# DEWAN DAULAT RAI KAPOOR ETC. ETC v. NEW DELHI MUNICIPAL COMMITTEE & ANOTHER ETC. ETC

- **Citation:** [1980] 2 S.C.R. 607
- **Court:** Supreme Court of India
- **Decided:** 1979-12-20
- **Bench:** P. N. Bhagwati, V. D. Tulzapurkar Anq R. S. Pathak
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/dewan-daulat-rai-kapoor-etc-etc-v-new-delhi-municipal-committee-another-etc-etc-7913
- **Pages:** 21

## Headnote

Delhi Mu1dcipal Corporation Act 1957, Seclion 116 & Punjab Municipal
Act 1911, Section 3(1)(b)-Assess1nent of buildinK for nu1nicipal tax-Annual
value-Standard rent or contractual rent--Applicahility of rent control legislation.
JVords & phrases--'Annual Valuei'-Reasonably-Meanin!J of.
Section 3(1)(b) of the Punjab Municipal Act, 1911 defines ·'annual value"'
to mean, in the case of a-ny house or builrJing "the gross annual rent at which
such house or: building. . . . may reasonably be expected to let from year to
year" subject. to certain specified deductions.
The same definition of "annual
value" is to be found in section 116 of the Delhi Municipal Corporation Act,
1957 but with Only difference that there, is a, second proviso to section 116 \vhich
is absent in section 3(1)(b).
One appeal· related to a case where the building is situated within the jurisdiction of the, New Delhi Municipal Committee and is liable to be assessed
to house tex under the Punjab Municipal Act, 1911 while the other
two
related to cases where the building is situated within the limits of the Corporation of Delhi and is assessable to house tax under the
Delhi
Municipal
Corporation Act, 1917. The house tax under both statutes was levied with
reference to the "annual value" of the building.
The common question of law arising in the appeals related to the a-ssessment of_ annual value for levy of house tax where the building is governed
by the provisions of Rent Control Legislation but where the standard rent
bas not yet b~en fiXed.
The argume,it of the Revenue was (i) that if it was not penal for
the
landlord to receive the contractual rent from the tenant, even if it be higher
than the standard rent determinable under the provisions of the Act, it would
not be incorrect to say that the landlord could reasonably expect to let the
building at the contractual rent and the contractual rent therefore provided
a correct measure for determination of the annual value of the building,
and (ii) the period of limitation for making an application for fixation of
the standard rent had expired long prior to the commencement of the assessment years and in each of the roses, the tenant was precluded by section
12 of the Rent Control Act from making an application for :fixation of the
standard rent with the result that the landlord was lawfully entitled to con·
tinue to receive ·the contrl\ctual rent from the tenant without any let or hinder-
. ance.
Allowing the appeals,
HELD : I. The Court would have examined the validity of this argument first on principle and then turned to the authorities, hut it proposed to
reverse this order becau!e the decisions in the Life Insurance Corporation's
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608
SUPREME COUi<T REPORTS
[1980] 2 S.C.R.
case and the Guntur Municipal Council's case (supra) completely covered the·
present controversy and did not leave any scope for further argument. The
decision in Padma Devi's case n1ay be said to be distinguishable on the ground
that in the present cases, unlike Padnia Devi's case, the standard rent of the
building was not fixed by the Controller and hence it could not be said that
it was unlawful or penal for the landlord to recieve. anything more than the
standard rent. But so far as the decision in Life Insurance Corporation's case
is concerned, it is difficult to sec how its applicability could be disputed, because there als0, as in the present case, the standard rent of the building was
not fixed by the Controller and in the absence of the standard rent, it
was
open to the landlord to receive rent in excess of the standard rent determinnble under the Act. The only distinction was that under the West Bengal
Premises Rent Control (Temporary Provisions) Act, 1950, which came up for
consideration in the Life 'Insurance Corporation's case, the standard rent was
statutorily determinable on the application of a mathematical formula without
any discretion being left in the Controller, \\·hiJe unde

## Text

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607
DEWAN DAULAT RAI KAPOOR ETC. ETC.
v.
NEW DELHI MUNICIPAL COMMITTEE & ANOTHER ETC. ETC.
December 20, 1979
[P. N. BHAGWATI, V. D. TULZAPURKAR ANQ R. S. PATHAK, JJ.]
Delhi Mu1dcipal Corporation Act 1957, Seclion 116 & Punjab Municipal
Act 1911, Section 3(1)(b)-Assess1nent of buildinK for nu1nicipal tax-Annual
value-Standard rent or contractual rent--Applicahility of rent control legislation.
