National & Grindlays Bank Ltd. Vs.
The Municipal Corporation of Greater Bombay  INSC 27 (5 February 1969)
05/02/1969 RAMASWAMI, V.
CITATION: 1969 AIR 1048 1969 SCR (3) 565 1969
SCC (1) 541
Bombay Municipal Corporation Act 3 of 1888,
S. 146-Landlord leasing land to tenant who constructs thereon-Whether section
contemplates composite assessment of property tax on land and building-If
primary liability to tax that of landlord.
The appellant had leased a plot of land
situated in the Malad Area in Greater Bombay at a rental on a monthly basis.
The lessee had constructed a house on the
plot of land at his own cost. Prior to the merger of the Malad Area into
Greater Bombay in February, 1947, the Malad District Municipality assessed and
levied taxes on the land andthe structures separately and recovered the same
from the landlord and the tenant. After the merger, the respondent Bombay
Municipal Corporation issued a notice to the appellant-under section167 of the
Bombay Municipal Corporation Act No. 3 of 1883, informing him that there would
be a composite assessment on him. An appeal against the order to the Chief
Judge, Small Causes Court. Bombay, under section 217 of the Act was dismissed.
A single bench of the High Court dismissed a further appeal on the view that it
was bound by the decision in Ramji Keshavji v. Municipal Corporation of Bombay
56 B.L.R. 1132. A Letters Patent appeal was also dismissed.
In the appeal to this Court it was contended
on behalf of the appellant that on a proper construction of section 146 (2) of
the Art there should have been a separate assessment in respect of the building
and the land; alternatively even if section 146(2) contemplates a composite
assessment of the building and the land, a preliminary liability should be
imposed upon the owner of the building in whom the right to let the building
vests and not on the owner of the land; the appellant could not be treated as a
lessor under section 146(2) because it did not let the land with the building
thereon as one unit to the lessee,
HELD : (1) The scheme under section 146 is
that when the land is let and the tenant has built upon the land, there should
be a composite assessment of tax upon the land and the building taken together.
In the case of such a composite unit the primary liability of assessment of tax
is intended lo be on the lessor of the land under section 146 (2) (a) of' the
Act. [571 F] In section 146(1) and (2) the word "Premises" is used in
contrast to section 146(3) where the words "land and building" are
separately mentioned. Section 146(3) which is admittedly not applicable in the
present cases, furnishes a key to the interpretation of section 146(2) (a). In
the context of section 146(3) the lessor of the premises, as mentioned in
section 146(2) (a) must be construed to mean the lessor of the land on which
the building has been constructed by the tenant. [571 D] Section 147 provides
for an apportionment of responsibility to property tax when the premises are let,
or sub-let; it is clear the intention of the legislature was to impose the
primary liability for payment of property tax upon the lessor of the land to
facilitate its collection and to give him the right to recoupment under section
147. [571 F] 566 Ramji Keshavii v. Municipal Corporation for Greater Bombay, 56
Bom. L.R. 1132. approved.
(2)Even assuming that the meaning of section
146(2) is obscure and that it is possible to interpret it as throwing the
primary liability for payment of property tax upon the lessee who has
constructed. a building on the land, this was, not a case where the law
expressed by the High Court in Ramji Keshavji's case, should be interfered
with. That is the construction which the. authorities have put upon it by their
usage and conduct for a long period of time, and the Court may therefore resort
to contemporary construction by applying the principle "optima legum
interpres est consuetudo". [572 E] Ohlson's case,  1 Q.B. 485, 489;
Clyde Navigation Trustees v. Laird, 8 A.C. 658, 670, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 462 of 1966.
Appeal by special leave from the order dated
March 25, 1964 of the Bombay High Court in Letters Patent Appeal No. 28 of
S.V. Gupte, P. P. Khambatta, D. P. Mehta, Bhuvnesh
Kumari and O. C. Mathur, for the appellant.
M. C. Chagla and I. N. Shroff, for the
respondent.' The Judgment of the Court was delivered by Ramaswami, J.-The
question of law involved in this appeal is whether the primary liability is
imposed on the appellant under the Bombay Municipal Corporation Act, 1888 (Act
No. 3 of 1888) to pay property taxes to the respondent i.e., the Municipal
Corporation of Greater Bombay in respect of landowned by the appellant and let
on a monthly basis to a third party who has constructed a building thereon.
The appellant is a banking company
incorporated in the United Kingdom and has established places of business in
India. The appellant is the sole trustee of the estate of the late Mr. F. E.
