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PETITIONER: MUNICIPAL CORPORATION OF DELHI

       Vs.

RESPONDENT: M/S. EXPRESS NEWSPAPERS LTD.

DATE OF JUDGMENT:       16/07/1998

BENCH: SUJAT V. MANOHAR, S. RAJENDRA BABU

ACT:

HEADNOTE:

JUDGMENT:                  THE 16TH DAY OF JULY, 1998 Present:             Hon’ble Mrs. Justice Sujata V.Manohar             Hon’ble Mr. Justice S. Rajendra Babu Ranjit Kumar and Ms. Anu Mohla, Advs. for the appellant Anoop G.Choudhary,  Sr.Adv.,  P.H.Parekh,  Sanjay  Bhartari, Ms.R.Deepamala, Advs. with him for the Respondent                       J U D G M E N T      The following Judgment of the Court was delivered: Mrs. Sujata V. Manohar, J.      These appeals arise from decision rendered by the Delhi High Court  in a group of writ petitions which were filed by the respondent M/s. Express Newspapers Ltd. before the Delhi High Court.  These writ  petitions challenged  the  rateable value of  the property  of the  respondent consisting of two buildings on  land bearing  plot nos.9  and 10, Bahadur Shah Zafar Marg, New Delhi.      Under a  lease deed  dated 17th of March, 1958 executed between  the  respondent  and  the  Secretary  (Local  Self- Government)  to   the  Chief   Commissioner  of  Delhi,  the respondent acquired  lease hold  rights in  respect of  plot bearing nos.  9 and  10, Bahadur Shah Zafar Marg, New Delhi. The premium  paid by the respondent for acquiring lease hold rights  of   this  land  was  Rs.96/955/-.  A  building  was constructed on  these plots.  Construction commenced in 1958 and when  it was  completed the  total cost  of construction came to  Rs.31,78,945.47 (excluding  the cost  of the land). Under the provisions of the Delhi Municipal Corporation Act, 1957,  the   rateable  value  of  this  property  was  first determined in  the year  1958-59. It  has been  subsequently revised. There  were several  disputes as to the revision of the rateable value of this building which have been referred to in  the judgment of the learned Single Judge of the Delhi High Court  in  these  proceedings.  We  are,  however,  not concerned with these disputes pertaining to the old building in the present appeals      At the  time when the first building was constructed an area of  2740 sq. yards out of the said plot was required to be kept  as an  open area  because of  some  drainage  pipes passing  through   that   portion.   Drainage   pipes   were

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subsequently   realigned   and   shifted.   Thereafter   the respondent commenced  construction of  a new building on the said  portion   of  the   plot,  which,   for  the  sake  of convenience, can  be called  the new  building, in  the year 1978. This  construction was  completed on 10th April, 1981. On that  date, a  notice was issued by the respondent to the appellant intimating  the appellant  that the  building  had been completed,  and  permission  was  sought  for  use  and occupation of the building under Section 346(2) of the Delhi Municipal Corporation Act. This permission was not granted.      In fact  prior to  10th April,  1981, a notice had been served on  the  respondent  to  the  effect  that  this  new construction was  illegal and  the  respondent  should  show cause why  the same should not be demolished. The show cause notice was  challenged and  has been ultimately set aside by this Court  in separate  proceedings which were taken by the respondent  in   that  connection  (See  Express  Newspapers Pvt.Ltd. and  Ors. V.  Union of India and Ors. [(1986) 1 SCC 133]).      In respect  of assessment  year 1981-82, the respondent received  a  notice  dated  1st  of  March,  1982  from  the appellant in which the respondent was told that the rateable value of  the said property was proposed to be substantially increased  to   R.1,01,02,910/-.  Subsequent   notices  were received proposing  higher rateable  values  in  respect  of these  buildings   for  subsequent   assessment  years.  The rateable values so proposed to be fixed have been challenged by the  respondent in  this group of writ petitions filed by the respondent  before the  Delhi High  Court. This group of writ petitions pertains both the rateable value of the first building as also the rateable value of the new building. The present appeals, however, pertain only to the rateable value of the new building.      In  respect  of  the  new  building,  assessment  years involved are  1981-82 to  1986-87. Learned  Single Judge who heard these  writ petitions,  has in  his  common  judgment, dealt with  the challenge  with regard  to the assessment of the old building separately and the challenge with regard to the assessment of the new building separately. In respect of the new  building the  learned  Single  Judge  came  to  the conclusion that  the appellant was not justified in applying the provisions  of Section  9(4) of  the Delhi  Rent Control Act, 1958 in order to determine the standard rent of the new building on  the basis  of which  rateable value  has to  be fixed under  the Delhi  Municipal Corporation Act, 1957. The learned Single  Judge has  held that  the standard  rent has first to  be determined  under Section  6 of  the Delhi Rent control Act;  and that  in doing  so, the ratio laid by this Court in the case of Balbir Singh and Ors. v. M/s.M.C.D. and Ors. ([1985]  1  SCC  167)  must  be  applied.  So  that  in determining the  standard rent of a new building the cost of land cannot be again taken into account when the cost of the same land has already been taken into account in determining the standard  rent for  the old  building.  He has held that since the  value of  the land  as in 1958 had to be added to the cost of construction of the old building for arriving at its standard  rent and rateable value, the market price of a part of  the same  land as in 1978 (when construction of the new building  started)  cannot  be  added  to  the  cost  of construction of  the  new  building  while  determining  the standard rent of the new building. This view has been upheld by a Division Bench of the Delhi High Court while dismissing Letters Patent  Appeals  filed  before  the  Division  Bench challenging the  findings given  by the learned Single Judge relating to  the determination  of the rateable value of the

