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PETITIONER: MUNICIPAL CORPORATION, INDORE AND OTHERS

       Vs.

RESPONDENT: SMT. RATNA PRABHA AND OTHERS

DATE OF JUDGMENT29/10/1976

BENCH: SHINGAL, P.N. BENCH: SHINGAL, P.N. RAY, A.N. (CJ) BEG, M. HAMEEDULLAH

CITATION:  1977 AIR  308            1977 SCR  (1)1017  1976 SCC  (4) 622  CITATOR INFO :  D          1980 SC 541  (6)

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

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                     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

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                     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

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       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

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       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