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Dewan Daulat Ram Kapur Vs. New Delhi Municipal Committee and anr. - Court Judgment

LegalCrystal Citation
SubjectTenancy
CourtDelhi High Court
Decided On
Case NumberCivil Writ Appeal No. 580 of 1971 and Letter Patent Appeal Nos. 54 and 61 of 1972
Judge
Reported inILR1973Delhi363
ActsDelhi Municipal Corporation Act, 1957 - Sections 116; Delhi Rent Control Act, 1958 - Sections 6(1)(A)(2)
AppellantDewan Daulat Ram Kapur
RespondentNew Delhi Municipal Committee and anr.
Advocates: P.N. Lekhi,; L.C. Vats,; S.N. Chopra,;
Cases ReferredFilmistan Private Ltd. v. Municipal Commissioner
Excerpt:
delhi municipal corporation act (1957) - section 116-annual or rateable value-determination of, for purpose of assessment of property tax-premises not let out to tenant-whether determination of standard rent for such premises necessary so as to take such standard rent as basis for assessment-delhi rent control act (1958) - sections 6(1)(a)(2)(b), 6(1)(b)(2)(b)&9. ; that in the case of rented premises the annual value shall not exceed the standard rent, if fixed by the controller or statutorily determined under thee delhi rent act and, in other cases where the standard rent has not been fixed or determined as aforesaid, the annual value shall not exceed the agreed rent unless the agreed rent is tainted by fraud, collusion, emergency, relationship and such other consideration. in the.....s.n. andley, j.(1) the writ petition and the letters patent appeals cams up for hearing before a division bench of this court. the division bench felt that several supreme court decisions and two division bench decisions of this court had to be considered and they referred these matters to a full bench. this judgment will cover all these matters. (2) the writ petition is concerned with a property situate in jor bagh in new delhi within the jurisdiction of the new delhi municipal committee which is governed by the punjab municipal act, 1911. the appeals are in respect of properties which are situate within the jurisdiction of the municipal corporation of delhi which is governed by the delhi municipal corporation act, 1957. properties situate within the jurisdiction of the municipal.....
Judgment:

S.N. Andley, J.

(1) The writ petition and the Letters Patent appeals cams up for hearing before a Division Bench of this Court. The Division Bench felt that several Supreme Court decisions and two Division Bench decisions of this Court had to be considered and they referred these matters to a Full Bench. This judgment will cover all these matters.

(2) The writ petition is concerned with a property situate in Jor Bagh in New Delhi within the jurisdiction of the New Delhi Municipal Committee which is governed by the Punjab Municipal Act, 1911. The appeals are in respect of properties which are situate within the jurisdiction of the Municipal Corporation of Delhi which is governed by the Delhi Municipal Corporation Act, 1957. Properties situate within the jurisdiction of the Municipal Corporation of Delhi or the New Delhi Municipal Committee are again governed by the Delhi Rent Control Act, 1958 and were even before 1958 governed by the previous Rent Restriction Acts including the Delhi and Ajmer Rent Control Act, 1952.

(3) The facts in the appeals and the writ petition are similar. Standard Rent has not been fixed by the Rent Controller for any of these premises under the Delhi Rent Control Act, 1958, or under the previous Rent Restriction Acts prevailing in Delhi. All the premises have been let out to tenants and admittedly the Municipal Corporation of Delhi, hereinafter referred to as 'the Corporation', and the New Delhi Municipal Committee, hereinafter referred to as 'the Committee', have assessed the annual value or rateable value on the basis of the actual rent which is being received. These assessments have been challenged on the ground that the Corporation or the Committee should not have taken the actual rent as the basis for assessment but should have proceeded to determine the standard rent of these premises in accordance with the provisions of the Delhi Rent Control Act, 1958 and should have taken such standard rent as the basis for assessment.

(4) The question that arises for consideration, shortly stated, is whether infixing the annual value of premises, the Committee and the Corporation are bound by the standard rent of the premises which may have already been fixed under the provisions of the aforesaid Rent Restriction Acts and, in other cases, to determine the standard rent that may be fixed upon an application made for the purpose and to fix the annual value at or below but not higher than the standard rent so ascertained or determined.

(5) The writ petitions leading to the Letters Patent appeals were heard by Rangarajan J. who decided them on September 13, 1971. The learned Judge was of the opinion, shortly stated, that even in cases of properties whose standard rent has not been fixed under the Rent Restriction Acts by the Rent Controller it was incumbent upon the Corporation while proceeding to fix the annual value to determine the standard rent of the premises in accordance with the provisions of the Delhi Rent Control Act, 1958 and arrive at the annual value on that basis. The learned Judge was also of the view that in the cases before him, the only provision available was the one relating to the ascertainment of the reasonable cost of construction as well as the market price of the land contained in section 6(l)(B)(2)(b) of the Delhi Rent Control Act, 1958 and he issued a mandamus to that effect.

