Municipal Corporation Of Delhi vs Nirupama Jain And Ors.
2007 Latest Caselaw 1251 Del

JUDGMENT

Mukundakam Sharma, C.J.

1. These Letter Patent Appeals have been filed by the Municipal Corporation of Delhi against the judgments dated 13th September, 2005, 20th September ,2005 and 29th September, 2005 passed by the learned Single Judge allowing the writ petitions filed by the respondents herein. The respondents in LPA Nos. 1029-31, 1034-35, 1039-40 and 1043/2006 are original allottees/members of the Co-operative society, namely Eastend Co-operative Group Housing Society and the respondent in LPA No. 1036/2006 is a subsequent purchaser of the flat originally allotted to Ms. Meena Kumari, a member of the Co-operative society and thereafter transferred to Sh. Prem Kumar. In the said appeal, the original allottees who have sold their rights to the respondents-purchasers are also parties.

2. As common questions and issues arise for consideration and similar arguments were addressed, we intend to dispose of the present appeals by this common judgment. For the sake of convenience, we have taken the case of Ms. Nirupama Jain as the lead case.

3. It is an admitted position that the respondents are the owners being original allottees/members or subsequent purchasers of different flats in Eastend Apartments Chilla, Delhi-110096. The said flats have been constructed by the Co-operative society, Eastend Co-operative Group Housing Society. Initially, the said society was part of Saraswati Kunj Co-operative Housing Society. The said society had constructed about 1,606 flats. On or about 7th March, 1994, the said society was bifurcated into two with Eastend Co-operative Group Housing Society having 1,306 flats.

4. We have examined the original records, which were produced before us by the appellant-Municipal Corporation of Delhi. Initially, the appellant had fixed Annual Rateable Value in respect of land, which was allotted to the Co-operative society by the Delhi Development Authority. The first assessment order was passed on 22nd December, 1987 fixing the Annual Rateable Value of the land with effect from 1st April, 1986. Notice for enhancement of Annual Rateable Value was also issued but we are not concerned with same in the present appeals.

5. Subsequently, notice dated 18th February, 1991 under Sections 131 and 175 of the Delhi Municipal Corporation Act, 1958 (hereinafter referred to as the Act, for short) was issued to the Co-operative society to furnish details of the flats constructed with name and addresses of the allottees. Several other details were also asked for. It appears that the first draw of lots was held on 23rd March, 1991 in which some allotments were made. This was followed by another notice dated 26th December, 1991 again under Sections 131 and 175 of the Act. The Co-operative society was required to furnish several details and documents.

6. In addition to these notices, the appellant Municipal corporation also issued notice under Section 126 of the Act proposing to fix consolidated annual rateable value of the land including the flats constructed thereon at 1,43,67,456/-. There are in fact two notices under Section 126 of the Act on record. The first notice is dated 10th May, 1991 was served on 26th March, 1991 and second notice dated 15th March, 1994, which was served by registered post. The notice dated 15th March, 1994 specifically records that the same was being issued on construction of 1306 flats. No objection to the said notices was filed and vide assessment order dated 10th March, 1997, the proposed rateable value was accepted. The annual rateable value of the property including 1306 flats, therefore, was fixed at 1,43,67,456 with effect from 1st April, 1993.

7. The Co-operative Society vide letter dated 28th June, 2000 had furnished several details in respect of 348 category 'C' type flats to the Municipal Corporation. On the basis of these details and as requested, an order under Section 132 of the Act was passed bifurcating and dividing the rateable value in respect of the said 348 category C flats vide order dated 2nd August, 2000.

8. It appears that the list of 1313 members in Eastend Co-operative Group Housing Society, was furnished for the first time on 17th March, 1998. It was stated that out of the said list of 1313 members, 1286 members had been allotted flats. The appellants have relied upon letter dated 4th December, 1998 written by Mr. N.C. Jain, the then Deputy Assessor and Collector to one of the members of the Society, wherein it is stated that list of 1313 members was furnished.

9. It is, therefore, clear that when the assessment order dated 10th March, 1997 was passed, the same was within the limitation period of three years from the date of issue and service of notice under Section 126 of the Act dated 15th March, 1994. It also appears that till 10th March, 1997 the Co-operative society had not furnished list of it's members/allottees as the said list was furnished for the first time Along with letter dated 17th March, 1998.