Dinshaw and in that capacity is the owner of a plot of land at Manchubhai Road,
Malad, Greater Bombay in the State of Maharashtra, bearing No. P-Ward No. 6418,
Street No. 299B. The said plot of land had been leased by the former trustee of
the estate to one Mr. R.-R. Pande Thereinafter referred to as the lessee) since
a number of years at a monthly rent of Rs. 12-50. The lessee had constructed at
his own cost a tiled house on the said plot of land. The Malad area merged into
Greater Bombay on 1st February, 1957. Upto the date of the merger the Malad
District Municipality was. assessing and levying taxes on the land and the
structure separately and recovering the same from the landlord and the tenant.
After the merger, the Bombay Municipal Corporation issued a notice to the
appellant under section 567 167 of the Act informing him that the assessment
book had been amended by inserting, the name of the appellant and that the
rateable value of the house had been fixed at Rs. 430/-. Being aggrieved by
this order the appellant preferred an appeal to the Chief Judge Small Causes
Court, Bombay under section 217 of the Act. The appeal was dismissed by the
Chief Judge, Small, Causes Court by his order dated 3rd August, 1960. The
appellant took the matter in further appeal to the Bombay High Court. The
appeal was heard by Mr. Justice Patel and was dismissed on the 14th January,
1964. The learned Judge felt that he was bound by the decision of Chagla, C.J.
and Shah, J. in , Ramji Keshavji v. Municipal Corporation for Greater
The appellant thereafter preferred a Letters
Patent Appeal No. 28 of 1964 which was summarily dismissed by Chief Justice H.
K. Chainani and Mr. Justice Gokhale on 25th March, 1964. The present appeal is
brought by special leave from the judgment of the Bombay High Court dated 25th
Section 3(r) of the Bombay Municipal
Corporation Act, 1888 (Act, No. 3 of 1888) (hereinafter called the Act) defines
'land' as including "land which is being built upon or is built upon or
covered with water......... Section 3(s) defines 'buildings' as including a
house, out-house, stable, shed, hut and every other such structure, whether of
masonry bricks, wood, mud, metal or any other material whatever.
Section 3(gg) defines 'Premises' as including
messages, buildings and lands of any tenure, whether open or enclosed, whether
built on or not and whether public or private.
Section 140 states :
"140. The following taxes shall be
levied on buildings and lands id Greater Bombay and shall be called
"property taxes", namely:(a)a water tax of so many per centum of
their rateable value as the corporation shall deem reasonable for, providing a
water-supply for Greater Bombay.
(b)a halalkhor-tax of so many-per centum, not
exceeding five of their rateable value as will, in the opinion of the
corporation, suffice to provide for the collection, removal and disposal, by
municipal agency, of all excrementitiously and polluted matter from privies,
urinals and cesspools and for efficiently maintaining and repairing the
municipal drains, constructed or used for the receiptions or conveyance of such
matter, subject however, to the provisions that the minimum amount of such tax
to be levied in respect of any one separate holding of land, or of any one.
building or of any one portion of a building which is let as a separate
holding, shall (1) 56 Bom. L.R. 11 32.
568 be six annas per month, and that the
amount of such tax to be levied in respect of any hotel, club or other large
premises may be specially fixed under section 172;
(c)a general tax of not less than eight and
not more than twenty-six per centum of their rateable value, together with not
less than one-eighth and not more than three-quarters per centum of their
rateable value added thereto, in order to provide for the expense necessary for
fulfilling the duties of the corporation arising under clause (k) of section 61
and Chapter XIV;
(ca) the education cess leviable under s.
(d)betterment charges leviable under Chapter
XII-A." Section 146 provides "146. (1) Property taxes shall be
leviable primarily from the actual occupier of the premisesupon which the said
taxes are assessed, if such occupier holds the said premises immediately from
the Government or from the corporation or from a fazendar.
Provided that the property taxes due in
respect of any premises owned by or vested in the Government and occupied by a
Government servant or any other person on behalf of the Government for
residential purposes shall be leviable primarily from the Government and not
the occupier thereof.
(2)Otherwise the said taxes shall be
primarily leviable as follows, namely:(a) if the premises are let, from the
(b) if the premises are sub-let, from the
superior lessor; and (c)if the premises are unlet, from the person in whom the
right to let the same vests.
(3)But if any land has been let for any term
exceeding one year to a tenant, and such tenant On any person deriving title
howsoever from such tenant has built upon the land, the property taxes assessed
upon the said land and upon the building erected thereon shall be leviable
primarily from the said tenant or such person, whether or not the premises be
in the occupation of the said tenant or such person".
5 6 9 Section 147 states "147. (1) if
any premises assessed to any property tax are let, and their rateable value
exceeds the amount of rent payable in respect thereof to the person from whom,
under the provisions of the last preceding section, the said tax is leviable,
the said person shall be entitled to receive from his tenant the difference
between the amount of the property tax levied from him, and the amount of which
would be leviable from him it the said tax were calculated on the amount of
rent payable to him.
