ITEM NO. 1-A           ( For Judgment )

           COURT No.5     SECTION  IIIA

              S U P R E M E   C O U R T   O F   I N D I A                            RECORD OF PROCEEDINGS

Civil Appeal Nos. 6802-6806 of 2003

M.C.D. ..   Appellant(s)     Versus

Shashnak Steel Industries (P) Ltd. ..   Respondent(s)                          

WITH

CIVIL APPEAL NO. 6800 OF 2003 CIVIL APPEAL NO. 7143 OF 2003 CIVIL APPEAL NO. 7144 OF 2003 CIVIL APPEAL NO. 1011 OF 2005 CIVIL APPEAL NO. 1019 OF 2005

CIVIL APPEAL NO......OF 2008 @ SLP(C) NO. 18371 OF 2006

DATE : 17/11/2008      These matters were called on for pronouncement of                        judgment today.                                                                                   For Appellant(s) Mr.  C.S. Ashri, Adv.

Mr. Praveen Swarup, Adv.     For Respondent(s) M/s V.B. Saharya, Adv.for         M/s Saharya & co.,Advs.

Mr. Sudhir Nandrajog, Adv.

              ---

Hon'ble Mr. Justice S.H. Kapadia pronounced the judgment of the Bench

comprising his Lordship and Hon'ble Mr. Justice B. Sudershan Reddy

Leave granted in SLP(C) No. 18371 of 2006

The appeals are dismissed with no order as to costs in terms of the signed

judgment which is placed on the file.

[ S. Thapar ]     PS to Registrar

 [ Madhu Saxena ]    Court Master  

[ Signed reportable judgment is placed on the file ]

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.6802-6806 OF 2003

Municipal Corporation of Delhi     … Appellant(s)

                   versus

Shashnak Steel Industries (P) Ltd.       … Respondent(s)

WITH

Civil  Appeal  No.6800/2003,  Civil  Appeal  No.7143/2003, Civil  Appeal  No.7144/2003,  Civil  Appeal  No.1011/2005, Civil  Appeal  No.1019/2005,  Civil  Appeal  No. 6687   of 2008 (arising  out of S.L.P. (C) No.18371/2006)  

J U D G M E N T

S. H. KAPADIA, J.

Leave granted in S.L.P. (C) No.18371 of 2006.

2. In this batch of  civil appeals  we  are  concerned  with

two types of matters - one concerning perpetual sub-lease and

the other concerning lease.   

3. The lead matter is Civil Appeal Nos.6802-6806 of 2003

-  Municipal  Corporation  of  Delhi vs.  M/s.  Shashnak  Steel

Industries Pvt. Ltd. which concerns Perpetual Sub-lease dated

20.2.81.   Similarly the  lead matter  for the  other  set  of civil

appeals  is  Civil  Appeal  No.1011  of  2005  –  Municipal

Corporation of Delhi v. M/s. Gauri Constructions Co.

CIVIL APPEAL NOS.6802-6806 OF 2003

4. A  Perpetual  Sub-lease  dated  20.2.1981  stood

executed  between  the  President  of  India  (as  the  lessor),

Mohan Co-operative Industrial Estate Ltd. (as the lessee) and

M/s. Shashnak Steel Industries Pvt. Ltd. (as the sub-lessee) of

an industrial plot.   

5. We  quote  hereinbelow  some  of  the  relevant  recitals

and  the  terms  and  conditions  of  the  said  Deed  dated

20.2.1981:  

“RECITALS

This  indenture made this  Twentieth (20th)  of  February One  thousand  nine  hundred  and  Eighty  one  between  the President of India (hereinafter called “the lessor”) of the one part and  the  Mohan  Co-operative  Industrial  Estate  Ltd.  Society registered under the Bombay Co-operative Societies Act, 1925, as in force in the Union Territory of Delhi and having its registered office at S. Mohan Singh Building, Connaught Lane, New Delhi hereinafter  called  “the  Lessee”  of  the  second  part  and  M/s. Shashank Steel Industries Pvt. Ltd. hereinafter called sub-lessee of the third part.

(i) Whereas by a lease executed on the Twentieth (20th) of February One thousand nine hundred and Eighty and registered in  office  of  the  Registrar/Sub-Registrar,  Delhi/New  Delhi (hereinafter called “the lease”, a copy of which is annexed hereto and marked ‘X’) the Lessor demised unto the lessee in perpetuity the industrial plots as mentioned therein.

