Sir Sobha Singh & Sons (P) Ltd. vs New Delhi Municipal Council
1996 Latest Caselaw 506 Del

JUDGMENT

R.C. Lahoti, J.

(1) Feeling aggrieved by an order of assessment dated 13.12.95 assessing rateable value of the petitioners' property bearing No. 1II-P/R-557 a writ petition was filed which came up for hearing before a learned Single Judge of this Court, who has directed the petition to be dismissed as' not maintainable in view of an alternate remedy of filing an appeal being available to the petitioners. Aggrieved by the order of the learned Single Judge this Lpa has been filed.

(2) The facts in so far as relevant for the purpose of this appeal may be noticed briefly. 2.1 The rateable value of the property has been assessed at Rs.3.47,11,200.00 less 10% w.e.f. 1.4.95. 2.2 According to the appellants the rateable value of the property was assessed at Rs.l,10,000.00 for the year 1986-87. It was revised and assessed at Rs.l.38,00,000.00 for the period 1987 to 1991. For the year 1991-92 the rateable value was revised and assessed at Rs.2.88 crores. 2.3 Several appeals were preferred by the petitioners which came to be heard and disposed of along with a number of similar other appeals by order dated 16.3.92 passed by Shri R.K.Verma, Additional Dislt. Magistrate, Delhi (North and East). The appeals preferred by the petitioners herein were registered as appeal No.s.105/87, 59/88, 25/89, 426/90 and 109/91. relatable to the periods 1987-88, 1988-89. 1989-90, 1990-91 and 1991-92. All the appeals were allowed. It was held that where the properly was let out or was on rent, its annual value shall have to he fixed keeping in view, the rent being received. The Appellate Authority has clearly opined that the assessment could not have been made under Chapter V of Delhi Rent Control Act. 2.4 According to the petitioners the properly is owned by them and is situated on a plot of land measuring approximately 1.5 acres. The building standing on the land is being used as a hotel. There are a number of servant quarters and garages which also stand let out to the tenants. Under the deed of lease dated 6.1.51, the rent which was being charged by the owners from the tenants was Rs.8000.00 per month. A subsequent deed of lease was executed on 23rd October 1954 revising the rate of rent to Rs.1 lac per annum. The term of lease was for a period of 10 years commencing 1st day of September, 1954. On 9th May, 1964 the lease was extended for a period of 10 years which has expired on 31st August, 1974. 2.5 The petitioners further allege that the relations of the landlords (i.e. the petitioners) with the tenant are highly strained and there are a number of civil suits pending between them the details whereof arc given as under :- ___________________________________________________________________________ Court Suit No. Subject of the Present Status Date of the case case next hearing Lower Court Civil 17/93 Suit for Reply & 15.3.96 2900/89 dispossession Arguments on restoration application filed by plaintiff. Delhi High Civil 1632/90 Use of lawn in Admission & 07.03.96 Court from of the Denial of Hotel. documents. Lower Court Civil Suit No.Suit for Replication & 21.03.96 (Sub Judge) 145/93 demolition of reply to the generator application under Order Xvi Lower Court Civil Suit Suit for For proper 22.04.96 (Sub Judge) No. 17/95 injunction lo orders, remove replication & vegetable shop Reply to the from garage application B-21 occupied under Order by ex-employee. Xvi Lower Court Civil Suit No. 1njunction suit Replication 11.04.96 (Sub Judge) 224/95 rcg.scootcr/ cycle parking space. Lower Court Civil 85/91 Recovery of Plaintiffs 2.4.96 (Sub-Judge) Rs.38500 evidence & Recovered by arguments on Ndmc by the preliminary attaching issues. SSPL's Bank A/c. for H. Tax Lower Court Civil Suit No.Suit for (Sub) Judge) /93. demolition of shed. ____________________________________________________________________________

(In all the cases Sir Sobha Singh & Sons is the plaintiff and United Hotels Ltd. is defendant). 2.6 It is submitted that the respondent-NDMC should have taken into consideration the rate of rent which is being charged or which is liable to be charged by the petitioners from the tenant but in no case the assessment could have been made under Chapter V or Section 6 of Delhi Rent Control Act.

