The Corporation of Calcutta v. Sm. Padma Debi and Others

SuBBA RAO, J.-This appeal by CX'rtificate from the order of the High Court at Calcutta raises the question of the true interpretation of the provisions of s. 127(a.) of the Calcutta Municipal Act, 1923 (hereinafter called the Act). The respondents are the owners of pre­ mises No. 296, Bowbazaar Street, Calcutta. The Corporation of Calcutta fixed the annual ~ valuation of the said premises at a sum of Ha. 14,093 and directed the same to take effect from the second quarter of I 950-51. In fixing the annual valuation, the said Corporation took as basis Rs. 1,450 as the monthly rental value of the premises. On June 20, 1950, notice of the asses­ sment based on the said annual valuation was ~ servud on the respondents. Respondent No. 1 filed objections to the said assessment under s.139 of the Act. Meanwhile under the West Bengal Premises Rent Control (Temporary Provision) Act, 1950 (W.B. XVII of 1950), (hereinafter called the Rent Control Act), the standard rent of the said premises was fixed by the Rent Controller: the rent was fixed at Rs. 550 per month with effect from ;.April, 1951, and at Rs, 632-8-0 per month with effect from August, 195 I. One of the objections raised was that the Corporation had no power to 1961 The Corporation of Calcutta v. Sm. PC«Zma Debi Sul1l11r Rao J. 1961 TM Corporation oJ Calcutta v. Sm. Pad ma Debi Sul>ba Raa J. SUPREME OOURT REPORTS (lll62] fix the annual valuation at a figure higher than .• the standard rent. The Special Officer disallowed all the objections and confirmed the assessment. Being aggrieved by the said order, respondent No. I filed an appeal in the Court of Small Causes, Calcutta, and the learned Small Causes Judge allowed tho appeal and fixed the annm1l valuation, for the purpose of assessment, at Rs. 6,831. That was on the basis of the standard rent of Rs. 632-8-0 per month. The Corporation of Calcutta questioned the correctness of the said J udgmcnt by preferring an appeal to the High Court at Calcutta. The High Court by a majority agreed with the Small Causes Judge and dismissed the appeal. H<'nce the present appeal. The main contention of Mr. K. C. Chatterjee, learnt>d counsel for the appellant Corporation, is that under s. 12i(a) of the Act the Corporation has to aacertain only the hypothetical rent realis­ able from a hypothetical tenant at the time of assessment and not tho actual rent payable at that time by any tenant, and therefore it is not bound to take into consideration the standard rent fixed under the Rent Control Act. A subsidiary point raised in the appeal is as to the precise meaning of the phrase "at the time of assessment" occurring in s.127(a) of the Act. The problem presented depends for its solution on the interpretation of the provisions of ! 1.127(a.) of the Act. The said section reads: "the annual value of land, and the annual value of any building erect€d for lotting purposes or ordinarily let, shall be deemed to be the gross annual rent at which the land or building might at the time of assessment reasonably be expected to let from year to year, less, in the case of a " building, a.n allowance of ten per cent for the cost of repairs and for all other expen1011 - - .. - 3 £.C.R. SUPREME COURT REPORTS necessary to maintain the building in a state to command such gross rent." We shall first look at the provisions of the sE ction to ascertain the meaning. The crucial words are "gross annual rent at whir:h the land or building might at the time of assessment reasonably be ~ expected to let from year to year". The dictionary meaning of the words "to let", is "grant use of for rent or hire". It implies that the rent which the landlord might realise if the house was let is the basis for fixing the annual value of the building. The criterion, therefore, is the rent realisable by the landlord and not the value of the holding in " the hands of the tenant. This aspect has been emphasized by the Judicial Committee in Bengal Nagpur Railway Company Limited v. Corporation of Calcutta('). The question for determination in that case was whether the assessment of a certain premises to the consolidated rate was made in accordance with the provisions of s.127(a) of the Calcutta Municipal Act, 1923. There the plot in question was a vacant land occasionally used by the • member of Railway Officer's Club for practice of the gamo of Golf. It was bought by the Railway