http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

CASE NO.: Appeal (civil) 5898  of 1997

PETITIONER: DELHI GOLF CLUB LIMITED & ANR.

       Vs.

RESPONDENT: N.  D.M.  C.

DATE OF JUDGMENT:       15/01/2001

BENCH: S.P.Bharucha, Doraswamy Raju, Ruma Pal

JUDGMENT:

L.....I.........T.......T.......T.......T.......T.......T..J       J U D G M E N T

     Raju, J.

     The  appellants,  who had lost before the High  Court, filed  this  appeal against the judgment of the  Delhi  High Court dated 14.7.97 in CWP No.2349 of 1995 since reported in AIR  1997  Delhi 347, whereunder the challenge made  by  the appellants  to a demand raised by the respondent to the tune of  Rs.4,37,56,295.90  on  account of property-tax  for  the period  from 1.4.69 to 31.3.95 in their house-tax bill dated 24.11.94,  notice of demand dated 31.3.95 and a letter dated 13.6.95 came to be rejected.  Having regard to the nature of issues  raised,  certain  factual   details  need  elaborate reference  to  properly deal with and appreciate  the  same. The  Delhi Golf Club limited (hereinafter referred to as the Club)   is  a  limited   company  incorporated  under  the Companies Act, 1956 with the object of promoting the game of Golf and for that purpose provide courses and grounds at New Delhi  or  elsewhere in the State of Delhi, to lay  out  and also  maintain the same by providing club houses, pavilions, lavatories,  kitchens,  refreshment rooms, workshops,  sheds and  other conveniences for the use of its members and other persons  either gratuitously or on payment of charges.   The land  measuring  183  acres situate in Wellesley  Road,  New Delhi,  was being used by the New Delhi Municipal  Committee (hereinafter  referred to as the Municipal Committee)  for running  a  Golf Course till 1950 and in the year 1950,  the Municipal  Committee handed over the said Golf Course to the Club.   In  the year 1952, a lease deed dated  10.12.52  was executed  between the Municipal Committee and the Club under which  the land together with old buildings existing thereon known  as Golf Club with a plinth area of 3000 sq.  feet and a  new building identified as Office with plinth area of 450 sq.  feet was granted on lease on an annual rent of Rs.200/- for  land  and  Rs.50/- as rent for the  old  buildings  and another  Rs.50/- as rent for the new buildings.  Due to some development  and  turn  of events in the Ministry  of  Works Housing and Supply, Land & Development Office, Government of India,  New  Delhi, the entire property, noticed above,  was taken  over by the Central Government on payment of a sum of Rs.25,000/-   as  compensation  for   tools  and  plants  as

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

evidenced  by a letter dated 19.12.63.  Simultaneously,  the Land  and  Development Office by its letter  dated  19.12.63 informed the Club about the said taking over and called upon them  to  pay  a  sum of Rs.25,000/- by means  of  a  cheque towards  the  compensation  for the tools and  plants  etc., which  were in the possession and use of the Club.  The Club has been making representations for grant of a regular lease of  the  land  and  the  buildings  or  the  super-structure standing  thereon.  Though, no formal lease deed as such was executed, the Government of India, Ministry of Works Housing and  Supply,  Land and Development Office, vide  its  letter dated  23.4.68 communicated the sanction of the President of India  for the temporary allotment for the period upto  1980 of land measuring about 180 acres for the use of the Club on the  terms  and  conditions set out therein.  The  Club  was obliged  to  use  the land and buildings for the  bona  fide purposes  of the Golf Club and for no other purpose and  was further obligated to pay rent from 8.11.63 at the rates more fully  set  out  therein.   A  restriction  on  any  further construction  without the prior permission of the Government and  without obtaining the prior approval of building  plans from  the  Local  Body as well as the Land  and  Development Officer  was  also imposed.  All the trees standing  on  the land  were declared to be the Government property which  are not  to be cut or removed without the prior approval of  the Government.  The lease was also stated to be a temporary one terminable within one month notice from either side, with an obligation  to  the  Club, in case of  such  termination  to restore  and surrender possession.  Certain other conditions regarding  the manner of maintenance of the properties  were also  imposed  and it is unnecessary to dwell at  length  on those  conditions.   The Club made the necessary payment  as required in the letter dated 23.4.68.

