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Municipal Corporation of Greater Bombay Vs. Century Spinning and Manufacturing Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai High Court
Decided On
Case Number First Appeal Nos. 133 and 135 of 1978, 82, 83, 681 and 683 of 1979 and 832 to 835 and 837 to 843 of
Judge
Reported in(1983)85BOMLR423
AppellantMunicipal Corporation of Greater Bombay
RespondentCentury Spinning and Manufacturing Co. Ltd.
Excerpt:
bombay municipal corporation act (bom. iii of 1888), sections 217, 154 - bombay rents, hotel and lodging house rates control act (bom. lvii of 1947), sections 11(1), 5(10)(b)(iii) - fixation of rateable value in relation to standard rent under rent control laws--interference in appeal with decision of municipal commissioner as to rateable value--onus to show cause for interference whether shifts on assessing authority--hypothetical rent and statutory standard rent in working rateable value--lower rent than standard rent whether permissible for fixing rateable value--concessional rent charged whether can be ground for interference in appeal under section 217 of b.m.c. act--clause (c) of section 154(3) of b.m.c. act whether independent of clause (b) of section 154(3).;the onus to show cause.....aggarwal, j.1. these are different sets of appeals filed by the municipal corporation of greater bombay under section 218d of the bombay municipal corporation act, 1888, against the different decisions of the learned additional chief judges of the small causes court, bombay, decided by them under section 217 of the said act in respect of the rateable value of the different properties of the respondents - the century spinning and ., having their registered office at dr. annie besant road, worli, bombay.2. for the sake of clarity and convenience, the appellants herein, who were respondents in the lower appellate court, will be described as the 'corporation' and the respondents herein, who were the applicants in the lower appellate court will be described hereafter as the 'assessee.....
Judgment:

Aggarwal, J.

1. These are different sets of appeals filed by the Municipal Corporation of Greater Bombay under Section 218D of the Bombay Municipal Corporation Act, 1888, against the different decisions of the learned Additional Chief Judges of the Small Causes Court, Bombay, decided by them under Section 217 of the said Act in respect of the rateable value of the different properties of the respondents - the Century Spinning and ., having their registered office at Dr. Annie Besant Road, Worli, Bombay.

2. For the sake of clarity and convenience, the appellants herein, who were respondents in the lower appellate Court, will be described as the 'Corporation' and the respondents herein, who were the applicants in the lower appellate Court will be described hereafter as the 'assessee Company'.

3. The first set of appeals consists of F.A. No. 82 of 1979 and F.A. No. 83 of 1979. The second set of appeals consists of F.A. No. 133 of 1978 with F.A. No. 135 of 1978. The third set of appeals consists of F.A. No. 681 of 1979 with F.A. No. 683 of 1979. In these appeals, the judgment appealed against is of the same learned Additional Chief Judge Shri Y.D. Wagh, delivered on April 2, 1979.

4. The fourth set consists of four appeals, F.A No. 832 of 1981 with F.A. 833 of 1981, F.A. No. 834 of 1981 and F.A. No. 835 of 1981. In these matters, a common judgment under appeal was delivered by Shri G.M. Khamibete, Additional Chief Judge, on March 24/25, 1981. In these matters, on behalf of the assessee Company, the assessee Company examined Jagdish Prasad Tripathi in support of its case. On behalf of the Corporation, Gajanan Shantaram Joshi was examined.

5. The last set of appeals consists of F.A. No. 837 to 843 all of 1981. In these matters, the assessee Company examined Jagdish Prasad Tripathi in support of its case while the Corporation examined Shasikant Damle. The judgment in these matters was delivered by the learned Additional Chief Judge Shri G.M. Khambete on March 26, 1981.

6. Thus we have five sets of appeals. However, it was agreed by learned Counsel on both sides that they will confine their arguments on the basis of the evidence and the judgments delivered, which are the subject-matter of F.A. No. 82 of 1979 and F.A. No. 83 of 1979 and F.A. No. 132 of 1978 and F.A. No. 135 of 1978 and the evidence recorded in those matters. The decision in these matters will bind the parties in the remaining three sets of appeals. Therefore, neither the evidence was read nor the judgment considered in those matters.

7. First Appeal No. 82 of 1979, along with First Appeal No. 83 of 1979, pertains to chawl No. 10 in property bearing G-S-1701-3 situated at 6KA, Pandurang Budhakar Marg, Bombay, comprising of 23 chawls, out of which 14 are newly constructed after demolishing old chawls and 9 are old chawls. Each of the tenements admeasures 17.70 sq. metres and the rent charged per tenement is Rs. 26.45. The Corporation, on hearing complaint of the assessee Company in respect of the rateable value of chawl No. 10, fixed the rateable value for the year 1975 and for the year 1975-76 at Rs. 18,615. Being aggrieved of the fixation of this rateable value, the assessee Company filed an appeal under Section 217 of the said Act, contending that the rateable value of the property worked out to Rs. 9,944 on the basis of the rent received.