(2)If the premises are sub-let and their
rateable, value exceeds the amount of rent payable in respect thereof to the
tenant by his sub-tenant, or the amount of rent payable in respect thereof to a
sub-tenant by the person holding under him, the said tenant shall be entitled
to receive from his subtenant or the said subtenant shall be entitled to
receive from the person holding under him, as the case may be, the difference
between any sum recovered under this section from such tenant or sub-tenant and
the amount of property-tax which would be leviable in respect of the said
premises if the rateable value thereof were equal to the difference between the
amount of rent which such tenant or subtenant receives and the amount of rent
which he pays.
(3)Any person entitled to receive any sum
under this section shall have, for the recovery thereof, the same rights and
remedies as if such sum were rent payable to him by the person from whom he is
entitled to receive the same".
Section 154(1) enacts as, follows "In
order to fix the rateable value of any building or land assessable to a
property-tax' there shall be deducted from the amount of the annual rent for
which such land or building might reasonably be expected to let from year to
year a sum equal to ten per centum of the said annual rent and the said
deduction shall be in lieu of all allowances for repairs or on any other
account whatever"., Section 155 enacts "155. (1) To enable him to
deter-mine the rateable value of any building or land and the person primarily
liable for the payment of any property tax leviable in respect thereof the
Commissioner may require the owner or occupier of such building, or land, or of
any portion thereof, to furnish him, within such reasonable period 570 as the
Commissioner prescribes in this behalf, with information or with a written
return signed by such owner or occupier(a)as to the name and place of abode of
the owner or occupier, or of both the owner and occupier of such building or
land; and (b)as to the dimensions of such building or land, or of any portion
thereof, and the rent, if any, obtained for such building, or land, or any
(2)Every owner or occupier on whom any such
requisition is made shall be bound to comply with the same and to give true
information or to make a true return to the best of his knowledge or belief.
(3)The Commissioner may also for the purpose
aforesaid make an inspection of any such building or land".
Section 156 states "The me Commissioner
shall keep a book, to be called "the assessment book" in which shall
be entered every official year(a)a list of all buildings and lands in Greater
Bombay distinguishing each either by name or number, as he shall think fit;
(b)the rateable value of each such building
and land determined in accordance with the foregoing provisions of this Act(c)the
name of the person primarily liable for the payment of the property taxes, if
any, leviable on each such building or land.......
It was contended by Mr. Khambatta that on a
proper construction of section 146(2) of the Act there should, have been
separate assessments in respect of the building and the land in the present
case. It was argued in the alternative that even if section 146(2) of the Act
contemplates a compo site assessment of the building and the land, the primary
liability should be imposed upon the owner of the building and not on the owner
of, the land. It was said that the right to let the building vests in the
lessee of the land and not in the appellant, and so, the primary liability was
upon the lessee under section 146(2) of the Act. The argument was pressed that
the appellant cannot be treated as a lessor under section 146(2) of the Act,,
because the appellant has not let the 571 land with the building thereon as
one-unit to the lessee.
The opposite viewpoint was presented on
behalf of the respondent. It was, argued, in the first place, that section
146(2) of the Act contemplates that there should be a composite assessment of
the land and the building taken as one unit. In the case of such a composite
assessment, the primary liability of the payment of tax was on the landlord
under sub-section (2)(a) of section 146 except in the case, referred to in
sub-section (3) where the primary liability was-upon the tenant and not upon
the landlord. Admittedly, the present case did not fall under section 146(3),
and, therefore,. the primary liability was placed upon the appellant. In our
opinion, the argument put forward on behalf of the respondent is well-founded
and must be accepted as correct. In the first place, the language of section
146(2) indicates that the Legislature contemplated that in a case where the
land and the building are owned by different persons there should be a
composite assessment of property tax. The reason is that in section 146(1) and
(2) the word premises' is used in contrast to section 146(3) where the words
'land and building' are separately mentioned. In section 154(1) of the Act
again, the Legislature uses the expression 'building or land'. Then section 155
provides for the right of the Commissioner to call information from the owner
or the occupier in order to enable him to determine the rateable value of ;any
building or land and the person primarily liable for the payment of any
property, tax levied in respect thereof. Section 156 provides that the
Commissioner shall maintain a book to be called 'the assessment book' which
book is to contain among other things a list of all lands and buildings.