(ii) And whereas under the lease the lessee has to sub-lease, on such premium and yearly rent as may be fixed by the lessor, one industrial plot to each of the members of the lessee who may

be approved by the Chief Commissioner Delhi (hereinafter called “the Chief  Commissioner”)  for  carrying on such manufacturing process  or  running such industry as may be approved by the Chief Commissioner.

(iii) And whereas the Sub-lessee has applied to the lessee for the grant of  a perpetual sub-lease of an industrial plot and, on the faith of the statements and representations made by the Sub- lessee, the Lessee has agreed grant and the lessor has agreed to confirm a perpetual sub-lease of an industrial plot.

(iv) And whereas on an application by the lessee the lessor has fixed the amount to be paid initially towards premium before the  execution  of  these  presents (and  the  lessor  shall  fix subsequently  additional  or  sum  payable  towards  premium as provided in the covenants hereinafter contained) and the yearly of industrial plot hereby sub-leased.

(v) And whereas the Chief Commissioner has approved the sub-lessee and the manufacturing process be carried on or the industry to be run on the said industrial plot by the sub-lessee.

Now this indenture witnesseth that, in consideration of the sub- lessee having paid to the lessee 16,093.60 Sixteen thousand and ninety three and  paise sixty  only  towards  premium before the execution of these present (the receipt whereof the lessee hereby acknowledges)  and of  the rent hereinafter  reserved  and  of  the covenants on the part of the Sub-lessee hereinafter contained, the lessee doth hereby sub-lease and the lessor doth hereby confirm unto the sub-lessee. ………

Subject  always  to  the  exceptions  reservations,  covenants  and conditions contained in the lease and hereinafter contained that is to say as follows:-

Covenants and the conditions contained in the Lease

I. The lessor …

(1) The Sub-lessee shall pay to the lessee within such time such additional sum or sums towards premium in respect of the industrial plot as may be decided upon and fixed by the lessor on account of  the compensation awarded by the Land Acquisition Collector being enhanced on reference or in appeal or both as mentioned in Sub-clause (1) and (5)(a) of Clause II  of the Lease and the  decision of the lessor in this behalf   shall be final and binding on the Sub-lessee and lessee.

………

(2) The Sub-lessee shall pay unto the lessee the yearly rent hereby reserved on the days  and in  the manner herein before appointed.

(3) …

(4) The  sub-lessee  shall  at  all  times  duly  perform  and observe all the covenants and conditions which are contained in the lease on the part of the lessee or sub-lessee there under to be performed and observed insofar as the same may be applicable to, affect and relate to the industrial plot sub-leased to him.

(5) The sub-lessee shall within a period of two years from the twentieth day of February one thousand nine hundred eighty one  and  the  time so  specified  shall  be  of  the  essence  of  the contract  after  obtaining  sanction  to  the  building  plan,  with necessary  designs,  plans  and  specifications  from  the  proper municipal or other authority  at his own expense erect upon the industrial plot and complete in a substantial and workmanlike manner  an  industrial  building  for  carrying  on  be  approved manufacturing  process  or  industry  within  the  requisite  and proper  walls,  sewers  and  drains  and  other  conveniences  in accordance  with  the  sanctioned  building  plan  and  to  the satisfaction of such municipal or other authority.

(6)(a) The  sub-lessee  shall  not  sell,  transfer,  assign or otherwise part with the possession  of  the whole or  any of  the industrial plot in any form or manner, benami or otherwise to a person who is not a member of the lessee.

(b) The Sub-lessee  shall  not  transfer  assign  or  otherwise part with the possession of the whole or any part of the industrial plot  to any other member of the lessee except with the previous consent in writing of the lessor which it shall be entitled to refuse in his absolute discretion.

Provided that, in the event of the consent being given, the lessor may impose  such  terms and conditions  as  thinks  fit and  the lessor  shall  be  entitled  to  claim and  recover  a  portion  of  the unearned increase in the value (i.e.  the difference between the premium paid and the market value) of the industrial plot at the time of sale transfer assignment, or parting with the possession, the amount to be recovered being fifty percent of the unearned increase and the vision  of  the lessor  in  respect  of  the market value shall be final and binding.

Provided  further that the lessor shall have the pre-emptive right to purchase the property after deducting

Provided that the Lt. Governor reserves the right to resume any plot  or  part  thereof  on  payment  of  reasonable  compensation which may be required for the development of the area like laying of  sewerage, Trunk Services,  Electric  and Telephone Wires and Water Supply lines etc., or such other purposes, which may be deemed of public and general utility.