8. First Appeal No. 133 of 1978, with First Appeal No. 135 of 1978, arises in respect of a chawl and a building constructed by the assessee Company for the accommodation of its employees. Chawl bearing No. C.S. 1701 (1) situated at 6H Pandurang Budhakar Mare, Bombay, was the subject-matter of Municipal Appeal No. M/663 of 1973 and the building bearing No. CS 1702 (2) situate at 693, 6K Pandurang Budhakar Mare. Bombay; was the subject-matter Of Municipal Appeal No. M/662 of 1973. The tenements of the chawl in Municipal Appeal No. M/663 of 1973 were rented out at the rate of Rs. 26.48 per month each and each of the tenements admeasures 17 sq. metres,-whereas the blocks in the building, subject-matter of Municipal Appeal No. M/662 of 1973, admeasure 42 sq. metres each and the rent recovered in respect of each block in the building was Rs. 43 per month approximately. According to the assessee Company, the rateable value in respect of the chawl should be Rs. 10.501 and not as fixed by the Corporation at Rs. 21.485 on the basis of the rental of each tenement at Rs. 45.90 per month. According to the assessee Company, the rateable value of the building ought to have been Rs. 39,055 and not Rs. 41,345 as fixed by the Corporation.

9. The, Corporation's contention before the lower appellate Court was that as regards the chawl premises, the property was occupied as quarters for the workers of the assessee Company with effect from November 2, 1972. The assessee Company's complaint was investigated by the investigating officer and he fixed the rateable value at Rs. 17,995 with effect from November 1, 1972 and denied that the rateable value of the chawl property works out at Rs. 10,501 as contended by the assessee Company. So far as the building was concerned, the investigating officer of the Corporation, while investigating the assessee Company's complaint, reduced the rateable value from Rs. 41,345 to Rs. 39,055 with effect from November 1, 1972.

10. All these appeals were heard by the learned Additional Chief Judge Shri Y.D. Wagh.

11. The assessee Company examined Champaklal Ghelabhai Desai, legal assistant of the assessee Company, in support of its case in all the appeals. On behalf of the Corporation, its Deputy Superintendent in G South Ward, Assessment & Collection Department, Shashikant Mukund Damle, was put in the witness-box. These witnesses, however, testified separately in respect of the property, which is the subject-matter of F.A. No 82 of 1979 and F.A. No. 83 of 1979, and the property which is the subject-matter of F.A. No. 133 of 1978 and F.A. No. 135 of 1978. The learned Additional Chief Judge also delivered separate judgments. However, the points involved in all the appeals are common and they can be disposed of by a common judgment and they have also been argued on that footing.

12. The learned Additional Chief Judge, by his judgment dated November 10, 1978, allowed the appeals of the assessee Company and fixed the rateable value on the basis of the actual rental recovered by the assessee Company from the tenants.

13. On behalf of the Corporation, it was contended before the learned Judge that the tenants in the chawl were the assessee Company's employees and what was charged to them by way of rent was not the actual or standard rent but concessional rent. In support of this, the statement of one Rao, who appeared before the investigating officer of the Corporation at the time of investigating the assessee Company's complaint, was relied upon to show that (the tenements put up by the assessee Company and let out to the workers) the chawls are workers' chawls compulsorily built as required and hence the assessee Company is not supposed to make any profit and that the tenements have been given to the workers at concessional rent of Rs. 25 per month. It was also contended that though the Corporation had asked the assessee Company to produce the evidence of cost of construction, the assessee Company had not done so. On the strength of the admission of Rao and in view of the fact that the assessee Company had not produced the evidence about the cost of construction, it was urged before the learned Judge that the rate taken by the investigating officer for fixation of rateable value should be treated as fair and reasonable rate and the rent actually charged should be treated as concessional rent.

14. After bearing in mind the definition under Section 5(10)(iv) and the provisions of Section 11 of the Bombay Rent Act and the decision in New Delhi Municipal Committee v. M.N. Soi A.I.R. [1977] S.C. 302and the fact that the old tenements, comprised of an area of 10.21 sq. metres and the rent for which was Rs. 5.54 each, were demolished and the new chawls having tenements of an area of 16.07 sq. metres were constructed and the rent charged was Rs. 27.99 per month, the learned Judge opined thus:

Therefore, it must be concluded that after constructing new building the appellants took into consideration the cost of construction and made a considerable increase in rent. The rent of Rs. 27.09 charged for each of the tenements which arc occupied by the employees of the appellants cannot be called concessional and not in the least nominal. I should also observe that the rent if concessional to some extent cannot be a ground for interference by the Court under the provisions of. Section 11(1)(d) of the Bombay Rent Act. Therefore, the rent charged by the appellants to the respondents should be taken as standard rent and as such hypothetical rent for fixation of rateable value under Section 154 of the Bombay Municipal Corporation Act.

Thus the learned Judge held that the hypothetical rent or standard rent for fixation of rateable value per tenement should be taken at Rs. 27.99 and since there are 40 tenements in the chawl, the total rent comes to Rs. 1,119.60 per month, i.e., the yearly rent comes to Rs. 13,435.20 and after giving statutory deduction at 10 per cent, fixed the rateable value at Rs. 12,090.

15. In another judgment dated December 13, 1977, the subject-matter of F.A. No. 133 of 1978 with companion F.A. No. 135 of 1978 comprising of the chawls and the blocks in the building, the question which fell for determination was whether the rateable value determined by the Corporation was excessive. On behalf of the Corporation, it was urged that it was for the assessee Company to prove that the rateable value charged by the Corporation was excessive. In this connection, it was pointed out that the assessee Company's witness Desai was unable to state on what basis the assessee Company had charged rent to its employees and that the assessee Company had not produced evidence regarding the cost of construction of the chawl, the value of the land, etc.. which was in its possession. Reliance was also placed on certain judgments of that Court, in which it was observed that the burden was on the persons who came in appeal under Section 217 of the said Act to prove that the rent charged by them was fair and reasonable. In one judgment of that Court, it had been observed that the standard rent of the premises cannot be fixed until the appellants concerned prove the amounts scent by them over the construction of the premises. In these circumstances, it was contended that the assessee Company did not prove that the rateable value charged by the Corporation was excessive and that the ratable value chargeable on the basis of the rent recovered by the Convocation should be taken as reasonable. The learned Judge, after' hearing in mind the decision in the New Delhi Municipal Committee's case (supra) and the 'standard rent' as defined under the Bombay Rent Act as the rent prevalent on September 1, 1940 or if the premises are let after that date, the rent prevalent on the date of first letting, stated thus:

Thus the burden to prove that the premises let out are at a reasonable rate lies upon the appellants, the law of burden of proof cannot be strictly construed so as to lay the whole burden upon the appellants after the evidence is over. The appellants have clearly stated that they have let out the premises at certain rent. It is the case of the respondents brought out in the evidence that the rate at which the premises have been let out is concessional because the tenants happen to be the employees of the appellants. The respondents say that the rent prevalent, in the locality is much higher than the rent charged by the appellants. The respondents' witness has made a vague statement recording the rate prevalent in the locality but he has not given any special instances of the higher rent charged in the same locality. Therefore, though the burden lies upon the appellants to show that the rent charged by the appellants is reasonable, there appears to be no evidence led on behalf of the respondents by way of rebuttal to show that the rent charged by the appellants is unreasonable or concessional.

As per the principles of fixation of standard rent under the Bombay Rents Act, the evidence as regards cost of construction, valuation of the land etc. should come before the Court. The appellants' witness has made a statement that they have started charging rent at the present rate after taking into consideration the report of their architect. Though the report has not been produced, there was no specific cross-examination on behalf of the respondents to state as to what would have been the value of the building in question. The respondents did not themselves lead any evidence as regards the cost of construction and value of the land which made them to arrive at a certain figure as fair and reasonable rent. The respondents say that the rent charged is concessional because the premises are let out to the employees of the appellants and also because the rate of rent in the locality is higher cannot be accepted as gospel truth. Mr. Damle who was examined as witness on behalf of the respondents is a law graduate and he cannot be treated as an expert in building valuation. As he has not given the specific instance of the higher rate of rental charged in the locality, it is difficult to accept that what the appellants are charging is the concessional rent.

The legal position as regards charging of rent is more ambiguous. The appellants have now already started charging their employees at a certain rate. This rent will be the rate of first letting and as the premises are covered under the Bombay Rent Act, they will not be entitled to enhance the rent. From this point of view also what the appellants are charging should be taken as fair and rensonable rent.

Thus, according to the learned Judge, the rateable value in respect of the chawl and the building should be on the basis of rent actually charged to the tenants and fixed the rateable value at Rs. 12,096 and Rs. 32,400 respectively after making the statutory deduction at the rate of 10 per cent.

16. Shri Walawalkar submitted that the learned Judge misdirected himself by putting a formal and technical onus on the assessee Company and by placing in substance the onus on the Corporation to prove that the rent charged by the assessee Company from its employees is unreasonable or concessional. The assessee Company had not discharged the onus of proving that the revised assessment made by the Assessor and Collector of the Corporation was excessive. The assessee Company had the best evidence of cost of construction in its possession, which, if produced, would have enabled the lower appellate Court to determine the rent in the light of the relevant provisions of the Bombay Rent Act, but the assessee Company was shy for reasons best known to the assessee Company to show to the authority concerned at the stage of the investigation of the assessee Company's complaint and even before the lower appellate Court.

17. Shri Gumaste for the assessee Company submitted that the assessee Company had discharged the burden which initially rested on it by testifying through witness Desai that the rateable value is not properly fixed. The assessing authority has ignored the law laid down by the Supreme Court in The Corporation of Calcutta v. Smt. Padma Debt : [1962]3SCR49 and New Delhi Municipal Committee v. M.N. Soi (supra), which requires that the reasonable rent is the standard rent. If the evidence is lacking, submitted Shri Gumaste, the Court cannot throw on the assessee Company the burden of proving what is the standard rent When the case of the assessee Company is that the standard rent is as per the provisions of Section 5(10)(b)(iii) of the Bombay Rent Act (the 'standard rent' in relation to any premises means, where they were first let after September 1, 1940, the rent at which they were first let). Therefore, submitted Shri Gumaste, it would be wrong to call upon the assessee Company to produce in the Court evidence of the cost of construction.

18. Now, before going into the above points, it is useful to refer to the unreported judgment of Gajendragadkar and Shah, JJ, (as they then were) in The Municipal Commissioner v. The Ganesh Co-operative Housing Society (1954) First Appeal No. 581 of 1964 decided by Gajendragadkar and Shah JJ, on November 22, 1954 (Unrep.) in which the distinguished Judges, after referring to the relevant provisions of the Bombay Municipal Corporation Act, 1888, point out that though in the first instance the rateable value is fixed by the officers of the Corporation in the manner prescribed by the Act, the said value is open to challenge by the assessee and a complaint made by the assessee is inquired into by the Commissioner in the presence of the assessee. After the complaint is finally disposed of by the Commissioner, the assessee is given one more chance to ventilate his grievance by filing an appeal under Section 217 of the Act. The learned Judges said:

It is an appeal by the assessee against the decision of the Municipal Commissioner and as such it is clear that it would be for the assessee to make out a ease for the interference of the the Chief Judge of the Small Cause Court with order of assessment under appeal. In our opinion, there can be no doubt that in such an appeal the onus to show cause for interfering with the order under appeal must lie on the appellant.

