Full Judgment Text
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PETITIONER:
THE CORPORATION OF CALCUTTA
Vs.
RESPONDENT:
SM. PADMA DEBI AND OTHERS
DATE OF JUDGMENT:
08/08/1961
BENCH:
SUBBARAO, K.
BENCH:
SUBBARAO, K.
SINHA, BHUVNESHWAR P.(CJ)
DAYAL, RAGHUBAR
MUDHOLKAR, J.R.
CITATION:
1962 AIR 151 1962 SCR (3) 49
CITATOR INFO :
R 1970 SC1417 (3,4,6,7)
R 1970 SC1584 (16)
R 1971 SC 353 (4)
D 1974 SC1779 (12,13,14)
RF 1975 SC1234 (18,21)
F 1977 SC 302 (8,10,11,12,14,15)
RF 1977 SC 308 (4,6,7,8,10)
R 1980 SC 541 (2,3,4,5,8)
ACT:
Assessment-Determining annual value of property-Basis of-If
could be increased above standard rent-"At the time of
assessments, Meaning of-Hypothetical rent-Open market, if
includes ’black market’ ’Black market ’Meaning of-West
Bengal Premises Rent Control (Temporary Provisions) Act,
1950 ( W. B. XVII of 1950), ss. 2(10) (b), 33 (a) Calcutta
Municipal Act, 1923 (Ben. 3 of 1923), ss. 127 (a), 131, 140.
HEADNOTE:
The Calcutta Corporation in fixing the annual valuation of
the respondents premises took as basis Rs. 1,450/- as the
monthly value of the premises. The respondent filed
objection to the said assessment under s. 139 of the
Calcutta Municipal Act, 1923. Meanwhile, under the West
Bengal Premises Rent Control (Temporary Provision) Act,
1950, the standard rent of the said premises was fixed by
the Rent Controller at Rs. 632/8/- per month, with effect
from August 1951. One of the objections raised was that the
Corporation had no power to fix the annual valuation at a
figure higher than the standard rent. The objection was
disallowed and the assessment was confirmed. On appeal the
Small Causes Court fixed the annual valuation for the
purpose of assessment on the basis of the standard rent.
Corporation went up in appeal to the High Court which was
dismissed. Thereafter the Corporation came up in appeal by
special leave.
The Corporation contended that under s. 127 (a) of the Act,
the Corporation has to ascertain only the hypothetical rent
realisable from a hypothetical tenant at the time of the
assessment and not the actual rent payable at the time by
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any tenant, and therefore it is not bound to take into
consideration the standard rent fixed under Rent Control
Act. Corporation also raised a subsidiary point as to the
precise meaning of the phrase "at the time of assessment"
occurring in the said section.
Held, that on a fair reading of the express provisions of s.
127 (a) of the Calcutta Municipal Act, 1923, the rental
value cannot be fixed higher than the standard rent under
the Rent Control Act.
Held, further, that the words ’gross annual rent at which
the land or building might at the time of assessment
reasonably
50
be expected to let from year to year’ in s. 127 (a) of the
Act implies that the rent which the landlord might realise
if the house was let is the basis for fixing the annual
value of the building. The criterion is the rent realisable
by the landlord and not the value of the holding in the
hands of the tenant. The value of the property to the owner
is the standard in making the assessment.
The word ’reasonably’ is not capable of precise definition;
in ultimate analysis it is, a question of fact. Whether a
particular act is reasonable or not depends on the
circumstances in a given situation. A bargain between a
willing lessor and a willing lessee uninfluenced by any
extraneous circumstances may afford a guiding test of.
reasonableness.
A law of the land with its penal consequences cannot be
ignored in ascertaining the reasonable expectation of a
landlord in the matter of rent, and must necessarily 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 reason. ably be expected to be let. In the
situation, a statutory limitation of rent circumscribes the
scope of the bargain in the market. In no circumstances the
hypothetical rent can exceed the limit.
The phrase at the time of assessment’ means that the
assessment commences with the making of the valuation under
S. 131 of the Act and ends with the determination of the
objection under s. 140 thereof. An event which takes place
during this period may be relied upon for assessing the
annual value under s. 127 (a) of the Act.
In the present case as the Rent Control Act, 1950, came into
force before assessment was finally determined the Corpo-
ration had no power to fix the annual value of the premises
higher than the standard rent.
Corporation of Calcutta v. Ashutosh Deo (1927) 31 C.W.N. 864
and The Municipal Corporation of the. City of Rangoon v.
The Surati Bara Bazzar Company Limited. (1923) I. L. R. 1
Rang. 668 and Bengal Nagpur Railway Company Limited v. Corporation
of Calcutta (1946) L. R. 74 1. A. 1, approved.
