Bombay High Court
The State Bank Of Inddia vs Vipul Chandrakant Rajgor on 12 September, 2025
Author: N.J.Jamadar
Bench: N.J.Jamadar
2025:BHC-AS:38135
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.4123 OF 2025
M/s. A.R.Builders,
SWAROOP
SHARAD a Partnership firm, registered under
PHADKE the Indian Partnership Act,
Digitally signed by having their address at D-5, 2nd Floor,
SWAROOP SHARAD
PHADKE Manoj Co-operative Housing Society
Date: 2025.09.12
20:13:14 +0530 Ltd., Prabhadevi, Mumbai - 400 025
through C.A. Gaurav Chitnis ... Petitioner
versus
1. Vipul Chandrakant Rajgor,
Age 42 years, Occu - Business
2. Paresh Chandrakant Rajgor,
Age 39 years, Occu - Business,
3. Ashit Chandrakant Rajgor,
Age 36 years, Occu - Business,
4. Leena Bharat Bhatt,
Age 32 years, Occu - Business,
All of Mumbai, Hindu Inhabitants,
having their address at 311,
Narsi Natha Street, Mumbai - 400009
5. The State Bank of India
having its office at Rajgor Chambers,
99, Surat Street, Mumbai - 400 009. ... Respondents
WITH
WRIT PETITION (ST) NO.16410 OF 2025
The State Bank of India
Masjid Bunder Branch,
Bhumideep Chambers, Narshi
Natha Street, Masjid Bunder (W),
Mumbai - 400 009 ... Petitioner
SSP 1/19
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versus
1. Vipul Chandrakant Rajgor,
Age 42 years, Occu - Business
2. Paresh Chandrakant Rajgor,
Age 39 years, Occu - Business,
3. Ashit Chandrakant Rajgor,
Age 36 years, Occu - Business,
4. Leena Bharat Bhatt,
Age 32 years, Occu - Business,
All of Mumbai, Hindu Inhabitants,
having their address at 311,
Narsi Natha Street, Mumbai - 400009
5. M/s. A.R.Builders,
a Partnership firm, registered under
the Indian Partnership Act,
having their address at D-5, 2nd Floor,
Manoj Co-operative Housing Society
Ltd., Prabhadevi, Mumbai - 400 025
through C.A. Gaurav Chitnis
6. The Brihanmumbai Mahanagarpalika (BMC),
Through the Assistant Assessor and
Collector, Property Tax Department,
B Ward, Mahapalika Building,
1st floor, Babula Tank Road,
Mumbai - 400 009. ... Respondents
Mr. Kunal Bhanage with Ms. Priyanka Acharya i/by Mr. Akshay Pawar for
Petitioners in WP No.4123 of 2025 and for Respondent No.5 in WPST
No.16410 of 2025.
Mr. Suresh Pakale, Sr. Advocate with Mr. Rakesh L. Singh, Mr. Nilesh Desai
i/by M.V.Kini and Co., for Petitioner in WP(ST) No.16410 of 2025 and for
Respondent No.5 in WP No.4123 of 2025 and
Mr. Bhavik Lalan i/by Mr. Rajesh Chheda, for Respondent No.3 in WP
No.4123 of 2025.
SSP 2/19
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CORAM: N.J.JAMADAR, J.
RESERVED ON : 26 JUNE 2025
PRONOUNCED ON : 12 SEPTEMBER 2025
JUDGMENT :
1. Rule. Rule made returnable forthwith and, with the consent of the
parties, heard finally at the stage of admission.
2. The Petitioners - Defendant Nos.1 and 2 assail the legality, propriety
and correctness of the judgment and order dated 12 February 2025 passed
by the Appellate Bench of the Court of Small Causes in Revision Application
No.39 of 2023, whereby the Revision Application preferred by the Petitioner
in WP No.4123 of 2025 against an order dated 18 November 2022 passed by
the learned Judge, Court of Small Causes, on an application (Exh.156) in
T.E.& R. Suit No.117/123 of 2002 directing the Petitioners to deposit the
arrears of municipal taxes in respect of the premises consisting of the first
floor and north eastern portion of the 2 nd floor of the building known as Rajgor
Chambers, Elphinstone Estate, Surat Street, Mumbai - 400 009 (the subject
premises) from the period 1 April 2000 to 31 March 2021, came to be
dismissed by affirming the said order.