JVords & phrases--'Annual Valuei'-Reasonably-Meanin!J of.
Section 3(1)(b) of the Punjab Municipal Act, 1911 defines ·'annual value"'
to mean, in the case of a-ny house or builrJing "the gross annual rent at which
such house or: building. . . . may reasonably be expected to let from year to
year" subject. to certain specified deductions.
The same definition of "annual
value" is to be found in section 116 of the Delhi Municipal Corporation Act,
1957 but with Only difference that there, is a, second proviso to section 116 \vhich
is absent in section 3(1)(b).
One appeal· related to a case where the building is situated within the jurisdiction of the, New Delhi Municipal Committee and is liable to be assessed
to house tex under the Punjab Municipal Act, 1911 while the other
two
related to cases where the building is situated within the limits of the Corporation of Delhi and is assessable to house tax under the
Delhi
Municipal
Corporation Act, 1917. The house tax under both statutes was levied with
reference to the "annual value" of the building.
The common question of law arising in the appeals related to the a-ssessment of_ annual value for levy of house tax where the building is governed
by the provisions of Rent Control Legislation but where the standard rent
bas not yet b~en fiXed.
The argume,it of the Revenue was (i) that if it was not penal for
the
landlord to receive the contractual rent from the tenant, even if it be higher
than the standard rent determinable under the provisions of the Act, it would
not be incorrect to say that the landlord could reasonably expect to let the
building at the contractual rent and the contractual rent therefore provided
a correct measure for determination of the annual value of the building,
and (ii) the period of limitation for making an application for fixation of
the standard rent had expired long prior to the commencement of the assessment years and in each of the roses, the tenant was precluded by section
12 of the Rent Control Act from making an application for :fixation of the
standard rent with the result that the landlord was lawfully entitled to con·
tinue to receive ·the contrl\ctual rent from the tenant without any let or hinder-
. ance.
Allowing the appeals,
HELD : I. The Court would have examined the validity of this argument first on principle and then turned to the authorities, hut it proposed to
reverse this order becau!e the decisions in the Life Insurance Corporation's
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608
SUPREME COUi<T REPORTS
[1980] 2 S.C.R.
case and the Guntur Municipal Council's case (supra) completely covered the·
present controversy and did not leave any scope for further argument. The
decision in Padma Devi's case n1ay be said to be distinguishable on the ground
that in the present cases, unlike Padnia Devi's case, the standard rent of the
building was not fixed by the Controller and hence it could not be said that
it was unlawful or penal for the landlord to recieve. anything more than the
standard rent. But so far as the decision in Life Insurance Corporation's case
is concerned, it is difficult to sec how its applicability could be disputed, because there als0, as in the present case, the standard rent of the building was
not fixed by the Controller and in the absence of the standard rent, it
was
open to the landlord to receive rent in excess of the standard rent determinnble under the Act. The only distinction was that under the West Bengal
Premises Rent Control (Temporary Provisions) Act, 1950, which came up for
consideration in the Life 'Insurance Corporation's case, the standard rent was
statutorily determinable on the application of a mathematical formula without
any discretion being left in the Controller, \\·hiJe under the Delhi Rent Control
Act, 1958 the standard rent was not a certain and definite figure to be arrived
at mathematically by application of the formula laid down in section 6 but it
was left to the Controller under section 9 sub-section (2) to fix the standard
rent at such amount as appeared to him to be reasonable having regard to
the provisions of section 6 and the circumstances of the case.
Hence, until
the standard rent was fixed by the Controller, it could not be said what
\\ould be the standard rent of the building.
[622D-H, 623A]
2. Undoubtedly there is some difference in the provisions of the
two
st~tutes but this difference is not of such a character as to a[ect the appticapability of the decision in the Life Insurance Corporation's case. In that
case too, the prohibition against the landlord to receive any rent in excess
of the standard rent was operative only after the fixation of the standard rent
by the Controller and so long as the standard rent was not fixed, it was not
unlawful or penal for the landlord to receive any rent in excess of the standard rent.
If the standard rent though not fixed and hence not legally enforceable, could provide the measure for the reasonable expectation of the landlord to recieve rent from a hypothetical tena·nt in the Life Insurance Corporation's case, there is no reason why it should not equally be h~ld to provide
such measure in the present cases.