     While  matters  stood  thus, the  Municipal  Committee served  a  notice  dated 13.2.69 purporting  to  assess  the property in the hands of the Club and proposed to assess the house/property  tax under Section 65 of the Punjab Municipal Act, 1911 (hereinafter referred to as the Act) in relation to  the  Golf  area (open land) and  the  building  standing thereon  at  the  annual  value  of  Rs.1,32,83,357.71.   As required  in  the notice, the Club, though  felt  surprised, filed its objections contending that the proposed assessment was  wrong,  illegal, ultra vires and  without  jurisdiction since  the Club was neither the owner nor a permanent lessee of  the  property  in question to  attract  liability  under Section  61 of the Act and that, in any event, the valuation was  also  arbitrary  and  based   on  merely  surmises  and conjectures.   The purpose and objects of the Club which was meant for the development and protection of the game of Golf and  the fact that it is a non-profit making enterprise, was also  duly  highlighted.   Though  an  opportunity  to  make personal  representation  was  also granted in  the  notice, counsel  deputed along with the Accountant was said to  have been  not  allowed  to  state anything,  making  the  entire exercise  a  mere pretence.  Thereupon, vide a letter  dated 3.5.69,  the Club was informed that the assessment has  been finally  settled  and  confirmed  with an  annual  value  of Rs.1,32,83,357.70  with  effect from 1.4.69 vide  Resolution No.19 (156) of the Ordinary Meeting of the Committee said to have  been  held  on 26.3.69.  On the service  of  the  said proceedings  on the Club on 5.5.69, an appeal was filed.  In the  meantime, on 8.10.69 a notice came to be issued calling upon  the  payment of Rs.16,60,420.68 as house tax  for  the period  from 1.4.69 to 31.3.70 within 7 days from receipt of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

the  notice on threat of action under Section 80 (3) of  the Act.   While repudiating the said claims and demands through its  counsel  on  23.10.69,  and faced with  the  threat  of recovery  proceedings  by the Authorities of  the  Municipal Committee, the Club filed two Suits Nos.419/69 and 367/70 in the Court of Subordinate Judge, 1st Class, Delhi, in respect of  the  assessment  years 1969-70 and 1970-71  seeking  for permanent  injunction  restraining the  Municipal  Committee from  realisation,  demand  or  recovery of  any  amount  as house-tax  from the plaintiffs and/or enforcing the  demands made  as noticed above and/or from taking coercive  measures for  the  realisation of the said amount in any manner.   By judgment and decree dated 27.4.73, the suits were decreed as prayed  for  and it was held by the learned Judge  that  the Club  had  only  a  temporary lease  of  the  property  and, therefore,  was  not  liable  to be assessed  to  tax  under Section  61  of the Act, that the suit was not barred  under Section  86 of the Act and that the assessment was also  not in conformity with Section 3 (1) of the Act.  Aggrieved, the Municipal  Committee pursued the matter on appeal before the District  Court  in  RCA No.12976 and 130/76.   The  learned First  Appellate Judge also concurred with the judgment  and decree  of  the  Trial  Court and the  appeals  came  to  be dismissed  on 5.3.77.  Though the matter was further pursued before  the  High  Court on second appeal in RSA  Nos.206  & 207/77,  the  appeals came to be dismissed as  withdrawn  on 30.8.1985.   An  application filed seeking for review in  CM No.1250/85 also came to be dismissed on 20.9.85.

     Thereafter,  the  matter was under suspense  for  some time  so  far as the parties are concerned.  Meanwhile,  the Government  of India, Ministry of Urban Development, Land  & Development  Office,  by  its   proceedings  dated   20.7.94 communicated  its decision to allow the Club to use the land measuring about 179 acres beyond 31.12.90 for 20 years, i.e. from  01.01.1991  to  31.12.2010, subject to the  terms  and conditions  more  fully  set  out   therein,  of  which  the following may be mentioned as relevant and necessary for the purposes of this case:-

     I.   The  period  of temporary lease will  be  for  a period of 20 years, i.e., from 1.1.1991 to 31.12.2010.

     II.   (I) The Delhi Golf Club shall be required to pay annual  ground  rent for 2.08 acres or area required as  per building  bye-laws for the covered area @ 5% of Rs.39  lakhs per acre.

