Delhi High Court
Mr. Ved Marwah vs Ndmc And Ors. on 23 March, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 20.03.2018
Pronounced on: 23.03.2018
+ W.P.(C) 188/2018, C.M. APPL.772/2018
MR. VED MARWAH ..... Petitioner
versus
NEW DELHI MUNICIPAL COUNCIL (NDMC) AND ORS.
.... Respondents
+ W.P.(C) 2198/2017
SAURABH MALHOTRA AND ORS ..... Petitioners
Versus
NEW DELHI MUNICIPAL COUNCIL (NDMC) AND ORS.
.... Respondents
+ W.P.(C) 3995/2017
M/S. PEAREY LAL AND SONS (P) LTD. ..... Petitioner
versus
NEW DELHI MUNICIPAL COUNCIL AND ANR..... Respondents
+ W.P.(C) 4789/2017, C.M. APPL.20759/2017
M/S. MEHRA JEWEL PALACE PVT. LTD. ..... Petitioner
versus
NEW DELHI MUNICIPAL COUNCIL AND ANR..... Respondents
Through: Mr. B.B. Jain, Mr. Amitabh Marwaha
and Mr. Abhay Jain, Advocates, in W.P.(C)
188/2018, W.P.(C) 2198/2017 & W.P.(C)
3995/2017.
Ms. Aastha Dhawan and Ms. Diksha Mathur,
Advocates, for petitioner, in W.P.(C) 4789/2017.
Mr. Arjun Mitra, Mr. Abhishek Mishra, Ms.
Kaskaran Kaur, Advocates, with Mr. Puneet Gupta,
DEO and Mr. Hardeep Singh, Jr. Assistant,
NDMC, in all matters.
Mr. Sanjeev Uniyal and Mr. Dhawal Uniyal,
Advocates, for UOI, in W.P.(C) 188/2018.
Ms. Shreya Sinha and Mr. Amritesh Raj,
Advocates, for UOI, in W.P.(C) 2198/2017.
W.P.(C) 188/2018, 2198/2017, 3995/2017 & 4789/2017 Page 1 of 15
Mr. Santosh Kumar Pandey, Advocate, for UOI, in
W.P.(C) 3995/2017.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A.K. CHAWLA
MR. JUSTICE S. RAVINDRA BHAT
%
1. In all these petitions, although several grounds are urged, the
common reliefs claimed are the quashing of notices under Section 72 of
the New Delhi Municipal Act, 1994 (hereafter "the Act"); the assessment
orders made pursuant thereto and the demands made by the respondent
(NDMC). The petitioners also challenge the validity of Section 116(b) of
the Act as arbitrary.
2. The New Delhi Municipal Council (NDMC) is a statutory
local/municipal body constituted under the Act. As part of its
functioning, it is entitled to assess and collect municipal property taxes in
respect of each kind of property. The Punjab Municipal Act, 1911 was
the precursor to the Act; Section 416(1) of the Act repealed that Act (of
1911). Section 63 of the Act authorizes the assessment and collection of
municipal property taxes and reads as follows:
"63. Determination of rateable value of lands and buildings
assessable to property tax.-(l) 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:
W.P.(C) 188/2018, 2198/2017, 3995/2017 & 4789/2017 Page 2 of 15
Provided that in respect of any land or building the standard
rent of which has been fixed under the Delhi Rent Control Act,
1958 (59 of 1958) the rateable value thereof shall not exceed
the annual amount of the standard rent so fixed.
(2) The rateable value of any land which is not built upon
but is capable of being built upon and of any land on which a
building is in process of erection shall be fixed at five per cent
of estimated capital value of such land.
(3) All plant and machinery contained or situate in or upon any
land or building and belonging to any of the classes specified
from time to time by public notice by the Chairperson with the
approval of the Council, shall be deemed to form part of such
land or building for the purpose of determining the rateable
value thereof under sub-section (1) but save as aforesaid no
account shall be taken of the value of any plant or machinery
contained or situated in or upon any such land or building."
3. Section 72 of the Act which is also relevant for the purpose of these
proceedings reads as follows:
"72. Amendment of assessment list.-(l) The Chairperson may,
at any time, amend the assessment list
(a) by inserting therein the name of any person whose name
ought to be inserted; or
(b) by inserting therein any land of building previously omitted;
or
(c) by striking out the name of any person not liable for the
payment of property tax; or (d) by increasing or reducing for
adequate reasons the amount of any rateable value and of the
assessment thereupon; or
(e) by making or cancelling any entry exempting any land or
building from liability to property tax; or
(f) by altering the assessment on the land or building which has
been erroneously valued or assessed through fraud, mistake or
accident; or
W.P.(C) 188/2018, 2198/2017, 3995/2017 & 4789/2017 Page 3 of 15
(g) by inserting or altering an entry in respect of any building
erected, reerected, altered or added to, after the preparation of
the assessment list:
Provided that so person shall by reason of any such amendment
become liable to pay any tax or increase of tax in respect of any
period prior to the commencement of the year in which the
notice under sub-section (2) is given.