/\s in the one case so also in the other,
the upper limit of the standard rent. though yet to be fixed by the Controller.
would enter into the determination of the reasonable rent.
[623A-D]
3. It is not correct to say that under section 9 sub-section (2) of the
Delhi Rent Control Act, 1958, it is left to the unfettered and unguided
discretion of the Controller to fix any standard rent which he
considers
reasonable. He is required to fix the standard rent in accordance
with
the
relevant forn111la laid do,vn in section 6 and he cannot ignore that formula
by saying that in the circumst::inces of the case, he considers it reasonable
to do so.
The only discretion given to him is to make adjtistments in the
result nrrived at on the application of the relevant formula, where it is necessnry to do so by reason of the fact that the landlord might have made some
addition, alteration or improvement in the building or circumstances might
have t_ranspired affecting the condition or utility of the building or some
such c1rcum~tances of similar
character.
The compulsive
force
of
the
formula leid down in section 6 for the determination of the standard rent
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DEWAN DAULAT RA! V. N.D.M.C·
609
is not in any way whittled down by section 9 sub-section (2) but a marginal
discretion is given to the Controller to mitigate the rigour of th( formula
where the circumstances of the case so require.
The amount calculated in
accordance with the relevant formula set out in section 6 would, ther~fore,
ordinarily represent the stand•::trd rent of the building, unless the land>-:nd
or the tenant, as the case
nir~y be, can persuade the Controller that the1~
are circumstances requiring adjustment in the
~n1ount so arrived at.
There
is therefore no material distinction between the West Bengal Premises Rent
Control (Tem:;orary Provisions) Act, 1950 and the Delhi Rent Control Act,
1958 so far as the provisions regarding determination of standard rent are
concerned and the decision in the
Life Insurance Corporation's
case
must
be held to be applicable in determination of the annual value in the 'present
cases.
[623D-H, 624A]
4. Jn the Gu11tur Municipal Council's case also, as in the present case<;,
C
the standard rent of the building was not fixed by the ControUer and under
the Andhra Pradesh Rent Act which applied to the town of Guntur, in the
;1h..ence of fixation of the fair· rent, it was lawfully competent to the landlord
to recover rent in excess of the fair-rent determinable under that Act. [6248-Cl
5. The annual value of the building governed by the Delhi Rent Control
Act, 1958 must be limited by the
measure of
st«·ndard
rent determinable
D
under that Act.
The landlord cannot reasor:ably expect to get more rent
than the standard rent payable in accordance with the principles laid down
in the Delhi Rent Contrel Act, 1958.
It is true that the standard rent of the
building not having been fixed by the Controller, the assessing authority would
havo to arrive at its O\vtl figure of standard rent by applying the principlesi
laid down in the Delhi Rent Control Act, 1958 for determination of standard rent, but that is a task \vhich the assessing authority would have
to
E
perfonn as a part of the process of .assessment nnd iu the Guntur Municipal
Council's case, thi'> Court has said that it is not <..• task foreign to the function
of assessment and has to be carried cut by the assessing authority.
When
the assessing authority arrives at its own figures of standard rent by applying
the principlts laid down in the Act. it does not, in any way, usurp the function
of the Controller, becoause it does not fix the standard rent which would be
binding on 1hc landlord and the tenant, which can be done only by the ConF
troller under the Act. but it n1crely arrives at its own estimate of standard
rent for the purpose of detern1ining the annual value of the building. That
is a perfectly legitimate function within the· <>cope of the jurisdiction
of
the
assessing authority.
[624G-I-l. 625A-C]
6. The existing tenant
n~11y be barred from making an application for
fixation of the standard rent and n1ay. therefore, i.Je liable to pay contractual
G
rent to tile Jantl!o:·d but the hypothetical tenant to whom the building is
hypoth'''.'.:ally to be let, would not suffer from this disability created by the
bar of limitation and he would be entitled to rn.1ke an application
for
. fixation of the standard rent at any time within two years of the hypothetical
letting n·nd the limit of the standard rent deterniin;1ble under the Act, would
therefore, inevitably enter into the bargain and circumscribe the rate of rent
at \Vhich the building could reasonably be expected to be let.
[625E-G]
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7. Tt is difficult to see how the annual value of the building could vary
accordingly as it is tenanted or self occupied. The circumstance that in each
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WPREME COLRT REPORTS
[1980] ~ S.C.R.