3. Shorn of superfluities, the background facts necessary for the
determination of these petitions, can be stated as under :
3.1 Respondent Nos.1 to 4 are the owners / landlords of the subject
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premises. Under an Indenture of Lease dated 15 February 1973, the landlord
gave the subject premises on lease to M/s. A.R.Builders (Defendant No.1), a
partnership firm. Rent was payable at Rs.2,550/- per month and at an
increased rate after the initial term of 10 years. Defendant No.1 was also
liable to pay the landlord the increase in taxes payable to the Municipal
Corporation.
3.2 The lessee was allowed to sublet the subject premises. Accordingly,
Defendant No.1 executed an Indenture of Lease in favour of State Bank of
India (SBI), Defendant No.2, on 19 October 1973. It was, inter alia, agreed
that in addition to the rent and compensation, Defendant No.2 - bank would
pay any increase in the taxes or new taxes which may be levied by the
Municipal Corporation.
3.3 Respondent Nos.1 to 4 and their mother late Jyoti (Plaintiff No.1)
instituted a suit for eviction of Defendant Nos.1 and 2, being T.E. & R. Suit
No.117/123 of 2002. In the meanwhile, Defendant No.1 terminated the
tenancy of Defendant No.2, and, eventually, Defendant No.2 handed over the
possession of the subject premises to Defendant No.1, on 8 March 2022.
The municipal taxes of the subject premises were, however, not regularly
paid. A substantial amount accrued as arrears of the municipal taxes. Thus,
on 28 March 2022, a warrant of attachment of the subject premises was
issued by the Brihanmumbai Municipal Corporation ("BMC").
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3.4 Thereupon, in the said Suit, the Plaintiffs - landlord filed an application
Exh.156 seeking directions to the Defendants to deposit the arrears of
outstanding municipal taxes from 1 April 2000 to 31 March 2021 along with
the penalty levied thereon, aggregating to Rs.3,26,45,316/-. It was, inter alia,
asserted that the defendant No.2 - bank having been in the actual possession
of the subject premises, was liable to pay the arrears of taxes.
3.5 The Application was resisted by both the Defendants by controverting
their liability to pay the municipal taxes under the terms of the contract and in
law. The Defendant No.2 - bank contended that it had duly paid the monthly
rent and taxes to Defendant No.1, in accordance with the contract with the
Defendant No.1. Conversely, there was no privity of contract between the
Defendant No.2 and the Plaintiffs. Therefore, it was not liable to pay the
taxes.
3.6 By an order dated 18 November 2022, the learned Judge, Court of
Small Causes, was persuaded to allow the application and direct the
Defendant Nos.1 and 2 to deposit the arrears of municipal taxes along with
penalty aggregating to Rs.3,26,45,316/-. Learned Judge was of the view that
there was nothing to indicate that the alleged rent agreed to be paid to the
Plaintiffs/landlords was inclusive of taxes. At any rate, the Defendant No.2 -
bank was in the occupation of the premises upto the March 2022. Defendant
No.2, therefore, cannot deny the liability to pay the municipal taxes in respect
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of the subject premises till the date it was in the occupation thereof. Thus,
both the defendants were jointly and severally liable to pay the municipal
taxes.
3.7 Defendant No.1 assailed the said order passed by the learned Judge in
Revision Application No.39 of 2023. The Appellate Bench of the Court of
Small Causes, found no error in the order passed by the trial Court. It was
noted that, indisputably, the Defendant No.2 bank was in the occupation of
the subject premises for the period for which the taxes remained outstanding.
Under the terms of the agreements between the parties, the lessees were
liable to pay the increase in the taxes. There was substantial increase in the
taxes levied by the Municipal Corporation after the bank (Defendant No.2)
started banking operations in the subject premises, and, therefore, Defendant
Nos.1 and 2 were liable to pay the taxes.
