Macdowell & Co. Ltd. vs Municipal Corporation Of Delhi
1997 Latest Caselaw 738 Del

JUDGMENT

Devinder Gupta, J.

(1) Writ of Mandamus directing respondents 1 to 3 to transfer/mutate the portion of the property, namely, west half wing comprising of the basement, ground floor, the entire first floor and western half of the barsati floor with land under-heath at F.44-A, New Delhi South Extension Part-I, New Delhi in favour of the petitioner with further direction to quash the warrant of distress and attachment orders (annexure-VI and VII) dated 7.10.1988 and 13.10.1988 respectively and to restrain the respondents from collecting arrears of Municipal Property Tax amounting to Rs.1,82,918.00 or any other arrears of Municipal Tax as reflected in the bill (annexure-V) pertaining to the predecessors in interest of the petitioner or the other co-owners of the property in occupation of the other half is sought in this petition instituted on 19.10.1988.

(2) It is the petitioner's case that through an agreement of sale dated 23.6.1983 entered into between the petitioner and respondent No.5, the petitioner agreed to purchase the aforementioned half wing of property, namely, F.45-A, N.D.S.E.Part-I, New Delhi with land under-heath as well as the East half wing of the first floor of the said property for a total sale consideration of Rs.25,15,000.00 . A formal sale deed was executed on 11.10.1985 by respondent No.5, which was duly registered in the office of the Sub Registrar-III, Delhi on the same day. It is alleged that under the terms of the agreement to sell as well as the sale deed, it was covenanted between the parties that all municipal charges and taxes of the land underneath would be paid by the vendor upto the end of the financial year 1982-83 and thereafter by the vendee. Pursuant to the deed of sale, the petitioner on and from 4.4.1985 has been paying its share of Municipal Tax and cess for the period commencing from 1.4.1983.

(3) It is further alleged that through various letters, respondent No.1 was informed about the sale transaction with a prayer for mutating the property in petitioner's favour and to apportion its share of Municipal Taxes between the petitioner and respondents 4 and 5. For the period prior to 1983-84 the petitioner company was not at all liable to pay taxes. This request was followed by another letter reiterating its stand contained in letter dated 13.9.1987 with further request that the property be mutated in its favour. It is alleged that the petitioner had so far cleared its liability towards Municipal Taxes for its portion of the property, respondent No.1 has been insisting upon to pay taxes even for the remaining share of the property. Finally the petitioner on 17.10.1988 received a letter from its banker stating that it had received warrant of distress from the Municipal Corporation of Delhi attaching a sum of Rs.1,82,918.00 from all bank accounts of the in petitioners. Along with the letter the bankers also forwarded a copy of the Distress Warrant.

(4) It is the petitioner's case that it is not at all liable to pay taxes as demanded by respondents 1 and 2. The attachment of its bank accounts is illegal and arbitrary. Municipal taxes prior to 1.4.1983 cannot be foisted upon or transferred to the petitioner because the petitioner had served requisite notice of the transfer on respondents. The petitioner does not fall within the concept of a person primarily liable to property taxes within the ambit of the Delhi Municipal Corporation Act. The petitioner company became owner of the property upon the execution of the sale deed on 11.4.1985 although it had agreed to pay taxes after 1.4.1983, as per terms of agreement of sale. The petitioner in any case cannot be held liable to pay taxes prior to 1.4.1983.

(5) The respondents in their reply filed on the affidavit of Shri A.L.Agnihotri, Legal Assistant (Taxes), Municipal Corporation of Delhi, have stated that under Section 123 of the Delhi Municipal Corporation of Act, 1957 all taxes are a first charge on the property subject to payment of land revenue, if any, to the Central Government. Being a charge on the property, the property taxes are attached to the property and go with it. Whosoever is the owner of the property is liable to pay all property taxes qua the property irrespective of the fact whether the arrears are prior to or after acquisition of the property. The petitioner thus is liable to pay all property taxes due as on date in respect of the property in question. It is also stated that under Section 132 of the Delhi Municipal Corporation Act, 1957, even if a property is owned in severally the entire building has to be treated as one for purposes of assessment. However, under the proviso the same may be assessed separately but the same is subject to the bye-laws so made. Municipal Corporation of Delhi has framed bye-laws under the Act, which govern assessment of property tax, mutation, sub-division etc. Under Section 128 of the Delhi Municipal Corporation Act, 1957 where title to any property is transferred a notice to this effect has to be given to the Commissioner. The manner of serving notice is laid down in the Taxation Miscellaneous Provisions Bye--Laws, 1959.