10. Subsequently, another notice dated 18th March, 2000 under Section 126 of the Act was issued for additional flats, (construction of additional flats), proposing to assess the annual rateable value of the Co-operative society at 13,01,03,550 with effect from 1st April, 1999. This notice was issued before order under Section 132 of the Act dated 28th June, 2000 in respect 348 flats was passed. No reply and response to the notice was received within the statutory period of thirty days after service of notice. Individual notices to the allottees were also issued for fixing rateable values of their flats with effect from 1st April, 1999. This is clear from the order sheet dated 21st March, 2000 and performa notice dated 27th March, 2000 on record. The said notice reads as under:

MUNICIPAL CORPORATION OF DELHI

ASSESSMENT & COLLECTION DEPARTMENT

SPECIAL ASSESSMENT UNIT Minto Road Complex Vivekanand Marg.

                                                             New Delhi-110002

No. Dy.A&C/SAU/C-XIV/99-2000/4623                            Dated:-27.3.2000
 

SH./SMT._____________________ 

Flat No.____________Block No.________ 

East End Apptt. C.G.H.S. Ltd. 

Plot No. 25, Mayur Vihar Extn. Ph-`. 

Delhi.- 110096.
 

Sub:- Notice Under Section 126 of D.M.C. Act 1957 for amendment in Assessment List of 1999-2000 to the allttees of flats in the East End Apptt. Co-op. GHS
 

Dear Sir/Madam
 

A Notice Under Section 126 of DMC Act 1957 on a consolidate rateable value of Rs. 13,01,03550/- w.e.f. 1.4.1999 has served upon on the East End Apptt. CGHS Ltd. It has been informed that you have been allotted flat No.___________ Block No. _____________in the said Group Housing Society. You have not so far applied for the mutation of this flat in your name. This is to give you a notice Under Section 126 of the DMC Act 1957 on the proposed rateable value Category wise as under:

 Type of the Flat                Proposed Rateable Value
'A'                                  Rs. 1,42,700/-
w.e.f. 1.4.1999 each flat
'A-1'                                Rs. 1,06,600/-
w.e.f. 1.4.1999 each flat
'B'                                  Rs. 1,21,900/- 
w.e.f 1.4.1999 each flat
'A-2/D'                              Rs. 1,55,500/-
w.e.f 1.4.1999 each flat
'E-1'                                Rs.  90,320/-
w.e.f. 1.4.1999 each flat
 

You may file your objection, if any within 35 days for the year 1999-2000 which shall be considered before finalising the assessment. In case you need any other information about the proposed rateable value of the method of determination of rateable value before filing a reply, you can collect the same from the office. Kindly furnish all the relevant documents/information showing purchase value/allotment date/rent agreement if any.

(M.C. JAIN)

Dy. ASSESSOR & COLLECtor

C-XIV/SAU

The said notice can be treated as a notice under Section 126 of the Act. These notices were in the names of original allottees.

11. Noting on the official file shows that the office bearers/ members of the Co-operative Society, including the Administrator, were not cooperative with the MCD during the period 1996 onwards. On 17th March, 1998, officers of MCD had personally visited the Co-operative Society asking for various particulars and details including cost of construction, cost charged, etc. and details of the present allottees or purchasers of the flats. These details with regard to cost of construction on each flat, date of allotment etc. and the names and details of subsequent purchasers were not made available. However, by the said date, some of the flats had already been occupied. Flat No. 201, Block 8(Category D) had been rented out w.e.f. 3rd June, 1997 on rent of Rs. 8000/- per month, with refundable security deposit.

12. The Co-operative Society had written a letter dated 7th February, 2002. The said letter refers to an earlier letter dated 4th February, 2002 written by the Municipal Corporation and the special camp held by the Co-operative Society on 9th February, 2002 for the purpose of property tax. The Co-operative Society has stated in the said letter that the Managing Committee had recently taken over charge from the Administrator and the details with regard to the cost of construction, etc. of the individual flats were not readily available and they had approached an architect and a chartered accountant for furnishing the details. Co-operative Society on behalf of the all it's members stated that they had agreed to cooperate and had informed it's members to pay taxes on self-assessment basis. Thereafter another camp was organized in the said Society on 24th February, 2002 to enable the individual members to pay their taxes. On 20th February, 2002, the Co-operative Society furnished some details. Several pleas were taken in the letter including the contention that the flats that have been constructed were part of the stock-in-trade of the Society. At the same time, it was stated that the Society was not liable to pay property tax and it's members were liable to pay the property tax after the year 2001. However, in para 4 of the said letter it was stated that all notices, etc. may be sent to the Secretary, East End Apartments, CGHS Ltd, Mayur Vihar, Phase-I, New Delhi 110096.

