Municipal Corporation, Indore and Others v. Smt. Ratna Prabha and Others

SHINGHAL, J.-This appeal by special leave is directed against the judgment of the Madhya Pradesh High Court dated September 26, 1968 setting aside the appellate order or the Second Additional District Judge, Indore, dated October 29, 1966 and remitting the " matter to the Municipl!l Commissioner for a fresh determination of B the annual value of the building. n The building in question is known as "Viram Lodge", on Ravindra Nath Tagore Marg, Indore. It belongs to the respon~nt and has been used by them as a hotel. The annual gross r~ntal value of the building was determined at Rs. 6600/ in 1956. It was revised by the Assessment Officer on June 3, 1965 and was.raised to Rs. 43,405.20. The respondents, filed objections to the valuation, but the Municipal Commissioner· fixed the annual value at Rs. 43,405.20. He held that, in view of the "11011-obstante" clause in section 138(b) of the Madhya Pradesh Municipal Corporati9n Act, 1956, hereinafter referred to as the Act, there was no justifica­ tion for the argument that the rental value of the premises could not be fixed at a rate higher than the standard rent under section 7 of the Madhya Pradesh Accommodation Control Act, 1961. An appeal was taken to the Second Additional District Judge, but without success. The respondents then filed an application for revi­ sion, which was allowed by the impugned judgment of the High Court dated September 26, 1968. This is how the present appeal has arisen at the instance of the Municipal Corporation and its officers. Section l3 8 of the Act prescribes the mode for determining the annual value of any land or building for purposes of assessing it to property tax. Clause (a) of the section deals with the annual value of land, and it is not the case of the parties that it has any bearing on the controversy. Clause (b) prescribes the mode of determining the annual value of a building and reads as follows,- " (b) the annual value of any building shall notwithstand­ ing anything contailied in any other law for the time being in force be deemed to be the gross annual rent at which such building, to~ether with its appur­ tenances and any furniture that may be let for use or enjoyment· therewith might reasonalJJ.y at the time of assessment be expected to be let from year to year, less 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 annual rent." There are two explanations to the clause. It is nobody's case that they have any bearing on the short point in controversy before us. Clause ( c) of the section prescribes that if the gross annual rent of a building cannot be determined under clause (b) , the annual value of the building shall be determined according to that clause. It is , I / MUNICIPAL CORP. "· SMT. RATNA PRABHA (Shinghal, J.) 1019 not in contr~versy before us that the Viram Lodge was never let . on rent, and is being run as a hotel by its owners, the present res­ pondents, so that the question of fixing its standard rent under s. 'J of the Madhya Pradesh Accommodation Control Act, 1961, has not arisen. It has argued that, even so, the reasonable rent contemplat­ ed by s. 138(b) of the Act cannot exceed the standard rent to be fixed under the aforesaid section 7. It has thus been. urged that it was incumbent for the Municipal Commissioner to determine the annual value of the building on the same basis on which i!s standard rent was required to be fixed under section 7. Reliance m this conni!ction has been placed on the decisions of this Court in The Corporation of Calcutta v. Smt. Padma Debi and others,(') Corpora­ tion of Calcutta v. Life Insurance Corporation of India,(') Guntur Municipt!l Council v. Guntur Town Rate Payers' Association(') and New Delhi Municipal Committee v. M. N. Soi and another.( 4 ) As has been stated, clause (b) of section 13 8 of the Act provi­ des that the annual value of any building shall "notwithstanding any­ thing contained in any other law for the time being in force" be deemed to be the gross annual rent for which the building might "reasonably at the time of the assessment be expected to be let from year to year." While therefore the requirement of the law is that · the reasonable letting value should determine the annual value of the building, it has also been specifically provided that this would be so "notwithstanding anything contained in any other law for the time being in force". It appears to us that it would be a proper interpretation of the provisions of clause (b) of section 138 of the Act to hold that in a case where the standard rent of a building has been fixed under section 7 of the Madhya Pradesh Accommoda­ tion Control Act, and there is nothing to show that there has been fraud or collusion, that would be its reasonable letting value, but, where this is not so, and the building has never been