Company not for present use but to be kept in re· serve against the company's future requirement. The Corporation assessed the land on the basis of rental value of land in the neighbourhood. It was argued that the premises ought to be valued on the basis ) of rent which would be paid by a hypothetical tenant who must be presumed to keep the land vacant, or at the most use it as an imperfect golf eourse. The Judicial Committee rejected the conten­ tion and made the following observations at p. 5 : "Indeed, it provides a striking example of the danger attending an injudicious use of precedent. The owner of land in England is not chargeable with rates, as owner, at all. If he leaves land vacant and unoccupied, he (I) [1946] L. R. 74 I. A. I. 1961 The Corporation of Calcutta v. Sm. Padma IJebi SubfJa Rao J. J9Cl 'l'he Cc.r1){fraiio11 of Calcutta v. Sm. I'ndm.•J. Debi Subba Uno J. - 54 .SUPHEllIE COURT REPOll'I'S [I 9621 pays no rates. llndcr the Calcutta Act mere·• ownership carries with it a liability to pay one-half of the rate assessed on tho anuuiil viilnc of the land. It i" impossible to cons­ true s.127 as meaning that, when land is unoccupied, its annual value must be taken to ho the rent at which it might be expected to be let to a tenant who was precluded from • occupying it. 11iere is nothing in the words of the Rectio1; to suggest that ii hypothetical tenancy of so improbable a character waR contemplated, and tho elahornte provisions of s.151 can hardly have been framed in order to reduce by" half, for the benefits of the non occupying. owner, what would already he a merely nominal sum." The same princip!I' was accepted by n division bench of th!· 1\Iaclra:; High Court as <'arly as 1886 in Secretar11 of State \". Madrr1.~ .Municipality(•). Section I 23 of the City of Jlfadrni; J\Iunicipal A<'t (]\[ad. I of I 884) which was similar in it A terms to s.12/(a) of the Cak:ntta J\fuuicipal Art, 1923, ran as follows: "The gross annual rent at which a. building or Janel might reasonably be expected to !Pt from month to month or from year t-0 year shall for the purposPH of assPHSm!'nt under this Act he deemed to be the annual ,-aluo of such building or land." Thn learned .Judges i11 «on8truing thr "aid Roction observed thus at JI. 41 : "The Htandanl of value iH certainly the v!lluc of the property to the owner which is to be measured, whether he orcupies the - -. ' property himself or lets it out to a tenant by , the amount of rent per annum it \f"Ould be ... worth to a hypothetical tenant." (I) [1886] 1.L.R. 10 Mad. 38. 3 S.C.R. SUPREME COURT REPORTS 55 Mukherjee, J., in Corporation of Calcutta v. Ashutosh De (1), accepted the said principle and applied the same in construing s.127(a) of the Act though Roy, J., differed from him. We would, with respect, accept the said principle in the construc­ tion of the said section and hold that the value of the property to the owner is the standard m making the assessment thereunder. The word "reasonably" in the section throws further light on this interpretation. The word "reasonably" is not capable of precise definition. "Reasonable" signifies "in accordance with reason." In the ultimate analysis it is a question of fact. Whether a particular act is reasonable or not depends on the circumstances in a given situation. A bargain between a willing lessor and a willing lessee uninfluenced by any extraneous circumstances may afford a guiding test of reasonableness. An inflated or deflated rate of rent based upon fraud, emergency, relationship, and such other considera­ tions may take it out of the bounds of reasonable­ ness. Equally it would be incongruous to consider • fixation of rent beyond the limits fixed by penal legislation as reasonable. Under the Rent Control Act, the receipt of any rent higher than the standard rent fixed under the Act is made penal for the landlord. Section 3 of the said Act says that any amount in excess of the standard rent of any premises shall be irrecoverable notwithstand­ ing any agreement to the contrary. Section 33(a) thereof provides inter alia that "whoever knowingly receives, whether directly or indirectly, any sum on account of the rent of any premises in excess of the standard rent" will be liable to certain penalties. "Standard rent" has been defined in 2(10)(b) to mean that "where the rent has been fixed under s. 9, the rent so fixed , or at which it "' would have been fixed if application were made (l) (1917) 31 C.W.N. 864. 