(6) Annual value or rateable value is determinable under the Delhi Municipal Corporation Act, 1957, hereinafter referred to as 'the Corporation Act' under section 116 and under the Punjab Municipal Act, 1911, hereinafter referred to as 'the Municipal Act' under section 3(1)(b). For all practical purposes, the provisions of these two sections are similar except that section 116 of the Corporation Act contains a second proviso in the following words-

'provided further that in respect of any land or building the standard rent of which has been fixed under the Delhi and Ajmer Rent Control Act, 1952, the rateable value thereof shall not exceed the annual amount of standard rent so fixed.'

while section 3(1)(b) of the municipal Act does not contain any such proviso. Learned counsel appearing for the Corporation and the Committee have rightly conceded that the existence of the proviso is immaterial and does not alter the law as has been held in Corporation of Calcutta v. Life Insurance Corporation: : [1971]1SCR249 . It has also been rightly conceded by the learned counsel that in view of the provisions of the aforesaid Rent Acts, the annual value or rateable value cannot exceed the amount of standard rent if it has been fixed under the provisions of the said Acts by the Rent Controller in proceedings taken for fixation of standard rent or, even without such proceedings, if standard rent has been statutority determined by the provisions of the Rent Acts.

(7) The only contention which has been canvassed before us is whether in the case of premises whose standard rent has not been fixed in either of these two modes, it is open to the Corporation or the Committee to fix the annual value or the rateable value in accordance with the contractual rent in the case of premises which have been let or on the basis of a hypothetical rent which may be paid by a hypothetical tenant in the case of owner-occupied properties. The contention on behalf of the Corporation and the Committee is that it is. The respondents contend that it is not and further that it is incumbent upon the Corporation or the Committee to ascertain what the standard rent of the premises would be in accordance with the A provisions of the Rent Act and then to fix the annual value or rateable value accordingly.

(8) In Patel Gordhandas Hargovindas v. Municipal Commissioner Ahmedabad: : [1964]2SCR608 , all the Municipal Acts in this country were examined and after tracing their legislative history it was observed that the rate 'always had the meaning of a tax on the annual value or rateable value of the lands or buildings. It was further held that this annual value or rateable value is arrived at by one of three modes, namely,-

'(I)actual rent fetched by land or building where it is actually let, (ii) where it is not let. rent based on hypothetical tenants, particularly in the case of buildings, and (iii) where either of these two modes is not available, by valuation based on capital value from which annual value has to be found by applying a suitable percentage which may not be the same for lands and buildings.'

(9) The effect of the local Rent Restriction Acts on the fixing of annual value or rateable value was authoritatively laid down by the Supreme Court in The Corporation of Calcutta v. Smt. Padma Debi and others : [1962]3SCR49 where there Lordships were concerned with the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950 since this is the leading case on the subject, it is necessary to deal with it at some length.

(10) The Corporation of Calcutta fixed the annual value of the premises in question at a sum of Rs. 14,093 with effect from the second quarter of 1950-51 taking Rs. 1,450 the rent actually received per month by agreement as the basis for fixing the annual value. Meanwhile, under the aforesaid Rent Control Act, the standard rent of the premises was fixed by the Rent Controller at Rs. 550 per month with effect from April, 1951 and at Rs. 632/8.00 per month with effect from August, 1951. The contention of the landlord assessed was that annual value could not be fixed at a figure higher than the standard rent while the contention on behalf of the Corporation was that it had to ascertain only the hypothetical rent realisable from a hypothetical tenant at the time of assessment and not the rent payable at that time by any tenant and, thereforee, it was not bound to take into consideration the standard rent fixed under the said Rent Act.

(11) Section 127(a) of the Calcutta Municipal Act, 1923, defined annual value of land and the annual value of any building erected for letting purposes or ordinarily let, to be 'the gross annual rent,at which the land or building might at the time of assessment reasonably be expected to be let from year to year, less,.in the case of a building an allowance of ten per cent for the cost of repairs and for all other expenses necessary to maintain the building in a state to command such gross rent.' The above quoted words were in the view of the Supreme Court the crucial words. The principal laid down in Secretary of State v. Municipal Commissioners of the City of Madras I.L.R. 10 Madras 38 which was applied in Corporation of Calcutta v. Ashutosh De : AIR1927Cal659 was accepted by the Supreme Court and it was held that the value of the property to the owner is the standard in making the assessment under the Municipal Acts. The Supreme Court then observed that the word .'reasonably' in the section threw further light on this interpretation. They observed:-

'Abargain between a willing Lesser and a willing lessee uninfluenced by any extraneous circumstances may afford a guiding test of reasonableness. An inflated or deflated rate of rent based upon fraud, emergency, relationship, and such other considerations may take it out of the bounds or reasonableness.'

