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PETITIONER: CORPORATION OF CALCUTTA

       Vs.

RESPONDENT: LIFE INSURANCE CORPORATION OF INDIA

DATE OF JUDGMENT: 09/04/1970

BENCH: SHAH, J.C. BENCH: SHAH, J.C. HEGDE, K.S.

CITATION:  1970 AIR 1417            1971 SCR  (1) 248  1970 SCC  (2)  44  CITATOR INFO :  RF         1977 SC 308  (4,7)  R          1980 SC 541  (1,4,5,8,9,10)

ACT: West Bengal Premises Rent Control (Temporary Provisions) Act (17 of 1950), s. 2(10)(b) and Calcutta Municipal Corporation Act (33 of 1951), s. 168(1),Premises let out-Sub-letting for larger rent by tenant-Fixation of annual value-Standard rent payable  by  tenant  or rent received by  tenant  from  sub- tenants to be considered.

HEADNOTE: The respondent was the owner of a building whose tenant  was paying a certain amount as rent.  No standard rent under  s. 9  of  the West Bengal Rent Control  (Temporary  Provisions) Act, 1950 was fixed but the amount of rent was such that it would  have been fixed as standard rent if  application  for such fixation was made under that Act.  The tenant had  sub- let  the promises and was receiving a much larger  sum  from the  sub-tenants.  For  the purpose  of  assessment  to  the consolidated rate under s. 168(1) of the Calcutta  Municipal Corporation Act, 1951, the annual rent at which the building might  be  reasonably expected to be let from year  to  year should   be   taken  into  consideration.    The   appellant determined the annual value of the building on the basis  of the rental received by the tenant from its sub-tenants.   In appeal by the respondent the Court of Small Causes held that only the rent paid by the tenant to the respondent should be taken as the basis; and the High Court confirmed the  order. In  appeal  to this Court it was contended  that  under  the proviso to s.  168(i), if standard rent had been fixed under the West Bengal Rent Control (Temporary Provisions) Act,  it would  form the, basis of annual rent, but, if there was  no such  fixation,  the appellant was competent  to  take  into account  all  relevant circumstances including the  rent  at which the building- was sub-let. HELD  :  (1)  The corresponding section, s.  127(a)  of  the Calcutta  Municipal  Act,  1923 did not  contain  a  proviso similar  to the one in s. 168(1) of the 1951-Act.   But  the decision  in  Corporation of Calcutta v. Smt.   Padma  Debi,

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[1962]  3 S.C.R. 49, interpreting s. 127(a) of  the  1923Act and holding that the annual value should be determined  only on the footing of the standard rent applies.  In determining the  annual rent statutory limitation of rent  circumscribes the scope of the bargain in the market and the rent at which the  premises could be let out from year to year  can  never exceed the standard rent.  Under s. 2(10) of the West Bengal Premises Rent Control (Temporary Provisions) Act, when there is no order of the Controller fixing the standard rent under s. 9 of that Act, the standard, rent would be the amount  at which it would have been fixed if application were made  for such  fixation.  Therefore, in the present case  the  annual rent at which the building, might reasonably be expected  to be let from year to year, would be rent which the tenant was paying  to the respondent and not the rent which the  tenant was receiving from the sub-tenants. [251 D-H] (2)  Section 193 of the Calcutta Municipal Corporation  Act, which only provides for apportionment of consolidated rates, is irrelevant in determining the annual value. [252 G] 249