Secretary of State v. Madras Municipality, (1886) 1. L. R.
10 Mad. 38, Poplar Assessment Committee, v. Robert,#, (1922)
2 A. C. 93, Mougharam Jiwandas v. Municipal Corporation of
the City of Bombay, 1. L. R. (193 1) Bom. 713 and The
Madurai Municipality v. Kamakshisundaram ’Chettiar, (1955)
11 M.L.J. 369 referred to,,
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JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 268 of 1958.
Appeal from the judgment and decree dated June 15,1956, of
the Calcutta High Court in Appeal from Original order No.
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349 of 1953.
N. C. Chatterjee and S. Ghose, for the appellant.
B. P. Maheshwari, for respondents Nos. 1, 2 and 4.
1961. August 8. The Judgment of the Court was delivered by
SUBBA RAO, J.-This appeal by certificate from the order of
the High Court at Calcutta raises the question of the true
interpretation of the provisions of s. 127(a) of the
Calcutta Municipal Act, 1923 (hereinafter called the Act).
The respondents are the owners of premises No. 296,
Bowbazzar Street, Calcutta. The Corporation of Calcutta
fixed the annual valuation of the said premises at a sum of
Rs. 14,093 and directed the same to take effect from the
second quarter of 1950-51. In fixing the annual valuation,
the said Corporation took as basis Rs. 1,450 as the monthly
rental value of the premises. On June 20, 1950, notice of
the assessment based on the said annual valuation was served
on the respondents. Respondent No. 1 filed objections to
the said assessment under s. 139 of the Act. Meanwhile
under the West Bengal Premises Rent Control (Temporary
Provision) Act, 1950 (W.B. XVII of 1950), (hereinafter
called the Rent Control Act), the standard rent of the said
premises was fixed by the Rent Controller: the rent was
fixed at Rs, 550 per month with effect from April, 1951, and
at Rs, 632-8-0 per month with effect from August, 1951. One
of the objections raised was that the Corporation had no
power to
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fix the annual valuation at a figure higher than the
standard rent. The’ Special Officer disallowed all the
objections and confirmed the assessment. Being aggrieved by
the said order, respondent No. 1 filed an appeal in the
Court of Small Causes, Calcutta, and the learned Small
Causes Judge allowed the appeal and fixed the annual
valuation, for the purpose of assessment, at Rs. 6,831.
That was on the basis of the standard rent of Rs. 632-8-0
per month. The Corporation of Calcutta questioned the
correctness of the said Judgment by preferring an appeal to
the High Court at Calcutta. The High Court by a majority
agreed with the Small Causes Judge and dismissed the appeal.
Hence the present appeal.
The main contention of Mr. N. C. Chatterjee, learned counsel
for the appellant Corporation, is that under s. 127(a) of
the Act the Corporation has to ascertain only the
hypothetical rent realisable from a hypothetical tenant at
the time of assessment and not the actual rent payable at
that time by any tenant, and therefore it is not bound to
take into consideration the standard rent fixed under the
Rent Control Act.
A subsidiary point raised in the appeal is as to the precise
meaning of the phrase ,’at the time of assessment" occurring
in s.127(a) of the Act.
The problem presented depends for its solution on the
interpretation of the provisions of s.127(a) of the Act.
The said section reads :
"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
reasonably be expected to let from year to
year, less, in the case of a buildings an
allowance of ten per cent for the cost of
repairs and for all other expenses
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necessary to maintain the building in a state
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to command such gross rent."
We shall first look at the provisions of the section to
ascertain the meaning: The crucial words are "gross annual
rent at which the land or building might at the time of
assessment reasonably be expected to let from year to year".
The dictionary meaning of the words "to let", is "’grant use
of for rent or hire". It implies that the rent which the
landlord might realise if the house was let is the basis for
fixing the annual value of the building. The criterion,
therefore, is the rent realisable by the landlord and not
the value of the, holding in the hands of the tenant. This
aspect has been emphasized by the Judicial Committee in
Bengal Nagpur Railway Company Limited v. Corporation of
Calcutta(1). The question for determination in that case
was whether the assessment of a certain premises to the
consolidated rate was made in accordance with the provisions
of s.127(a) of the Calcutta Municipal Act, 1923. There the
plot in question was a vacant land occasionally used by the
member of Railway Officer’s Club ’for practice of the game
of Golf. It was bought by the Railway Company not for
present use but to be kept in reserve against the company’s
future requirement. The Corporation assessed the land on
the basis of rental value of land in the neighborhood. It
was argued that the premises ought to be valued on the basis
of rent which would be paid by a hypothetical tenant who
must be presumed to keep the land vacant, or at the most use
it as an imperfect golf course. The Judicial Committee
rejected the contention and made the following observations
at p. 5 :
"Indeed, it provides a striking example of the
danger attending an injudicious use of
precedent. The owner of land in England is
not chargeable with rates, as owner, at all.