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new  building.  The  present  appeals  are  filed  from  the decision of  the Division Bench. We are, therefore, confined to the  manner of  determination of  the rateable value of a new building  constructed on  the same plot of land on which an old building already stands.      Under Section  114 of  the Delhi  Municipal Corporation Act, 1957,  property taxes  shall be  levied  on  lands  and buildings on  Delhi and  shall consist,  inter  alia,  of  a general tax  of not  less than  10% and not more than 30% of the rateable  value of  lands  and  buildings  within  urban areas. Under Section 116 of the said act, the rateable value of any lands or buildings assessable to property taxes shall be the  annual rent  at which  such land  or building  might reasonably be  expected to  be let  from year to year - less certain amounts which are specified in that section.  We are not concerned with other parts of Section 116. Property tax, therefore, is leviable as a percentage of the rateable value of lands  and buildings.  Such  rateable  value  has  to  be determined on  the basis  of the  annual rent  at which such land or building might reasonable be expected to be let from year to year.      Where, however, the building whose rateable value is to be determined  is subject  to any  Rent Control legislation, this Court has held in the case of Balbir Singh (supra) that the rateable  value of  a building is limited by the measure of standard  rent arrived  at by  the assessing authority by applying the principles laid down in the Rent Act and cannot exceed the  figure of the standard rent so arrived at by the assessing authority.  This Court  relied  upon  its  earlier decision in  Dewan Daulat  Rai Kapoor  and Ors. V. New Delhi Municipal Committee  and Ors.  ([1980] 1  SCC 685)  for this purpose. Therefore, in the present case, we must examine the provisions of  the Delhi  Rent Control  Act, 1958  which are applicable to  the old  as  well  as  the  new  building  in question.      Section 6  of the  Delhi Rent  Control Act,  1958 deals with standard rent. The relevant provisions of Section 6 and Section 7 as they stood at the relevant time are as follows:      "6. Standard rent:      (1) Subject  to the  provisions  of      subsection (2), ’standard rent’, in      relation to any premises, means-      (A)  in  the  case  of  residential      premises-      (1) ................      (2) Where  such premises  have been      let out at any time on or after the      2nd day of June, 1994,-      (a) .................      (b) in  any other  case,  the  rent      calculated on  the basis  of  seven      and one-half  per cent per annum of      the   aggregate   amount   of   the      reasonable cost of construction and      the  market   price  of   the  land      comprised in  the premises  on  the      date of  the  commencement  of  the      construction.      Provided......................      (B) In  the case  of premises other      than residential premises-      (1) ...............      (2) Where  the premises  have  been      let out  at nay  time or  after the      2nd day of June, 1994,-

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    (a) ................      (b) in  any other  case,  the  rent      calculated on  the basis  of  seven      and one-half  per cent per annum of      the   aggregate   amount   of   the      reasonable cost of construction and      the  market   price  of   the  land      comprised in  the premises  on  the      date of  the  commencement  of  the      construction.      Provided......................      (2)    Notwithstanding     anything      contained in sub-section (1),-      (a) .................      (b) In  the case  of any  premises,      whether   residential    or    not,      constructed on or after the 9th day      of June,  1955, including  premises      constructed after  the commencement      of  this   Act,  the   annual  rent      calculated with  reference  to  the      rent  agreed   upon   between   the      landlord and  the tenant  when such      premises were  first let  out shall      be deemed  to be  the standard rent      for a period of five years from the      date of such letting out.      (3) ...............      7. Lawful increase of standard rent      in certain  cases and  recovery  of      other   charges.-   (1)   Where   a      landlord has  at any  time,  before      the commencement  of this  Act with      or  without  the  approval  of  the      tenant or after the commencement of      this Act  with the written approval      of the tenant or of the Controller,      incurred   expenditure    for   any      improvement, addition or structural      alteration  in  the  premises,  not      being expenditure  on decoration or      tenantable  repairs   necessary  or      usual for  such premises,  and  the      cost of  that improvement, addition      or alteration  has not  been  taken      into  account  in  determining  the      rent of  the premises, the landlord      may lawfully  increase the standard      rent per  year  by  an  amount  not      exceeding seven  and  one-half  per      cent of such cost.      (2) ..............      In  the   present  case,   the  relevant  provision  is contained  in   Section   6(1)(B)(2)(b)   subject   to   the application of sub-section (2). Under Section 9(4), however, it is provided as follows:      "9(4): Where  for any  reason it is      not  possible   to  determine   the      standard rent  of any  premises  on      the  principles   set  forth  under      Section 6,  the Controller  may fix      such rent  as would  be  reasonable      having  regard  to  the  situation,      locality  and   condition  of   the      premises and the amenities provided