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1559  of 1966. Appeal from the judgment and order dated February 15, 1963 A the Calcutta High Court in Appeal from original order No.  6 of 1959. P.   K.  Mukherjee,  A.  N. Sinha and Rathin  Das,  for  the appellant. G. L. Sanghi and K. L. Hathi, for the respondent. The Judgment of the Court was delivered by- Shah, J. Messrs.  A. Firpo Ltd. held as tenants premises No. 11,  Government  Place  East,  Calcutta,  belonging  to  the Asiatic  Assurance Company Ltd., under a lease dated  August 6,  1941,  ,it a monthly rental of Rs. 2,000, The  rent  was increased by mutual agreement with effect from November 1953 to Rs. 2,800 per month.  Messrs.  A. Firpo Ltd. had sublet a major part of the premises to five different tenants and the aggregate rent received from the sub-tenants amounted to Rs. 4,520. The Corporation of Calcutta assessed the annual value of the premises at Rs. 32,076 for six years prior to April 1, 1955. With effect from April 1, 1955, the Corporation assessed the annual  value of the premises at Rs. 62,761.  The  objection raised  by  the owner against the  determination  of  annual value   was   rejected  by  the  Special  Officer   of   the Corporation.  In appeal by the Life Insurance Corporation of India  (which  had statutorily acquired the  rights  of  the owner) the Court of Small Causes assessed Rs. 30,240 as  the annual value.  The order was confirmed in appeal to the High Court under S. 183(3) of the Calcutta Municipal  Corporation Act, 1951.  With certificate granted by the High Court, this appeal has been preferred. In  this appeal the Corporation claims that  in  determining the annual value of the premises the assessing authority was entitled  to take into consideration the rental received  by Messrs  Firpo Ltd. from its sub-tenants.  This Court in  The Corporation of Calcutta v. Smt.  Padma Debi and Others(1)-’a case  arising  under the Calcutta Municipal  Act,  1923-held that  in assessing the annual value under s. 127(a)  of  the Calcutta  Municipal Act, 1923, the rent which  the  landlord may realise if the house was let is the basis for fixing the annual value of the buildings : the criterion being the rent

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realisable by the landlord and not the value of the building in  the hands of the tenant.  The test of reasonableness  of the gross annual rent at which the building may at the time of (1)  [1962] 3 S.C.R. 49. 250 assessment  reasonably be expected to let in s. 127  (a)  is the rent which the landlord may realize if the house is  let under  a  bargain  between a willing lessor  and  a  willing lessee  uninfluenced  by extraneous considerations,  and  in determining  the  reasonableless of the expectation  of  the landlord  in  the matter of rent a law which  imposes  penal consequences  cannot be ignored.  The law must 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,  and  since  a statutory limitation of rent circumscribes the scope of  the bargain   in  the  market,  in  no  circumstances  can   the hypothetical rent exceed the limit prescribed by the law. It  was there fore clearly laid down by this Court  in  Smt. Padma  Debi’s case(1) that in determining the ’annual  value of the land or building for the purpose of ascertaining  the consolidated  rate, the standard rent is the maximum  amount which can be taken into account. In  the present case the Court of Small Causes and the  High Court have determined the annual value on the footing of the standard rent., Counsel  for  the Corporation, however, contended  that  the decision in Smt.  Padma Debi’s case(1) has no application to this case, since that case was decided on the interpretation of  s. 127(a) of the Calcutta Municipal Act,  1923,  whereas the   present   case   falls  to  be   determined   on   the interpretation   of  s.  168  of  the   Calcutta   Municipal Corporation  Act,  1951, of which the scheme  is  different. Section 168(1) at the relevant time provided               "For   the  purpose  of  assessment   to   the               consolidated rate the annual value of any land               or  building shall be deemed to be  the  gross               annual  rent  at which the  land  or  building               might at the time of assessment be  reasonably               expected   to   let   from   year   to   year,               less.........               Provided  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." Counsel  urged that under the proviso, gross rent for  which the Laid or building might reasonably be expected to let  is subject  to the maximum limit of the annual  standard  rent, only in those cases in which standard rent under s. 9 of the West Bengal Premises (1)  [1962] 3 S.C.R. 49. 251 Rent  Control (Temporary Provisions) Act, 1950 is  fixed  by order of the Controller, and since no such standard rent  is fixed by order of the Controller, the proviso to s. 168 does not  apply, and the assessing authority was, in  determining the  annual  value,  competent  to  take  into  account  all relevant  circumstances  including  the rent  at  which  the premises were or could be sublet. It  is  true  that the assessment of annual  value  in  Smt. Padma Debi’s case(1) was for the year 1950-51 and s.  127(a)