The learned Judges in that case, while repelling the submission that it was for the assessing authority to justify the assessment and not for the assessee to show that the order under appeal is wrong, observed:

However much the Court may sympathise with the grievance of the assessee in dealing with his appeal the Court cannot forget the fart, that the assessee by his appeal purports to challenge an order made by the Commissioner of the municipality under statutory authority conferred on him by the Act itself. It. would be idle to suggest that every order passed by the Commissioner is unreasonable and so there can be no justification for requiring the Corporation to justify the order at the outset. It may be that in discharging the onus the appellant would be justified in requesting the appellate Court to call upon the Corporation to produce such evidence as the Court may deem to be relevant and material. There is no doubt that in discharging the onus the appellant would almost in every case be at some disadvantage. Ho may find it difficult to collect relevant evidence and would feel compelled to ask for assistance in that manner by requiring the municipal authorities to produce relevant evidence, documentary or oral. If an application is made by the appellant in that behalf, the appellate Court would undoubtedly consider the application on the merits and would naturally require the production of relevant evidence in order to enable the appellate judge to dispose of the matter satisfactorily. But that does not mean that there is any obligation tot such on the Municipality or that the onus is on the Corporation itself. At the hearing of the appeal it, may be open to the appellate Judge to call for the record made by the Commissioner when he heard the complaint preferred before him by the assessee. That record itself may afford assistance to the appellant in a proper case to show cause why the order under appeal may be revised and it would in every case give the basic material for the appellate Judge to deal with the dispute before him. If this material is not satisfactory or sufficient, then the appellate Judge would, undoubtedly be justified in recording such further evidence as may be relevant and material.

(emphasis is mine) [herein indicated in italics-Ed.)

19. Shri Walawalkar referred to another decision of this Court in Filmistan Private Limited v. The Municipal Commissioner for Greater Bombay (1969) 72 Bom. L.R. 461, on the rule of burden of proof in appeals under Section 217 of the Bombay Municipal Corporation Act, 1888. In that case, the rateable value was enhanced by the Corporation and it was contended on behalf of the assessee that the increase was without any apparent justification and, therefore, the burden must rest on the Corporation to show that the increase was justified. In rejecting this submission, Chandrachud, J., as he then was, speaking for the Court observed (at page 465):It is clear that the scheme envisaged by the Act is that an appropriate entry is to be made in the assessment book by the Commissioner, notice thereof, sometimes specially, is to be given to the person affected by the entry and the burden is cast on the person challenging the entry to show that the rateable value fixed by the Commissioner or the increase proposed by him is not justified. That is why the assessee is required to file a complaint and if the Commissioner finds on investigation that the complaint is unjustified, the assessee has been given a right under Section '217 to file an appeal to the Chief Judge of the Court of Small Causes. It is open to the assessee to satisfy the Chief Judge, if necessary by examining an expert valuer under Section 21813 of the Act, that the Commissioner has not fixed the rateable value of the property correctly. If the appeal to the Chief Judge fails, the assessee is given a further opportunity to file an appeal to the High Court under Section 218D. The burden however must always rest on the assessee to establish that the rateable value has not been property fixed by the Commissioner.

(emphasis is mine) [herein indicated in italics-Ed.]

20. These two decisions of this Court clearly lay down that the burden rests on the assessee who challenges the correctness of the rateable value fixed by the Commissioner on the assessee's complaint. The appellate judge was not unaware of this legal position that the onus was on the assessee Company. Now, the weight of this onus will depend on the facts of each case. It is difficult to describe the weight of this onus as either heavy or light, and under what circumstance and on what evidence the initial onus lying on the assessee can be said to be discharged.

21. Before proceeding to consider whether the assessee Company had discharged the burden that the rateable value fixed by the Municipal Commissioner was excessive or unreasonable and unfair, it is necessary to bear in mind the provisions of Section 154(1) of the said Act under which the rateable value is determined and how these provisions are to be understood in the light of the decisions in The Corporation of Calcutta v. Smt. Padma Debi (supra) and New Delhi Municipal Committee v. M.N. Soi (supra). It is sufficient to note here that Sub-section (1) of Section 154 provides that the rateable value of any building or land assessable to a property-tax is to be fixed on the amount of the annual rent for which such land or building might reasonably be expected to let from year to year (emphasis supplied). [Herein indicated in italics-Ed..] But Sub-section (2) of Section 154 carves out exceptions for determining the rateable value on the basis of actual rent charged for specified tenements and not on the rent for which such tenements might reasonably be expected to let, as provided under the main Sub-section (1) of Section 154. At present, we are to consider that the tenements of the assessee Company fall within the main Sub-section (1) of Section 154 because Shri Gumaste's alternative contention was that the tenements would fall under Sub-section (2) of Section 154 and, therefore, the rateable value of the tenements is required to be fixed on footing of the actual rent charged from the workers and employees and not on the basis of the rent on which the tenements might reasonably be expected to let. Under Section 154, the reasonable expectation of a landlord in regard to the rent which his property would fetch cannot exceed what he can lawfully recover from his tenant under the Bombay Rent Act because the Bombay Rent Act leaves no room for doubt that a contract for a rent at a rate higher than the standard rent is not only unenforceable but also the landlord would be committing an offence if he collected a rent above the rate of the standard rent. Under these circumstances, a landlord cannot, as a prudent person, be expected to contract for a rent higher than the standard rent. The expression 'might reasonably be expected to let from year to year' used in Section 154(1) of the B.M.C. Act does not speak of actual rent realised by a landlord but contemplates a hypothetical rent which can be reasonably expected to realise if the building is let. But hypothetical rent may be described as a rent which a landlord may reasonably be expected to get in the open market. In that case, a statutory limitation of rent circumscribes the scope of the bargain in the market and, in no circumstance, the hypothetical rent can exceed that limit. Therefore, municipal rating, where legislative provisions for control of rent are in force, is to be on the basis of that statute. The search for hypothetical rent contemplated under Section 154(1) is put at par with statutory standard rent. What might reasonably be expected in letting out the tenements cannot be higher than its standard rent under the Rent Control Laws. But that does not mean that it can be lower than its standard rent. The rateable value of the property assessable to property tax cannot be got reduced by fixing a rent lower than the standard rent by arbitrary method or by charging nominal rent or by accepting some consideration in addition to rent or by taking into special consideration like relationship of blood, friendship, service or in other circumstance or for a consideration resulting in the charging of rent lower than its standard rent under the Rent Control Laws. The rent charged should be such as may reasonably be expected to be charged by a landlord from his tenant in the open market, but at the same time, it cannot be at a higher or lower rate than its standard rent under the Rent Control Laws. The two unreported decisions of this Court clearly lay down that the onus to show cause for interference' with the decision of the Municipal Commissioner would be on the assessee. It is hot for the assessing authority to justify that the assessment is reasonable and fair or that the rent recovered is not the standard rent or that the assessing authority should itself work out the cost of construction, as urged by Shri Gumaste.