     (ii)  The club shall pay the Licence Fee @  Rs.1,000/- per acre for the green area measuring 176.92 acres.

     (iii)  There  will be complete ban of construction  on green  areas and prior permission of the Government would be necessary for any construction on 2.08 acres.

     (iv)  The  Delhi  Golf  Club shall  pay  the  property tax/service  charges  or any other taxes demanded  by  local bodies  to pay the Government the equivalent amount (in case Government  is  billed by local bodies) for the entire  land under  their occupation.  Though the property taxes for  the period  prior  to 1.1.91 does not form part of  the  Current Lease  Agreement, the Club shall, however, settle all issues pertaining  to  outstanding property tax etc.  with NDMC  as communicated   to  them  vide   their  office  letter  dated 26.4.1993  and  make  necessary  payments to  NDMC  in  this

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

regard.   Their will be no liability in Government of  India whatsoever towards property tax.

     III.   The  land  shall  be   used  for  its  bonafide activities of promoting the sport of Golf.

     In  the light of the above position, you are  required to  pay  the  following dues to this office  on  account  of licence fee, ground rent etc.  for the period from 1.1.91 to 31.12.1995.

         A.  Ground rent of area 2.08 acres @ Rs.4,05,600/- P.A w.e.f.  1.1.91 to 31.12.95 Rs.20,28,000.00

     B.   Licence fees of area 176.92 acres @ Rs.1,76,920/- P.A.  w.e.f.  1.1.91 to 31.12.95 Rs.8,94,600.00

     2.   The Government shall reserve its right either  to cancel  the lease for the green area or terminate the  lease for  the covered area or both by giving six months notice in case  it is decided to put the land to alternative use for a public purpose.

     4.   If the terms and conditions referred to above are acceptable,  acceptance  thereof  alongwith the  payment  of above  dues  may be sent to this office within 30 days  from the  date of receipt of this letter failing which the  terms communicated to you for the extension of temporary allotment will  be withdrawn and cancelled without any further  notice to you.

     The  other  conditions also specifically provided  for including  the  stipulated  number  of  nominees  from   the Government  of India on the Management Committee of the Club with full voting rights, preferential rights and priority to use   upto  the  stipulated   extent  and  requirement,  the Government  servants  as  also those who come  to  Delhi  on tenure  basis.   It was followed by a further  communication dated  20.6.95  informing  about  the complete  ban  of  any construction  on  the land measuring 176.92 acres  of  green area  and the restriction to use FAR of this green area  for construction   of  the  building.   A  formal   lease   deed evidencing  the grant of temporary lease deed  incorporating the  terms  and conditions governing the same  was  executed between  the Club and the Government of India represented by the  President  on  5.8.96.  The period of lease  under  the document  was to commence from 1.1.91 and to be in  currency for  the  duration  of  20 years making it  clear  that  any continuation  beyond the expiry of the said period also  has to  be  only on temporary basis.  A perusal of  the  various clauses, 21 in number, with the relevant sub-clauses therein would  go to show that except permitting the use of the land for  the Club purposes stringent and strict conditions  have been  imposed  therein  regulating   the  relationship   and respective  rights  of parties in and over the  property  in question.

     At this stage, the Municipal Committee appears to have once  again woke up by initiating proceedings and ultimately raised  a  demand  in  a revised bill  No.   dated  24.11.94 calling  upon  the Club to pay a sum  of  Rs.4,37,56,289.90.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

The  said sum was stated to include not only the arrears  of House  Tax  due up to 3/94 but also the amount due  for  the year ending 3/95.  A similar demand dated 5.12.94 appears to have  been  raised in the name of the Land  and  Development Officer  in which, as against the column :  Name of owner L &  D.O., Nirman Bhawan, has been specified.  In the  orders of  assessment also the name of the owner has been specified as Land and Development Officer, only.