Lessor shall be entitled to claim the recover one fifty percent of the  unearned  increase  in  the  value  of  the  industrial  plot  as aforesaid and  the  amount  of  the  lessor’s  share  of  the  said unearned increase shall be a first charge, having priority over the said mortgage or charge.  The decision of the lessor in respect of the market value of  the said  industrial  plot  shall  be final and binding on all parties concerned.

Provided further that the lessor shall have the pre-emptive right to purchase the mortgaged or charged property after deducting fifty percent of the unearned increase as aforesaid.

(7) The lessor’s right to the recovery of fifty percent of the unearned  increase  and  the  pre-emptive  right  to  purchase  the property as  mentioned  hereinafter  shall  apply  equally  to  an involuntary  sale  or  transfer  whether  it  be  by  or  through  an executing or insolvency court.

(8) ………

(9) ………

(10) The sub-lessee shall  from time to time and at all time pay and discharge all  rates,  taxes,  charges and assessment of every description  which  are now or  may at any time hereafter during the continuance of the sub-lease be assessed, charged or imposed upon the industrial  plot  hereby sub-leased or on any building to be erected hereupon or on the landlord or tenant in respect thereof.

(11) ………

(12) ………

(13) ………

(14) The sub-lessee shall not  without the written consent of the lessor  use or  permit to be used the industrial  plot or  any building  thereon for  residence or  for  carrying on  any trade or business whatsoever or use the same or permit the same to be used  for  any  purpose  other  than  that  of  carrying  on  the manufacturing process or running the industry of  Item as per Master Plan or such other manufacturing process or industry as

may be approved from time to time by the Chief Commissioner or to or suffer to be done therein any Act or thing whatsoever which in the opinion of  the lessor may be a nuisance,  annoyance or disturbance  to  the  Lessor,  Lessee  and  other  Sub-lessees  and persons in the neighborhood.

(15) ………      

(16) The sub-lessee shall on the determination of this Sub- lease peaceably yield up the said industrial plot and the buildings thereon unto the lessee or the lessor, as may be entitled.  

III. If the sum or sums payable towards the premium or the yearly rent hereby reserved or any part thereof shall any time be in arrear and unpaid for one calendar month next after any of the days whereon the same shall have become due whether the same shall have been demanded or not, or if it is discovered that this sub-lease has been obtained by suppression of any fact of by any mis-statement,  misrepresentation  or  fraud  if  there  shall  have been in the opinion of the lessee or the lessor and the decision of the lessor  shall  final  any breach  by  the sub-lessee or  by  any person claiming through or under him of any of the covenants or conditions contained herein and in the lease and on his part to be observed or performed, then land in any such case, it shall be lawful for lessor or the lessee with the prior consent in writing of the lessor notwithstanding the waiver of any previous cause or right of re-entry upon the industrial plot and sub-leased and the buildings  thereon,  to  re-enter  upon  and  take  possession of industrial plot and buildings and fixtures thereon, and thereupon this  sub-lease  and  everything  herein  contained  shall  cease determine in respect of  the industrial  plot  so re-entered upon, and  the  sub-lessee  shall  not  be  entitled  to  any  compensation whatsoever nor to the return of any premium paid by him.

………

IV. No. forfeiture or re-entry shall be effected until the lessor or the lessee has served on the sub-lessee a notice in writing.

(a) specifying the particular breach complained of and

(b) if  the breach if  capable of  remedy,  requiring the sub- lessee to remedy the breach.

and the sub-lessee fails within such reasonable time as may be mentioned in the notice to remedy the breach if it is capable of remedy; and in the event of forfeiture or re-entry the lessor in his discretion or the lessee, with the prior consent in writing of the lessor  may  relieve  against  forfeiture  on  such  terms  and conditions as the lessor thinks proper.”