(2) Before making any amendment under sub-section (1) the
Chairperson shall give to any person affected by the
amendment, notice of not less than one month that he proposes
to make the amendment and consider any objection which may
be made by such person."
4. In all these cases, the petitioners are owners of the assessable
properties which were subject to the levy of property tax. On different dates,
notices were issued and served, proposing to assess the properties or amend
the assessment list to determine the rateable value upwards. The relevant
facts, i.e. the names of the petitioners; the properties in question; the dates of
the notice(including the periods for which the fresh assessment was to relate,
including the periods for which the assessments were to be effective from);
the dates when assessment orders were made and the dates of the demands
are set-out for convenience in a tabular statement:
Name of Property in Date of the Period for Date when Date of the
the question notice which assessments demand
Petitioner assessments orders were
were to be made
effective
Ved Flat No.A- 11.02.2002 2001-02 31.10.2017 01.11.2017
Marwah 2, 44,
Amrita 31.03.2011 2010-11
Shergill
Marg, New 08.03.2017 2016-17
Delhi
S.P. Delson 10.02.2003 2002-03 13.12.2016 06.01.2017
W.P.(C) 188/2018, 2198/2017, 3995/2017 & 4789/2017 Page 4 of 15
Malhotra Motor
Workshop
A.L. BF FF SF 24.03.2011 2010-11
Malhotra 3F
Windsor
Satyawati Mansion 28.03.2015/ 2014-15
Malhotra Janpath 30.03.2015
Vivek
Malhotra
The Remaining 09.03.2006/ 2005-06 06.02.2017 15.02.2017
Secretary, area except 31.03.2006
Pearey Lal (3105 sq. ft
and Sons at 19.03.2008/ 2007-08
(P) Ltd. 2ndFloor), 25.03.2008
Harsha
Bhawan, E-
Block,
Connaught
Place, New
Delhi.
Mehra C-11 (incl. 28.02.2003 2002-03 27.02.2017 17.03.2017
Jewel Mezz),
Palace Pvt. Connaught
Ltd. Place 24.03.2006 2005-06
28.03.2007 2006-07
5. All the petitioners complain that the completion of assessment
proceeding or the revision of the assessment lists, after an inordinate period
renders the exercise of power unreasonable. It is urged that the assessing
officers do not have the power to adjudicate upon issues that are in fact stale
or conclude proceedings after an inordinate delay in such a way as to result
in manifold liability on the part of the property owners which they would be
unprepared to bear. According to the petitioners, the assessments pursuant to
any given notice - either proposing a first-time assessment of any property
W.P.(C) 188/2018, 2198/2017, 3995/2017 & 4789/2017 Page 5 of 15
or revision of the existing rateable value is to be completed within a
reasonable period of not more than 3 years failing which the NDMC ceases
to have any power to adjudicate upon such notices which should be
considered stale.
6. Mr. B.B. Jain, learned counsel for the petitioners also submits that in
all these cases, that even after receiving notices and filing their objections,
the petitioners/assessees continued to deposit property tax in accordance
with the existing rateable value and the NDMC made no attempts to either
adjudicate or indicate that the amounts were accepted without prejudice to
its claim that the rateable value needed upward revision. It is furthermore
submitted that in some cases, like in W.P.(C) 2198/2017 though the initial
notice issued for the period 2003 onwards was never finally adjudicated,
later, further notices under Sections proposing upward revision of rateable
values for later periods were issued which too were adjudicated finally in
2017.
7. Learned counsel for the petitioners rely upon the objections filed to
the assessment notices and the notices proposing amendment to the
assessment list and state that NDMC did not afford proper hearing or
opportunity to the assessees and instead proceeded to pass final orders
casting oppressive burdens upon the property owners, including individuals.
It is pointed out that the NDMC also ignored the fact that for the period 2009
onwards, the method for determining the rateable value underwent a
substantial change on account of introduction of "Unit Area" system. The
drawing-up of a composite order based entirely upon the notional market
rent that the property owner is likely to secure from a hypothetical tenant,
could not have been applied in these circumstances.
