PETITIONER:
MUNICIPAL CORPORATION, INDORE AND OTHERS
Vs.
RESPONDENT:
SMT. RATNA PRABHA AND OTHERS
DATE OF JUDGMENT29/10/1976
BENCH:
SHINGAL, P.N.
RAY, A.N. (CJ)
BEG, M. HAMEEDULLAH
CITATION:
1977 AIR 308 1977 SCR (1)1017
1976 SCC (4) 622
ACT
Madhya Pradesh Municipal Corporation Act 1956--Sec.
138(b)--Madhya Pradesh Accommodation Control Act 1961--Sec.
7--Must rental value under the Municipal Act follow the
standard rent under Accommodation Control Act when premises
let out--When used by owner.
HEADNOTE
The respondents are the owner of a building known as
Viram Lodge. They run a hotel in the said building. The
annual gross rental value of the. building was determined at
Rs. 6,600/- in 1956. It was revised to Rs. 43,405/- by the
Assessment Officer in 1965. Section 138(b) of the Madhya
Pradesh Municipal Corporation Act, 1956, provides that
notwithstanding anything contained in any ,other law for the
time being in force, the annual value of any building shall
be deemed to be the gross annual rent at which such building
might be reasonably at the time of assessment be expected to
let from year to year at the time of the less an allowance
of 10 per cent for repairs etc. The respondent challenged
the valuation on the ground that the rental value of the
premises could not be fixed at a rate higher than the stand-
ard rent under section 7 of the Madhya Pradesh Accommoda-
tion Control Act, 1961. The Municipal Commissioner
negatived the respondents’ contention. An appeal filed by
the respondents to the Additional District Judge also
failed. The High Court however allowed the Revision filed
by the respondents.
Allowing the appeal by Special Leave held:
1. In the. present case the building in ques-
tion was never let on rent and is being used
by the owners as a hotel. [1019 A]
2. On a proper construction of section 138(b)
where the standard rent of a building has been
fixed under section 7 of the Accommodation
Control Act, and there is nothing to show that
there has been fraud or collusion that would
be its reasonable letting value but where the
building has never been let out the question
of fixation standard rent does not arise. In
that case it would be permissible to fix its
reasonable rent without regard to the provi-
sions of Madhya Pradesh Accommodation Control
Act. This view gives proper effect to the
nonobstante clause in section 138(b). [1019
D-F]
The Corporation of Calcutta v. Smt. Padma Debi and
others [1962] 3 S.C.R. 49, Corporation of Calcutta v. Life
Insurance Corporation of India [1971] 1 S.C.R. 246, Guntur
Municipal Council v. Guntur Town Rate Payers’ Association
[1971] 2 SCR 423 and New Delhi Municipal Committee v. M.N.
Soi and another [1977] 1 S.C.R. 731, distinguished.
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2111 of
1969.
(Appeal by Special Leave from the Judgment and Order
dated 26-9-1968 of the Madhya Pradesh High COurt in Civil
Revision No. 711/66).
V.S. Desai, P. C. Bhartari and D. N. Misra for the Appel-
lants.
B.N.. Lokur and Rameshwar Nath for the Respondents.
1018
The Judgment of the Court was delivered by
SHINGHAL, J.--This appeal by special leave is directed
against the judgment of the Madhya Pradesh High Court dated
September 26, 1968 setting aside the appellate order or
the Second Additional District Judge, Indore, dated Octo-
ber 29, 1966 and remitting the matter to the Municipal
Commissioner for a fresh determination of the annual value
of the building.
The building in question is known as "Viram Lodge",
on Ravindra Nath Tagore Marg, Indore. It belongs to the
respondent and has been used by them as a hotel. The
annual gross rental value of the building was determined
at Rs. 6600/in 1956. It was revised by the Assessment
Officer on June 3, 1965 and was raised to Rs. 43,405.20.
The respondents filed objections to the valuation, but the
Municipal Commissioner fixed the annual value at Rs.
43,405.20. He held that, in view of the "non-obstante"
clause in section 138(b) of the Madhya Pradesh Municipal
Corporation Act, 1956, hereinafter referred to as the Act,
there was no justification for the .argument that the rental
value of the premises could not be fixed at a rate higher
than the standard rent under section 7 of the Madhya Pradesh
Accommodation Control Act, 1961. An appeal was taken to
the Second Additional District Judge, but without suc-
cess. The respondents then filed an application for revi-
sion, which was allowed by the impugned judgment of the
High Court dated September 26, 1968. This is how the
present appeal has arisen at the instance of the Municipal
Corporation and its officers.
Section 138 of the Act prescribes the mode for determin-
ing the annual value of any land or building for purposes of
assessing it to property tax. Clause (a) of the section
deals with the annual value of land, and it is not the case
of the parties that it has any bearing on the controversy.
Clause (b) prescribes the mode of determining the annual
value of a building and reads as follows,--
"(b) the annual value of any building shall
notwithstanding anything contained in any
other law for the time being in force be
deemed to be the gross annual rent at which
such building, together with its appurtenances
and any furniture that may be let for use or
enjoyment therewith might reasonably at the
time of assessment be expected to be let from
year to year, less 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
annual rent."
There are two explanations to the clause. It is nobody’s
case that they have any bearing on the short point in con-
troversy before us. Clause (c) of the section prescribes
that if the gross annual rent of a building cannot be deter-
mined under clause (b), the annual value of the building
shall be determined according to that clause. If is
1019
not in controversy before us that the Viram Lodge was never
let on rent, and is being run as a hotel by its owners, the
present respondents, so that the .question of fixing its
standard rent under s. 7 of the Madhya Pradesh Accommodation
Control Act, 1961, has not arisen. It has argued that, even
so, the reasonable rent contemplated by s. 138(b) of the Act
cannot exceed the standard rent to be fixed under the
aforesaid section 7. It has thus been ’urged that it was
incumbent for the Municipal Commissioner to determine the
annual value of the building on the same basis on which its
standard rent was required to be fixed under section 7.