(12) They then observed,-

'equally it would be incongruous to consider fixation of rent beyond the limits fixed by penal legislation as reasonable.'

(13) After examining the provisions of the aforesaid Rent Act, the Supreme Court said,-

'Acombined reading of the said provisions leaves no room for doubt that a contract for a rent at a rate higher than the standard rent is not only not enforceable but also that the landlord would be committing an offence if he collected a rent above the rate of the standard rent. One may legitimately say under those circumstances that a landlord cannot reasonably be expected to let a building for a rent higher than the standard rent. A law of the- land with its penal consequences cannot be ignored in ascertaining the reasonable expectations of a landlord in the matter of rent. In this view, the law of the land must necessarily be taken as one of the circumstances obtaining in the open market placing an upper limit on the rate of rent for which a building Can reasonably be expected to let.'

(14) One of the provisions which was taken into consideration in this case by the Supreme Court was the definition of standard rent in section 2(l0)(b) of the aforesaid Rent Act according to which standard rent means 'where the rent has been fixed under S. 9, the rent so fixed; or. at which it would have been fixed if application were made winder the said section.' It is clear from this definition that standard rent in relation to any premises covered by the aforesaid Rent Act means not only the standard rent that may actually be fixed by the Rent Controller but also the standard rent which would have been fixed if application were made for the purpose. The Supreme Court further observed that the existence of an express prohibition in the Municipal Act not to fix the annual value beyond the standard rent was immaterial because such a prohibition was implicit in the definition of annual value.

(15) summarizing Padma Debi's case (supra), it appears that,-

'(1)a bargain between a willing Lesser and a willing lessee which is not tainted by fraud, emergency relationship and such other considerations affords a guiding test of reasonable letting value; (2) fixation of annual value beyond the Jimits of rent fixed by penal Rent Control legislation cannot be considered reasonable and a landlord cannot reasonably be expected to let a building for a rent higher than the standard rent; (3) according to the definition in the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950, standard rent is the rent which has actually been fixed by the Rent Controller under section 9 or at which it would have been fixed if application were made under the said section; and (4) an express prohibition is the Municipal Act like the one contained in section 26 of the Calcutta Municipal Act, 1923, was immaterial because such a prohibition was implicit in the definition of annual value.'

(16) It is in the light of these principles that we have to decide the matters before us. But before we do so, we will examine some of the other cases which were cited at the bar. Padma Debi's case (supra) was followed in Corporation of Calcutta v. Life Insurance Corporation of India: 1970(2) Supreme Court Cases in this case the tenant had taken the premises in question at a monthly rent of Rs. 2,000 which was later increased to Rs. 2,800 by agreement. The tenants sublet various portions of th3 premises to different sub-tenants and the Corporation of Calcutta which had assessed the annual value of the premises at Rs. 32,076 prior to April 1, 1955, increased the annual value to Rs. 62,761 by taking into consideration the rents realised by the subletting also. It was the common case of the parties that the standard rent of the premises had been statutorily determined at Rs. 2,800 per month by virtue of the second part of clause (b) of sub-section (10) of section 2 of the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950 providing that standard rent means the rent which would have been fixed if application were made for fixation of standard rent under this section. That being so, Padma Debi's case (supra) was followed and applied. The contention on behalf of the Corporation that Padma Debi's case was decided on the interpretation of section 127(a) of the Calcutta Municipal Act, 1923 which did not contain. a proviso like the proviso in section 168 of the Calcutta Municipal Corporation Act, 1951, and was, thereforee, distinguishable was repelled The proviso in section 168 of the Calcutta Municipal Corporation Act, 1951 'that in respect of any land or building the standard rent of which has been fixed under section 9 of the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950, the annual value thereof shall not exceed the annual amount of the standard rent so fixed' was held not to alter the law because 'in determining the gross annual rent statutory limitation of rent circumscribes the scope of the bargain in the market and thereforee in no circumstances the hypothetical rent may exceed the limit.' Because of this decision, counsel for the Corporation rightly made the concession, as stated earlier, that the existence of the second proviso that 'in respect of any land or building the standard rent of which has been fixed under the Delhi and Ajmer Rent Control Act, 1952, the rateable value thereof shall not exceed the annual amount of the standard rent so fixed' to section 116 of the Corporation Act would not make any difference and the legal position would be the same even if the proviso docs not exist as in the case of section 3(l)(b) of the Municipal Act.