If he leaves land vacant and unoccupied, he
(1) [1946] L. R. 74 1. A. 1.
54
pays no rates. Under the Calcutta Act mere, ownership
carries with it a liability to pay one-half of the rate
assessed on the annual value of the land. It is impossible
to construe s.127 as meaning that, when land is unoccupied,
its annual value must be taken to be the rent at which it
might be expected to be let to a tenant who was- precluded
from occupying it. There is nothing in the words of the
section to suggest that a hypothetical tenancy of so
improbable a character was contemplated, and the elaborate
provisions of s.151 can hardly have been framed in order to
reduce by half, for the benefits of the non occupying owner,
what would already be a merely nominal sum."
The same principle was accepted by a division bench of the
Madras High Court as early as 1886 in Secretary of State v.
Madras Municipality(,). Section 123 of the City of Madras
Municipal Act (Mad. 1 of 1884) which was similar in its
terms to s.127(a) of the Calcutta Municipal Act, 1.923, ran
as follows :
.lm15
"The gross annual rent at which a building or land might
reasonably be expected to let from month to month or from
year to year shall for the purposes of assessment under this
Act be deemed to be the annual value of such building or
land."
The learned Judges in construing the said section observed
thus at p. 41 :
The standard of value is certainly the value of the property
to the owner which is to be measured, whether he occupies
the property himself or lets it out to a tenant by the
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amount of rent per annum it would be worth to a hypothetical
tenant."
(1) [1886] I.L.R. 10 Mad. 38.
55
Mukherjee, J., in Corporation-of Calcutta v. Ashutosh De
(1), accepted the said principle and applied the same in
construing s.127(a) of the Act though Roy, J., differed from
him. We, would, with respect, accept the said principle in
the construction of the said section and hold that the value
of the property to the owner is the standard in making the
assessment thereunder.
The word "’reasonably" in the section throws further light
on this interpretation. The word "reasonably" is not
capable of precise definition. "Reasonable" signifies ’,in
accordance with reason." In the ultimate analysis it is a
question of fact. Whether a particular act is reasonable or
not depends on the circumstances in a given situation. A
bargain between a willing lessor and a willing lessee
uninfluenced by any extraneous circumstances may afford a
guiding test of reasonableness. An inflated or deflated
rate of rent based upon fraud, emergency, relationship, and
such other considerations may take it out of the bounds of
reasonableness. Equally it would be incongruous to consider
fixation of rent beyond the limits fixed by penal
legislation as reasonable. Under the Rent Control Act, the
receipt of any rent higher than the standard rent fixed
under the Act is made penal for the landlord. Section 3 of
the said Act says that any amount in excess of the standard
rent of any premises shall be irrecoverable notwithstanding
any agreement to the contrary. Section 33(a) thereof
provides inter alia that ,whoever knowingly receives,
whether directly or indirectly, any sum on account of the
rent of any premises in excess of the standard rent" will be
liable to certain penalties. "Standard rent" has been
defined in 2(10)(b) to mean that "where the rent has been
fixed under s. 9, the rent so fixed, or at which it would
have been fixed if application were made
(1) (1927) 31 C.W.N. 864.
56
under the said section." A combined reading of the said
provisions leaves no room for doubt that a contract for a
rent at a rate higher than the standard rent is not only
not enforceable but also J. that the landlord would be
committing an offence if he collected a rent above the rate
of the standard rent. One may legitimately say under those
circumstances that a landlord cannot reasonably be expected
to let a building for a rent higher than the standard rent.
A law of the land with its penal consequences cannot be
ignored in ascertaining the reasonable expectations of a
landlord in the matter of rent. in this view, the law of the
land must necessarily 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.
It is said that s.127(a) does not contemplate the actual
rent received by a landlord but a hypothetical rent which he
can reasonably be expected to receive if the building is
let. So stated the proposition is unexceptionable. Hy-
pothetical rent may be described as a rent which a landlord
may reasonably be expected to get in the open market. But
an open market cannot include a ,,black market", a term
euphemistically used to commercial transactions entered into
between. parties in defiance of law. In that situation, a
statutory limitation of rent circumscribes the scope of the
bargain in the market. In no circumstances the hypothetical
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rent can exceed that limit.