1961 Th, Co,porntion of Calcutta v. Sm. Padm.a Debi Subba Rao J. 1961 The Cor-poraliotl of CakuJta v. Sni. Padm~ Debi S lib'.J Rao J. SUPREME OOURT REPoRTS (1962] under the said section." A combined reading of the said provisions lem·cs no room for doubt that a contract for a rent at a rate l1ighcr than the standard rent is not onh- not enforceable but also ~hat the landlord woulrl ho .committing an offenco 1f he collccte<l a rent above the rate of the standard rent. One may l('gitimatcly i;ay under those circumstances that a landlord ran not reasonably be expected to let a building for a rent higher than the standard rent. A la\\· of the lan<l with its penal eonst!CJtienccs cannot be ignored in ascertaining the reasonable expectations of a land­ lord in the matkr of rent. In this view, the law of the land mu&t ncccssarih· be takP11 as one of the circumstance8 obtaining ' in the open market placing an upper limit 011 the rate of rent for which a building can reasonably be expected to let. It is said that ~.12i(a) does 11ot contemplate the actual rent received u\" a lamllord but a hypothetical rent which he can r<'asonauly uc expected to rcceiYO if the uuilding is let. So state<l the proposition is unexceptionaulc. Hy­ pothetical rert may uc dcscriued as a rent which a landlord may reasonauly be expected to get in the open market. But an open market cannot include a "black market", a term euphemistically used to commercial transactions entered into between parties in defiance of law. In that situation, a Rtatutory limitation of rent cirnumscriucs the scope of the bargain in the mark0t. In no circumstances the hypothetical rent can exceed that limit. Strong reliance is placed by learned counsel for the appellant on the <lecision of the House of Lords in Poplar Assessment Committe.r. v. Roberts (') in support of the contention that the standar<l rent fixed under th~ Rent Control Act shall not be taken into account in <letcrmining the valuation for rating purposes. There, it was held that in arriving at (I) [1922J 2 A. C. 93, 104, 107, 116, 118, Ill. - > ·. - 3 S.C.R. SUPREME COURT REPORTS 151 + the valuation of a hereditament under s. 4 of the Valuation (Metropolis) Act, 1869, the maximum gross value to be assigned to the hereditament was not limited to the standard rent of the heredita­ ment within the meaning of the Rent Restrictions Act, 1920. One of the noble Lords, Lord Carsqn, dissented from the majority view. It is not necessary to consider that case in detail except to note the passages in the judgments of the learned Lords emphasizing upon the peculiar aspect of the English Law of rating. Lord Buckmaster stated : "From the earliest time it is the inhabi­ tant who has to be taxed. It is in respect of his occupation that the rate is levied, and the standard in the Act is nothing but a means of finding out what the value of that occupation is for the purposes of assessment." Lord Atkinson observed : "What the ratepayer is, under both the Act of 183fi and that of 1869, rated in respect of is decided by many cases in this House to be the beneficinJ occupation of a heredita­ ment." Lord Sumner declared : "Rating is a process between an occupier and a rating authority, to the determination of which the landlord and the lessee are , strangers." Lord Parmoor stated thus : "Under 43 Eliz. c. 2, rates are to be levied upon every occupier of lands, houses etc. The distinction between occupier and ?wner, in this connection, is of primary nnportance. The occupation value of pro- A. perty may be, and often is, distinct from its value to the owner. This distinction would probably be emphasized . where an artificial Iil61 The· CorJ>Oration. of Calcutta v. Sni. Padma Debi Subb'a Rdo J; 1961 Tho Corporal"" •! C.UuUa y, Sm. Padota Debi 58 SUl?REME COURT R'.EPORTS (1962( statutory maximum is fixed and a statutorv . ' . restriction rirc,·enti; an owner from recovering from any tenant a greater amount, aR rent, than the statutory maximum." These passages bring out ;n bold relief the distinc· tion between the English and the Indian law which has already been pointed out by the Judicial Committee in Bengal Nagpur Railu·ay Company Limited '" Corporation of Calcmta ('). That is why, while in England the Yalu<> of occupation by a. tenant iR the crit('l'ion for fixing the standard rent under the rating law, under the Act the letting value of a building tu tho lan<llord iR the standard in fixing tlw rental Yaluc. If this distinction iR home in mind much of th•· doud cast in tbiR case i" diHpclled. ft would he instructive to quote the weighty ubsen·atioui; of Atkin, L. J., as he then was, whi<"h were apprond by Lord Carson in his dissenting judgm<'nt ; and they arc : "If no hii;thcr rent than the standard rent and statutmv increases is enforceable, as a matter of c·ommon sense that seems to be the limit of the rent a tenant can be rcasonablv t>xpccted to giw ................ " • "How then is the annual rent to be ascertained ? It is ohviouH that the definition presupposes that the premises arc deemed to be vacant anrl arc deemed to be capable of lX'ing let." Accepting the Hnid observations, Lord Carson proceeded to observe, "I cannot pcrnuade myself that it is possible to ask the assessment authority to enter into such super-speculative and hypothe· tical regions, and I am of opinion that the only rent we have to consider is a. rent de J°'ure recoverable and not a voluntary promise which cannot be enforced." (I) (19+6) L. ll. 741.A. I. - , - - 3 S.C.R. SUPREME COURT REPORTS 59 With great respect to the other learned Lords, we are inclined to agree with the observations of Atkin, L. J., as approved by Lord Carson. That apart, the majority view can easily be distinguished on the peruliar principle of rating obtaining in England which is fundamentally different from that accepted under the Act. There is another difference between the English law and the Indian law: under the English Act of 1920, payment of rent in excess of the statutory rent was not barred and the landlord might receive the same, but under the Rent Control Act receipt of a higher rent than the standard rent is penalised ; that is, while in England a contract to pay a higher rent may not by enforceable in a Court of law, it is not unlawful, but in India it is both unenforceable and unlawful. This difference is of vital importance in judging the reasonableness of a landlord's expectations to get a particular rent. The Bombay High Court in Mongharam Jiwandas v . . Municipal Corporation of the City· of Bombay (1) and the Madrns High Court in The 1lfadurrzi Municipality v. Kamakshisund.aram Chettiar (') followed the majority judgment of the House of Lords in Poplar Assessment Committee Case (') while the Rangoon High Court in The Jfunicipal Corporation of the City of Rangoon, v. The Surriti Bara Bazzar Company Limited (') and the Calcutta High Court in the present case distin­ guished the said decision. We would prefer to accept the view expressed by the Calcutta and Rangoon High Courts, as the decisions of the said Courts are based upon a correct appreciation of the distinction between the law of rating in England and that under the Act. -' It is said that, as under s. 9(l)(b) of the Rent (l) l.L.R. [1951] Born. 713. (2) (1955) II M.L.J. 369. (3) (1922) 2 A.C. 93, 104, 107, 116, 118. 125. (4) (1923) J.L.R. I Rang. 668. 1961 'l'he Corporation of Calcutta v. Sm. Padma Del. i Subba Rao J. 1961 The Corporation of CalcuUa v. .Sn•. Padma Debi Subba llao J. 60 l:lUPREME COURT REPORTS [l962] Control Act the landlord can get tho Htandard rent raiRPd by an amount equivalent to the increase in taxes, rates or ccssc,, there would not be any prejudice eycn if the annual v(Lluc of the building is fixed on the basis of (l, rnte of rent higher than that permissible under the said Act. But this reasoniug would laud us in a v1mous circle and would enable one to circumvent the provisions of the Rent Control Act, for though a tenant is not liable under an Act to pay a rent higher than the standard rent, by thio; proecss he wou Id bo compelled to pay a higher rent. On tho other ~and, the scope of th(l,t section can legitimately be confined to situations gi,·ing rise to increase of taxes such as the increase in the rate, etc. Nor are we impressed by the argument that the omission of a specific provision, as in s.26 of the Calcutta Rent Act of 1920, prohibiting the Calcutta Corporation from making assessment of any rent higher than the rent fixed by the Rent Controller in the subsequent Acts would inevitably lead to the conclusion that thC' omission implies the conferment of such a power. Section 26 of the Calcutta Rent Act, 1920 (Ben. III of 1920) debars the Corporation of Calcutta and other local bodies from raising the annual value of any premises above the standard rent ; but the life of that