22. We now go to the relevant provisions of the Bombay Rent Act. The definition of the expression 'standard rent' in Section 5(10) reads thus:

5. In this Act unless there is anything repugnant to the subject or context-

(1) to (9)....

(10) 'standard rent' in relation to any premises means--

(a) where the standard rent is fixed by the Court and the Controller respectively under the Bombay Rent Restriction Act, 1939 or the Bombay Rents, Hotel Rates and Lodging House Rates (Control) Act, 1944, such standard rent; or

(b) when the standard rent is not so fixed subject to the provisions of Section 11(1)(i) the rent at which the premises were let on the first day of September 1940, or

(11) where that were not let on the first day of September 1940, the rent at which they were last let before that day, or

(iii) where they were first let after the first day of September 1940, the rent at which they were first let, or

(iv) in any of the oases specified in Section 11, the rent fixed by the Court.

23. Section 11 so far as it is relevant is as follows:

11. (i) Subject to the provisions of section 11A in any of the following cases the Court may, upon an application made to it for that purpose or in any suit or proceedings, fix the standard rent at such amount as, having regard to the provisions of this Act and the circumstances of the ease, the Court deems just-

(a) where any premises are first let after the first day of September 1940, and the rent at which they are so let is in the opinion of the Court excessive; or

(b) where the Court is satisfied that there is no sufficient evidence to ascertain the rent at which the premises were let in any one of the cases mentioned in sub-clauses (i) to (iii) of Clause (b) of Sub-section (10) of Section 5, or

(c) where by reason of the premises having been let at one tune as a whole or in parts and at another time in parts or as a whole, or for any other reason, any difficulty arises in giving effect to this Part; or

(d) where any premises have been or are let rent-free or at a nominal rent or for some consideration in addition to rent; or

(e) where there is any dispute between the landlord and the tenant regarding the amount, of standard rent.

24. The definition of 'standard rent' is in simple and clear words. Though the cases in which the Court is required to fix the standard rent would require elucidation and interpretation in ,the light of the facts of a case, Shri Gumaste contended that in the present cases the premises are let out for ,the first time after September 1, 1940 and the rent at which they are first let is the standard rent and therefore the question of fixing the standard rent under Section 11 did not arise. Shri Gumaste further contended that there is no evidence to show that the premises were let out to the employees of the assessee Company at concessional rent and in that event the standard rent for the purpose of the rateable value should have been considered by the assessing authority by having the cost of construction worked out by itself. The assessee Company was not bound to produce the evidence of cost of construction nor the Commissioner could require the assessee Company, under Section 155, to furnish the cost of construction as the provisions of Section 155 specify only for two types of information, viz., (i) the name and place of abode of the owner or occupier and (ii) as to the dimensions of such building or land and the rent obtained. Shri Gumaste also contended that what the Commissioner cannot do under Section 155 the Court also cannot do. In other words, if the Commissioner had no power to call upon the owner to produce the evidence relating to the cost of construction, ,the Court also cannot do so.

25. In order to appreciate whether in the present cases, the assessee Company's stand that the rent recovered from the employees is the real rent and is uninfluenced by any other consideration, I would have to consider the evidence and material on record. A review of the evidence would also be necessary to find out if there is any substance in the case of the Corporation that the premises are let out on concessional rent and the rent charged or secured is not the result of a bargain in the market where a landlord and the lessee are strangers and the bargain is between a willing lessor and a willing lessee uninfluenced by consideration of the relationship of employer or employee and any other consideration. Shri Gumaste took me through the evidence recorded in Municipal Appeal No. M/662 of 1973 on which the judgment dated December 13, 1977 is based. Shri Walawalkar also referred to the evidence in Municipal Appeal No. M/232 of 1976 on which the judgment dated November 10, 1978 is based.