Strong reliance is placed by learned counsel for the
appellant on the decision of the House of Lords in Poplar
Assessment Committee v. Roberts (1) in support of the
contention that the standard rent fixed under the Rent
Control Act shall not be taken into account in determining
the valuation for rating purposes. There, it was held that
in arriving at
(1) [1922] 2 A. C. 93, 104, 107, 116, 118, 125.
57
the valuation of a hereditament under s. 4 of the Valuation
(Metropolis) Act, 1869, the maximum gross value to be
assigned to the hereditament was not limited to the standard
rent of the hereditament within the meaning of the lent
Restrictions Act, 1920. One of the noble Lords, Lord
Carson, dissented from the majority view. It is not
necessary to consider that case in detail except to note the
passages in the judgments of the learned Lords emphasizing
upon the peculiar aspect of the English Law of rating. Lord
Buckmaster stated:
",From the earliest time it is the inhabitant
who has to be taxed. It is in respect of his
occupation that the rate is levied, and the
standard in the Act is nothing but a means of
finding out what the value of that occupation
is for the purposes of assessment."
Lord Atkinson observed :
"What the ratepayer is, under both the Act of
1836 and that of 1869, rated in respect of is
decided by many cases in this House to be the
beneficial occupation of a hereditament."
Lord Sumner declared
"Rating is a process between an occupier and a
rating authority, to the determination of
which the landlord and the lessee are
strangers. "
Lord Parmoor stated thus
"Under 43 Eliz. c. 2, rates are to be levied
upon every occupier of lands, houses, etc.
The distinction between occupier and owner, in
this connection, is of primary importance.
The occupation value of property may be, and
often is, distinct from its value to the
owner. This distinction would probably be
emphasized where an artificial
58
statutory maximum is fixed, and a statutory
restriction prevents an owner from recovering
from any tenant a, greater amount, as rent,
than the statutory maximum."
These passages bring out in bold relief the distinction
between the English and the Indian law which has already
been pointed out by the Judicial Committee in Bengal Nagpur
Railway Company Limited v. Corporation of Calcutta (1).
That is why, while in England the value of occupation by a
tenant is the criterion for fixing the, standard rent under
the rating law, under the Act the letting value of a
building to the landlord is the standard in fixing the,
rental value. If this distinction is borne in mind much of
the cloud cast in this case is dispelled. It would be
instructive to quote the weighty observations of Atkin, L.
J., as he then was, which were approved by Lord Carson in
his dissenting judgment ; and they are
",If no higher rent than the standard rent and
statutory increases is enforceable, as a
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matter of common sense that seems to be the
limit of the rent a tenant can be reasonably
expected to give.................. "
"How then is the annual rent to be ascertained
? It is obvious that the definition
presupposes that the premises are deemed to be
vacant and are deemed to be capable of being
let."
Accepting the said observations, Lord Carson proceeded to
observe,
"I cannot persuade myself that it is possible
to ask the assessment authority to enter into
such super-speculative and hypothetical
regions, and I am of opinion that the only
rent we have to consider is a rent de jure
recoverable and not a voluntary promise which
cannot be enforced."
(1) (1946)L.R.74 I.A.I.
59
With great respect to the other lerned Lords,
we are inclined to agree with the observations
of Atkin, L. J., as approved by Lord Carson.
That apart, the majority view can easily be
distinguished on the peculiar principle of
rating obtaining in England which is
fundamentally different from that accepted
under the Act. There is another difference
between the English law and the Indian law:
under the English Act of 1920, payment of rent
in excess of the statutory rent was not barred
and the, landlord might receive the same, but
under the Rent Control Act receipt of a higher
rent than the standard rent is penalised ;
that is, while in England a contract to pay a
higher rent may not by enforceable in a Court
of law, it is not unlawful, but in India it is
both unenforceable and unlawful. This
difference is of vital importance in judging
the reasonableness of ’a landlord’s
expectations to get a particular rent.
The Bombay High Court in Mongharam Jiwandas v.
Municipal Corporation of the City of Bombay
(1) and the Madras High Court in The Madurai
Municipality v. Kamakshisundaram Chettiar (2)
followed the majority judgment of the House of
Lords in Poplar Assessment Committee Case (3)
while the Rangoon High Court in The Municipal
Corporation of the City of Rangoon v. The
Surati Bara Bazzar Company Limited (4 )and the
Calcutta High Court in the present case
distinguished the said decision. We would
prefer to accept the view expressed by the
Calcutta and Rangoon High Courts, is the
decisions of the said Courts are based upon a
correct appreciation of the distinction
between the law of rating in England and that
under the Act.