W.P.(C) 188/2018, 2198/2017, 3995/2017 & 4789/2017 Page 6 of 15
8. Learned counsel rely upon the decision of the Supreme Court in State
of Punjab and Ors.v. Bhatinda District Co-op Milk P. Union Ltd 2007 (11)
SCC 363 and Delhi Development Authority v Ram Prakash 2011 (4) SCC
180. It is stated that in these cases, it was held that even if a statute does not
indicate any limitation or a fetter (in point of time) requiring a statutory
authority to adjudicate or complete proceeding with respect to Show Cause
Notices issued, nevertheless, such statutory adjudicatory proceedings or
processes should be completed within reasonable time and finally orders
made.
9. It is urged that Section 116(b) to the extent it compels an aggrieved
assessee to deposit the entire arrears of property entire tax as a condition for
hearing the appeal is unconstitutional and ex-facie arbitrary. Learned counsel
submits that the remedy of an appeal would be efficacious if and only if the
conditions made applicable for the hearing of the appeal given meaningful
and real access to the party aggrieved, rather than render the remedy
illusory. The requirement of compelling the assessee to deposit the entire
arrears, or the whole of the disputed amount (on account of the statutory
authority's failure to adjudicate the notices resulting in a huge demand
spanning over a decade or more) is in effect compounding the omission of
the authority or itself. In these circumstances, it is only this Court under
Article 226 of the Constitution which can give real and effective remedy.
10. Learned counsel for the respondent NDMC, Mr. Arjun Mitra,
submitted that in the year 2001, in fact the NDMC had framed a proposed
bye-law requiring the AO's to complete the proceedings within three years.
However, that proposed bye-law was never implemented or brought into
force. Counsel for the NDMC urged this Court not to intervene but rather
W.P.(C) 188/2018, 2198/2017, 3995/2017 & 4789/2017 Page 7 of 15
pass an order facilitating the appellant's remedy under Section 116 of the
Act. Learned counsel relied upon the judgment of the Supreme Court in
Shyam Kishore v. MCD 1993 (1) SCC 22 and stated that as long as the
assessee deposits the tax arrears relating to the base year (first year in the
series of years for which demand is raised), the appeals can be heard.
11. It is urged next that the petitioners' grievance with respect to the
method adopted for completing the assessment is untenable. It is stated that
the statute in fact mandates that the rateable value of lands or buildings for
the purpose of property tax shall be the annual rent at which said land or
building shall reasonably be expected to be let from year to year.
12. It was submitted that this expression was the subject matter of
considerable litigation and finally decided by the Supreme Court in STC of
India v. NDMC AIR 2016 SC 1269 which upheld the NDMC's plea that the
arm's length rent which can be fetched in respect of any given premises
forms the basis for the fixation of the rateable value.
Analysis and Conclusions
13. The notices for revising the assessment list in all these cases were
issued over a decade prior to the passing of final orders. In one case, it was
16 years; in others, it was 14 years. In two cases, the same property was
subject to multiple notices for later periods, without finalization of rateable
value, for the previous year. Clearly, the finalization of these cases after
inordinate delay of 14 to 16 years was plainly unreasonable. Where such
open ended power-like in the present case, in Section 72- was conferred
upon a statutory authority, i.e. a sales tax authority official in Punjab, the
Supreme Court had outlined the correct approach in State of Punjab & Ors.
W.P.(C) 188/2018, 2198/2017, 3995/2017 & 4789/2017 Page 8 of 15
v. Bhatinda District Co-op Milk P. Union Ltd 2007 (11) SCC 363 with
respect to the limitations to exercise of such power. It was held that:
"5. In respect of the assessment for the year ending 31.3.2000,
the assessment proceedings were completed relying on the
return filed by the appellant on 20.3.2001. Indisputably, in
terms of Section 11 of the 1948 Act, a period of three years has
been prescribed as a period of limitation as contained under
sub-section (3) of Section 11 for completing assessment from
the last date for filing of return. Sub-section (6) of Section
11 reads as under :
_If upon information which has come into his possession,
the Assessing Authority is satisfied that any dealer has
been liable to pay tax under this Act in respect of any
period but has failed to apply for registration, the
Assessing Authority shall, within five years after the
expiry of such period, after giving the dealer a
reasonable opportunity of being heard, proceed to assess
to the best of his judgment, the amount of tax, if any, due
from the dealer in respect of such period and all
subsequent periods and in case where such dealer has
willfully failed to apply for registration, the Assessing
Authority may direct that the dealer shall pay by way of
penalty, in addition to the amount so assessed, a sum not
exceeding one and a half times that amount. Section 21 of
the said Act provides for revision. Section 21 of the Act
with which we are concerned herein reads as under: _
21. Revision-(1) The Commissioner may of his own
motion call for the record of any proceedings which are
pending before, or have been disposed of by any
authority subordinate to him, for the purpose of satisfying
himself as to the legality or propriety of such proceedings
or order made therein and may pass such order in
relation thereto as he may think fit.