let out and is being used in a manner where the question of fixing its standard rent does not arise, it would be permissible to fix its reasonable rent without regard to the provisions of the Madhya Pradesh Accommo­ dation Control Act, 1961. This view will, in our opinion, give proper effect to the non-obstante clause in clause (b). with due regard to its other provision that the letting. value should be "reason- able". • We have gone through the decision in Padma Debi's case (supra). G ..., There the premises were on rent and section 127 (a) of Calcutta Municipal Corporation Act, 1923, did not contain a 11011-vbstante clause. That the section provided, inter alia, was that the annual value shall be deemed to be the gross annual tent at which the land or building might at the time of assessment "reasonably be expected to let from year to year." This Court examined the significance of the word "reasonable" and held that it would be incongruous to H (1) [1962] 3 S.C.R. 49. (2) [1971] 1 .. C.R. 248. (3) [197\j 2 S.C.R. 423. (4) [1977] 1 S.C.R. 731. 15---1338SCT/76 consider fixation o~ rent beyond the limits fixed by pemtl legislation as reasonable. That view was taken with reference to the provi­ sions of th() Rent Control Act which penalised the taking of a higher rent, and also made it irrecoverable. While, therefore, we are in agreement with the view taken in Padma Debi's case (supra) that it would not be reasonable to consider fixation of rent beyond the. limits fixed by the Rent Control Act as reasonable, it would not be a proper interpretation of section 138(b) of the Act to ignore the significance of its non-obstante clause altogether. That is why we have taken the view that it would be a fair and reasonable ipter­ pretation of section 13 8 (b) to hold that as no standard rent has been fixed so far in respect of the Viram Lodge, the Municipal Commissioner was justified in adopting another suitable criti;{ion for determining the annual value of the building. There is in · fact nothing in the Act to .make it obligatory for the Commiss.ioner to follow the provisions of the Madhya Pradesh Accommodation Con­ trol Act in spite of the non-obstante clause and to limit the annual value to any standard rent that the building might fetch under that Act. . We have also gone through Corporation of Calcutta v. Life Insurance .Corporation of India (supra). That was also a case where the premises had been let out on rent. The standard rent had also been fixed, and that was why Padma Debi's case (supra) was held to be applicable. So also, Guntur Municipal Council v. Guntur Town Rate Payers' Association (supra) was a case where the premises. were on rent and there also Padma Debi's case was held to be applicable even though the standard rent had not been fixed, because it was held that there · was nothing to prevent the authorities concerned from ascertaining the fair rent by keeping ~ view the principles which had been laid down for its determination: under the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960. Section 82(2) of the Madras District Municipalities Act, which governed that case, did not contain a non-obstante clause. Much the same was the position in M. N. Soi's case which related to a house in New Delhi, of which rate had to be assessed under the provisions of the Punjab Municipal Act, •1911. The High Court did not properly apprecl'ate the difference between the wordings of section 127 of the Calcutta Municipal Cor­ poration Act, 1923, and section 138(c) of the Act, and committed an error in thinking that this was virtually similar to Padma Debi's case. We find that the High Court has taken the view that a full hear­ ing was not given to the respondents at the time of fixing the annual value of the Viram Lodge and that the valuation was based on "no principle". Here again, the High Court was clearly in error because we find from the judgment of the Second Additional District Judge, dated October 29, 1966, that the counsel for the respondents r ' MUNICIPAL CORP. V. SMT. RATNA PRABHA (Shinghal, J.) 1021 was given ;•ample opportunity" by the Municipal Commissioner to A represent his case before him. He has also stated that the Assess- ment Officer paid due regard to all the relevant circumstances which had a bearing1 on the determination of the reasonable letting value of the building. Counsel for the respondents has in fact not found it worth his while to argue either that such a hearing was not given, or that all the relevant factors were not taken into consideration in determining the annual letting value of the premises. B In the result, the appeal is allowed and the impugned judgm,ent of q High Court dated September 26, 1968, is set aside. The appellants will however pay the costs of the respondents as stipulated in the order of this CouD: granting the special leave. · P.H.P. Appeal allowed.