(emphasis supplied by us)

6. In  this  civil  appeal  the  main  contention  of  the

Corporation  is  that  the  perpetual  sub-lease  dated  20.2.81

operated  as  a  conveyance  having  the  effect  of  transferring

leasehold  rights,  which  constituted  “land”  as  defined  in

Section 2(24) of the Delhi Municipal Corporation Act, 1957, in

favour of  M/s. Shashnak Steel  Industries  Pvt.  Ltd.,  who on

purchase  became  the  “owner”  thereof  as  defined  under

Section 2(37) of the  said 1957 Act and consequently as the

said  “owner”  became  exigible  primarily  to  pay  property  tax

under  Section  120(1)(c)  of  the  said  1957  Act.   In  short,

according to the Corporation, M/s. Shashnak Steel Industries

Pvt. Ltd. was the owner of the leasehold rights under the said

Deed  who  was  primarily  liable  to  pay  property  tax  under

Section 120(1)(c)  of  the  said 1957  Act.   This argument  has

been  rejected  by the  High Court which has interpreted  the

perpetual sub-lease dated 20.2.81 in entirety and has come to

the conclusion that on account of various restrictions put on

the  sub-lessee  it  cannot  be  said that M/s.  Shashnak Steel

Industries  Pvt.  Ltd.  (sub-lessee)  was  the  owner  of  the

industrial  plot  and  that  the  perpetual  sub-lease  did  not

operate as a conveyance.  The impugned judgment of the High

Court was given in Civil Writ Petition No.1336 of 1990 dated

17.9.2002, hence this civil appeal is filed by the Corporation.  

7. For  the  sake  of  convenience,  we  also  quote  the

relevant  provisions  of  the  Delhi  Municipal  Corporation  Act,

1957 which read as follow:  

“CHAPTER I PRELIMINARY

Section 2. Definitions.- In this Act, unless the context otherwise requires, -  

(24). “land” includes benefits to arise out of land, things attached  to  the  earth  or  permanently  fastened  to anything attached to the earth and rights created by law over any street;

(37). “owner” includes a person who for the time being is receiving or is entitled to receive, the rent of any land or building whether on his own account or on account of himself and others or as an agent, trustee, guardian or  receiver  for  any  other  person  or  who  should  so receive the rent or be entitled to receive it if the land or building or part thereof  were  let  to a tenant and also includes-

(a) the custodian of evacuee  property in respect of evacuee  property  vested  in  him  under  the Administration  of  Evacuee  property  Act,  1950  (31  of 1950);

(b) the  estate  officer  to  the  Government  of  India, the  Secretary  of  the  Delhi  Development  Authority, constituted under the Delhi Development Act, 1957 (61 of 1957), the General Manager of a railway and the head of a Government  department,  in respect  of properties under their respective control;

CHAPTER VIII TAXATION

Levy of taxes

Section 120. Incidence of property taxes.-

(1) The property  taxes  shall be  primarily leviable  as follows:-

(a) if the land or building is let, upon the lessor;

(b) if the land or building is sub-let, upon the superior lessor;

(c) if the land or building is unlet, upon the person in whom the right to let the same vests:

Provided that the property taxes in respect of land or building, being property of the  Union, possession of which has been delivered in pursuance of Section 20 of  the  Displaced  Persons  (Compensation  and Rehabilitation)  Act,  1954  (44  of  1954),  shall  be primarily leviable upon the transferee.”

8. At the outset it may be stated that in this civil appeal

we  are  concerned  with the  assessment  years 1982 to 1987

when admittedly the land in question was vacant land.  We

may also state at the outset that in this civil appeal we are

concerned  with  interpretation  of  sub-lease  dated  20.2.81

which has been annexed to the civil appeal paper book.   

9. The forms in which tenancies are created in India are

not  uniform  and  they  do  not  conform  to  the  precedents

known to conveyancing; sometimes  the  words used  are  not

precise and it is not easy to understand from the said words

the intention of the parties in executing the documents.  The

nature  of  the  tenancy  created  by  any  document  must  be

determined  by construing the document as a whole.   If the

tenancy is for a building purpose, as is the case herein, then

prima facie it is intended for the life time of the lessee  or it

may in certain cases be even a permanent lease.  Prima facie

such  a  lease  is  not  intended  to  be  tenancy  at  will.   But

whether  it is tenancy for life  or a permanent  tenancy must

ultimately depend upon the terms of the contract itself. [See:

Sivayogeswara  Cotton  Press,  Devangere  and  others v.  M.

Panchaksharappa and another – AIR 1962 SC 413].  