W.P.(C) 188/2018, 2198/2017, 3995/2017 & 4789/2017 Page 9 of 15
(2) The State Government may by notification confer on
any Officer the powers of the Commissioner under sub-
section (1) to be exercised subject to such conditions and
in respect of such areas as may be specified in the
notification.
(3) A Tribunal, on application made to it against an
order of the Commissioner under sub-section (1) within
ninety days from the date of communication of the order,
may call for and examine the record of any such case and
pass such orders thereon as it thinks just and proper.
(4) No order shall be passed under this section which
adversely affects any person unless such person has been
given a reasonable opportunity of being heard.
**********************
***************
15. Sub-section (1) of Section 11 empowers the Commissioner
to extend the period of three years for passing the order of
assessment wherefor reasons are required to be recorded in
writing subject, however, to the maximum period of five years.
Ordinarily, therefore, a period of three years has been
prescribed for completion of the assessment in terms of the
provisions of the Act. We may also notice that in cases where an
assessment order is to be reviewed, the same should be done
within a period of one year.
16. A bare reading of Section 21 of the Act would reveal that
although no period of limitation has been prescribed
therefor, the same would not mean that the suo moto power can
be exercised at any time.
17. It is trite that if no period of limitation has been
prescribed, statutory authority must exercise its jurisdiction
within a reasonable period. What, however, shall be the
reasonable period would depend upon the nature of the statute,
rights and liabilities thereunder and other relevant factors.
18. Revisional jurisdiction, in our opinion, should ordinarily be
exercised within a period of three years having regard to the
purport in terms of the said Act. In any event, the same should
not exceed the period of five years. The view of the High Court,
thus, cannot be said to be unreasonable. Reasonable period,
keeping in view the discussions made hereinbefore, must be
found out from the statutory scheme. As indicated hereinbefore,
maximum period of limitation provided for in sub-section (6)
of Section 11 of the Act is five years."
14. Bhatinda (supra) was noticed and followed subsequently in Ram
Prakash (supra). In a more recent decision Ram Karan (D) by LRs v. State
of Rajasthan 2014 (8) SCC 282, it was held that:
"38. State of Punjab & Ors v Bhatinda District Co-op Milk P.
Union Ltd (supra) this Court held that if no period of limitation
has been prescribed, statutory authority must exercise its
jurisdiction within a reasonable period. However, what shall be
the reasonable period would depend upon the nature of the
statute, rights and liabilities thereunder and other relevant
factors. In the present case, neither any objection was raised
nor was any application filed by vendors for restoration of land
in their favour. The suit was filed by the Tehsildar, Viratnagar
after more than 31 years. No ground is shown to file such
petition after long delay nor it was mentioned as to whether the
vendors i.e. original landholders made any application for
restoration of land in their favour.
39. In view of the matter, we hold that the suit being filed
beyond the reasonable period was fit to be dismissed. The
Additional Collector rightly dismissed the suit being
barred by limitation."
14. In the present case, the finalization of assessment list or its revision,
after over 12 years in all the cases, cannot be countenanced. It is clearly
unreasonable and arbitrary and calls for interference.
15. As regards the second issue whether an appeal is an efficacious
remedy, the Court is of opinion that there is merit in the argument. In Mardia
Chemicals v. Union of India 2004 (4) SCC 311, it was held as follows:
"60. The requirement of pre-deposit of any amount at the
first instance of proceedings is not to be found in any of the
decisions cited on behalf of the respondent. All these cases
relate to appeals. The amount of deposit of 75% of the
demand, at the initial proceeding itself sounds unreasonable
and oppressive more particularly when the secured assets/the
management thereof along with the right to transfer such
interest has been taken over by the secured creditor or in
some cases property is also sold. Requirement of deposit of
such a heavy amount on basis of one sided claim alone,
cannot be said to be a reasonable condition at the first
instance itself before start of adjudication of the dispute.
Merely giving power to the Tribunal to waive or reduce the
amount, does not cure the inherent infirmity leaning one-
sidedly in favour of the party, who, so far has alone been the
party to decide the amount and the fact of default and
classifying the dues as NPAs without
participation/association of the borrower in the process.