It is said that, as under s. 9(1)(b) of the
Rent
(1) I.L.R. [1951] Bom. 713.
(2) (1955) 11 M.L.J. 369.
(3) (1922) 2 A C. 93,104.107.116,118,125.
(4) (1923) I.L.R. 1 Rang. 668.
60
Control Act the landlord can get the standard rent raised
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by an amount equivalent to the increase in taxes,
rates or cesses, there would not be any prejudice even
if the annual value of the building is fixed on the basis of
a rate of rent higher than that permissible under the said
Act. But this reasoning would land us in a vicious circle
and would enable one to circumvent the provisions of the
Rent Control Act, for though a tenant if; not liable under
an Act to pay a rent higher than the standard rent, by this
process he would be compelled to pay a higher rent. On the
other hand, the scope of that section can legitimately be
confined to situations giving rise to increase of taxes such
as the increase in the rate, etc.
Nor are we impressed by the argument that the omission of a
specific provision, as in s.26 of the Calcutta Rent Act of
1920, prohibiting the Calcutta Corporation from making
assessment of any rent higher than the rent fixed by the
Rent Controller in the subsequent Acts would inevitably lead
to the conclusion that the omission implies the conferment
of such a power. Section 26 of the Calcutta Rent Act, 1920
(Ben. III of 1920) debars the Corporation of Calcutta and
other local bodies from raising the annual value of any
premises above the standard rent ; but the life of that Act
expired in the year 1926. For many years thereafter there
were no Rent Control Acts in Bengal; but some Rent Control
Acts came to be passed in the years 1942, 1943 and 1946. In
1950, Act XVII of 1950 was passed to make better provision
for the control of rents of premises in Calcutta and in
certain other areas in West Bengal. The said Act was
amended by subsequent Acts and was finally repealed by Act
XII of 1956. It may be mentioned that in the subsequent
Acts there was no prohibition similar to that contained in
s. 26 of the Calcutta Rent Act of 1920. It may also be
stated that there is no such prohibition in the
61
Municipal Act of 1923. But when that Act was repealed and
replaced by the Calcutta Municipal Act, 1951) W. B: XXXIII
of 1951), a proviso was added to s.168(1) to the effect that
in respect of any land or building, the standard rent of
which has been fixed under s.9 of the tent Control Act of
1950,. the annual value under s.168 (1) shall not exceed the
annual amount of standard rent so fixed. It may be noticed
from the history of the legislation that when the Calcutta
Municipal Act, 1923, was passed, the Calcutta Rent Act of
1920 was still in force. Section 128 of the Calcutta
Municipal Act,, 1923, laid down the criteria for fixing the
annual value under that Act and perhaps it was found not
necessary to incorporate therein the prohibition contained
in s.26 of the Rent Act of 1920. But that in itself cannot
mean that the absence of such an express prohibition would
imply that but for such a corresponding provision of the
Rent Act the section should be understood as free from such
a prohibition. The intention of the Legislature depends
upon the interpretation of the words used in s.127(a) of the
Act and not on the provisions of another Act. On the other
hand, the Legislature, which must be presumed to have had
knowledge that the Calcutta Rent’ Act of 1920 would expire
within three years from the commencement of the Municipal
Act of 1923, and also have been aware that former Act
contained such a prohibition, if it intended to remove any
such prohibition during those three years or even there-
after, would have expressly made a provision to that effect
in the Municipal Act, 1923. On the other hand, the
phraseology of the section must have been designedly used
wide enough to comprehend such a prohibition. Indeed, when
the Act was repealed in 1951 by Act XXXIII of 1951, what was
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implicit in s.127(a) was made explicit in the proviso to
s.168(1) of that Act. We cannot, therefore, draw any
implied prohibition from
62
the history of the legislation. In the result, we hold,
on a fair reading of the express provision of s.127 (a) of
the Act in the light of the decisions considered, that the
rental value cannot be fixed higher than the standard rent
under the Rent Control Act.
The next question is, what is the meaning of the phrase "at
the time of assessments" occurring in s.127(a) of the Act.
The majority view of the High Court was that
assessment commences with the making of the valuation under
B. 131 of the Act and ends with the determination of the
objection under s.140 thereof, and that an event which took
place during this period may be relied upon for assessing
the annual value under s.127(a) of the Act. The correctness
of this view has not seriously been contested before us.
That apart, for the reasons mentioned by Lahiri and Sen,
JJ., that conclusion is justified on the provisions of the
Act.
No other question is raised. The appeal fails and is
dismissed with costs.
Appeal dismissed.