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of the present cases, the teoont was debarred by the period of limitation
from mak?1g an application for fixation of the standard rent and the landJord wa!'l consequently entitled to continue to receive the contractual rent
cannot'. therefore, affect the applicability of the decision in the Life !nsurlJtlce
Corr-'Oration's case anJ the
Guntur Municipal Council's case, and it must be
hcld that the annual value of the building in each of these cases was limited
by the measure of the standard rent deterrninaible under the Alt. [626B-C]
8. Even if the standard rent has not been fixed by
the
Controiler,
the
landlord cannot reasonably expect to receive from
•_t hypothetical
tenant
anything more than the standard rent detern1inable under the Act and
this
\Vonld be so equally whether the building has been let out to a tenant who
has lost his right to apply for fixation of the standard rent or the building is
self c.iccupied by the owner. The assessing authority would. in either case, hca,vc
'C
to arrive at its own figure of the standard rent by applyin~ principles laid down
in the Delhi Rent Control Act, 1958 for determination of standard rent and
dctern1ine the 2nnual value of the building on the basis of ~uch figure of standard rent.
[626G-H, 627A]
9. lt is · . .:lea.r therefore that in each of the present cas».:s the annual value of
the building must be held to be limited by the measure of the standard rent
D
determinable on the principles laid Cown in the Delhi Rent Control r\ct, 1958
and it cannot exceed such measure of standard re11t.
[627 A-B]
Corporation of Calcutta v. Life Insurance· Corporation [1970] 2 SCC 44;
Corporarion of Culcutta v. I'adn1a Devi [1962] 3 SCR 49;
Guntur /l,funicipal
.,
•
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(;ouncil v. Gun/ur Town Rate I'ayers' Association [19711 2 SCR 423;
l\f. f..f.
-.,. _..
F
Cha1vla v. 1. S. Sethi [1970j 2 SCR 390 refcrrc<l to.
,\1111iicipa/ Corporatio11, l11do11! & Ors. v. S1111. Ratnap1ahlu1 & Ors. [1977]
SCR 1017 distinguished.
CIVIL APPELLATE
1144/73 and 1201 (N)
JURISDICTION :
of 1973.
Civil
Appeal
Nos. 1143From the Judgment and Order dated 16-11-1972 of the
Delhi
High Court in C.W. No. 580/71, LPA No. 58/72 and 54/72.
..
P. N. Lekhi and M. K. Garg for the Appellan'.s in C.A.
Nos.
1143-44/73 and for Respondents in C.A. No. 1201/73.
.(_
F- S. Narifnan, P. D. Singhania., Ilonli Rani.no, Ravinder Narain
and T. Ansari in C.A. No. 1143/73 for the Intervener.
S. N. Kacker Sol. General and A. V. Rangam for the Respondent
in C.A. No. 1144/73 and for the Appellant in C.A. No. 1201/73.
S. N. Kacker, Sol. General, B. P. Maheshwari, s. Sethi, Bikramiit Nayyar and E. C. Sharma for Respondent No. l in
C.A.
Nos .
.fl
1143-44/73.
S. T. Desai, S. P. Nayyar and Miss A. Subhashi11i for the Intervener, C.I.T. Delhi.
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DEWAN DAULAT RA! v. RD.M.C. (Bhagwati, ].)
611
The Judgment of the Court was delivered by
BHAGWATI, J. These appeals by certificate raise a common question of law· relating to assessment of annual value for levy of housetax where the building is governed by
the
prov1S1ons
o[ Rent
Control legislation, but the standiird rent has not yet been fixed. One
appeal relates to a case where the building is situate within the jurisdiction of the New Delhi Municipal Committee and is liable to be
assessed to house tax under the Punjab Municipal Act, 1911 while
the other two relate to cases where the building is situate within the
limits of the Corporation of Del.hi and is assessable co house tax
under the Delhi Municipal Corporation Act, 1957. The house tax
under both statutes is levied with reference to the annuai value of
the building.
Section 3 ( l) (b) of the Punjab Municipal Act, J 911
defines "annual value" to mean, in the case of any house or building
"the gross annual rent at which such house or building ........ may
reasonably be expected to Jet from year to year" subject to certain
specified deductions, and the same definition of "annual value" is to
be found in section 116 of the Delhi Municipal Corporation Act,
1957 with only this difference that there is a second
proviso
to
section 116 which is absent in section 3(l)(b). That proviso reads:
"Provided further that in respect of any land or building the standard
rent 0£ which has been fixed under the Delhi and Ajmer Rent Control
Act, 1952, the rateable value thereof shall not exceed the
annual
amoi:;nt of standard rent so fixed."
