union Government. The expression property must be given its widest meaning to include both tangible and intangible property as well as moveable and immovable property. The immunity conferred under clause (1) of the Article 285 is only in respect of a tax on property. The rationale for providing Articles 285 and 289 of the Constitution is based on the principle that one sovereign cannot tax anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate cannot levy road tax on the vehicles owned by the Central Government or the Railway, which is a Ministry of the Union Government. 21.6 In Union of India vs. City Municipal Council, Bellary, AIR 1978 SC 1803 ("City Municipal Council"), it was observed that the property of the Union is exempt from all taxes imposed by the State or by any authority within the State under Article 285(1), unless the claim can be supported and sustained within the parameters of Article 285 (2). The expression "save in so far as Parliament may by law otherwise provide" in clause (1) of Article 285 is to enable the Parliament to control Union property. Thus, the Parliament may by law permit a State or any authority or instrumentality within a State to impose tax on Union property. But if no such law is made by the Parliament the immunity would continue. Similarly, clause (2) of Article 285 which is in the nature of an exception to clause (1) thereof, has given an overriding power to Parliament to take away any existing taxation of a State or a local authority of Union property prior to the commencement of the Constitution and which has continued to be levied in the State even after the enforcement th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. If the conditions of clause (2) of Article 285 are not satisfied, the pre- Constitution tax cannot be continued to be levied by a State by virtue of Article 372(1) as the latter Article states that the continuance of the existing law would be 'subject to the other provisions of the Constitution'. Hence, any law which is inconsistent with Article 285 cannot be continued by virtue of Article 372(1) of the Constitution. 21.9 The expression "immediately before the commencement of this Constitution" under clause (2) of Article 285 would mean that the property is liable or treated as liable to tax until the Union Parliament legislates to the contrary. One of the ways of interpreting this is that the property must have been liable to taxation even under the Government of India Act, 1935 in as much as if any property was not liable to be taxed under the said Act, in other words, if there was an immunity during the enforcement of the said Act then it would not have been taxed from the date of enforcement of the Constitution. It is also necessary to understand the meaning of expression "that tax" in clause (2) of Article 285 which would have a relation to its nature and character and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual occupier of the property upon which the tax is assessed, if he is the owner of the buildings or lands or holds them on a building or other lease from the Central or the State Government or from the Corporation, or on a building leased from any person. In any other case, tax shall be leviable as per sub-section (2) of Section 179 of the Act of 1959. The drainage taxes are assessed. Therefore, the levy of property taxes or other taxes on land and building is subject to Article 285 of the Constitution. 21.11 We have already discussed the scope and ambit of the two clauses of Article 285 of the Constitution. Applying the same to the present case and having regard to the reasoning given by us in the earlier part of this judgment, we have held that enemy property is not the property of the Union although it may vest with the Custodian for Enemy Property in India who is a person appointed by the Central Government. If the enemy property is not the Union property in terms of clause (1) of Article 285 of the Constitution then such property cannot be exempt from the taxes imposed by the State or by any authority within the State unless otherwise provided by the Parliament. 21.12 For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies within the definition of the Act. In such an event, the Custodian will have to take possession of such properties. Vesting of such enemy properties in the Custodian is thus only for the purpose of administration and management of such properties. In view of our discussion made above, there would be no transfer of ownership and such properties vest in the Custodian for their protection and management only. By such vesting, the Union cannot usurp ownership of such properties. In the same vein, when many persons who are resident in India left their properties and settled in enemy countries, the Custodian has taken possession of such properties which is only for the purpose of protection and maintenance and to be handed over as and when a conducive environment between the countries arises. We also observe that it was never the intention under the Defence of India Rules, 1962 and 1971 or under the provisions of the Act that enemy subjects would lose all their right, title and interest in the properties once the said properties vest in the Custodian and thereby become Union properties. In this regard, we also would like to emphasise that the expression "vest in the Union" is cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not handed over to the respondent, he filed a writ petition before the Bombay High Court which was allowed by directing that the possession of the properties should be handed over to the respondent. The Union of India filed an appeal before this Court by way of a Special Leave. Dismissing the appeal, this Court held that the Act was enacted for the purpose of continued vesting of enemy property in the Custodian of Enemy Property for India under the Defence of India Rules, 1962 and the Defence of India Rules, 1971. 22.1 This Court observed that the respondent therein was the sole heir and successor of the late Raja and properties belonging to the late Raja was succeeded to by the respondent by way of succession and the properties in question could no longer be enemy property within the meaning of Section 2(c) of the Act. Therefore, the Custodian could not be permitted to continue in possession of such properties. During the pendency of the Writ Petition before it, the High Court directed the appellant therein to place on record a copy of the note put up for release of the property of the respondent's father and the decision taken thereon by the Cabinet. 22.2 The Union of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the estate of the deceased enemy subject. That the title of the enemy property did not vest with the Custodian but the property vested in the Custodian for the purposes of management, control and possession of the properties only. In the said case, Union of India had admitted that under the provision of the Act, title of the property of an enemy does not vest in the Custodian but the Custodian takes over the enemy property only for the purpose of possession, control and management. That an Indian citizen is excluded from the definition of an "enemy" or "enemy subject" under Section 2(b) of the Act. That on the death of the enemy subject, his successors and legal heirs being Indian citizens were entitled to succeed to the subject property as it ceased to be an enemy property. That even though a decision was taken to release only 25% of the property to the respondent therein, the same was also not implemented, for over three decades. Therefore, the direction was issued to the appellant-Union of India therein to get the buildings (residence or offices) vacated from such officers and hand over the possession to the respondent therein within eight weeks. The appeal of the Union of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as the relevant provisions of the Constitution which we have now interpreted. Therefore, whatever amount have already been deposited by the respondent herein, the same shall not be refunded to them. But, if no other demand has been made till date, such demand shall not be made. However, from the current fiscal year onwards (2024-2025), the appellant shall be entitled to levy and collect the property tax as well as water tax and sewerage charges and any other local taxes in accordance with law. We have granted a relaxation to the respondent in view of the fact that the High Court by the impugned order dated 29.03.2017, had held in favour of the respondent herein and we are now reversing the said order. In view of the aforesaid discussion, we arrive at the following conclusions: 1) That the Custodian for Enemy Property in India, in whom the enemy properties vest including the subject property, does not acquire ownership of the said properties. The enemy properties vest in the Custodian as a trustee only for the management and administration of such properties. 2) That the Central Government may, on a reference or complaint or on its own motion initiate a process of divestmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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