(3) A perusal of the order of assessment shows that the Assessing Authority has not disbelieved the property having been let out by the petitioners to the tenant on lease from time to time as stated hereinabove. However, the Assessing Authority has opined that the term of the last of the lease deeds has expired on 31st August, 1974 and thereafter there has been no valid lease deed in existence and therefore the property cannot be treated as a let out property. It has been further stated that neither the landlord nor the tenant had furnished any material whereon determination of the annual value of the property could be based. Having held that the property was situated in a locality where good number of buildings having commercial activity or luxurious style of living were available surrounding the property in question, the Assessing Authority has formed an opinion that the premises in question could fetch rent at a minimum rate of Rs.50.00 per sq. ft. per month. The rent yielding capacity of the premises having been estimated at Rs.3,50,00,000.00 per annum, the rateable value has been maintained at Rs.3,47,11,200.00 less 10% w.e.f. 1/4/95 as was proposed.

(4) Having heard the learned counsel for the parties, we are of the opinion that not only the Lpa, but the writ petition filed by the appellant/petitioners also deserves to be allowed.

(5) We agree with the learned Single Judge that ordinarily an assessee feeling aggrieved by an order of assessing the rateable value of his property and fixing the tax leviable thereon under Chapter Viii of the New Delhi Municipal Council Act, 1994 should be left free to pursue, rather driven to the necessity of pursuing, the remedy of appeal available to him under the Act-and a writ petition under Article 226/227 of the Constitution would not be an appropriate remedy. However, this is an ordinary rule governing the discretion of the Court; it does not act as a bar to the exercise of writ jurisdiction of the High Court in appropriate cases. The case at hand involves interpretation of relevant, provisions of law and calls for setting at rest a controversy which is troubling the assessors and collectors, the Municipal Council/Corporation and a number of assessees. A large number of cases is likely to be affected by the principles of law to be settled and therefore we are of the opinion that the present one is a case which instead of being dismissed in limine deserved to be heard and disposed of on merits. Accordingly, we allow the appeal and set aside the order of the learned Single Judge to the extent to which it dismisses the civil writ petition in limine. By this order we would dispose of the petition itself on merits. We place on record that during the course of hearing of the appeal we had made it clear to the parties that if at all we form an opinion that the civil writ petition itself deserved to be heard and disposed of on merits instead of being dismissed in limine then we would allow the appeal and dispose of the petition on merits. Accordingly, the learned counsel for the parties have during the course of hearing addressed us on the merits of the petition also.

(6) Rule D.B.

(7) The disposal of the petition on merits would require a decision of the question : What would be the nature of possession of a tenant over a property leased out to him after the termination of tenancy by efflux of time or otherwise? This would have relevance for the purpose of finding out how and in what manner or on what principles rateable value of land or building in possession of such tenant ought to be determined.

(8) Under Chapter V of the Transfer of Property Act, 1882 a lease may be for a fixed term exceeding one year if it is in writing and accompanied by requisite legal formalities. If not executed in the manner contemplated by Section 107 or if there be no contract in writing, a lease runs from year to year or month by month depending on the purpose of lease as provided by S. 106. Section Iii provides how a lease determines. One of the modes of determination of lease is by efflux of the lime limited thereby. Clause (g) of S. 108 obliges the tenant on the determination of the lease to put the lessor into possession of the property. If the tenant may remain in possession of the property alter the determination of the lease and the lessor may accept rent from the lessee or otherwise assent to his continuing in possession, the lease in the absence of an agreement to the contrary is renewed from year to year or from month to month according to the purpose of tenancy. This is provided by Section 116. Under Clause (1) of S. 108 the lessee is bound to pay or tender the premium or rent to the lessor at the proper lime and place.