26. The evidence of the assessee Company's witness Desai is to the effect that the rent of the tenements is Rs. 27.99 each and of the blocks in the building is Rs. 100 each excluding Rs. 20 for service charges. These rents are charged on the advice of their architect and are treated as standard rent. In cross-examination, the witness stated that ,the assessee Company did not have the report of the architect in writing to charge fair rent. He had no idea of the cost of land and/or construction, etc. He admitted that the buildings were constructed for the workers and employees of the assessee Company. The fair rent is decided by the management. He did not know how the fair rent was arrived at by the management.

27. Now, this evidence is neither here nor there. The witness is not personally conversant with the relevant facts. His evidence is conflicting. In examination-in-chief, he stated that the rent was charged on the advice of the architect, but under cross-examination, his version was that the rent was charged on the advice of the management. About the advice of the architect, he stated that there was no written report. No attempt was made to examine the architect or the person concerned in the management of the assessee Company who gave such advice. He would have been the proper and competent person to tell the basis on which the rent was arrived at. It is positively not the case of the witness Desai that the rent was fixed by mutual bargain between the assessee Company and the concerned tenants, i.e., the workers and employees of the assessee Company. This evidence is wholly worthless. This sort of evidence does not even slightly shift the burden of proof to the Corporation, and gives rise to doubt about the quantum of rent realised in so far as it has impact on the assessment of the rateable value of the property. For the best evidence for the purpose of fixing rent, the true measure of which is the standard rent, is the cost of construction. The assessee Company has consistently felt shy to place that best evidence in its possession, either before the assessing authority or before the appellate court and even in this Court when the Corporation Counsel offered to abide by the relevant documents of cost of construction and entries in the books of accounts, etc., about the cost of construction. In Municipal Appeal No. M/232 of 1976, the same witness C.G. Desai, when examined about nine months after his evidence in the earlier matter, barely testified that the assessment made by the Corporation is not reasonable and it should have been as per rent paid by the workers. In cross-examination, he stated that chawls are meant for the employees and not any outsider. He did not know what the assessee Company spent for the construction of the buildings. The assessee Company must be keeping accounts, He denied that the assessee Company charges concessional rent from its employees.

28. This evidence equally lacks credibility.

29. Coming to the evidence given on behalf of the Corporation, its witness Damle in Municipal Appeal No. 232 of 1976 stated that he got the property measured through the departmental surveyors and proposed the assessment. The complaint lodged by the assessee Company was investigated and the investigating officer fixed the rateable value. The witness produced the Deputy Ward Officer's Report and the complaint extract marked ex. 2 colly. In cross-examination, he stated that he was aware of the principles on which fair rent is to be computed. His proposal on the fair rent was to be arrived on comparison (of rents). He did not remember how many comparable instances were in his mind at the time of making the proposal. He further stated:

I did make enquiries about the cost of its construction. But I did not get the figures from the Co. I made enquiries about the cost of construction on 30-12-1974 from Mr. Dandekar, who was Civil Engineer-in the Co. It was an oral enquiry. He told me that he would supply the information later on but he did not do so. I did not ask him about the same by any letter after 1 did not receive the reply. This enquiry has not been recorded in my field diary.

This evidence about the witness having taken comparable instances into consideration is not firm, but he did make an effort to secure from the assessee Company the cost of construction, but was unsuccessful. There is no reason to disbelieve the witness on this point as he has given the name of the person from whom he made the inquiry, his designation and the date on which the inquiry was made. He has also stated of what transpired in that conversation. This evidence goes to show that the assessee Company was not co-operating with the assessment department of the Corporation and was not only reluctant but unwilling to come out with the cost of construction and thereby leave the assessing department in dark in working out the rent on ,the basis of cost of construction. Had the assessee Company co-operated with the Corporation at the earliest stage when the assessee Company had complained about the proposal of rateable value, the protracted litigation could have been avoided. The witness also referred to the complaint extract, part of ex. 2 (collectively). This extract is described as extract of complaint registered for the year 1974-75 and refers ,to the complaint of the assesses Company. The extract is in the nature of a Roznama and is dated February 4, 1976. It states that Shri Rao appeared and he stated that the chawls were meant only for workers and after giving some details, the following statement is noted:

As to rates, he states that these are workers' chawls compulsorily built as required and hence they are not supposed to make any profit. They have to give them at concessional rent of Rs. 25/- only and hence the same should be taken.

(underlining is mine.) (herein indicated in Italics-Ed.)

30. The correctness of the statement recorded in the said extract was not challenged before the lower appellate Court and before me, too. In fact, the learned advocate appearing for the Corporation had in terms referred to the said statement in his submission before the lower appellate Court, which was also made a part of the judgment. The lower appellate Court seems to have overlooked this important piece of evidence, which is a pointer to the relationship between the assessee Company and the workers ,to whom the tenements had been let out. Apart from the tenements required to be compulsorily built by the assessee Company, their representative Rao in terms admitted that the tenements were given on concessional rent. This admission changes the picture and falsifies the stand taken before the lower appellate Court. The lower appellate Court committed a serious error in ignoring, this vital factor. Another error committed by the lower appellate Court was in presuming that the assessee Company must have taken into consideration the cost of construction while fixing ,the rent. There existed no circumstance to draw such a presumption in favour of the assessee Company. As discussed, the assessee Company had failed to disclose the cost of construction. The evidence led was unsatisfactory. The witness was not even sure whether the advice came from the architect or management. There is no manner of doubt that the rent recovered by the assessee Company from its workmen and employees is not the real rent but is influenced by special considerations. In the light of this discussion, the decision of the lower appellate Court is liable to be set aside.