     On  receipt  of  the  demand dated  24.11.94  and  the further communication dated 31.3.95 issued demanding payment of  the  amount on threat of coercive action, the  Club  has filed  a  Writ  Petition No.  CW 2349/95 in the  High  Court seeking for the relief noticed supra.  The sum and substance of the challenge made to the levy and the threat of recovery of  the  tax  from the Club is that the tax in  question  is leviable  only on an owner of the property, which the Club is  not,  it  being only a temporary lessee  permitted  with restricted use and enjoyment of the property for the objects of  the Golf Club and that the question of liability to  pay the  property  tax having been already decided in favour  of the  Club by Courts holding the Club to be not liable in the earlier  proceedings  filed  before  the  Civil  Court,  the Municipal  Committee which was a party to the same is  bound by the principle of res judicata and, therefore, cannot make any  demand  of  House/Property  Tax  from  the  Club.   The Division  Bench  of  the High Court by  its  judgment  dated 14.7.97,  though  partly allowed the claim for  1969-70  and 1970-71,  in  view  of  the decision  in  the  civil  suits, repelled  the challenge made by the Club on both the grounds and rejected the Writ Petition in other respects.

     Shri T.  R.  Andhyarujina, learned Senior Advocate for the appellant-Club, contended that the learned Judges of the High  Court committed an error in rejecting the plea of  the Club  based  upon the principle of res judicata and in  this connection,  invited  our attention to the decisions of  the English Courts and of this Court, apart from the treatise in Text Books on the subject.  Shri V.A.  Mohta, learned senior counsel  for the respondent, with equal force contesting the claim on behalf of the appellant-Club, brought to our notice certain decisions.  We consider it unnecessary to adjudicate on this issue, since the claim can be decided even otherwise on  merits,  without  detriment to the  appellant-Club.   We leave  open  the question relating to the  applicability  or otherwise  of  the principle of res judicata in relation  to taxation  matters  to be decided in an appropriate  case  of necessity.

     The  next  ground  of  challenge   is  based  on   the taxability  of the property in question in the hands of  the appellant-Club.   Section  61 of Act enables  the  Municipal Committee to impose the various category of taxes enumerated therein.   The  power  to  levy the  House/Property  Tax  in question  is traceable to clause (a) which refers to a  tax payable  by  the owner of building and lands  not  exceeding fifteen  percent of the annual value.  In dealing with this aspect of the matter, the High Court seems to have proceeded on  the  basis  of the definition of the word  owner  with reference  to the dictionary and other meanings of the  word in its generic sense as also upon the alleged object assumed to be underlying Section 61 (1)(a), i.e., to tax all persons who possess and use the land within municipal limits for the reason  that any one possessing land and using the same does make  use of municipal services.  First of all, the levy  is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