(9) When does the obligation of the tenant to pay rent come to an end ? Or in other words, when does the amount recovered or recoverable by the landlord from his tenant ceases to be rent ?

(10) A distinction exists between the leases governed by the rent control law and leases not so governed. In the case of lease governed by the rent control law in spite of the lease having been terminated either by efflux of time or by notice of termination of tenancy the tenant is not bound to surrender the possession over the tenancy premises to the landlord unless a competent court may record in its judgment a finding as to the existence of one or more of the grounds entitling a landlord to recover posses- 197 sion from his tenant followed by a decree of ejectment. It is only the decree of ejectment which would snap the landlord- tenant relationship, also bring to an end the obligation of the tenant to pay rent. In Chander Kali Vs. Jagdish Singh Thakar, , the case before their Lordship was one governed by the provisions of Madhya Pradesh Accommodation Control Act, 1961. Their Lordships noticed the definition of the term 'tenant' as given in that Act and then held : "On a plain reading of the definition aforesaid it is clear that a tenant even after the termination of his contractual tenancy does not become an unauthorised occupant of the accommodation but remains a tenant .It has been pointed out by this Court in Damadilal v. Prashram that such a tenant is conveniently called a statutory tenant. Whether the expression aforesaid borrowed from the English Law is quite apposite or not, but what is certain is that a person continuing in possession of the accommodation even after the termination of his contractual tenancy is a tenant within the meaning of the Act and on such termination his possession does not become wrongful, until and unless a decree for eviction is made. If he continues to be in possession even after the passing of the decree, he does so as a wrongful occupant of the accommodation." "In absence of a decree of eviction the person in occupation of the accommodation continues to be a tenant and is not liable to pay any damages as his occupation is not unauthorised or wrongful even after the termination of the contractual tenancy."

(11) In the case of premises not governed by any rent control law, termination of tenancy (without wailing for Court's verdict) brings to an end the contractual landlord-tenant relationship unless it be a case of tenant continuing in possession and the landlord cither accepting the rent or otherwise assenting to the continuance of the tenant in possession (S.116 of the Tp Act). Termination of tenancy converts the character of possession of the tenant over the premises into an unauthorised one though not adverse. Though in unauthorised possession still his status would be better than that of a rank trespasser inasmuch as his possession originated in a legal title while the possession of a trespasser would originate in an illegality.

(12) In Budri Lal Vs. Municipal Corporation of Indore, , vide para 8 the following passage from Air 1949 Fc 124 has been quoted : "On the determination of a lease, it is the duty of the lessee to deliver up possession of the demised premises to the lessor. If the lessee or a sub- lessee under him continues in possession, even after the determination of the lease, the landlord undoubtedly has the right to eject him forthwith; but if he does not and there is neither assent nor dissent on his part to the continuance of occupation of such person, the latter becomes in the language of English law a tenant on sufferance who has no lawful title to the land but holds it merely through the laches of the landlord. If now the landlord accepts rent from such person or otherwise expresses assent to the continuance of his possession, a new tenancy comes into existence as is contemplated by Section 116, Transfer of Property Act, and unless there is an agreement to the contrary, such tenancy would be regarded as one from year to year or from month to month in accordance with the provisions of Section 116 of the Act,"

(13) Though the tenant has not handed over possession to the landlord still a disability by virtue of Section 116 of the Evidence Act attaches with him; he cannot deny title of the landlord over the premises held by him so long as he has not surrendered the possession over the premises to the landlord.

(14) In Mt..BilasKunwarVs.Desraj Ranjit Singh & Ors., Air 1915 Pc 96, 19 Cwn !207 it has been held :-    "A tenant who has been let into possession cannot deny his landlord's title, however defective it may be, so long as he has not openly restored possession by surrender to his landlord."  

14.2 In Ganapathi Mudali VS. Venkala lakshminarasayya & Ors., Air 1915 Mad 345, the Division Bench has held :- "A tenant continuing in possession after the expiry of the lease cannot be said to be in adverse possession unless he actually surrenders possession to his landlord." 14.3 So is the view taken in Chandrika Prasada VS. Bombay Baroda & Central India Rly. Co. Air 1935 Pc 59.   