(6) It is also stated in reply that arrears of property tax have not been paid in entirety since 1975 and on the date the petitioner applied for mutation there being unpaid arrears of property tax qua the property no mutation was effected. Admittedly till filing of the petition huge arrears of property tax are in existence. The petitioner is jointly and severally liable to pay the same and hence cannot escape the liability to pay the same.

(7) We have heard learned counsel for the parties and been taken through the entire record.

(8) We need not reiterate various provisions of Delhi Municipal Corporation Act and the Delhi Municipal Corporation (Property Tax) Bye-laws, 1959 and other related and cognate provisions. The questions raised and argued before us are squarely covered by a recent decision of the Supreme Court in Municipal Corporation of Delhi v. Trigon Investment and Trading Pvt. Ltd.and another . Interpreting the provisions of the Delhi Municipal Corporation Act, it was held that property taxes constitute first charge upon land/building and because the land/building is fastened with this liability, the liability travels with the land/building. The transferee is liable to pay the property taxes due thereon not only for the period subsequent to transfer but even anterior thereto. Section 128 of the Delhi Municipal Corporation Act keeps alive and continue the liability of transferor to pay property taxes even after transfer till he gives the notice as contemplated by Section 128(1) of the Act. It was held:- "PROPERTY taxes due under the Act in respect of any land or building constitute first charge upon such land and building subject only to the prior payment of the land revenue, if any, due to the Government thereon [Section 123(1)]. The primary liability to pay taxes is upon the lessor where the building is let and upon the person entitled to let it, where the building is not let (Section 120). If the person primarily liable fails to pay the tax, it can be recovered from the occupier who in turn is entitled to be reimbursed by the person primarily liable (Section 122). Assessment lists containing the specified particulars have to be prepared by the Corporation (Section 124). The lists prepared under Section 124 can be amended at any time in any of the situations mentioned in sub-section (1) of Section 126. The situations specified in sub-section (1) of Section 126 inter alia are insertion of the name of a person whose name ought to be inserted, insertion of any land or building which was omitted and insertion or alteration of any entry in respect of any building re-erected, altered or added after the preparation of the assessment list. Before making any amendment under sub-section (1), the Commissioner shall give to any person affected by amendment a notice of not less than one month of his intention to make the amendment and consider any objection received in that behalf [Section 126(2)]. No person shall become liable to pay any tax or increase of tax in respect of any period prior to the commencement of the year in which notice under sub-section (2) is given [Proviso to Section 126(1)]. Where a land or building is transferred, the transferor is bound to give notice of such transfer to the Commissioner. If the transfer is effected by a registered document, such notice has to be given within three months and if the transfer is effected under an instrument of transfer which is not registered, within three month of the execution of such instrument. Failure to give such notice renders the transferor liable not only to penalty but also to payment of all property taxes from time to time payable in respect of such land or building until he gives such notice [Sections 128(1) and (4)]. At the same time, sub- section (4) of Section 128 expressly provides that the continued liability to pay the taxes cast upon the transferor (in addition to penalty) shall not affect the liability of the transferee for the payment of the said tax. Now, what do the words "but nothing in this section shall be held to affect the liability of the transferee for the payment of the said tax" in sub-section (4) of Section 128 mean and signify? In our opinion, the said words have to be understood in the light of the preceding provisions, viz., that the levy of the property tax is upon the lands and buildings, that the said tax constitutes the first charge upon such lands and buildings and that while the liability to pay tax lies upon the transferor, the transferee is not freed from the said liability on that account. The expression 'transfer' is not defined in the Act. If so, it has to be understood in its normal sense, i.e., in the sense it is understood in the Transfer of Property Act, 1882 but with the rider that Section 128(1) recognises a transfer, even where the instrument of transfer is not registered. The fact that possession of the flats was delivered to the respondent, that the respondent has paid the full consideration for the said flats and the further fact that the respondent has let out the flats and is in exclusive receipt of the rent clearly establishes that he is a transferee within the meaning of Section 128. Indeed, he would be the 'owner' as defined by clause (37) in Section 2 of the Act. He would be the 'owner' within the meaning of and for the purposes of the Act - whatever may be the position in general law. In that sense, the respondent is equally liable to pay the said taxes. This liability of the transferee arising from the fact of his being the 'owner' of the land or building concerned should not be mixed up or confused with the proviso to Section 126(1). Since the property tax constitutes first charge upon the land/building and because the land/building is fastened with this liability, the liability travels with the land/building. The transferee is liable to pay the property taxes due thereon not only for the period subsequent to transfer in his favour but even for the period anterior to the transfer. What Section 129 does is to keep alive and continue the liability of the transferor to pay property taxes even after the transfer till he gives the notice contemplated by Section 128(1). While making him so liable, Section 128(4) declares that this liability cast on the transferor shall not relieve the transferee from the obligation to pay the said tax, as explained above. This liability of the transferee is in no way qualified, curtailed or abridged by any provision in Section 126. Section 126 deals with amendment of assessment list and the procedural aspects concerning amendment. By way of illustration, take a case where property tax is assessed on a building, say, with effect from 1.4.1985. The building is transferred on 1.4.1987 but the transferor does not give notice of transfer. Later, on 1.4.1990, the name of the transferee is inserted in the place of the name of the transferor by amending the assessment list. Can the transferee say in such a case that he is not liable to pay the taxes for the period prior to 1.4.1990? If he can say so in law, would it not make Section 128(4) and Sections 119 and 123 (property taxes being levied upon the land/buildings and their constituting a first charge on such lands/buildings) nugatory and meaningless? So far as transferee is concerned, therefore, Section 126 does not in any manner cut down his liability or exonerate him from the liability resting upon him by virtue of other provisions in Chapter VIII. For the purposes of this case, it is not necessary to go into the scope and purport of Section 126. It is enough to clarify that whatever its scope and purport, it does not have the effect of relieving a transferee of a land/building from the liability to pay property taxes duly assessed upon such land/building and that this liability extends even for the period prior to the transfer in his favour and such taxes can be recovered from him according to law."

