Corporation of Calcutta Vs. Life
Insurance Corporation of India [1970] INSC 89 (9 April 1970)
09/04/1970 SHAH, J.C.
SHAH, J.C.
HEGDE, K.S.
CITATION: 1970 AIR 1417 1971 SCR (1) 248 1970
SCC (2) 44
CITATOR INFO:
RF 1977 SC 308 (4,7) R 1980 SC 541 (1,4,5,8,9,10)
ACT:
West Bengal Premises Rent Control (Temporary
Provisions) Act (17 of 1950), s. 2(10)(b) and Calcutta Municipal Corporation
Act (33 of 1951), s. 168(1),Premises let out-Sub-letting for larger rent by
tenant-Fixation of annual value-Standard rent payable by tenant or rent
received by tenant from subtenants to be considered.
HEADNOTE:
The respondent was the owner of a building
whose tenant was paying a certain amount as rent. No standard rent under s.
9 of the West Bengal Rent Control (Temporary
Provisions) Act, 1950 was fixed but the amount of rent was such that it would
have been fixed as standard rent if application for such fixation was made
under that Act. The tenant had sublet the promises and was receiving a much
larger sum from the sub-tenants. For the purpose of assessment to the
consolidated rate under s. 168(1) of the Calcutta Municipal Corporation Act,
1951, the annual rent at which the building might be reasonably expected to be
let from year to year should be taken into consideration. The appellant
determined the annual value of the building on the basis of the rental received
by the tenant from its sub-tenants. In appeal by the respondent the Court of
Small Causes held that only the rent paid by the tenant to the respondent
should be taken as the basis; and the High Court confirmed the order.
In appeal to this Court it was contended that
under the proviso to s. 168(i), if standard rent had been fixed under the West
Bengal Rent Control (Temporary Provisions) Act, it would form the, basis of
annual rent, but, if there was no such fixation, the appellant was competent to
take into account all relevant circumstances including the rent at which the
buildingwas sub-let.
HELD : (1) The corresponding section, s.
127(a) of the Calcutta Municipal Act, 1923 did not contain a proviso similar to
the one in s. 168(1) of the 1951-Act. But the decision in Corporation of
Calcutta v. Smt. Padma Debi, [1962] 3 S.C.R. 49, interpreting s. 127(a) of the
1923Act and holding that the annual value should be determined only on the
footing of the standard rent applies. In determining the annual rent statutory
limitation of rent circumscribes the scope of the bargain in the market and the
rent at which the premises could be let out from year to year can never exceed
the standard rent. Under s. 2(10) of the West Bengal Premises Rent Control
(Temporary Provisions) Act, when there is no order of the Controller fixing the
standard rent under s. 9 of that Act, the standard, rent would be the amount at
which it would have been fixed if application were made for such fixation.
Therefore, in the present case the annual rent at which the building, might
reasonably be expected to be let from year to year, would be rent which the
tenant was paying to the respondent and not the rent which the tenant was
receiving from the sub-tenants. [251 D-H] (2) Section 193 of the Calcutta
Municipal Corporation Act, which only provides for apportionment of
consolidated rates, is irrelevant in determining the annual value. [252 G] 249
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1559 of 1966.
Appeal from the judgment and order dated
February 15, 1963 A the Calcutta High Court in Appeal from original order No. 6
of 1959.
P. K. Mukherjee, A. N. Sinha and Rathin Das,
for the appellant.
G. L. Sanghi and K. L. Hathi, for the
respondent.
The Judgment of the Court was delivered byShah,
J. Messrs. A. Firpo Ltd. held as tenants premises No.
11, Government Place East, Calcutta,
belonging to the Asiatic Assurance Company Ltd., under a lease dated August 6,
1941, ,it a monthly rental of Rs. 2,000, The rent was increased by mutual
agreement with effect from November 1953 to Rs. 2,800 per month. Messrs. A.
Firpo Ltd. had sublet a major part of the premises to five different tenants
and the aggregate rent received from the sub-tenants amounted to Rs.
4,520.
The Corporation of Calcutta assessed the
annual value of the premises at Rs. 32,076 for six years prior to April 1,
1955.
With effect from April 1, 1955, the
Corporation assessed the annual value of the premises at Rs. 62,761. The
objection raised by the owner against the determination of annual value was
rejected by the Special Officer of the Corporation. In appeal by the Life
Insurance Corporation of India (which had statutorily acquired the rights of
the owner) the Court of Small Causes assessed Rs. 30,240 as the annual value.
The order was confirmed in appeal to the High Court under S. 183(3) of the
Calcutta Municipal Corporation Act, 1951. With certificate granted by the High
Court, this appeal has been preferred.
In this appeal the Corporation claims that in
determining the annual value of the premises the assessing authority was
entitled to take into consideration the rental received by Messrs Firpo Ltd.
from its sub-tenants. This Court in The Corporation of Calcutta v. Smt. Padma
Debi and Others(1)-'a case arising under the Calcutta Municipal Act, 1923-held
that in assessing the annual value under s. 127(a) of the Calcutta Municipal
Act, 1923, the rent which the landlord may realise if the house was let is the
basis for fixing the annual value of the buildings : the criterion being the
rent realisable by the landlord and not the value of the building in the hands
of the tenant. The test of reasonableness of the gross annual rent at which the
building may at the time of (1) [1962] 3 S.C.R. 49.