3.8 Being aggrieved, Defendant No.1 has preferred WP No.4123 of 2025,
and the Defendant No.2 - bank has preferred WP (ST) No.16410 of 2025.
4. I have heard Mr. Kunal Bhanage, the learned Counsel for the Petitioner
in WP No.4123 of 2025; Mr. Suresh Pakale, the learned Senior Advocate for
the Petitioner - Bank in WP (ST) No.16410 of 2025 and Mr. Bhavim Lalan,
the learned Counsel for the Respondent No.3 - Plaintiff at some length. With
the assistance of the learned Counsel for the parties, I have perused the
material on record.
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5. The jural relationship between the parties is not in dispute. Respondent
Nos.1 to 4 - Plaintiffs are the owners of the subject premises. Defendant
No.1 is the lessee of the subject premises. The execution of the Indenture of
Lease by the owners in favour of Defendant No.1 on 15 February 1973 is not
in dispute. Nor the fact that, under the terms of the lease, the lessee was
entitled to sublet the subject premises. Incontrovertibly, the defendant No.2 -
bank had been in the occupation of the subject premises under the lease
deeds; commencing from the Indenture of Lease dated 9 October 1973.
Indisputably, the bank - Defendant No.2 vacated the subject premises in the
month of March 2022. The fact that the bank was in the occupation of the
subject premises for the period for which the municipal taxes remained
outstanding and for the recovery of which the warrant of attachment came to
be issued is also not in dispute.
6. In the backdrop of the aforesaid admitted position, the core controversy
revolves around the question as to who is liable to pay the municipal taxes.
7. Mr. Bhanage, the learned Counsel for the Petitioner - Defendant No.1,
would submit that the learned Judge, Court of Small Causes, was in error in
directing the Defendant No.1 to pay the huge arrears of taxes along with the
penalty jointly and severally with the defendant No.2 bank, when in the
application (Exh.156), the Plaintiffs had categorically averred that since the
Defendant No.2 - bank was in the occupation of the subject premises, the
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Defendant No.2 - bank was liable to pay the taxes.
8. Taking the Court through the recitals and covenants in the Indentures of
Lease executed by and between Defendant Nos.1 and 2, Mr. Bhanage would
submit that the bank has unjustifiably declined to discharge its liability to pay
the taxes despite clear stipulations in those documents. In any event, since
the bank was in the occupation of the subject premises and had been carrying
on banking business therein, the liability to pay the municipal taxes is clearly
that of the bank only.
9. Mr. Suresh Pakale, learned Senior Advocate for the Petitioner in
WP(ST) No.16410 of 2025 submitted that, in accordance with the terms of the
modified agreement between the landlord and the Defendant No.1, the
landlord was enjoined to give notice to the tenants about the increase in the
taxes. However, no such notice was given. In fact, the material on record
would indicate that the bank had paid the rent to the Defendant No.1 inclusive
of taxes.
10. Mr. Pakale further submitted that if it could be demonstrated that the
bank is liable to pay the additional amount toward taxes, which the
Corporation determines, the bank is not averse to make the payment.
However, in the absence of any contractual or statutory liability, the bank
cannot be compelled to pay the taxes. Mr. Pakale would urge that, the primary
liability to pay the taxes was that of defendant No.1. It was further submitted
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that the conditions necessary to invoke the provisions contained in Section
209 of the Mumbai Municipal Corporation Act, 1888 (MMC Act, 1888),
empowering the Commissioner to levy the taxes on the occupier were not
fulfilled.
11. Mr. Lalan, the learned Counsel for the Plaintiffs, stoutly resisted the
submissions on behalf of the Defendant Nos.1 and 2. It was urged that the
defence of the bank that it was not called upon to pay the outstanding tax
amount is not bonafide. Attention of the Court was invited to the
communication dated 24 October 2002 addressed by the BMC to the Branch
Manager, SBI (Defendant No.2) that the taxes were due from 1 April 2000 and
the subject premises stood attached with effect from 18 September 2002 for
non-payment of the taxes, and, thus, the bank was requested to remit a sum
of Rs.18,32,550/- to avoid auction sale of the subject premises.