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of the Calcutta Municipal Act, 1923, was in these terms :               "the  annual  value of land,  and  the  annual               value  of  any building  erected  for  letting               purposes or ordinarily let, shall be deemed to               be the gross annual rent at which the land  or               building might at the time of assessment  rea-               sonably  be  expected to be let from  year  to               year, less, That  section did not contain a proviso in the form  of  the proviso  to s. 168(1) of the Calcutta Municipal  Corporation Act, 1951.  But the enactment of the proviso does not  alter the   law.   This  Court  in  Smt.   Padma   Debi’s   case() interpreted  the words "gross annual rent at which the  land or  building might at the time of assessment  reasonably  be expected  to let from year to year" in s. 127(a),  and  held that   in  determining  the  gross  annual  rent   statutory limitation of rent circumscribes the scope of the bargain in the   market   and  therefore  in   no   circumstances   the hypothetical rent may exceed the limit. By the addition of the proviso, in our judgment, the meaning of the expression "gross rent at which the land or  building might reasonably be expected to let" is not altered.  In the present  case,  there is no order of the  Controller  fixing standard  rent under s. 9 of the West Bengal  Premises  Rent Control  (Temporary Provisions) Act, 1950. but the  standard rent stands determined by the definition of that  expression in  s. 2(10)(b) of that Act, which provides (omitting  parts not relevant)               standard  rent’  in relation to  any  premises               means(a).............               (b)   where  the  rent has  been  fixed  under               section  9, the rent so fixed; or at which  it               would have been fixed if application were made               under the said section." We  are therefore of the view that the High Court was  right in  assessing the annual value on the basis of the  standard rent  as statutorily determined.  It is common  ground  that the standard rent of the premises was Rs. 2,800 per month by virtue of the second part of s. 2 ( 1 0) (b). (1)  [1962] 3 S.C.R. 49. 252 It  was  then  urged  that in  any  event  where  there  are different  grades  of owners of a  building,  the  assessing authority  is bound to take into consideration the value  to each  grade  of  owner for the purpose  of  determining  the standard rent.  It was submitted that qua their sub-tenants, Messrs.   A. Firpo Ltd. were the owners of the premises  and the  rent  which  they received had also to  be  taken  into account in determining the standard rent.  Reliance in  that behalf was placed upon the definition of "owner" in s. 5(53) and s. 193 of the Calcutta Municipal Corporation Act,  1951. Section  5(53) defines "owner" as including "the person  for the time being receiving the rent of any land or building or of  any  part of any land or building, whether  on  his  own account or as agent or trustee for any person or society  or for any religious or charitable purpose, or as a receiver or who would so receive such rent if the land, building or part thereof were let to a tenant".  Section 193 provides :               "Where  there are gradations of owners of  any               land   or  building,  the  Commissioner   may,               notwithstanding anything contained in  section               191,  apportion  the  owner’s  share  of   the               consolidated  rate in respect of such land  or               building  among such owners in  proportion  to               the amount of the net rent receivable by  each

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             of them and thereupon the owner’s share of the               consolidated rate shall be paid by such owners               accordingly.                Explanation.- But  under  the  Act the quantum of  the  consolidated  rate depends  upon  the annual value of land or building  on  the gross  rent for which the land or building might  reasonably be  expected  to let, and not the gross rent  at  which  the subordinate interest of a tenant may be expected to  sublet. In determining the assessment of annual value, the assessing authority  is not concerned with the rent which  the  tenant may receive from his sub-tenant.  It is the gross rent which the owner may realize by letting the land or building  under a bargain "uninfluenced by extraneous considerations"  which determines the-annual value.  Section 193 only provides  for apportionment  of  consolidated rate : it is  irrelevant  in determining annual value. The appeal fails and is dismissed with costs. V.P.S.                            Appeal  dismissed. 253