(15) The tenant may not pay the rent and yet the character of his possession would not change as merely by non-payment of rent he would not be prescribing adverse possession. ln Jagdeo Narain Singh & Ors. VS. Baldeo Singh & Ors. Air 1922 Pc 272 it has been held :-    "More non-payment of rent or discontinuance of payment of rent, has not, by itself been held to create adverse possession."  

(16) It is therefore clear that incase of a tenant continuing in possession after passing of a decree of ejectment where the tenancy is governed by Rent Control Law, and even in the case of tenancies not so governed, a tenant continuing in possession of the leased premises after the termination of the tenancy does not hold the premises as tenant. He holds the premises as a person in wrongful possession. Still he is not a mere trespasser. The landlord is entitled to recover from him mesne profits or damages for use and occupation. Called by whatever name the charges would be in lieu of use of the owner/landlord's premises by the (cx)tenant.  

(17) In the case of premises governed by the Rent Control Law, the amount paid by the tenant to the landlord or the amount not so paid though payable, would be the amount of rent. So also in the case of tenants in the premises not governed by Rent Control Law, if the tenant holds over the premises within the meaning of Section 116 of the Transfer of Properly Act, the amount paid or payable by him would remain rent. For the purpose of finding out the rate of annual rent at which such land or building might reasonably be expected to let, it will not make any difference even in respect of the premises where the tenant in premises governed by Rent Control Law does not vacate inspite of passing of the decree of ejectment or in case of premises not so governed the tenant does not su; render possession over the premises to the landlord inspite of the tenancy having terminated. The position would change only when the landlord having succeeded in securing possession lets out the premises to a new tenant on enhanced rate or changes the use of properly.

(18) For the purpose of Chapter Viii of the New Delhi Municipal Council Act, 1994, the term 'rent' must be assigned a wider meaning. The term is not defined in ihe Act. In the context of determination of rateable value the phrases used by the legislature are - 'the annual rent at which such land or building might reasonably expected to let' or 'the rent payable'.

(19) In State of Punjab & Anr. VS. British India Corporation Ltd,, , their Lordships have vide paragraphs 15 and 17 approved two senses in which the term 'rent' is used. In its wider sense, rent means any payment made for the use of land or building and thus includes the payment by a licencee in respect of the used and occupation of any land or building. In its narrower sense, it means payment made by tenant to landlord for property demised to him.

(20) David Yates and Hawkins state in "Landlord and Tenant Law" (Sweet & Maxwell, pp.l40-141):- "Situations can arise in which the legal relation of landlord and tenant exists without any arrangement at all for the payment of rent properly so- called, since none has been reserved. Analogous to this are cases in which the law implies from the conduct of the parties a promise to compensate the owner for his loss by reason of occupation of his premises. So, a tenant, or his assignee, who holds over alter his tenancy has expired or been determined by a notice to quit, will fall into this class, provided the landlord has acted so as to raise a presumption of a continued tenancy, and not an intention to treat the tenant as a mere trespasser." "It might he thought odd that where a lease is proved, which reserves a rent. an action for use and occupation can still he maintained. The rule here is that the rent reserved is used as a measure of Ihe quantum of damages payable to the plaintiff and. where present, will usually he decisive."

(21) In the absence of an express lease or agreement for a lease at a fixed rent, where the premises have been used or occupied hy the defendant by ihe permission or sufferance of ihe plaintiff, the law will imply a contract or promise by the defendant to pay the plaintiff a reasonable sum for such use and occupation." 21. Interpreting the term rent widely for use as a guiding factor determining rateable value, we are of the opinion that in the case of the premises lei out to a tenant, so long as the tenant has not vacated and surrendered or restored possession to the landlord owner, ihe rate of rent relevant for determining the rateable value would be the rate of rent at which the tenant was inducted into the premises i.e. the rate at which the rent is being paid or if not paid, remains payable hy the person in occupation of the property. Once inducted as tenant, without regard to the fact whether the tenancy has come to an end and whether a decree for ejectment has been passed, the situation would change and rateable value shall be available for revision only when the tenant has vacated the premises and thereafter either a new tenant has been let in or user o'f the premises changed. This interpretation will bring consistency in assessment of rateable value and avoid the necessity of revising the rateable value time and again though the landlord and the person in possession of the property remain the same and even the rate of rent has not undergone a change.