Aet expired in the year 1926. For many years thereafter there were no Ront Control Acts in Bengal ; but some Rent Control Acts came to be passed in the years 1942, 1943 and 1946. In 1950, Act XVII of 1950 was passed to make better provi­ sion for the control of rents of premises in Calcutta and in certain othor (l,rcas in West Bengal. The said Act was amended hy subsequent Acts and was finally repealed by Act XII of 1956. It may be mentioned that in the subsequent Acts there was no prohibition similar to that contained in s. 26 of the Calcutta Rent Act of 1920. It may also be st&kd that there is no such prohibition in tho .. .. - .. - t" - ) 3 S.C.R. SUPREME COURT REPORTS 61 Municipal Act of 1923. But when that Act was repealed and replaced by the Calcutta Municipal Act, 1951) W. B. XXXIII of 1951), a proviso waa added to s.168( 1) to the effect, that in respect of any land or building, the standard rent of which has been fixed under s.9 of the lient Control Act of 1950, the annual value under s.168 ( 1) shall not exceed the annual amount of standard rent so fixed. It may be noticed from the history of t),e legislation that when the Calcutta Municipal Act, 1923, was passed, the Calcutta Rent Act of 1920 was still in force. Section 128 of the Calcutta Municipal Act, 1923, laid down the criteria for fixing the annual value tinder that Act and perhaps it was found not necessary to incorporate therein the prohibition contained in s.26 of the Rent Act of 1920. But that in itself cannot mean that the absence of such an express prohibition would imply that but for such a corresponding provision of the Rent Act the section should be understood as free from such a prohibition. The intention of the Legislature depends upon the interpretation of the words used in s.127(a) of the Act and not on the provisions of another Act. On the other hand, the Legislature, which must be presumed to have had knowledge that the Calcutta Rent Act of 1920 would expire within three years from the commence­ ment of the Municipal Act of 1923, and also have been aware that former Act contained such a prohibition, if it intended to remove any such prohibition during those three years or even there­ after, would have expressly made a provision to that effect in the Municipal Act, 1923. On the other hand, the phraseology of the section must have been designedly used wide enough to com­ prehend such a prohibition. Indeed, when the Act was repealed in 1951 by Act XXXIII of 1951, what was implicit in s.127(a) was made explicit in the proviso to s.168(1) of that Act. We can­ not, therefore, draw any implied prohibition from 1981 Phe Corporation of Oal<JUla v. Sm. PadmaDebi SubbaRao J. 196] The Corporalion of Calcutta v. Sm. Padma Debi Subba Rao J. G'.! SUPREME COURT REPORTS [1962] the history of the legislation. In the result, we hold, on a fair rlladi11g of the express provision of s.l:2i (a) nf the Act in th~ Jicrht of the decisions . 0 cons1<lercd, that the r<'ntal ndue cannot he fixed higher than the Rtanrlarcl r0nt under the Rent Control Act .. Th<' next question is, what is the meaning of the phrase "at the time nf assessment" occur­ ring in s.12i(a) of the Act.. The majority view of the High Court was that as8CSfment commences with the making of the valuation under s. l:ll of the Art ancl ends with the dc,termination of the objection under s.140 thereof, anrl t.hat an event vrhirh took place during thii; period may be relied upon for assessini; the annual vahic unr!cr >d2i(a) of the Act. The correctness of this view has not seriously been contestccl before us. 'l'hat apart, for the reasons mentio11ed by Lahiri an<l Sen, J.T., thRt conulu8ion is justified on the provisions of the Act. No other question iR raisecl. The appeal fails ancl is dismissed with costB. APJieal dismisBed. A:\1AR JYOTI STONE CJH~STING CO. t'. THE UNION OF INDIA AND OTHER::i (R. r. sn<nA, c .. J., s. K. DAs, A. K. SAHKAR, N. RAJAGOPAJ.A AYYA!S'GARandJ.R. MvDHOLKAn,J.T.) Quorry·-Refusal of permit.-01,.nership "f mf~ral•-Pr~­ sumplion-I'unjab Land RP>'fnue Act, 1881 ().:~II of 1881) d. 42. The appellant had been granted a permit by the Collec: tor for quarrying stone upto June 30, 1957 under the Delhi Minor Mineral Rule& 1938 framed under s.155(1) ofthe Punjab Land Revenue Act, 1837. On the expiry of the tcrr:i of this permit the appellant applied for another permit but 1t W-' refused on the ~ound that the land ha<;! been inelu\lcc;\ ..