13. Mr. B.D. Arya, one of the flat allottees also wrote another letter dated 3/9th March, 2002 to the Municipal Corporation admitting therein that the Municipal Corporation had organized a camp for payment of property tax wherein several issues and contentions were discussed.

14. Municipal Corporation also issued another notice dated 7th March, 2002 asking for various details and giving an opportunity to the Co-operative Society to be heard. The said notice was duly served but it appears that no one represented the Society on the hearing fixed on 12th March, 2002 and an Assessment Order dated 14th March, 2002 was passed. The Assessment Order recorded that the rateable value of 348 flats had already been calculated and assessed. Accordingly, the rateable value of the balance 958 flats was assessed by the said Order at 10,50,00,000 w.e.f. 1st April, 1999. This was the consolidated rateable value for the said 958 flats. Copy of the said Assessment Order was also sent to the Co-operative Society along with letter dated 28th June, 2002 and was received by the Co-operative Society on 5th July, 2002 as per receipt available on record.

15. The Co-operative Society by letter dated 30th December, 2002 wrote to the Municipal Corporation with reference to the Assessment Order fixing the rateable value at 10,50,00,000, admitting and accepting that the consolidated rateable value that had been fixed for the 958 flat in the name of the Society. It was stated that the earlier consolidated rateable value fixed in respect of 348 flats had been bifurcated and divided into individual flats and the same process should be adopted in respect of the balance 958 flats. Co-operative Society agreed to cooperate with the Department and furnish relevant information. Thereafter, another letter dated 6th February, 2003 was written by the Co-operative Society including therein several documents as were required with details of expenses incurred and costs paid by the members. On the basis of the information and details furnished rectification Assessment Order was passed on 1st March, 2003 bifurcating and dividing the rateable value of 10,50,00,000 of 958 flats w.e.f. 1st April, 1999 depending upon the category of flats.

16. The circumstances and the facts leading to the passing of the Assessment Order on 14th March, 2002 by the Municipal Corporation in the name of the Co-operative Society fixing the rateable value of the property at 10,50,00,000/- (Ten Crores and Fifty Lakhs only) w.e.f. 1st April, 1999 have been set out above. The Co-operative society was treated as person liable to pay tax and property tax demand was raised against the Co-operative society. The effect is that the Co-operative Society would be and is liable to pay the said amount.

17. Assessment order dated 14th March, 2002 was not challenged by the Co-operative Society. The Co-operative Society, on the other hand, had vide its letter dated 30th November, 2002 approached the Municipal Corporation requesting them to bifurcate and divide the rateable value for individual flat owners, stating that the Co-operative Society had relevant information and documents available with them for the said purpose. They requested that the ex-parte assessment order dated 14th March, 2002 may be set aside. Thereafter, by another letter dated 6th February, 2003 several details required for bifurcation were furnished. Consequent upon the request made by the Co-operative Society, order dated 1st March, 2003 was passed specifically fixing the rateable value for different categories of 958 flats w.e.f. 1st April, 1999. The assessment orders dated 14th March,2002 and 1st March, 2003 have not been challenged or questioned and have become final and binding on the Co-operative Society. Property tax determined on the basis of these orders, has to be paid by the Co-operative Society. The Co-operative Society in turn will collect this amount from the members including the present respondents.

18. Letters for payment of the property tax demand were also sent to the individual members. Against the said letters, appeals were filed before the appellate authority i.e. District Judge by the respondents in LPA Nos. 1030-31, 1035-36, 1043/2006 and writ petitions were filed by the respondents in LPA Nos. 1029, 1034, 1039-40/2006. Learned Addl. District Judge remanded the matter back to the Assessing Officer to pass a fresh Assessment Order after hearing the objections of the appellants therein. As against the said orders passed by the learned Addl. District Judge writ petitions were filed by the said respondents.