(22) Section 63(1) of the Ndmc Act, 1994 provides :- "63. (1) The rateable value of any lands or building assessable to any property taxes shall be the annual rent at which such land or building might reasonably be expected to let from year to year less a sum equal to ten per cent of the said annual rent which shall be in lieu of all allowances for cost of repairs and insurance, and other expenses, if any, necessary to maintain the land or building in a state to command that rent : Provided that in respect of any land or building the standard rent of which has been fixed under the Delhi Rent Control Act, 1958 the rateable value thereof shall not exceed the annual amount of the standard rent so fixed." (underlining by us)

(23) How to find out, the annual rent at which such land or building might reasonably be expected to let from year to year? 23.1 In Dr. Balbir Singh Vs. Mcd, , the Supreme Court has held :- "Now, what is reasonable is a question of fact and it depends on the facts and circumstances of a given situation. Ordinarily, "a bargain between a willing lessor and a willing lessee uninfluenced by any extraneous circumstances may afford a guiding test of reasonableness" and in normal circumstances, the actual rent payable by a tenant to the landlord would afford reliable evidence of what the landlord may reasonably.. expect to get from the hypothetical tenant, unless the rent is inflated or depressed by reason of extraneous considerations such as relationship, expectation of some other benefit etc. There would ordinarily be close approximation between the actual rent received by the landlord and the rent which he might reasonably expect to receive from a hypothetical tenant." (Para 5) 23.2 In Government Servants Cooperative House Building Society Ltd. VS. Union of India, the Division Bench of Delhi High Court has held :- "In respect of a building not subject to any such rent control legislation the actual rent payable by a tenant to the landlord would afford reliable evidence of what the landlord reasonably expect to get from a hypothetical tenant, unless the rent is inflated or depressed by reason of extraneous considerations, such as, relationship, expectation of some other benefit and the like. There would ordinarily be, in a free market, close approximation between the actual rent received by the landlord and the rent which he might reasonably expect to receive from a hypothetical tenant." 23.3 In Morvi Municipality VS. State of Gujarat & Ors., Air 1993 Sc 1504, the Supreme Court has clearly laid down the law as under :- (i) the annual letting value of the building or land or both to which the rent restriction legislation is applicable cannot exceed the annual standard or fair rent (p. 1511 Col.2) (ii) where it. is not applicable nothing prevents the Municipality from assessing the properties on the basis of the actual rent received (p.l512Col.l).