(17) The next Supreme Court decision is the Guntur Municipal Council v. The Guntur Town Rate Payers Association : [1971]2SCR423 where again the view expressed in Padma Debi's case (supra) was held to be incontestable. In this case the Guntur Municipality had effected a general revision of the rental values of houses and buildings within its jurisdiction. Section 82 of the Madras District Municipalities Act, 1920, defined the annual value of lands and buildings to be deemed to be the gross annual rent at which they may reasonably be expected to let from month to month or from year to year less certain deductions. On the general revision being challenged by suits, the District Munsif held that the annual value had to be computed in the context of the rent that was payable under the Rent Control legislation and he granted a decree declaring that the 'general revision' by the Guntur Municipality by increasing the rental value of houses to more than the rental value which prevailed on the dates provided in the Rent Control Acts in force at the relevant time was ultra virus and illegal. This view was upheld by the first appellate Court with certain modifications in the decree and the High Court, on second appeals, confirmed the same. The only point which the Supreme Court was called upon to decide was whether before the fixation of a fair rent of any premises the Municipality was bound to make assessment in the light of the provisions contained in the Rent Acts. On this contention and taking note of section 82 of the Madras District Municipalities Act, 1920, the Supreme Court observed :-

'the test essentially is what rent the premises can lawfully fetch if let out to a hypothetical tenant. The Municipality is thus not free to assess any arbitrary annual value and has to look to and is bound by the fair or the standard rent which would be payable for a particular premises under the Rent Act in force during the year of assessment.'

(18) The Supreme Court rejected the contention that so long as the fair rent of a building or premises is not fixed, the assessment of valuation by a municipality need not be limited or governed bythe measure provided by the provisions of the Rent Act for determination of the fair rent and observed that

'logically such buildings or premises as are not let out to a tenant and are in the self-occupation ofthe landlords would also fall within the same principle if no fair rent has even been fixed in respect of them.'

(19) Here, some of the relevant provisions of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960 which applied in Guntur may be noticed. Section 4 of this Act provides for determination of fair rent. In doing so, the Controller has to have regard the prevailing rates of rent in the locality for the same or similar accommodation in similar circumstances during the twelve months prior to the 5th April, 1944; to the rental value as entered in the property tax assessment book of the concerned local authority relating to the same period as aforesaid and the circumstances of the case. Permitted specified increases are to be added to the figure thus ascertained to arrive at the figure of the fair rent. Section 7 of this Act Contains prohibitions against the landlord. Clause (a) of sub-section

(1)contains a prohibition against the landlord claiming or receiving anything in excess of fair rent where the Controller has fixed the fair rent of a building. Clause (a) of sub-section (2) contains a prohibition against the landlord claiming or receiving anything in excess of agreed rent where the fair rent of a building has not been so fixed. Subsection (3) provides that any stipulation in contravention of sub-section (2) shall be null and void. Then section 29 provides for penalties. inter alias for contravention of clause (a) of sub-sections (1) and (2) of section 7.

(20) It appears from the judgment of the Supreme Court that the only argument on which stress was laid on behalf of the Guntur Municipality was 'that section 7 of the Act makes it clear that it is only after the fixation of the fair rent of a building that the landlord is debarred from claiming or receiving the payment of any amount in excess of such fair rent.' The argument that the Act permitted the landlord to charge the agreed rent without incurring any penalties in cases where fair rent had not been fixed by the Controller and, thereforee, fixing the annual value on the basis of the agreed rent in such cases would be in accordance with the provisions of the Act was not advanced. This was because the general revision by the Guntur Municipality in 1960 was made not on the basis of agreed rent but by increasing the rental value of houses to more than the rental value which prevailed on the dates provided in the Rent Control Acts in force prior to 1960. This decision and the decision of the Supreme Court in Padma Debi's case (supra) were followed by a Division Bench of this Court in Civil Revision No.31 of 1966 in Municipal Corporation of Dellu v. Gauri Shankar Gupta decided on July,14, 1972, where it was correctly observed:-

'as the landlord cannot be lawfully expected to get more than the standard rent the assessment of rateable value by the Municipal Corporation should have taken into account the measure of standard rent as determinable under the Delhi Rent Control Act, 1958 (Act No.59 of 1958) by keeping in view the principles laid down in the said Act for fixation of standard rent. The method of flat rates adopted was not in conformity with the provisions of Act No.59 of 1958 and the enhancement made in the valuation could not, thereforee, be sustained irrespective of the correcteness or otherwise of the amount assessed.'