Reliance in this connection has been placed on the deci-
sions of this Court in The Car oration of Calcutta v. Smt.
Padma Debi and others,(1) Corporation of Calcutta v. Life
Insurance Corporation of India(2) Guntur Municipal Council
v. Guntur Town Rate Payers’Assiciation(3) New Delhi Munici-
pal Committee v. M.N. Soi and another.(4)
As has been stated, clause (b) of section 138 of the Act
provides that the annual value of any. building shall
"notwithstanding anything contained in any other law for
the time being in force" be deemed to be the gross annual
rent for which the building might "reasonably at the time
of the assessment be expected to be let from year to year."
While therefore the requirement of the law is that the
reasonable letting value should determine the annual value
of the building, it has also been specifically provided that
this would be so "notwithstanding anything contained in any
other law for the time being in force". It appears to us
that it .would be a proper interpretation of the provisions
of clause (b) of section 138 of the Act to hold that in a
case where the standard rent of a building has been fixed
under section 7 of the Madhya Pradesh Accommodation Control
Act, and there is nothing to show that there has been fraud
or collusion, that would be its reasonable letting value,
hit, where this is not so, and the building has never been
let out and is being used in a manner where the question of
fixing its standard rent does not arise, it would be permis-
sible to fix its reasonable rent without regard to the
provisions of the Madhya Pradesh Accommodation Control Act,
1961. This view will, in our opinion, give proper effect
to the non-obstante clause in clause (b with due regard to
its Other provision that the letting value should be "rea-
sonable".
We have gone through the decision in Padma Debi’s case
(supra). There the premises were on rent and section 127(a)
of Calcutta Municipal Corporation Act, 1923, did not con-
tain a non-obstante clause. That the section provided,
inter alia, was that the annual value shall be deemed to be
the gross annual rent at which the land or building might at
the time of assessment "reasonably be expected to let from
year to year." This Court examined the significance of the
word "reasonable" and held that it would be incongruous to
...
(1) [1962] 3 S.C.R. 49. (2) [1971] 1 .C.R. 248.
(3) [1971] 2 S.C.R. 423. (4) [1977] 1 S.C.R. 731.
15--- 1338SC1/76
1020
consider fixation of rent beyond the limits fixed by penal
legislation as reasonable. That view was taken with refer-
ence to the provisions of the Rent Control Act which pena-
lised the taking of a higher rent, and also’ made it
irrecoverable. While, therefore, we are in agreement with
the view taken in Padma Debi’s case (supra) that it would
not be reasonable to consider fixation of rent beyond the
limits fixed by the Rent Control Act as reasonable, it
would not be a proper interpretation of section 138(b) of
’the Act to ignore the significance of its non-obstante
clause altogether. That is why we have taken the view that
it would be a fair and reasonable interpretation of section
138(b) to hold that as no standard rent has been fixed so
far in respect of the Viram Lodge, the Municipal Commis-
sioner was justified in adopting another suitable criterion
for determining the annual value of the building. There is
in fact nothing in the Act to. make it obligatory for the
Commissioner to follow the provisions of the Madhya Pradesh
Accommodation Control Act in spite of the non-obstante
clause and to limit the annual value to any standard rent
that the building might fetch under that Act.
We have also gone through Corporation of Calcutta v.
Life Insurance,Corporation of India (supra). That was also
a case where the premises had been let out on rent. The
standard rent had also been fixed, and that was why Padma
Debi’s case (supra) was held to be applicable.
So also, Guntur Municipal Council v. Guntur Town Rate
Payers’ Association (supra) was a case where the
premises.were on rent and there also Padma Debi’s case was
held to be applicable even though the standard rent had not
been fixed, because it was held that there was nothing to
prevent the authorities concerned from ascertaining the
fair rent by keeping in view the principles which had been
laid down for its determination under the Andhra Pradesh
Buildings (Lease, Rent and Eviction) Control Act, 1960.
Section 82(2) of the Madras District Municipalities Act,
which governed that case, did not contain a non-obstante
clause.
Much the same was the position in M.N. Soi’s case which
related to a house in New Delhi, of which rate had to be
assessed under the provisions of the Punjab Municipal Act,
1911.
The High Court did not properly appreciate the differ-
ence between the wordings of section 127 of the Calcutta
Municipal Corporation Act, 1923, and section 138(c) of the
Act, and committed an error in thinking that this was virtu-
ally similar to Padma Debi’s case.
We find that the High Court has taken the view that a
full hearing was not given to the respondents at the time of
fixing the annual value of the Viram Lodge and that the
valuation was based on "no principle". Here again, the
High Court was clearly in error because we find from the
judgment of the Second Additional District Judge, dated
October 29, 1966, that the counsel for the respondents
1021
was given "ample opportunity" by the Municipal Commissioner
to represent his case before him. He has also stated that
the Assessment Officer paid due regard to all the relevant
circumstances which had a bearing on the determination of
the reasonable letting value of the building. Counsel for
the respondents has in fact not found it worth his while to
argue either that such a hearing was not given, or that all
the relevant factors were not taken into consideration in
determining the annual letting value of the premises.
In the result, the appeal is allowed and the impugned
judgment of the High Court dated September 26, 1968, is
Set aside. The appellants will however pay the costs of the
respondents as stipulated in the order of this Court grant-
ing the special leave.
P.H.P. Appeal al-
lowed.
1022