(9) In view of the aforementioned decision of the Supreme Court, the petitioner's stand that it is not liable to pay taxes with respect to the property in question prior to the date when notice under Section 128(1) of the Act was duly served upon the respondent pursuant to sale is wholly unjustified and for that reason there is no ground to declare the demand, warrant of distress or the attachment warrants (Annexures-V and VII) as illegal. The respondents were also justified in not mutating the property in petitioner's favour for the reason that Bye-law 10 of the Assessment List Bye-laws, 1959 is not complied. All property taxes due on the entire property are not paid. The Bye-law reads:- "WHERE a person desires, that a part, or two or more parts of any land or building be assessed under the proviso to Section 132 as a separate property, the Commissioner may in his discretion treat such part or two or more of such parts as separate property for the purpose of the said proviso if:- i) All property taxes due on the entire property are paid; ii) a plan of the property showing the division and duly signed by all the owners of the property is enclosed with the application; iii) transfer fee provided for under the bye-laws made under sub-section (3) of Section 128 has been paid in full in advance with an assurance that necessary action for transfer would be taken by the applicants immediately after the division."

(10) In view of the above, we find no illegality or irrationality in the respondents' action in not effecting mutation with respect to the portion of the property in petitioner's favour and in having issued demand, distress warrants or warrants of attachment.

(11) Consequently, the writ petition is dismissed with no order as to costs. Needless to add that on petitioner's complying with the requirement of the relevant provisions of law mutation will be effected in its favour on the basis of the sale deed.