(21) It seems to us that if the basis of valuation by the municipal authority is the agreed rent of any premises whose fair rent has not been fixed and if such agreed rent is legally recoverable under the provisions of the Rent Act, the principles of Padma Debi's case (supra) will not be attracted. In other words, if the Rent Act permits or does not prohibit the recovery of agreed rent in the absence of fixation of fair rent, it cannot be said that agreed rent in such cases is not rent for which the premises cannot reasonably be expected to let and that such agreed rent cannot be the basis of assessing the annual value of any premises. This conclusion appears to us to be justified by the following observation of the Supreme Court in Motichand Hirachand and others v. Bombay Municipal Corporation: 1968 Supreme Court Reports 546 :-

'it is true that the rating was so far made including the year in question on the basis of the actual rent derived from the property. That appears to have been done because of the restrictions under the Bombay Rent Act by reason of which the property cannot be leased at rent higher than the standard rent allowed under the provisions of that Act. Since no hypothetical tenant would pay rent higher than such standard rent the actual rent would ordinarily be the rent expected from a hypothetical tenant.'

(22) We have to apply these principles to the provisions of the Corporation Act, the Municipal Act and the Delhi Rent Control Act, 1958 hereinafter referred to as 'the Delhi Rent Act' to determine the controversy in the matters before us.

(23) The Corporation Act provides by sub-section (1) of section 116 that the rateable value of any land or building assessable to property taxes shall be the annual rent at which such land or building might reasonably be expected to let from year to year less certain specified deductions. The second proviso to this sub-section, quoted earlier, provides a ceiling on such rateable value to the extent of the standard rent of any land or building which has been fixed under the Delhi Rent Act. For the purpose of determining the rateable value of any land or building the Commissioner of the Corporation is empowered by sub-section of section 131 of the Corporation Act to require the owner or occupier to furnish (a) the name and place of residence of the owner or occupier or of both (b) the measurements or dimensions of the land or building and the rent obtained for such. land or building and (c) the actual cost or other specified details connected with the determination of the value of such land or building. Read ing these provisions tother, the Corporation is entitled to take into consideration the rent obtained if the land or building is let, or its actual cost for these purpose of determining the rateable value subject tothe ceiling provided by the standard rent fixed under the Delhi Rent Act.

(24) Section 3(1)(b) of the Municipal Act defines annual value of land or building. The measure of annual value is the gross annual rent at which the land or building may reasonably be expected to let from year to year subject to certain deductions. Section 73 imposes a duty of furnishing true information on every person on demand being made by a duly authorised officer of the Committee. But this section does not specify the nature of the information as is provided in section 132 of the Corporation Act. However a combined reading of these two provisions leads to the same result as inthe case of the Corporation Act because these are the well recognised modes of determining the annual value as held in Patel Gordhandas Hargovindas's case (supra).

(25) Coming to the Rent legislation in Delhi, to begin with there was the New Delhi House Rent Control Order, 1939 followed by the Delhi Rent Control Ordinance, 1944; the Delhi and Ajmer-Merwara Rent Control Act, 1947 and the Delhi and Ajmer Rent Control Act, 1952. Some of these applied only in the areas administered by the New Delhi Municipal Committee and some in the areas administered by the erstwhile Delhi Municipal Committee. The present Act, the Delhi Rent Control Act, 1958, was enacted inter alia, to provide for the control of rents and evictions in certain areas in the Union Territory of Delhi detailed in the First Schedule of the Act which comprises areas administered by various Municipalities including the Corporation and the Municipality. 'Standard Rent' is defined by section 2(k) of the Delhi Rent Act to mean the standard rent refered to in section 6 or the increased standard rent under section 7.

(26) Section 9 of the Delhi Rent Act empowers the Controllerto fix the standard rent in accordance with the provisions of the Act.

(27) Broadly speaking, standard rent is to be fixed in respect of premises let out be they residential or non-residential on the basis of the rent prior to June 2, 1944, with certain permitted increases; or on the basis of rents after 2, 1944 with certain permitted increases; or on the basis of rent fixed under the Delhi and Ajmer-Merwara Rent Control Act, 1947 or the Delhi and Ajmer Rent Control Act, 1952 with specified increases; or on the reasonable cost of construction of the building and the market price of the land with a specified return; or on the basis of first letting in case of premises constructed between June 2, 1951 and June 9, 1955 or after June 9, 1955 or on the basis of rent which the Controller considers reasonable having regard to the situation, locality and condition of the premises or on the basis of the standard rent payable for similar or nearly similar premises in the locality. A summary of the relevant provisions for fixing standard rent is as follows :-