19. The writ petitions filed by the respondents stand allowed by the impugned judgments, inter alia, holding that notice under Section 126 of the Act for enhancement of rateable value was issued in the name of the Co-operative Society and not in the name of the individual members, even though the list of individual members was available with the appellant Corporation at least on 4th December, 1998 before the said notices dated 21st March, 1999 were issued. Learned Single Judge relied upon the decision of the Supreme Court in case of MCD v. Trigon Investment and Trading Pvt. Ltd. and Anr. reported in 62 (1996) DLT 222 (SC) and the cases MCD v. L.P. Naithani and Anr. reported in 102 (2003) DLT 61 as well as Municipal Corporation of Delhi v. Sunil Kumar Jain reported in 125(2005) DLT 238 (DB) decided by the Delhi High Court. Learned Single Judge has held that the Municipal Corporation of Delhi was negligent and reckless in not issuing notices to the allottee members and issuing notices directly to the Co-operative Society and in the absence of individual notices under Section 126 of the Act, the assessment orders are liable to be quashed.

20. In view of the facts stated above and discussed in detail we do not think that conduct of Municipal Corporation is such that they should be denied tax legitimately due and payable to them. The conduct cannot be regarded as negligent, callous or reckless. Moreover, from the records it is also apparent that individual notices under Section 126 of the Act were also issued to the members on 27th March, 2000 as per the list furnished by the Co-operative Society. Copy of one such notice has been enclosed along with counter affidavits filed in the cases of Mahesh Chander Mathur and some other respondents. However, the difficulty in such cases and some other cases was that many of the original members of the Co-operative Society had sold and transferred their flats without the transferor and the transferee paying mutation charges and also issuing notice in terms of the Act in the prescribed format. The Co-operative Society also was acting at the behest and on behalf of all the members including subsequent transferees. The Co-operative society has not disputed its liability to pay property tax by filing any appeal or writ petition. The Co-operative society accepted the assessment order but only asked for bifurcation of the rateable value flat wise. On details being furnished the rateable value fixed vide order dated 14th March,2002 was bifurcated and divided flat/category-wise.

21. Learned Counsel for the respondent submitted that in the present case, notice of transfer was given by furnishing list of members and, therefore, the transferor i.e. Co-operative Society cannot be held liable. We, however, do not think that the respondents can raise the said objection/contention. Notice under Section 126 was issued to the Co-operative Society for enhancement of rateable value w.e.f. 1st April, 1999. No objection to the said notice was filed by the Co-operative Society. The ex-parte assessment order dated 16th March, 2002 was passed fixing lumpsum rateable value of all the flats in the Co-operative Society. This ex-parte assessment order was not challenged by the Co-operative Society, but request was made to bifurcate and divide the rateable value, by giving specific details of individual flats. It was stated that the Society will cooperate in the assessment and facilitate the processing of assessment. In view of the said statement, rectification/assessment order was passed on 1st March, 2003. The purported transferor i.e. Co-operative Society has not challenged and questioned the rectification /assessment order on the ground that it is not bound by the same. It has accepted the assessment order and its liability to pay. This is also clear from letter dated 6th February, 2003 written by the Co-operative Society furnishing various details and requesting for grant of 15% rebate admissible to Co-operative Group Housing Societies.

22. Learned Single Judge in the impugned judgments has accepted the contention of the respondents that the Assessment Order dated 14th March, 2002 fixing consolidated rateable value was never passed and no notice dated 18th March, 2000 under Section 126 of the Act was issued to the Co-operative Society for giving proposal to fix the rateable value at 13,01,03,550 w.e.f. 1st April, 1999. This is not factually correct. In fact in the appeal filed under Section 169 of the Act by Mr. Mahesh Narain Mathur and some others, it was specifically mentioned by the respondents that consolidated rateable value of 10,50,00,000/- w.e.f. 1st April, 1999 was fixed vide Assessment Order dated 14th March, 2000 and on the basis of the said Assessment Order bills were issued after bifurcation. Thus the respondents have admitted passing of the Assessment Order dated 14th March, 2002 within a period of three years w.e.f. the issue of notice dated 18th March, 2000 under Section 126. The Co-operative Society has also admitted passing of the Assessment Order dated 14th March, 2002 in its correspondence dated 30th December, 2002 and 6th February, 2003. Thereafter, on the request of the Co-operative Society, rectified Assessment Order dated 1st March, 2003 was passed bifurcating and dividing the rateable value of 10,50,00,000/- into different category of flats and communicated to the Secretary, Co-operative Society in terms of the earlier letter dated 20th February, 2002. Therefore, issue and receipt of notice dated 18th March, 2000 under Section 126 of the Act proposing enhancement of rateable value to 13,01,03,550/- and the order fixing the reteable value at 10,50,00,000/- vide order dated 14th March, 2002 is accepted and admitted. It is also apparent that at the behest of the Co-operative Society rectification Order dated 1st March, 2003 was passed bifurcating and dividing the rateable value.