10. Although  it  is  the  case  of  the  Corporation that  the

perpetual  sub-lease  operated  as  a  conveyance  for  which

reliance was placed on the terms and conditions mentioned in

the  Deed,  what  we  are  concerned  in  this  civil  appeal  is:

whether on the terms and conditions mentioned in the said

Deed, could primary liability to pay property taxes be placed

on the assessee  under Section 120(1)(c) of the said 1957 Act

to pay property taxes.  It is well settled that “intendment” has

no role  to  play in a taxing statute.   Section 120(1)  falls in

Chapter VIII of the said 1957 Act which deals with taxation.

11. Before dealing with the provisions of the Chapter VIII

of  the  said 1957  Act  we  are  required  to  analyse  the  Deed

dated 20.2.81.  The Deed is described as perpetual sub-lease.

The President of India under the Deed  is the lessor, Mohan

Co-operative Industrial Estate Ltd. is described as lessee and

M/s.  Shashnak Steel  Industries  Pvt.  Ltd.  is described  as a

sub-lessee.   We  have  quoted  the  recitals  extensively

hereinabove.   On reading the first recital, we enquired from

Ms. Madhu Tewatia, learned counsel appearing on behalf of

the Corporation, as to the existence of the lease dated 20.3.80

which is referred to in the first recital as “annexed mark X”.

This query was raised because it was argued on behalf of the

Corporation that the Deed dated 20.2.81, which is the Deed

in  question,  was between  the  President  of  India  and  M/s.

Shashnak  Steel  Industries  Pvt.  Ltd.  in  which  the  lessee,

namely,  Mohan Co-operative  Industrial  Estate  Ltd.  was the

confirming party.   Since  this was the  argument  put  in the

forefront  by  the  learned  counsel  for  the  Corporation  we

enquired of the lease dated 20.3.80.  It was not produced.  Be

that as it may, on reading the  said Deed  dated  20.2.81 we

find that there  was a lease deed  dated 20.3.80 between the

lessor and the  lessee  in the  first instance  under  which the

lessee  Mohan Co-operative  Industrial Estate  Ltd.  was given

the authority to sub-lease on such premium and yearly rent

as  may  be  fixed  by  the  lessor  (President  of  India).   This

position emerges from the second recital in the Deed.  It also

appears from the first recital that the lessor had demised the

lease  in  perpetuity  to  the  lessee  –  Mohan  Co-operative

Industrial Estate  Ltd. on 20.3.80.   Similarly, from the  third

recital it becomes clear that the sub-lessee  (M/s. Shashnak

Steel Industries Pvt. Ltd.) had applied to the lessee  – Mohan

Co-operative Industrial Estate Ltd. for grant of perpetual sub-

lease  of  an industrial plot  to  which the  lessee  had agreed.

The most important aspect in the third recital is that the sub-

lessee  had  applied  for  the  lease  to  the  lessee,  the  lessee

agreed  to sub-let and the lessor (President of India through

Delhi Administration) had agreed to confirm a perpetual sub-

lease.  This position is also stated in the operative part of the

said  Deed  before  setting  out  the  terms  and  conditions.

Therefore,  the  lessor  and  not  the  lessee  is  the  confirming

party  to  the  sub-lease  between  the  lessee  –  Mohan  Co-

operative  Industrial  Estate  Ltd.  on  one  hand  and  M/s.

Shashnak  Steel  Industries  Pvt.  Ltd.  on  the  other  hand.

Therefore,  there  is no merit  in the  contention advanced  on

behalf  of  the  Corporation  that  under  the  Deed  lessor

conferred  leasehold  rights  to  the  sub-lessee  to  which  the

lessee was a confirming party.  On the contrary, the said Deed

indicates the lease was between the lessee and the sub-lessee

to which the lessor was the confirming party.  There  is one

more aspect to be kept in mind.  The lessor is the confirming

party because under the Deed in question rent and premium

was  revisable  periodically  and  the  determination  of  the

revised/enhanced rent/premium was left to the lessor though

rent  and  premium  was  payable  by  the  sub-lessee  to  the

lessee.   

12. The said Deed indicates that the sub-lessee  obtained

the  sub-lease  in order  to put  up  an industrial unit on the

industrial plot.

13. In  this  case  great  emphasis  is  placed  by  the

Corporation on the fact that the sub-lessee  was required to

pay a sum of  Rs.16093.60  as premium in addition to  rent

which  according  to  the  Corporation  indicated  purchase  of

leasehold rights.  According to the Corporation on purchase of

leasehold  rights  the  sub-lessee  became  the  owner  thereof.