(A)Section 6(1)(A)(1) provides the rental before June 2. 1944 as the basis in the case of residential premises with specified increases. (b) Section 6(1)(A)(2) provides for residential premises let after June 2, 1944 and the basis is the rent fixed under the Delhi and Ajmer-Merwara Rent Control Act, 1947 or the Delhi and Ajmer Rent Control Act, 1952, with permitted increases and, in any other case, the rent calculated on the basis of a specified percentage of the reasonable cost of construction and the market price of land. (c) Section 6(1)(B)(1) provides for premises other than residential premises where they have been let out before June 2, 1944 on the basis of 'basic rent' with permitted increases. (d) Section 6(l)(B)(2)(a) provides for premises other than residential premises where they have been let out after June 2, 1944, on the basis of rents fixed under the Delhi and Ajmer-Merwara Rent Control Act, 1947 or the Delhi and Ajmer Rent Control Act, 1952 with permitted increases. (e) Section 6(l)(B)(2)(b) provides for premises other than residential premises in any other case on the basis of a specified percentage of the reasonable cost of construction and the market price of the land. (f) Section 6(2) starts with a non-obstante clause and by this subsection the rental of premises, whether residential or not, constructed between June 2, 1951 and June 9, 1955, obtained for March, 1958, or the rent obtained when they were last let out is deemed to be the standard rent for a period of 7 years from the date of the completion of construction and in the case of any premises constructed after June 9, 1955, or after the commencement of the Delhi Rent Act, the agreed rent at the time of the first letting for a period of 5 years from the date of such letting out. (g) Section 9(4) provides that if it is not possible to determine the standard rent of any premises on the principles set forth under section 6, Controller may fix such rent as would be reasonable having regard to the situation, locality and condition of the premises and the amenities provided therein and where there are similar or nearly similar premises in the locality having regard also to the standard rent payable in respect of such premises. (h) The Second Schedule then defines the 'basic rent' or the 'original rent' with reference to premises which were governed by the New Delhi House Rent Control Order, 1939 or the Delhi Rent Control Ordinance, 1944.

(28) Sections 4 and 5 of the Delhi Rent Act prohibit the recovery or payment of rent in excess of the standard rent and section 48 imposes penalties, inter alia, for the contravention of section 5. Because of the provisions of sections 4, 5 and 48, the dictum of the Supreme Court in Padma Debi's case (supra) fully applies and rent in excess of the standard rent whether fixed by the Controller or statutorily determined cannot be treated as reasonable rent for which the premises can be expected to be let from year to year. At the same time it is clear that under the Delhi Rent Act agreed rent is legally recoverable where standard rent has as not been fixed by the Controller or statutorily determined by the provisions of the Act. In fact section 12 of the Delhi Rent Act provides a period of limitation for making an application to the Controller for fixing inter alia, the standard rent of the premises. If the period of limitation expires in a given case and standard rent cannot be fixed the agreed rent remains legally recoverable. Examining the provisions of the Delhi Rent Act in M.M.Chawla V. J.S.Sethi : : [1970]2SCR390 , the Supreme Court observed that:-

'the prohibition in sections 4 and 5 operates only after the standard rent of the premises is determined and not till then. So long as the standard rent is not determined by the Controller, the tenant must pay the contractual rent; after the standard rent is determined the landlord becomes disentitled to recover an amount in excess of the standard rent from the date on. which the determination operates.'

and again,- 'Wheare unable to agree that standard rent of a given tenement is by virtue of section 6 of the Act a fixed quantity, and the liability for payment of a tenant is circumscribed thereby even if the standard rent is not fixed by order of the Controller. Under the scheme of the Act standard rent of a given tenement is that amount only which the Controller determines. Untill the standard rent is fixed by the Controller, the contract between the landlord and the tenant determines the liability of the tenant to pay rent. .........That section clearly indicates that the Controller alone has the power to fix the standard rent, and it cannot be determined out of court.......... In our view, the prohibition against recovery of rent in excess of the standard rent applies only from the date on which the standard rent is determined by order of the Controller and not before that date.'

(29) This is a clear pronouncement to say that agreed rent is legally recoverable in spite of the provisions of the Delhi Rent Act if standard rent of the premises has not been fixed by the Controller. thereforee, the limit placed by the Supreme Court in Padma Debi's case (supra) on rent for which premises can reasonably be expected to let will apply in Delhi only if standard rent has been either fixed by the Controller or is statutorily determined under the Delhi Rent Act. The provisions of the Delhi Rent Act which statutorily determine the standard rent are :-

'(I)Section 6(1)(A)(1); (ii) Section 6(1l)(A)(2)(a); (iii) Section 6(1)(B)(1); (iv) Section 6(1)(B)(2)(a); (v) Section 6(2)'