Such an onerous and oppressive condition should not be left
operative in expectation of reasonable exercise of discretion
by the concerned authority. Placed in a situation as indicated
above, where it may not be possible for the borrower to raise
any amount to make the deposit, his secured assets having
already been taken possession of or sold, such a rider to
approach the Tribunal at the first instance of proceedings,
captioned as appeal, renders the remedy illusory and
nugatory.
61. In the case of Seth Nandlal (supra), while considering the
question of validity of pre-deposit before availing the right of
appeal the Court held "....right of appeal is a creature of the
statute and while granting the right the legislature can
impose conditions for the exercise of such right so long as the
conditions are not so onerous as to amount to unreasonable
restrictions rendering the right almost illusory. ...."
(emphasis supplied). While making said observation this
Court referred to the decision in the case of Anant Mills Co.
Ltd. (supra). In both the above noted decisions this Court had
negated the plea raised against pre-deposit but in the case of
Seth Nandlal (supra) it was found that the condition was not
so onerous since the amount sought to be deposited was
meager and that too was confined to the landholding tax
payable in respect of the disputed area i.e. the area or part
thereof which is declared surplus by the Prescribed Authority
(emphasis supplied) after leaving the permissible area to the
appellant. In the above circumstances it was found that even
in the absence of a provision conferring discretion on the
appellate authority to waive or reduce the amount of pre-
deposit, it was considered to be valid, for the two reasons
indicated above. The facts of the case in hand are just
otherwise.
62. As indicated earlier, the position of the appeal under
Section 17 of the Act is like that of a suit in the court of the
first instance under the Code of Civil Procedure. No doubt in
suits also it is permissible, in given facts and circumstances
and under the provisions of the law to attach the property
before a decree is passed or to appoint a receiver and to
make a provision by way of interim measure in respect of the
property in suit. But for obtaining such orders a case for the
same is to be made out in accordance with the relevant
provisions under the law. There is no such provision under
the Act.
63. Yet another justification which has been sought to be
given for the requirement of deposit is that the secured assets
which may be taken possession of or sold may fall short of
the dues therefore such a deposit may be necessary. We find
no merit in this submission too. In such an eventuality the
recourse may have to be taken to sub-section 10 of Section 13
where a petition may have to be filed before the Tribunal for
the purpose of making up of the short-fall.
64. The condition of pre-deposit in the present case is bad
rendering the remedy illusory on the grounds that (i) it is
imposed while approaching the adjudicating authority of the
first instance, not in appeal, (ii)there is no determination of
the amount due as yet (iii) the secured assets or its
management with transferable interest is already taken over
and under control of the secured creditor (iv) no special
reason for double security in respect of an amount yet to be
determined and settled (v) 75% of the amount claimed by no
means would be a meager amount (vi) it will leave the
borrower in a position where it would not be possible for him
to raise any funds to make deposit of 75% of the
undetermined demand. Such conditions are not alone
onerous and oppressive but also unreasonable and arbitrary.
Therefore, in our view, sub-section (2) of Section 17 of the
Act is unreasonable, arbitrary and violative of Article 14 of
the Constitution."
16. In Sunil Rai v. Municipal Corporation of Delhi & Ors 48 (1992) DLT
621 (DB) after the judgment in Shyam Kishore (supra) a Division Bench of
this Court had interpreted a provision identical to Section 116 (b) and held
that the proper exercise of discretion by the appellate forum in cases where
assessment orders are framed for a number of years, is to direct the assessee
to deposit the disputed tax in respect of the base year and then to proceed to
hear and decide the appeal in respect to the base year assessment and after
deciding the said appeal the decision of the appeal in respect of the base year
would automatically govern the assessment for the subsequent
years. Adoption of such an approach, in the opinion of this Court, saves the
provision of Section 116 of the Act.
17. In view of the above reasoning, it is held the impugned final orders of
assessment and the demands issued are clearly unreasonable and void. They
are hereby quashed. Consequently, it is held that the NDMC is at liberty to
rework the assessments in respect of the properties that are the subject matter
of these proceedings, by issuing fresh notices for the periods commencing
from 3 years prior to the date on which the final notices were issued, and
finalize the assessments within reasonable time. In the event of grievance on
the part of the assessee to such fresh assessment orders, it is open to them to
approach the appellate tribunal; provided they deposit the amount towards the
tax liability for the base year.
18. For the above reasons, the writ petitions are allowed; there shall be no
order on costs.
S. RAVINDRA BHAT
(JUDGE)
A.K. CHAWLA
(JUDGE)
MARCH 23, 2018