31. The judgment dated December 13, 1977, subject-matter of F.A. No. 133 of 1978, proceeds on the basis that the first letting was after September 1, 1940 and, therefore, the rent at which they were first let should be taken as fair and reasonable rent. Now, it is true that so far as the plain definition of the expression 'standard rent' goes under Section 5(10)(b)(iii) of the Bombay Rent Act where the premises are let after the first day of September 1940, the rent at which they were first let is, prima facie, the 'standard rent', provided, that rent is equivalent to a rent which a landlord was reasonably expected to get in the open market. A landlord under the garb of Section 5(10)(b)(iii) cannot have a lower rent fixed with his tenant and thereby affect the rateable value of the property. If the rent charged on the first letting is not accepted by the Corporation, and the assessee files an appeal under Section 217 then the standard rent for the purpose of rateable value is to be worked out by the appellate Court concerned. Shri Gumaste submitted that the present cases are not covered under any of the Clauses (a) to (e) of Sub-section (l)'of 's. 11 and, therefore, the lower appellate Court cannot be in a position to determine the standard rent for the purpose of rateable value. In other words, if a case does not fall under Sub-section (1) of Section 11, then for municipal rating, the methodology of standard rent contemplated under the Bombay Rent Statute cannot be used in determining the rateable value for the purpose of Section '154(1). Now, the evidence shows that the assessee Company was charging concessional rent. Therefore, the rent charged on the first letting after September 1, 1940 is not the real rent. The provisions of Section 11 of the Bombay Rent Act are as such not made applicable to Section 154(1) of the Bombay Municipal Corporation Act. What is to be considered is whether the rent recovered matches with the standard rent chargeable under the Rent Act. No application is required ,to be made for fixation of standard rent under Section 11 so as to require an applicant to bring his case under any of the clauses (a) to (e) or the Court is required to find out whether the case falls under any of the clauses of Sub-section (1) of Section 11. It seems that my view is fortified by what is said by the Division Bench of this Court in Filmistan Private Limited, v. The Municipal Commissioner for Greater Bombay (supra). In the case before the Division Bench, the learned Chief Judge of the Bombay Small Cause Court was of the view ,that since the standard rent had not been fixed and since under the Bombay Rent Act the standard rent can be fixed only by a Court constituted under that Act; the learned Chief Judge had, therefore, no jurisdiction to go into the question as 'to what would be the standard rent of the premises: In this connection, the learned Judges say this (at p. 464):

The ratio of the decision of the Supreme Court (The Corporation of Calcutta case, A.I.R. 1962 S.C.I. 151) is that the rateable value of a property cannot be fixed higher than its standard rent under the Rent Control Act. This is not dependent upon whether the standard rent has been actually fixed under the Rent Control Act. It is true, as observed by the learned Chief Judge, that in Bombay, the Small Cause Court alone could fix the standard rent and sitting as a persona designata he could not arrogate to himself that power.

32. The learned Judges proceed to further observe (at p. 464):

But once it is clear that for the purpose of determining the annual letting value of a property, regard must be had to the standard rent of that property under the Rent Control Act it must follow that while fixing the rateable value one must consider what would be the standard rent of the property. As persona designata the learned Chief Judge could not fix the standard rent under the 'Bombay Rent Act but there is a distinction between fixing the standard rent under the Rent Control Act and considering for the purpose of fixing the rateable value as to what the standard rent would be. The result of the enquiry conducted by the Chief Judge for ascertaining the standard rent may not bind the parties for the purposes of the Rent Act. But in order to determine what is the rateable value of the property the learned Judge must apply his mind to the question as to what would be the standard rent of the property.

(underlined by me) [herein indicated in italics-Ed.]

This being the law laid down by this Court, I do not think ,that the learned Chief Judge while exercising jurisdiction under Section 217 of the Bombay Municipal Corporation Act, 1888, is required first to consider whether the case before him for fixation of rateable value falls in any of the categories provided under Clauses (a) to (e) or not. The learned Chief Judge was required to determine the rateable value of the property and not the standard rent of the premises as such. The working out of the standard rent is only for the purpose of arriving at the rateable value. The learned Judge's approach that the concessional rent to, some extent, cannot be a ground for interference under Section 11(1)(d) was not correct. The case was not required to be brought in any of the clauses of Section 11(1).

33. In view of the above discussion, I do not find any substance in the other contention of Shri Gumaste mentioned above.

34. The last submission of Shri Gumaste relates to the interpretation of the provisions of Section 154 of the Bombay Municipal Corporation Act, 1888. Though the relevant provisions which require consideration are Clauses (b) and (c) of Sub-section (3), it is convenient to set out the entire section:

154. (1) In order to fix the rateable value of any building or land assessable to a property-tax, there shall be deducted from the amount of the annual rent for which such land or building might reasonably be expected to let from year to year a sum equal to ten per centum of the said annual rent and the said deduction shall be in lieu of all allowances for repairs or on any other account whatever.

(2) The value of any machinery contained or situate in or upon any building or land shall not be included in the rateable value of such building or land.

(3) Notwithstanding anything contained in this section, the rateable value in the case of a building-

(a) owned by or belonging to the Government or the Bombay Housing Board constituted under the Bombay Housing Board Act. 1948, or other similar body constituted by any law for the time being in force for the purpose of providing housing accommodation;

(b) constructed, purchased or occupied on or after the 1st day of April 1947 as part of a recognised scheme of subsidised housing for industrial workers or persons belonging to lower income groups or poorer classes; and

(c) comprising in part or in whole of tenements let out to such workers or persons on a monthly rent, inclusive of all service and other charge not exceeding rupees thirty-two and fifty naye paise for each such tenement shall be fixed-

(i) with respect to such tenements comprised therein, with retrospective effect from the date of their construction, purchase or occupation as stated in Clause (b) on the actual rent charged for such tenements and not on the rent for which such tenements might reasonably be expected to let from year to year less a, deduction of ten per centum of the said annual actual rent in lieu of all allowances for repair or on any other account whatsoever; and

(ii) with respect to the remaining portions, if any, of such building, on the basis of the provisions of Sub-sections (1) and (3).