(30) In Ram Parshad and others v. Municipal Corporation of Delhi and others (C.W.No-112-D of 1962 decided on January 19, 1971 by Rangarajan J.), the construction of the Second proviso to section 116(1) of the Corporation Act came up for consideration. In this case there was no actual fixation of the standard rent by the Controller under the Delhi Rent Act but the premises had been let at the time when the Delhi and Ajmer Rent Control Act, 1952, was in force and, thereforee, the standard rent was statutorily determined by the provisions of the Delhi Rent Act. The learned Judge was with respect, right in holding that it was not necessary that standard rent should have been actually fixed by the Controller. Then the learned Judge construed the Second proviso to section 116(1) of the Corporation Act and observed that in the context it has to be understood,-

'as not merely covering cases where there is any order of fixation by the concerned authority under the provisions of the Delhi and Ajmer Rent Control Act 1952 but also cases where the standard rent has been provided for (fixed) by the provisions of the statute itself-and this is what applies to the present case.'

(31) With respect, the learned Judge was not correct in his construction of the Second proviso because, as a matter of construction, the Second proviso only contemplates a case where the standard rent has actually been fixed. The disability of the Corporation in fixing the annual value at above the satandard rent which is statutorily determined by the provisions of the Delhi Rent Act arises not by reason of the Second proviso to section 116(1) of the Corporation Act but by reason of the dictum of the Supreme Court in the cases referred to earlier, particularly the case of Corporation of Calcutta v. Life Insurance Corporation of India (supra), where it was observed that the existence of the proviso was immaterial. The next case is Vidya Parkash v. Municipal Committee, Simla: 1969(71) Punjab Law Reporter 179 (Delhi Section), where a Division Bench of this Court was considering section 3(l)(b) of the Municipal Act which was also applicable in Simla. In this case no fair rent for the premises in question had been fixed under section 4 of the East Punjab Urban Rent Restriction Act, 1949, which also was applicable in Simla. The question for decision was whether the building is to be assessed on the annual value as ascertainable according to the definition in section 3(1)(b) of the Municipal Act or as restricted by the definition of fair rent enacted in section 4 of the aforesaid Rent Restriction Act. The assessment was on the basis of the actual rent paid for the building. Examining the provisions of the East Punjab Urban Rent Restriction Act it was observed that it,-

'does not lay down that the fair rent of every building shall be fixed by the Rent Controller or that it is illegal for a landlord and a tenant to agree to a rent which is higher than some notional fair rent though none is determined........ Once such a fair rent is determined, the assessing authority under the Punjab Municipal Act, 1911 is bound to take such a fair rent as the basis of the reasonable letting value. For, the fixation of fair rent is binding on the landlord and the tenant and a higher or a lower rent cannot be agreed to between them as that would be contrary to the provisions of the law. It would not be reasonable, thereforee, for the assessing authority to expect that the building would be let at a rent higher or lower than the fair rent so fixed........ The only reason why the basis of the reasonable letting value has to be the fair rent when such fair rent has been fixed is that the law prohibits the parties from agreeing to any other rent and thereforee, it is not reasonable to expect that the letting value of such a house can be anything other than the fair rent.'

(32) In our view these observations were correctly made in view of the decision of the Supreme Court in Padma Debi's case (supra).

(33) Another decision of a Division Beanch of this Court which may be referred is in the case of the Municipal Corporation of Delhi v. Lachhmi Narain Singh: 1971 Rent Control Reporter 230. In this case the annual house tax in 1956 was Rs.40 corresponding to an annual value of Rs.444. The Corporation raised the annual house tax in 1957 to Rs.75.60 corresponding to an annual value of Rs.840. The owner objected to the increase on the ground that even though standard rent had not actually been fixed by the Controller, since the premises were let at a time when the Delhi and Ajmer Rent Control Act, 1952, applied, the standard rent must be taken to have been statutorily determined under the provisions of this Act read with its Second Schedule and, thereforee, the annual value under section 3(1)(b) of the Municipal Act could not exceed the amount of such standard rent. It was observed that the case was governed by the the provisions of the Delhi and Ajmer Rent Control Act, 1952, Second Schedule which clearly laid down that the original rent at the time of first letting was itself the standard rent for the purpose of the Act till it was varied by the Controller and the proposed increase in the annual value was struck down. In our view, this case was correctly decided.

(34) Respondents strongly rely upon a Division Bench judgment of the Bombay High Court in Filmistan Private Ltd. v. Municipal Commissioner for Greater Bombay : 1970 Maharashtra Law Journal 866 . In this case the Corporation increased the rateable value of the property in question on the basis of the actual rents received by the landlord. This was challenged by the landlord but having failed before the Assessor and Collector of the Corporation, the landlord appealed under the Corporation Act to the Chief Judge of the Court of Small Causes. Inter alia, the Chief Judge held that the prima facie evidence of the annual letting value furnished by the rent which was being paid by the tenants to the appellants must be taken to be conclusive and that sitting under section 217 of the Corporation Act, it was not competent to him to fix the standard rent of the premises which could be fixed only by the Court of exclusive jurisdiction constituted under the Bombay Rents, Hotel and Lodging Hou se Rates Control Act. 1947. The learned Judges applied Padma Debi's case (supra) and observed.-

'the ratio of the decision of the Supreme Court 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. 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 that would be the standard rent of the property.'