not  a  fee  to be viewed as referable to  the  availing  of municipal  services.   Further,  the  levy  envisaged  under Section 61(1)(a) is property tax levied qua ownership of the property  within the municipal limits and income  therefrom, not  a  service tax payable for the service rendered to  the person  in occupation of the land or building.  That  apart, the  Act  itself  has a definition of its own  rendering  it unnecessary  to  delve into general connotation of the  word and Section 3 (11) defines owner to include the person for the  time being receiving the rent of land and buildings, or either  of  them, whether on his own account or as agent  or trustee  for  any person or society or for any religious  or charitable  purpose or who would so receive the same if  the land  or building were let to a tenant.  In contrast, clause (e)  and (ee) of sub-section (1) of Section 61  specifically enables  the  levy of tax envisaged therein on the  occupier for  availing of civic services and amenities.  That  apart, the  proviso to clause (a), in stipulating that in the  case of  lands and buildings occupied by tenants in  perpetuity the  tax  shall  be payable by such  tenants,  declares  the legislative  intent  in specific and unmistakable  terms  as well as by necessary and inevitable implication that tenants of  the  category  other than tenants  in  perpetuity  are outside  the  purview  of  Section 61  (1)(a)  of  the  Act. Therefore,  no  tenant  other than one holding  a  lease  in perpetuity  can be saddled with any liability to tax qua his status  as a mere tenant under Section 61(1)(a) of the  Act. Periodical  leases  with provision therefor and actual  such renewals  from  time  to  time cannot be  affixed  with  the character   of   leases  in    perpetuity   merely   because cumulatively  considered  the  lessee might be  in  physical possession  for  long, particularly when there is no  vested right  of renewal as such in the lessee.  The Government  of India  in the Ministry of Urban Development, the lessor,  is the  indisputable owner of the property leased in favour  of the  Club  and they have not done anything which could  even indicate  slightly of the grant of their rights of ownership in  favour  of  the Club.  The  respondent-Local  Authority, therefore,  cannot  act in a manner which is likely to  even cast  a  cloud  around  the title, ownership  and  right  to possession  of  the Government of India.  Consequently,  the view  expressed  by  the  High Court  that  the  Club  would constitute  owner  for purposes of the levy  in  question, does  not  either  sound to reason or can be said to  be  in conformity  with  the  statutory provisions  in  force  and, therefore, does not merit our approval.

     The  incidental question that also needs reference and consideration  is  as to whether the appellant-Club  can  be held  or said to hold the property in question as a  tenant in  perpetuity.   Even  a  cursory perusal  of  the  orders sanctioning the lease as well as the terms and conditions of the  lease would make it beyond any doubt that the lease  in question is merely a temporary allotment/temporary lease and the  further  stipulation that any continuance, beyond  even the  expiry  of 20 years for which the temporary  lease  has been granted shall also be a lease on temporary basis leaves the matter beyond any controversies whatsoever.  The various clauses  in  the lease deed restricting and  regulating  the mode  and  character  of  enjoyment by the  lessee  and  the specific  stipulation reserving absolute power in the lessor to  terminate  the lease and resume possession as  and  when required  on  giving  a  notice for  the  stipulated  period militates  against  the lease being characterised as one  in perpetuity.   In the light of the above, the respondent  has

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

no   legal   authority   or   jurisdiction   to   levy   the House/Property  Tax  against  the   appellant-Club  in   its capacity  merely  as  a tenant in respect of  the  property, which  is  the subject-matter of the lease.  The  fact  that certain  constructions have been put up by the Club or  that while  so  applying to the Municipal Body for permission  to put  up  such constructions, the appellant-Club  represented itself  to  be  an  owner is besides the  point  and  wholly irrelevant  in  the  matter  of consideration  of  levy  and collection  of  House/Property  Tax on the property  of  the leasehold  and  which is the subject-matter of the lease  on the  Club qua its position and status as a mere lessee.   In respect  of the vacant land or land over which constructions have  been  put  up  by the owner of the land  and  all  the buildings  which were themselves the subject-matter of lease granted  in  favour  of the  appellant-Club,  the  appellant cannot  be  assessed  to House/Property Tax in  question  or saddled  with  any liability therefor.  The Club was not  in the present case sought to be made liable only in respect of constructions  put up by it and held by it during the period of  subsistence of the lease.  We do not, therefore,  decide whether the Club can be made so liable.

     For  the reasons stated above, we allow the appeal and set  aside  the judgment of the Division Bench of the  Delhi High Court under challenge and consequently hold -

     a)  That the appellant-Club is not liable to be levied with or directed to pay House/Property Tax in respect of the vacant  land and land and buildings put up by the lessor and owned  by  it  and let to the Club as part  of  the  demised property;

     b)   That   the   question  of   taxability   of   the appellant-Club  in respect of buildings/structures put up by it on the leasehold land is left open;

     c) This judgment relates to the levy and collection of only  House/Property  Tax  from  the  Club,  directly  under Section  61(1)  (a) and not of any other  class/category  of taxes  which  may be levied under the Act and in  accordance with law;  and

     d)  The Club is entitled to costs in these proceedings which we fix at Rs.25,000/-.