We find no merit in this contention.  If one looks at the Deed

in question we find that the lessor has retained its right to

determine  periodically  the  rent  payable  and  the  premium

chargeable.  One has to keep in mind the purpose of the Deed

in  question.   What  was  demised  was  an  industrial  plot.

Initially,  the  lessee  –  Mohan Co-operative  Industrial  Estate

Ltd. was given the authority to sub-lease the industrial plot on

such premium and yearly rent as may be fixed by the lessor.

Mohan  Co-operative  Industrial  Estate  Ltd.  was  a  society

registered  under  Bombay  Co-operative  Societies  Act,  1925;

one  of  its  members  appears  to  be  M/s.  Shashnak  Steel

Industries  Pvt.  Ltd.  who  had  agreed  under  the  Deed  in

question to set up an industrial unit.  Under one of the terms,

the sub-lessee  was required to pay premium and rent to be

fixed  by the  lessor.   However,  both rent  and premium was

payable by the sub-lessee to the lessee.  As stated, the sub-

lessee  had agreed to put up at its own expense  a factory on

the  industrial  plot  within  two  years  from  dated  20.2.81.

Under the Deed the lessor had to estimate the capital value

(including the enhancement) as and when the unit came up.

It appears from the Deed that lessor was entitled to a share in

the enhanced value.   The said Deed  further stated that the

lessor  shall  have  a  right  to  recover  50%  of  the  unearned

increase as and when the lessor gives permission to the sub-

lessee  to transfer, assign or part with the possession of the

plot  to  any  other  member  of  the  lessee  society.   All  these

terms indicate that under the Deed parties contemplated that

on the unit coming up on the leasehold land there would be

an  accretion  in  the  value.   In  our  view,  the  provision  for

premium  was  only  an  additional  source  of  revenue.

Therefore,  we  do  not  find  any  merit  in  the  contention

advanced  on  behalf  of  the  Corporation that on  payment  of

premium the sub-lessee  became the owner of the leasehold

rights.  Further as rightly held by the High Court there  are

numbers  of  restrictions  put  on  the  sub-lessee  which

prevented the sub-lessee from full enjoyment of the leasehold

rights.  Under Clause 6(a) the sub-lessee  was not entitled to

sell, transfer, assign or part with possession of the whole or

any  part  of  the  industrial  plot  to  a  person  who  is  not  a

member of the lessee society – Mohan Co-operative Industrial

Estate Ltd.  Under Clause 6(b) it was not allowed to transfer,

assign or part with possession to any other  member  of  the

lessee society, except with the prior consent in writing of the

lessor  which  in  its  discretion  is  entitled  to  refuse  such

concept.  Further, under Clause 6(b), in the event of consent

being given, it was open to the lessor to claim a portion of the

unearned  increase  in  the  value.   Under  Clause  16,  on

determination  of  the  sub-lease,  M/s.  Shashnak  Steel

Industries Pvt. Ltd. herein had to yield up the industrial plot

along with the buildings thereon unto the lessee/lessor.  The

said restrictions indicate that the said Deed did not operate as

a conveyance.    

14. In this case,  we  are  concerned  with the  question of

primary liability on the vacant land during the period 1982 to

1987.   During  that  period  the  factory  had  not  come  up.

Therefore,  there  was  no  question  of  enhanced  value  on

account  of  accretion  taking  place  during  the  said  period.

Therefore,  keeping  in  mind the  restriction(s)  placed  on  the

sub-lessee we are of the opinion that this is a case of “letting”.

It is not the case of conferring ownership rights on the sub-

lessee.  Under the Deed, M/s. Shashnak Steel Industries Pvt.

Ltd. remains a sub-lessee.  In fact, there is forfeiture/re-entry

provided for in the said lease.  That right of forfeiture/re-entry

can be  effected  either  by the  lessor or by the  lessee  which

further shows that the sub-lessee  is not in full enjoyment of

the leasehold rights in the property in question.

15. For the  aforestated  reasons  on interpretation of  the

perpetual sub-lease dated 20.2.81, we are of the view that the

said Deed cannot be construed as a conveyance of leasehold

rights in favour of M/s. Shashnak Steel  Industries Pvt. Ltd.

We are of the view that this case is that of letting.  Therefore,

we do not find any infirmity in the impugned judgment.  We

also agree with the view taken by the Delhi High Court that a

bare  perusal  of  the  Deed  would  show  that  the  condition

imposed on the sub-lessee  to pay tax is only as a matter of

indemnification  and it  would  not  indicate  ownership  of  the

leasehold rights in favour of the sub-lessee.