12. Mr. Lalan submitted that the Municipal Corporation has also furnished
the bifurcation of the amounts which were recoverable from Defendant Nos.1
and 2 along with the communication dated 17 April 2025 (Annexure B to the
additional Affidavit dated 21 April 2025). Mr. Lalan laid emphasis on the fact
that a substantial portion of the taxes was attributable to the occupation of the
premises by the bank. Therefore, no interference is warranted in the
impugned order, lest the Respondents - Plaintiffs would suffer grave
consequence of being divested of the ownership of the subject premises by
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the auction sale for no fault on their part.
13. I have given careful consideration to the rival submissions canvassed
across the bar. Before adverting to appreciate the material on record in
regard to the core controversy, it may be apposite to consider the provisions
which cast liability to pay the municipal taxes. Under Section 146(1) fo the
MMC Act, 1888, the primary responsibility to pay the property taxes shall be
on the actual occupier of the premises, upon which the said taxes are
assessed if such occupier holds the said premises immediately from the
Government or from the Corporation or from a fazendar. In other cases, as
per sub-section (2), the property taxes shall be primarily leviable on the
following persons :
(2) Otherwise the said taxes shall be primarily
leviable as follows, namely : -
(a) if the premises are let, from the lessor;
(b) if the premises are sublet, from the superior
lessor;
(c) if the premises are unlet, from the person in
whom the right to let the same vests;
(d) if the premises are held or occupied by a
person who is not the owner and the where about of the owner
of the premises cannot be ascertained, from the holder or
occupier; and
(e) if the premises are held or developed by a
developer or an attorney or any person in whatever capacity,
such person may be holding the premises and in each of
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whom the right to sell the same exists or is acquired, from such
holder, developer, attorney or person, as the case may be :
Provided that, such holder, developer, attorney or
person shall be liable until the actual sale is effected."
14. Section 147 which deals with the apportionment of responsibility for
property tax when the premises assessed are let or sublet reads as under :
"147. Apportionment of responsibility for property
tax when the premises assessed are let or sublet :
(1) If any premises assessed to any property tax are
let, and their rateable value [or the amount of property tax levied
on the basis of capital value, as the case may be, exceeds the
amount of rent payable in respect thereof to the person from
whom, under the provisions of the last preceding section, the said
tax is leviable, the said person shall be entitled to receive from his
tenant the difference between the amount of the property tax
levied from him, and the amount which would be leviable from
him if the said tax were calculated on the amount of rent payable
to him.
(2) If the premises are sublet and their rateable value
[or the amount of property tax levied on the basis of capital value,
as the case may be, exceeds the amount of rent payable in
respect thereof to the tenant by his sub-tenant, or the amount of
rent payable in respect thereof to a sub-tenant by the person
holding under him, the said tenant shall be entitled to receive
from his sub-tenant or the said sub-tenant shall be entitled to
receive from the person holding under him, as the case may be,
the difference between any sum recovered under this section
from such tenant or sub-tenant and the amount of property tax
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which would be leviable in respect of the said premises if the
rateable value [or the amount of property tax levied on the basis
of capital value, as the case may be, thereof were equal to the
difference between the amount of rent which such tenant or sub-
tenant receives and the amount of rent which he pays.
(3) Any person entitled to receive any sum under this
section shall have, for the recovery thereof, the same rights and
remedies as if such sum were rent payable to him by the person
from whom he is entitled to receive the same."
15. A plain reading of the aforesaid provisions would indicate that if the
landlord is called upon to pay the taxes in excess of the rent he receives from
the tenant, the landlord shall be entitled to receive from his tenant the
difference between the amount of property tax levied from him and the
amount which would be leviable from him after the said tax is calculated on
the amount of rent payable to him. Under sub-section (3) of Section 147, any
person entitled to receive any sum under the said section shall have, for the
recovery thereof, the same rights and remedies as if such sum were rent
payable to him by the person from whom he is entitled to receive the same.