(35) It was held that the Chief Judge was not precluded from determining what the standard rent of the premises would be under the aforesaid Rent Act and the matter a was remanded to the Chief Judge to find as to what would be the standard rent of the premises. In doing so it was observed,-

'IT is necessary to clearify that the agreed rent could, in conceivable cases, constitute a true measure of the standard rent. For example, the circumstance that a particular tenant has paid a particular amount of rent over a long course of years without resorting to the valuable remedy of having the standard rent fixed would be a relevant circumstance to be taken into consideration for the purpose of seeing what is the standard rent of the premises. The error into which the learned Judge has fallen is that he assumed that in the instant case the agreed rent was the measure of the standard rent. No such assumption can be made be- cause what is the standard rent of the particular premises is an issue which has to be decided like any other issue of fact.'

(36) If agreed rent is not to be taken into consideration at all, we do not see, with respect, the relevancy of this observation. If, however, the learned Judges meant to say that agreed rent, in the absence of fixation of standard rent under the Rent Act, could not be the basis of ascertaining the annual value even though there was no prohibition in the Rent Act against the recovery of such agreed rent, we respectfully disagree with the view expressed.

(37) Where there is an actual tenancy, it is as if the hypothetical tenant has materialised in actuality. The rent paid in pursuance of an agreement which is not tainted by fraud, emergency, relationship and such other considerations as are pointed out in Padma Debi's case (supra) is a good measure of the rent for which any particular premises may reasonably be expected to be let within the meaning of the Municipal Act. Such agreed rent would be subject to the ceilling provided by the standard rent if it has been fixed by the Controller or has been statutorily determined under the relevant Rent Act. If such standard rent has not been fixed by the Controller or statutorily determined under the Rent Act, the agreed rent will be legally recoverable according to Chawla's case (supra) and would not, thereforee, be rent for which the premises cannot be reasonably expected to let.

(38) There may, however, be premises, which are not let and are occupied by the owner in the relevant year of assessment or premises which have never been let or premises which are newly constructed but not let and whose annual value is to be ascertained. Even for such premises, annual value will have to be arrived at in accordance with the provisions of the Rent Act as held in the Guntur Municipality's case (supra).

(39) We shall now consider the various situations that are likely to arise in the fixation of annual value under the Corporation Act or the Municipal Act and apply the aforesaid decisions to such situations in the light of the provisions of the Delhi Rent Act.

(40) In the case of rented premises the annual value shall not exceed the standard rent if fixed by the Controller or statutorily determined under the Delhi Rent Act and, in other cases where the standard rent has not been fixed or determined as aforesaid, the annual value shall not exceed the agreed rent unless the agreed rent is tainted by fraud, collusion, emergency, relationship and such other considerations.

(41) In the case of premises not let in the year of assessment but let at any time previous to it, the annual value shall not exceed the standard rent if fixed earlier by the Controller or statutorily determined under the Delhi Rent Act and, in the absence of such fixation or determination, the annual value shall not exceed the agreed rent in the earlier years.

(42) In the case of premises which have never been let at any time or premises ose annual value is being fixed for the first time, the annual value shall not exceed the amount arrived at in accordance with the provisions of section 6(l)(A)(2)(b) or section 6(l)(B)(2)(b) of the Delhi Rent Act as the case may be and, in case it is not so ascertainable then on the principles contained in sub-section (4) of section 9 of the Delhi Rent Act.

(43) In all the cases before us, the premises have been let and the assessment of annual value is on the basis of the agreed rent which is legally recoverable under the Delhi Rent Act as standard rent has not been fixed by the Controller or statutorily determined under the provisions of this Act. The learned Single Judge was, thereforee, not right in holding that even in these cases the appellants must ascertain the reasonable cost of construction as well as the market price of the land, if any, and arrive at a rateable value for assessing the property tax. The judgment under appeal in writ Petitions Nos.80, 133 to 137 and 176 of 1971 is, thereforee, set aside.

(44) We are told that even after this decision some other points will survive. All the writ petitions will, thereforee, now be placed before a learned Single Judge for disposal in the light of this judgment. In the circumstances of the case we do not make any order as to costs of these appeals and of the writ petition for the hearing before us.


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