The Corporation of Calcutta Vs. Sm.
Padma Debi & Ors  INSC 239 (8 August 1961)
SINHA, BHUVNESHWAR P.(CJ) DAYAL, RAGHUBAR
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)
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.
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
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 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
The word 'reasonably' is not capable of
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
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,, 51
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.
349 of 1953.
N. C. Chatterjee and S. Ghose, for the
B. P. Maheshwari, for respondents Nos. 1, 2
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 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 52 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
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 53 necessary to maintain the building in a
state 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)  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 amount of rent per annum it
would be worth to a hypothetical tenant." (1)  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.
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 rent can exceed
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)
 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
",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
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)
59 With great respect to the other learned
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
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.  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 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,
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 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
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.