23. We may now refer to the decision of this Court in the case of Municipal Corporation of Delhi v. R.P. Singh and Ors. in Civil Revision No. 1257/1997 , decided on 19th December, 2002. In the said decision, the learned Single Judge of this Court has referred to Sections 120, 126, 128 and 132 of the Act as well as Sections 19-22 of Delhi Apartments and ownership Act, 1986. While referring to Section 22 of the Delhi Apartments and ownership Act, 1986 the Court also noticed that the deeming provision requires suitable regulations to be enacted and the said regulations had not been enacted. Question also arose about the common areas and undivided interest, in the Co-operative Society in spite of allotment of flats to members. With reference to Section 132 of the Act, the learned Single Judge noticed that when land with building is owned by two or more people, the same can be assessed as a whole treating it as one property, but the Commissioner under the proviso on conditions being satisfied and subject to the bye-laws can divide the property into separate parts and treat them as separate property for the purpose of property tax. In this case Ld. Single Judge has held that notice under Section 126 of the Act to the Secretary of the Co-operative Society, is a valid notice under the Act and an Assessment Order passed thereupon is also legal. At the same time, learned Single Judge was conscious of the fact that ultimately it is the members who pay the property tax even if a consolidated assessment order is passed in the name of the Co-operative Society. Learned Single Judge held that principles of natural justice require that members should be heard, if they so desire. In fact the counsel appearing for the MCD conceded and accepted that the members of the Co-operative Society should be heard and the matter may be remanded back for this purpose. It was observed that:

There is no dispute in between the parties that the entire complex of the Supreme Co-operative Group Housing Society was treated as one property. There is also no dispute about the fact that apartments were subsequently passed on by transfer, succession or any other manner to more than 300 persons by dividing the entire construction into simplex and duplex flats, thus in several parts. They occupied them in severalty, treated each such several part as a separate property. The Commissioner may certainly assess such parts, here individual apartments, to taxes. But this Provision definitely implies the principle of natural justice, of being heard whenever the Commissioner decides to assess the property separately though does not says so specifically. Section 132 does not require that a fresh notice should be sent, but certainly requires that in such a case, the person concerned should be heard before finalising the assessment.

24. This judgment was followed in several cases. It may also be relevant to state here that against the judgment of the learned Single Judge of this Court , the Co-operative Society and it's members had filed a Special Leave Petition before the Supreme Court. The leave prayed for under Article 136 of the Constitution of India was granted by the Supreme Court but the Civil Appeals were dismissed vide Order dated 22nd September, 2004. No doubt the Order dated 22nd September, 2004 is non-speaking but doctrine of merger as held by the Supreme Court in the case of Kunhayammed v. State of Kerala is applicable.

25. We are inclined to follow the said judgment in the present case. Land was allotted to the Co-operative Society. Flats were also constructed by the Co-operative Society. The Co-operative Society is a juristic entity and is owner of the land and the flats, which stand allotted to the allottees. No order Under Section 132 of the Act has been passed. It may be noted here that one has to also approach the subject matter and question from a practical point of view and adopt a pragmatic approach. A theoretical approach without appreciating practical ground realities can only cause confusion and litigation. A Co-operative Society will normally have list of it's members but the said list will not include names of members who have sold and transferred their flats. Details of the said transfers were earlier not recorded by a proper instrument of transfer. When the Delhi Municipal Corporation Act, 1957 was enacted the concept of Group Housing Co-operative Society was not in vogue. Concept of a Co-operative housing society constructing flats, rather than plotted development, became the order of the day in the 1980s and thereafter. In the case of Calcutta Gujrati Education Society v. Calcutta Municipal Corporation it has been observed as under:

25. Taking into consideration, however, the practical difficulties, particularly concerning multi-storeyed buildings occupied by several tenants, sub-tenants and occupants, a mere non-issuance and/or service of public and written notices to all individuals concerned who are persons primarily liable or liable, would not be treated by the authorities concerned and courts as invalidating the consolidated rate determined and apportioned on various persons regarding such building/buildings unless a serious prejudice is found to have been caused to the persons aggrieved.