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    therein and where there are similar      or nearly  similar premises  in the      locality, having regard also to the      standard rent payable in respect of      such premises."      The appellant has purported to fix the standard rent of the new  building under  Section 9(4). Both the Single Judge as well  as the  Division Bench  have, however, rightly held that the  correct section which has to be applied is Section 6 and  the relevant  parts thereof.  As it  is  possible  to calculate standard rent under Section 6 there is no question resorting to Section 9(4).      The entire  question of  fixation of  rateable value in the cases  where the Delhi Rent Control Act is applicable to the premises, has been considered at length by this Court in the case  of Balbir  Singh  (supra).  After  considering  in detail the  provisions of the Delhi Rent Control Act and the Delhi       Municipal       Corporation       Act       this Court has  given its  findings in  respect of four different categories of cases. It has dealt with: (1)  Determination   of  rateable   value  of  self-occupied      residential and non-residential premises; (2)  Determination of  rateable value  of premises which are      partly self-occupied and partly tenanted; (3)  Building whose  rateable  value  is  to  be  determined      stands  on  land  which  is  lease  hold  land  with  a      restriction that  the lease  hold interest shall not be      transferable without the approval of the lessor; and (4)  Where the premises are constructed in stages.      The fourth  category directly  covers the present case. In the fourth category of premises, when the premises at the first stage  of construction are to be assessed for rateable value, the assessing authority has to determine the standard rent of  the premises  then constructed under the applicable sub-section of Section 6. Where sub-sections (1)(A)(2)(b) or (1)(B)(2)(b) of  Section 6  are attracted  the standard rent will be  on the  basis of  the cost  of construction and the market price  of land. Keeping in mind the upper limit fixed by the  standard rent  and taking  into account  the various factors discussed  in the  judgment in  Balbir Singh (supra) the assessing  authority would  then have  to determine  the rent which  the owner  of the premises may reasonably expect to get  if the premises are let out to a tenant. Such annual rent would represent the rateable value of the premises.      However, this  Court has observed in the above judgment that, "The  formula set  out in  sub-section  (1)(A)(b)  and (1)(B)(2)(b) of  Section 6 cannot be applied for determining the standard rent of an addition as if that addition was the only  structure   standing  on   the  land.   The  assessing authorities  cannot  determine  the  standard  rent  of  the additional  structure  by  taking  the  reasonable  cost  of construction of  the additional  structure and  adding to it the  market   price  of  land  and  applying  the  statutory percentage of  7 1/2  to the  aggregate amount.  The  market price of  the land  cannot be  added twice  over, once while determining the  standard rent of the original structure and again while  determining the standard rent of the additional structure. Once  the   addition is made, the formula set out in sub-section  (1)(A)(2)(b) and  (1)(B)(2)(b) of  Section 6 can be  applied only  in relation to the premises as a whole and where  the additional  structure consists  of a distinct and separate  unit for  occupation, the  standard rent would have to  be apportioned  in the  manner  indicated  in  this judgment".      It was  contended before  us that  the ratio  of Balbir