16. Section 209 of the MMC Act, 1888 provides the conditions under which
the occupiers may be held liable for payment of the property taxes. Section
209 falls under the sub-heading "Collection of Taxes". Sub-section (1) of
Section 209 provides that if the bill has been raised on the person primarily
liable for the payment taxes, but that person does not happen to be an
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occupier of the premises in respect of which the tax has fallen due, the
Commissioner can serve a bill on the occupier and, thereupon, the occupier is
liable to pay it. It is imperative to note that sub-section (4) of Section 209
provides that if any sum is paid by, or recovered from an occupier under the
said Section, he shall be entitled to credit therefor in account with the person
primarily liable for the payment of the same.
17. Keeping in view the aforesaid provisions, reverting to the facts of the
case, first and foremost, it is necessary to note, what were the terms of the
Indenture of Lease between the Plaintiffs - landlord and the Defendant No.1.
In the Indenture of Lease dated 15 February 1973, it was, inter alia, provided
that the rent was to be Rs.2,550/- from 31 March 1973 till the completion of 10
years thereof, and, thereafter, at the rate of Rs.3,550/- p.m. The said monthly
rent was to be inclusive of taxes and out ongoing as also the ground rent of
the said property. The agreement dated 15 February 1973, by which the said
Indenture of Lease was modified, provided that if the Municipal Corporation
claims or recovers from the landlord more taxes or charges than what would
be payable by the landlord to such authorities or bodies on the basis of the
rent provided in the said Indenture of Lease, then and, in that case, such
excess shall be payable by the tenants either to landlord or to such
authorities, provided the landlord shall give forthwith to the tenants intimation
in writing about such claim having been made by the said authorities and an
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opportunity to the tenant to dispute the same. The said agreement which
modified the Indenture of Lease was executed on the day the Indenture of
Lease was executed and it was in the contemplation of the parties that the
lessee had already negotiated with the bank for giving the subject premises
on sub-lease to the bank, and, thus, the increase in the taxes was imminent.
18. At this juncture, it is necessary to note the terms of the lease executed
between the Defendant Nos.1 and 2. In the first Indenture of Lease dated 9
October 1973, in addition to the rent of Rs.6,507/- and the compensation of
Rs.4,338/- p.m., the bank agreed to pay any increase in the taxes or new
taxes which may be levied by the BMC, provided such increase or new taxes
were specifically declared by the Municipal Corporation as being recoverable
by the landlords from their tenants. The second Indenture of Lease dated 9
February 1986, categorically records that the Defendant No.2 agreed to take
subject premises on lease at the rent of Rs.27,445/- p.m., excluding rates
and taxes. The covenant that the bank will pay any increase in the rates or
any new taxes which may be levied by the Municipal Corporation, also found
incorporated in the said Indenture of Lease. The last Indenture of lease dated
1 February 1992 again makes the position beyond the cavil. By the said
Indenture, the bank agreed to take the premises on lease for the rent of
Rs.79,840/- excluding rates and taxes. The liability of the bank to pay any
increase in the rates or new taxes was again specifically incorporated in the
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lease deed.
19. In the face of these documents, the contention of the bank that the rent
was inclusive of taxes is plainly against the weight of the material on record.
Indisputably, Defendant No.2 was carrying on banking operations from the
subject premises. Evidently, the taxes, which were originally levied in respect
of the subject premises, increased substantially after the Defendant No.2
started to carry on banking business in the subject premises.
20. I find substance in the submission of Mr. Lalan that the contention of
the bank that it was never called upon to pay the taxes is not bonafide. The
communication dated 24 October 2002 (page 66 of the compilation of
documents filed on behalf of Defendant No.1) clearly records that the bank
was called upon to pay the arrears of taxes since 1 February 2002
aggregating to Rs.18,32,550/- to avoid the auction sale of the subject
premises. This communication dated 24 October 2002, the receipt of which
was duly acknowledged by the bank on 25 October 2002, evidences the fact
that the bank - defendant No.2 was called upon to pay the taxes in its
capacity as occupier of the subject premises under Section 209 of the MMC
Act, 1888.
21. It would be contextually relevant to note that the bill-wise outstanding
report (pages 119 to 121 of WP No.4123 of 2025) gives a complete bifurcation
of the building tax and the bank tax and the penalty levied on those different
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components. The bank tax far outweighs the building tax.