Therefore, the scheme of section 146 is that, when the land is let and the
tenant has built upon the land, there should be a composite assessment of tax
upon the land and building taken together. We are further of opinion that in
the case of such a composite unit the primary liability of assessment of tax is
intended to be on the lessor of the land under;
section 146(2)(a) of the Act. It was objected
by Mr. Khambatta that the appellant was only the lessor of the land and not of
the building, and so, the appellant cannot be held to be the lessor within the
meaning of section 146(2) (a). 'We do not think that there is any merit in this
objection. Section 146(3) of the Act furnishes the key to the interpretation of
section 146(2)(a), in the context of section 146(3) the lessor of the premises
as mentioned in section 146(2)(a) must be construed as to mean the lessor of
the land on which the building has been constructed by the tenant. In this
connection, reference should be made to section 147 which provides for an
apportionment of responsibility for property tax when the premises assessed are
let or sub-let. The language of this sub-section sugge sts that the lessor of
the land has the right of recovering from his tenant the amount of tax 572
which he has paid in excess, of the tax which the property is liable to pay on
the basis of the rent recovered by the lessor. It is also clear that the intention,
of the Legislature in fixing the primary liability of property tax upon the
owner of the land in a case not falling under s.
146(3) of the Act is to facilitate the
collection of, property tax. In the, case of a monthly tenant who puts up a
temporary shack or asbestos shed on the land and who may at any time terminate
the lease at a short notice, it is not always possible for the Corporation to
keep track of the lessee and to collect the property tax from him. It is not
unreasonable therefore that in a case of this description the Legislature
should impose the primary liability for the payment of the property tax upon
the lessor of the land and to give him the right of recoupment under section
147. A similar view with regard to the interpretation of section 146, of the
Act was expressed by a Division Bench of the Bombay High Court consisting of
Chagla, C.J. and Shah, J.
in Ramji Keshavji's(1) case. It was held by
the learned judges in that case that where the owner of a land had leased it to
a tenant for a period of one year and the tenant had put up a structure upon
the land, the owner of the land was primarily liable to pay property tax
together with the structure constructed thereon. Counsel on behalf of the
appellant challenged the correctness of this decision, but for the reasons
already expressed we hold that the ratio of this decision is correct.
We Shall, however , assume in favour of the
appellant that the meaning of section 146 (2) of the Act is obscure and that'
it is possible to interpret it as throwing the primary liability for payment of
property tax upon the lessee who has constructed a, building on the land. Even
upon that assumption we think that the view of the law expressed by the Bombay
High Court in this case ought not to be interfered with. The reason is that in
a case where the meaning of an enactment is obscure, the Court may resort to
contemporary construction, that is the construction which the authorities have
put upon it by their usage and conduct for a long period of time. The principle
applicable is "optima legum interpres est consuetudo" (2). In
Ohlson's case(3), in dealing with the interpretation of section 39 of the
Pawnbrokers, Act, 1872, Stephen, J. said :
" What weighs with me very greatly in
coming to the present conclusion is the practice of the Inland Revenue
Commissioners for the past sixteen years. So long ago as 1874 this very point
was decided by Sir Thomas Henry, for whose decisions we 'all have very great
respect; and the least that can be said with regard to the (1) 56 Bom. L. R. 11
(3)  1 Q.B. 485, 489.
(2) 2 Co. Rep. 8 1.
5 7 3 case before him is that he pointedly
called the attention of the commissioners to the case-the learned magistrate
having offered to state a case-an offer refused by the ,commissioner, who by
their refusal must be taken to have acquiesced in the decision.
'Mat is a very strong contemporaneous
exposition of the meaning of the Act".
The same principle was referred to by Lord
Blackburn in Clyde Navigation Trustees v. Laird(1). The question in dispute in
that case was, whether the Clyde Navigation Consolidation Act, 1858 (repealing
eight prior Acts) imposed navigation dues on timber floated up the Clyde in
logs chained together. From 1858 to 1882 dues had been levied on this class of
timber without resistance from the owners; and some judges in the Court of
Session suggested that this nonresistance might be considered in construing the
On this point Lord Blackburn said .
"I think that submission raises a strong
prima facie ground on which they (the owners) could not resist, And I think a
court should be cautious, and not decide unnecessarily that there is no such
ground. If the Lord President (Inglis) means no more than this when he calls it
'contemporanea exposito of the statutes which is almost irresistible', I agree
with him. I do not think that he means that enjoyment at least for any period
short of that which gives rise to prescription, if founded on a mistaken
construction of a statute, binds the court so as to prevent it from giving the
true construction. If he did, I should not agree with him, for whom I know of
no authority, and am not aware of any principle, for so saying .
In our opinion, the principle of
contemporanea exposito applies to the present case. The Act was passed in the
year 1888 and there appears to be a practice followed by the Bombay Municipal
corporation for a very long time of treating the land and the building
constructed upon it as single unit and charging the property tax upon the owner
of the land in a case where the land is let for a period of less than one year
to a tenant who has constructed a building thereon [See Ramji Keshavji's
For the reasons expressed, we hold that there
is no merit in this appeal which is accordingly dismissed with costs.
R.K.P.S. Appeal dismissed.
(1) 8 A.C.658 670.
(2) 56 Bom. L.R. 1132.