16. Coming  to  the  interpretation  of  the  provisions  of

Section 120(1)  of  the  said 1957 Act,  at  the  outset  we  may

state that the language of the said section suggests that the

intention  of  the  Legislature  in  fixing  primary  liability  of

property tax upon the  owner  of the  land is to facilitate  the

collection  of  property  tax.   It  is  not  unreasonable  for  the

Legislature to impose the primary liability upon the lessor and

to give  him the  right of  recoupment.   In this case,  we  are

concerned  only  with  the  question  as  to  whether  the

Corporation  was  right  in  imposing  primary  liability  to  pay

property tax on the sub-lessee under Section 120(1)(c) of the

said  1957  Act.   Whether  the  liability  was  on  Mohan  Co-

operative Industrial Estate Ltd., is not required to be gone into

by us because that is not the case of the Corporation and also

because the lease between the President of India and Mohan

Co-operative  Industrial  Estate  Ltd.  dated  20.3.80  was  not

produced before us.  We also do not know the basis on which

premium was payable by the lessee to the lessor.   

17. On a bare reading of Section 120(1)(c), in the context

of the Deed dated 20.2.81, we find that the said Deed did not

operate  as a conveyance and that the industrial plot was let

out to M/s. Shashnak Steel Industries Pvt. Ltd.   Since there

was letting in favour of the said company, Section 120(1)(c) of

the said 1957 Act did not apply.   

18. For the aforestated reasons, we see no infirmity in the

impugned judgment of the Delhi High Court.  Accordingly, the

civil appeal filed by the Corporation is dismissed with no order

as to costs.                

Facts  in  Civil  Appeal  No.1011/2005  and  other  Civil Appeals  

19. The  lead  matter  in  this  set  of  civil  appeals  is  Civil

Appeal No.1011 of 2005 –  Municipal Corporation of Delhi v.

M/s.  Gauri  Constructions  Co.  On  7.5.1999  there  was  a

Perpetual Lease  executed  by the President of India through

Delhi  Administration  as  lessor  in  favour  of  M/s.  Gauri

Constructions  Co.  (respondent  herein).   Unlike  Mohan  Co-

operative Industrial Estate Ltd., the lessee in the earlier case,

the respondent herein had no right to sell, transfer, assign or

part with the possession of the commercial plot except  with

the  consent  in writing from the  lessor  who was entitled  to

refuse such consent in its absolute discretion.  In the case of

M/s. Shashnak Steel Industries Pvt. Ltd. (supra) it was a case

of grant of Perpetual Sub-lease.  In that case there were two

leases.  In the first instance, there was a lease dated 20.3.80

from the lessor to Mohan Co-operative Industrial Estate Ltd.

(lessee),  a  society  registered  under  Bombay  Co-operative

Societies  Act, 1925,  under  which the  lessee  was entitled  to

sub-lease  whereas  in  the  present  case  of  M/s.  Gauri

Constructions Co., no such right was given to the lessee  to

sub-lease.   In  the  circumstances,  for  the  reasons  given

hereinabove, the case of M/s. Gauri Constructions Co. would

not attract Section 120(1)(c) of the said 1957 Act.  In this civil

appeal also we are concerned only with the period when the

land was vacant.   

20. Before  concluding,  we  may  state  that  there  is  a

difference  between  “liability”  and “exemption  from liability”.

In  this  case  Union  of  India  is  exempt  from  payment  of

property tax, we are not concerned with that aspect.  We are

only  concerned  with whether  the  assessee(s)  was  primarily

liable to pay property tax under Section 120(1)(c) of the said

1957 Act.  For that purpose, we were required to examine the

Deed  dated  7.5.99  to  find out  whether  the  case  is  that  of

letting or conferment  of  ownership of  leasehold  rights.  On

reading and analyzing the said Deed, we are of the view that it

did  not  operate  as  conveyance  of  leasehold  rights.

Consequently,  Section 120(1)(c) of  the  said 1957 Act is not

attracted.

21. For the aforestated reasons we find no infirmity in the

impugned judgments of the Delhi High Court and accordingly

all the civil appeals filed by the Corporation stand dismissed

with no order as to costs.   

……………………………J.                                                       (S.H. Kapadia)

……………………………J.                                                      (B. Sudershan Reddy)

New Delhi; November 17, 2008.