(24) It is settled by two Division Bench decisions of this Court namely Government Servants Co-op.Housing Building Society Ltd. (supra) and Delhi Paints & Chemicals VS. N.D.M.C., 1993 (2) Delhi Lawyer 18 that in case of the properties to which the provisions of Delhi Rent Control Act arc not applicable resort cannot be had to the provisions of Delhi Rent Control Act for the purpose of fixing the rateable value. Neither the concept of standard rent as reasonable rent can be pressed into service nor can resort be had to Section 6A of the Delhi Rent Control Act. The rateable value of such lands or building (to which applicability of Delhi Rent Control Act is not attracted) shall have to be determined by finding out the annual rent at which such land or building might reasonably be expected to let from year to year by having recourse to the principles de hors the provisions of the Delhi Rent Control Act. If any property forms subject matter of contractual rent then the rate of rent agreed upon between the parties and which was being actually paid by the tenant and received by the landlord can safely be accepted as determining factor of rateable value unless there be material available to hold the rate of rent having been influenced or depressed by reason of extraneous considerations such as fraud, collusion, relationship, expectation of some other benefit etc. The following are a few instances which might have contributed for depression of the rent :- (1) The landlord has collected huge amount as "Pagri" and is charging nominal rent. (2) The premises are shown to have been let out for a month or so on nominal rent to have the benefit of Section 6(2) (b) of the Drc Act, and after expiry of the period of alleged tenancy, the real tenant pays much more than the alleged tenant. Say the premises were agreed to be let out to one of the sister concern at Rs.20,000.00 per month for a period of three year. However, after the expiry of just three months the premises were let out at Rs.75,000.00 per month to a Public Sector Undertaking. Or to say, the premises were shown to have been let out at Rs.9,000 p.m. for a period of two years, but the tenancy was terminated within a period of less than two months and the premises were let out at Rs.36,000.00 per month. On enquiries, it was found that even the completion certificate was not applied for when the alleged rent of Rs.9,000.00 per month was shown. (3) The Landlord collects huge amounts as interest-free security and lets out the premises at nominal rent with permission to sub-let. The tenant, after taking over possession, lets out the premises at exorbitant rent. (4) The premises are lei out to a sister concern at low rent with permission to sub-let, and the sister concern lets out the premises for huge amounts. (5) The owner with his family members is staying in the premises and the same have been let out to either his employer or the employer of his son, to have benefit of rent. However, the rent is depressed as it cannot be more than the House Rent entitlement of himself or his son. [Illustrations picked up from Nabhi's Guide of House Tax in Delhi 1996, pp 1.79-80]

(25) As already noted the premises owned by the petitioner/appellant were held on tenancy by M/s.United Hotels Pvt.Ltd. but the term of the tenancy had expired on 31st August, 1974. No material is available on record to find out and determine the state of affairs governing the property after 31.8.74. Either some new arrangement must have been arrived at between, the owner and the person in possession which needs to be found out or else whatever is being paid or is liable to be paid by the person in possession to the owner would be actual rent within the extended meaning of the term rent.

(26) In as much as the rent of the premises exceeds Rs.3,500.00 , the applicability of Delhi Rent Control Act would be excluded by virtue of Section 3(C) thereof. In case of such premises there is no question of finding out standard rent or determining the rateable value by taking recourse to the provisions of Delhi Rent Control Act.

(27) As the principles of law set out hereinabove have not been kept in view by the learned Assessing Authority, the impugned order of assessment dated 13.12.95 has to be set aside. The assessment has to be made afresh. The act empowers the authorities to call for such requisite information as would enable finalising the assessment in accordance with law from such persons as may be possessed of the information. Section 77 confers power to call for information and returns and to enter and inspect premises. Values may be employed under Section 81. Similar relevant information may be called for under Section 1.22 as well. The Assessing Authority would do well to call for the petitioner/appellant who is owner of the premises as also M/s. United Hotels Pvt.Ltd., the tenants. Apart from such other information which the assessing authority may be inclined to collect and such enquiry as the Assessing Authority may deem fit to hold, in particular the assessing authority shall enquire :- (i) Has there been any new agreement of tenancy between the landlord and the tenant after 31st August, 1974 and effective for the period under assessment; (ii) whether there is any reason to hold the actual rate of rent applicable between the landlord and the tenant either inflated or depressed by reason of extraneous considerations which would justify the assessing 203 authority discarding such rate of rent tor the purpose of finding out the rate of rent at which the premises may be reasonably expected to let. The Assessing Authority may thereafter finalise the assessment afresh. The petitioners shall, as duly bound, make available all the Information and documents called for by the Assessing Authority and cooperate with finalising the assessment proceedings at an early date. Else the assessing authority would be free to draw an adverse inference against the assessee.

(28) The petition is allowed. The petitioners are directed to appear before the Assessing Authority on 22.7.96 at 3.00 Pm whereafter the Assessing Authority shall proceed to finalise the assessment in accordance with the principles laid down and observations made hereinabove. No order as to the costs.