22. As a dispute was sought to be raised by the bank that it had already
paid the rent along with the taxes, to satisfy the conscience of the Court, the
Defendant No.1 was directed to place on record the documents to evidence
the collection of rent from the bank and the rent receipts issued by the
landlord. The receipt dated 26 February 2005 (Exh.B to the additional
affidavit filed on behalf of the Petitioner in WP No.4123 of 2025) indicates
that for the months of 1 April 2004 to 31 March 2005, compensation was paid
@ Rs.79,840/- plus rates and taxes @ Rs.1679.94 p.m. For the
corresponding period, in the bill-wise outstanding report, referred to above,
the bank tax was Rs.1,00,647/- each, for the first part and second part of the
financial year. In stark contrast, the bank had paid taxes at the rate of
Rs.1680/- per month only.
23. As the occupier of the subject premises, the bank was, therefore, liable
to pay the property tax under the terms of the contract as well as in law.
Evidently, under Section 10 of the Bombay Rents, Hotel and Lodging House
Rates (Control) Act, 1947, where the landlord was required to pay any fresh
rate, cess, charges, tax or increase in rate, cess, charges, tax on the lands
and building, notwithstanding anything contained in any other provisions of
the said Act, but save as otherwise expressly provided in any other law for the
time being in force, the landlord was entitled to make increase in the rent of
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such premises, provided that the increase in rent should not exceed the
amount of any such rate, cess, charges, tax.
24. A useful reference in this context can be made to a judgment of the
Supreme Court in the case of M/s. Hotel Kings and Ors. V/s. Sara Farhan
Lukmani and Ors.1 wherein the Supreme Court held that the 'permitted
increase' served as a yardstick for the landlord to increase the rent on
account of payment of rates and taxes by the landlord.
25. Thus, looked at from any perspective, the primary responsibility, in the
facts of the case, to pay the taxes was that of the bank. Therefore, the
impugned order to the extent it makes the Defendant No.1 jointly and
severally liable to pay the taxes till the period the bank was in the occupation
of the premises, deserves to be interfered with. The Defendant No.2 - bank
would, however, be free to enforce its remedies, against the Defendant No.1
as provided under Sections 147(3) and 209(4) of the MMC Act, 1888, if
permissible in law.
26. The upshot of aforesaid discussion is that WP No.4123 of 2025
deserves to be partly allowed and WP (ST) No.16410 of 2025 deserves to be
dismissed and the impugned order is required to be modified.
27. Hence, the following order :
1 (2007) 1 SCC 202
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ORDER
(i) Writ Petition (St) No.16410 of 2025 stands dismissed.
(ii) Writ Petition No.4123 of 2025 stands partly allowed.
(iii) The impugned judgment and order stands modified as
under :
(a) The Defendant No.2 - bank (SBI) shall deposit an
amount of Rs.3,26,45,316/- with the Court of Small Causes towards the
arrears of municipal taxes and penalty for the period 1 April 2000 to 31
March 2021, within a period of one month from today.
(b) It is clarified that the liability of the Defendant No.2 -
bank to pay the taxes shall be co-terminus with the date of the delivery
of the possession of the suit premises by the Defendant No.2 - bank to
the Defendant No.1.
(c) In the event, the amount is deposited, the Plaintiff
shall be entitled to withdraw the same and deposit the said amount with
the BMC and furnish receipt of payment of taxes to the Court of Small
Causes, Mumbai.
(d) Upon deposit of the said amount, Defendant No.2 -
bank shall be entitled to institute an appropriate proceeding to recover
such amount as the Defendant No.1 was liable to pay towards the
taxes as provided under Sections 147(3) and 209(4) of the MMC Act,
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1888.
(e) Needless to clarify that, in the event such a proceeding is
instituted, it shall be decided on its own merits and in accordance with
law. All contentions of all the parties shall remain open for
consideration, and the observations in this order may not be construed
as an expression of opinion on the said aspect of the matter.
(f) No costs.
(g) Rule made absolute to the aforesaid extent.
( N.J.JAMADAR, J. )