250 assessment reasonably be expected to let
in s. 127 (a) is the rent which the landlord may realize if the house is let
under a bargain between a willing lessor and a willing lessee uninfluenced by
extraneous considerations, and in determining the reasonable less of the
expectation of the landlord in the matter of rent a law which imposes penal
consequences cannot be ignored. The law must 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, and since a
statutory limitation of rent circumscribes the scope of the bargain in the
market, in no circumstances can the hypothetical rent exceed the limit prescribed
by the law.
It was there fore clearly laid down by this
Court in Smt.
Padma Debi's case(1) that in determining the
'annual value of the land or building for the purpose of ascertaining the
consolidated rate, the standard rent is the maximum amount which can be taken
into account.
In the present case the Court of Small Causes
and the High Court have determined the annual value on the footing of the
standard rent., Counsel for the Corporation, however, contended that the
decision in Smt. Padma Debi's case(1) has no application to this case, since
that case was decided on the interpretation of s. 127(a) of the Calcutta
Municipal Act, 1923, whereas the present case falls to be determined on the
interpretation of s. 168 of the Calcutta Municipal Corporation Act, 1951, of
which the scheme is different.
Section 168(1) at the relevant time provided
"For the purpose of assessment to the consolidated rate the annual value
of any land or building shall be deemed to be the gross annual rent at which
the land or building might at the time of assessment be reasonably expected to
let from year to year, less.........
Provided that in respect of any land or
building the standard rent of which has been fixed under Section 9 of the West
Bengal Premises Rent Control (Temporary Provisions) Act, 1950, the annual value
thereof shall not exceed the annual amount of the standard rent so fixed."
Counsel urged that under the proviso, gross rent for which the Laid or building
might reasonably be expected to let is subject to the maximum limit of the
annual standard rent, only in those cases in which standard rent under s. 9 of
the West Bengal Premises (1) [1962] 3 S.C.R. 49.
251 Rent Control (Temporary Provisions) Act,
1950 is fixed by order of the Controller, and since no such standard rent is
fixed by order of the Controller, the proviso to s. 168 does not apply, and the
assessing authority was, in determining the annual value, competent to take
into account all relevant circumstances including the rent at which the
premises were or could be sublet.
It is true that the assessment of annual
value in Smt.
Padma Debi's case(1) was for the year 1950-51
and s. 127(a) of the Calcutta Municipal Act, 1923, was in these terms :
"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 be let from year to year,
less, That section did not contain a proviso in the form of the proviso to s.
168(1) of the Calcutta Municipal Corporation Act, 1951. But the enactment of
the proviso does not alter the law. This Court in Smt. Padma Debi's case()
interpreted the words "gross annual rent at which the land or building
might at the time of assessment reasonably be expected to let from year to
year" in s. 127(a), and held that in determining the gross annual rent
statutory limitation of rent circumscribes the scope of the bargain in the
market and therefore in no circumstances the hypothetical rent may exceed the
limit.
By the addition of the proviso, in our
judgment, the meaning of the expression "gross rent at which the land or
building might reasonably be expected to let" is not altered. In the
present case, there is no order of the Controller fixing standard rent under s.
9 of the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950.
but the standard rent stands determined by the definition of that expression in
s. 2(10)(b) of that Act, which provides (omitting parts not relevant) standard
rent' in relation to any premises means(a).............
(b) where the rent has been fixed under
section 9, the rent so fixed; or at which it would have been fixed if
application were made under the said section." We are therefore of the
view that the High Court was right in assessing the annual value on the basis
of the standard rent as statutorily determined. It is common ground that the
standard rent of the premises was Rs. 2,800 per month by virtue of the second
part of s. 2 ( 1 0) (b).
(1) [1962] 3 S.C.R. 49.
252 It was then urged that in any event where
there are different grades of owners of a building, the assessing authority is
bound to take into consideration the value to each grade of owner for the
purpose of determining the standard rent. It was submitted that qua their
sub-tenants, Messrs. A. Firpo Ltd. were the owners of the premises and the rent
which they received had also to be taken into account in determining the
standard rent. Reliance in that behalf was placed upon the definition of
"owner" in s. 5(53) and s. 193 of the Calcutta Municipal Corporation
Act, 1951.
Section 5(53) defines "owner" as
including "the person for the time being receiving the rent of any land or
building or of any part of any land or building, whether on his own account or
as agent or trustee for any person or society or for any religious or
charitable purpose, or as a receiver or who would so receive such rent if the
land, building or part thereof were let to a tenant". Section 193 provides
:
"Where there are gradations of owners of
any land or building, the Commissioner may, notwithstanding anything contained
in section 191, apportion the owner's share of the consolidated rate in respect
of such land or building among such owners in proportion to the amount of the
net rent receivable by each of them and thereupon the owner's share of the
consolidated rate shall be paid by such owners accordingly.
Explanation. But under the Act the quantum of
the consolidated rate depends upon the annual value of land or building on the
gross rent for which the land or building might reasonably be expected to let,
and not the gross rent at which the subordinate interest of a tenant may be
expected to sublet.
In determining the assessment of annual
value, the assessing authority is not concerned with the rent which the tenant
may receive from his sub-tenant. It is the gross rent which the owner may
realize by letting the land or building under a bargain "uninfluenced by
extraneous considerations" which determines the-annual value. Section 193
only provides for apportionment of consolidated rate : it is irrelevant in
determining annual value.
The appeal fails and is dismissed with costs.
V.P.S. Appeal dismissed.
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