26. No doubt the provisions of the Calcutta Municipal Corporation Act are not pari materia to Section 126 of the Act but the observations made above indicate that practical difficulties while computing rateable value of flats in multi-storied buildings cannot be ignored and should be taken into consideration while adjudicating and deciding questions relating to property tax.

27. It may be relevant to state that till 1999, assessment had always been made in the name of the Co-operative Society. Under the Delhi State Co-operative Societies Act, the Co-operative Society is a juristic person. Land is allotted to the Co-operative Society and, thereafter, the construction of flats is also done by the Co-operative Society. Subsequently, these flats are allotted to its members. It appears that initially, the stand taken by the Municipal Corporation of Delhi was that individual notices need not be served upon the members and assessment can be done in the name of the Co-operative Society itself. This stand is supported by the judgments of this Court that service of notice on the Secretary of Co-operative Society is valid and sufficient as service in law on the allottee or members of the Co-operative Society. In addition to R.P. Singh's case, similar view was taken by this Court in number of other matters as is apparent from the Civil Appeal 1345/2004 filed by Supreme Co-operative Group Housing Society Ltd. in Supreme Court. The said appeals were dismissed. It is not difficult to understand the predicament which the Municipal Corporation was facing when it issued notices in the name of the Co-operative Society and thereafter again in the name of the individual members. The assessment was earlier done in the name of Co-operative Society and the land continued to remain in the name of the Co-operative Society. There were also common areas. It also appears that the Co-operative Society kept on corresponding with the Municipal Corporation during this time.

28. Municipal Corporation later on decided to pass assessment orders in cases of individual members. This was just and appropriate because the flats allotted may be self occupied or rented out. Rental incomes can also vary and differ. Keeping these aspects in mind in the case of Sh. R.P. Singh's Case (Supra) and other cases, the matter was remanded back to the Assessing Officer to hear the individual members and, thereafter, fresh assessment orders be passed.

29. Having considered and examined the records, we feel that the present appeal should be allowed and the matter should be remanded back to the Assessor and Collector for fresh adjudication for hearing the members.

30. It may also be noted here that the said respondents in LPA Nos. 1029, 1034, 1039-40/2006 had not filed any statutory appeal as provided under the Act but had directly approached this Court by filing a writ petition. The judgment of the Division Bench of this Court in the case of Municipal Corporation of Delhi v. Sunil Kumar Jain relates to a different factual situation. In para 5 of the said judgment, the Division Bench noticed that there were no averments in the appeal filed by the Municipal Corporation that notice had been issued to the Society before list of members was given. Moreover in the present case the Co-operative Society had itself not filed any objection after being served with notice under Section 126 of the Act. After the Assessment Order was passed request was made by the Co-operative Society for bifurcation of the rateable value. The said request was accepted and a rectification order was passed bifurcating and dividing the rateable value flat-wise. The effect of Section 132 of the Act was also not examined as it was held that the Municipal Corporation had been reckless and negligent. In the present case, conduct of the Municipal Corporation is not negligent.

31. In view of above, we partly allow the present appeals and remand the matter back to the Assessing Officer and order him to hear and thereafter, decide rateable value in respect of the flats allotted to the respondents. After hearing the objections of the respondents, orders in accordance with law will be passed and bills will be raised for payment. While passing the Assessment Order, the assessing officer shall take into consideration the objections raised by the respondents for fixing the rateable value. For this reason, we are not examining the contentions raised by the respondents regarding the quantum of rateable value and the date from which the property tax is payable. These aspects and other aspects will be decided by the Assessing Officer on merits. The aforesaid exercise will be completed within a period of six months from the date of this order. The respondents are directed to appear before the Assessing Officer on 6th Aug., 2007 at 11.00 AM.

32. In the facts and circumstances, no orders as to costs.