Explanation:- For the purpose of this sub-section recognised scheme of subsidised housing for industrial workers or persons belonging to lower income groups or poorer classes' shall mean such scheme as may be recognised by the State Government from time to time in this behalf, after consultation with the Corporation.

According to Shri Gumaste, Sub-section (3) speaks of three different types of buildings falling under Clauses (a), (b) and (c) of Sub-section (3), In other words, according to Shri Gumaste, Clause (c) is independent of Clause (b). A building which falls under Clause (b) has nothing to do with a building which falls under Clause (c). The word 'and' appearing at the end of Clause (b) is merely to show that Clause (c) follows after Clause (b) and the word 'and' is not to be understood as connecting Clause (b) with Clause (c). The words 'such workers or persons' appearing in Clause (c) are in no way related to the 'industrial workers or persons belonging to lower income groups or poorer classes' appearing in Clause (b). This being the correct interpretation of Clause (b) and (c), Shri Gumaste submitted that the actual rents charged for the tenements let out to the workers of the assessee Company are required to be considered for the purpose of determining the rateable value and not the rent for which such tenements might reasonably be expected to let from year to year as provided in Sub-section (1) of Section 154.

35. Now, Sub-section (3) has' been added by Bombay Act 28 of 1957 and is an exception to Sub-section (1) of Section 154 and makes provision for rateable value in case of certain classes of buildings to which the provisions of Sub-section (1) of Section 154 are not made applicable. One class of buildings which are owned by or belonging to the Government or the Bombay Housing Board constituted under the Bombay Housing Board Act, 1948, or other similar body constituted by any law for the time being in force for the purpose of providing housing accommodation are exempted. The construction which is required to be put is on Clauses (b) and (c) to find out whether Clause (b) is independent of Clause (c) or both are to be read together. On a reading and re-reading of these clauses, I find that they are to be read together. Clause (c) without Clause (b) is lame. It seems to me that the second class of buildings which are sought to be exempted from Sub-section (1) of Section 154 are buildings constructed after April 1, 1947 as a part of a recognised scheme of subsidised housing for industrial workers or persons belonging to lower income groups or poorer classes. The other class of buildings are those which have been purchased after April, 1, 1947 under a recognised scheme of subsidised housing for industrial workers or persons belonging to lower income groups or poorer ' classes. The third type of buildings are those which are occupied by industrial workers or persons belonging to lower income groups or poorer classes but are so occupied under a recognised scheme of subsidised housing brought into force after April 1, 1947. The tenements which are spoken of in class 3 are the tenements for such industrial workers or persons belonging to the lower income groups or poorer classes who occupy the same in buildings either constructed or purchased or occupied under a recognised scheme of subsidised housing for them and not under any other type of scheme which is not a recognised scheme. As to what is a recognised scheme of subsidised housing referred to in Clause (b), the explanation to the Sub-section (3) clarifies. The 'explanation is also in the nature of a definition. It defines the expression 'recognised scheme of subsidised housing for industrial workers or persons belonging to lower income groups or poorer classes' and the meaning given co this expression is

a scheme as may be recognised by the State Government from time to time in this behalf, after consultation with the Corporation.

Though the scheme may be formulated by any person for subsidised housing for industrial workers or persons belonging to lower income groups or poorer classes, but such a scheme must be recognised by the Government. The Government would not recognise such a scheme without consulting the Corporation. I am unable to agree with Shri Gumaste that the words 'such workers or persons' used in Clause (c) are not connected or related to Clause (b) and the words 'such workers' used in Clause (c) would cover the workers of the assessee Company who are occupying the tenements built by the assessee Company. Shri Walawalkar rightly joined issue with Shri Gumaste and contended that the point taken for the purpose of interpretation of Sub-section (3) of Section 154 is a mixed question of law and facts. This question was not raised in the complaint lodged for reviewing the assessment or in the evidence before the lower appellate Court. The Memo of Appeal is also silent on this point. I think that this criticism is justified, but as Clause (c) does not represent a separate category of buildings which can be said to be exempted from rateable value on the basis of Sub-section (1) of Section 154 and liable for rateable value on the basis of actual rent and it is not the case of the assessee Company that the tenements have been constructed or occupied by its industrial workers under a recognised scheme of subsidised housing, the argument of Shri Gumaste must fail.

36. In the result, the order passed in each of these appeals is set aside and all the matters are remanded to the learned Chief Judge of the Court of Small Causes, Bombay, for determination of the rateable value of the property in the light of the above observations. It will be open to the Corporation to treat the evidence already recorded as evidence on remand or lead additional evidence. The learned Judge will dispose of the appeals within six months from the receipt of the record. The Registrar of this Court to return the record forthwith.

37. As regards the question of costs, the assessee Company is directed to pay the costs of the Corporation in each appeal. Although the assessee Company had been in possession of the relevant material relating to the cost of construction, but as observed earlier, the assessee Company was shy to produce the same for reasons best known to it. This has led to protracted proceedings and further resulted into remand.


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