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Singh’s case  (Supra) would be applicable only when there is any addition  made to  the existing  structure. It  will not apply where  a separate  structure is  erected later  on the same plot  of land.  This contention is not borne out by the ratio of  the decision  in Balbir  Singh’s case  (Supra). In paragraph 19,  while dealing  with the  fourth  category  of cases, this  Court has  expressly dealt with different kinds of additions  which may be made to the original structure at a subsequent  stage. It  has observed  (page 194) that three different situations  may arise.  Firstly, the  addition may not be of a distinct and separate unit of occupation but may be merely by way of extension of the existing premises which are self-occupied.  In such  a case  the  original  premises together with  the additional  structure would  have  to  be treated as  a single  unit for  the purpose  of  assessment. Secondly, the existing premises before the addition might be tenanted and  the addition might be to the tenanted premises so that  additional structure  also forms  part of  the same tenancy and  thirdly, the  addition may be of a distinct and separate unit  of occupation and in such a case the rateable value of  the premises  would have  to be  determined on the basis of  the formula  earlier laid down in the judgment for assessing the  rateable value  of  the  premises  which  are partly self-occupied  and partly  tenanted. It  is  observed thereafter, "The  basic point to be noted in all these cases is -  and this  is what we have already emphasised earlier - that the  formula set  out in  sub-sections (1)(A)(2)(b) and (1)(B)(2)(b) of  Section 6 cannot be applied for determining the standard  rent of  an addition,  as if that addition was the only  structure standing  on the  land". A  distinct and separate unit of occupation can be either constructed on the old existing  structure or  adjoining it on the same plot of land. The ratio of Balbir Singh (Supra) will apply in either case.      The Single  Judge as  well as  the Division  Bench have rightly come  to the  conclusion that  the ratio  of  Balbir Singh’s case (Supra) applies to the present case. It is also pointed out  before us that an application for clarification in Balbir  Singh’s case  (Supra) has  been dismissed by this Court. In  the case  of Common  Cause Registered  Society v. Union of  India &  Ors. (1987  4 SCC  44) This  Court, after citing  the  relevant  passages  from  Balbir  Singh’s  case (Supra), and  noting that  an application  for clarification was already  dismissed on  certain  other  aspects  and  the remaining applications  were before  it,  observed  that  no clarification is  required in  cases relating  to subsequent construction as  a separate  unit. This  Court rejected  the contention that the ratio of Balbir Singh’s case (Supra) was confined only  to  cases  of  subsequent  construction  upon existing construction  and would  not apply  to  a  separate construction on  the same  land. It  observed, (at  page 47) "This  Court  had,  therefore,  indicated  that  when  at  a different stage,  additional construction  was raised on the property already  valued, the  market value  of the land was not to  be  taken  into  account  as  it  had  already  been considered while  fixing the  valuation of  the pre-existing construction". This Court, therefore, said that there was no ambiguity in  the ratio  laid down  by Balbir  Singh’s  case (Supra).      It  was   also  contended   before  us  that  when  the additional construction  came  up  on  the  said  plot,  the lessors were  entitled to levy conversion charges for change of user.  Such conversion  charges for  change of user. Such conversion charges  levied in  1978 should  be added  to the market  price  of  land  at  the  commencement  of  the  old

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construction for  arriving  at  the  standard  rent/rateable value. This  contention was  not raised  before  the  Single Judge. The  Division Bench in its judgment has observed that this point does not appear to have been taken in the counter affidavit filed  before the  Single  Judge  nor  was  it  so argued. Therefore, a disputed question of fact which was not taken or  urged before the learned Single Judge could not be allowed to be taken for the first time in the Letters Patent Appeals. This  would apply  with  even  more  force  to  the present appeals from the Letters Patent Appeals.      The Quantum  of such  conversion charges in the present case was  the subject matter of dispute before this Court in the case  of Express  Newspapers Pvt. Ltd. and Ors. (Supra). This Court  in its judgment (from paragraphs 185 to 198) has dealt  with   the  determination   of  the  amount  of  such conversion charges.  It has,  inter  alia,  said  that  such conversion  charges   should  be   determined  by   a   duly constituted Tribunal  or in a suit. We fail to see how these conversion charges can be considered as a part of the market price of land at the commencement of old construction. Under Clause 2(7)  of the  March, the  Lease Deed  dated 17 March, 1958 the  Lessee will  not,  inter  alia,  permit  the  said premises to  be used  for any  purpose otherwise  than as  a Newspaper Press with such number of residential flats on the topmost floor as the Chief Commissioner of Delhi, may in his absolute discretion, allow for bona fide staff of the Press. From the  limited material  available on  record, conversion charges appear  to have  been claimed  by the  lessees under this clause.      The lessees  also appear  to  have  claimed  conversion charges for the change the use of 2740 Sq. yds. of open area originally required  to be kept open because of the drainage lines running  through it.  The respondent,  after diverting the drainage  pipes was  permitted to  built on  this  area. These charges  were, therefore,  for a  change in the use of the land  or buildings  at a point of time subsequent to the lease. They  are not by way of additional price of the land. In  view  of  the  fact  that  the  exact  nature  of  these conversion charges has not been placed before the High Court or before  us, and no claim was made by the appellant in the present case  on the basis of such conversion charges in the writ petitions,  we do  not see nay reason to entertain this plea at this stage.      The appeals are, therefore, dismissed with costs.