It was, however, com1non ground
between the parties that !his proviso is immaterial and, ir, fact, it
was so held in Corporation of Calcutta v. Life Insurance Corpora--
lion('). We may, therefore, ignore the existence of this proviso and
c
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E.
deal with both the categories of appeals on the basis of the samB
definition of "annual value".
"Annual value" of a building, accord- · F
ing to this definition, would be the gross annual rent at which the
building
may
reasonably be expected to Jet from
year
to year
(emphasis supplied).
It is obvious from this definition that unlike the English
Law
where the value af occupation by a tenant is the criterion for fixing
annual value of the building for rating purposes, here it is the value
of the property to the owner which is taken as the
standard for
making assessment of annual value.
The criterion is the rent realisable by the landlord and not the value of the holding in the hands
the tenant The rent which the landlord might realise if the building were let is made the basis for fixing the annual value of the
(I) [1970) 2 s.c.c. 44.
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SUPREME COU<T REPORTS
[1980] 2 S.C.R.
building.
The word "reasonably" in the definition is very important.
What the landlord might reasonably expect to get from a hypothetical
tenant, if the building were let from year to year, affords the statutory
yardstick for determining the annual value.
Now, what 'i5 reasonable
is a question of fact and it would depend on the facts and circu.mstances of a given situation. Ordinarily, as pointed out by Subba Rao,
J., speaking on behalf of the Court in Corporation of Calcutta v.
Padma Devi('); "a bargain between a willing lessor and a
wiUing
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".
The actual
rent payable by a tenant to the landlord would in normal circumstances afford reliable evidence of what the landlord might reasonably
expect to get· from a hypothetical tenant, unless the rent is inflated
or depressed by reason of extraneous considerations such as relationship, expectation of some other benefit etc. i.Jhere would ordinarily
be in a free market close approximation between the actual rent receh ed by the landlord and the rent which he might reasonably expect
to receive from a hypothetical tenant.
But where the rent of the
bujlding is subject to rent control legislation, this approximation may
and often does get displaced.
It is, therefore, necessary to consider
the effect of rent control legislation on the determination of annual
value
This is fortunately not a virgin field.
There are at least
three
decisions of this Court which have spoken on thi·s subject.
The first
,s the decision in Corporation of Calcutta v.
Pad ma Devi (supra).
The question which arose in that case was whether the "annual value"
of a building governed by the West Bengal Premises Rent Control
(Temporary Provisions) Act, 1950 could be determined at a figure
hi·gher than the standard rent fixed under the provision of that Act.
The definition of "annual value" in section 127 (a) of the Calcutta
Municipal Act, 1923 under which the house tax was being levied was
the same as in section 3 (1 )(b) of the Punjab Municipal Act, 1911
or section 116 of the Delhi Municipal Corporation Act, 1957 without
the second proviso and hence in order to determine the "annual value"
of the building it was necessary to find out what was the rent at
which the building might reasonably be expected to Jet from year
to year.
The Court speaking through Subba Rao, J. emphasized the
use of the word "reasonably" in the definition and pointed out that
since it was penal for the landlord to receive any rent in excess of
(l) [1962] 3 S.C.R. 49.
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DEWAN DAULAT RA! v. N.D.M.C. (Bhagwati, J.)
613
<the standard rent fixed under the Act, the landlord could not reasonably expect to receive any higher rent in breach of the law. It is
the standard rent alone which the landlord could reasonably expect
to receive from a hypothetical tenant, because to receive anything
·more would be contrary to law.
The learned Judge, after analysing
ihe provisions of the Act, observed:
''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
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 stnndard 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 may be noted that in this case the standard rent of the building
was fixed under the Act and since it was penal for the landlord
to receive any rent higher than the standard rent fixed under the Act,
it was held that the landlord could not reasonably· expect to receive
anything more than the standard rent from a hypothetical tenant and
the annual value of the building could not exceed the standard rent.
The next decision to which we must refer in this connection is
me decision of this Court in Corporation of Calcutta v. Life Insurance
Corporation (supra). This case also related to a building
situate
in Calcutta which was governed by the West Bengal Premises Rent
Control (Temporary Provisions) Act, 1950.
Section 2(10)(b) of
the Act defined "standard rent" to mean "where the rent has been
fue<l under section 9, the rent so fixed, or at which it would have
been fixed if application were made under the said section".
Here,
unlike Padma Devi's case, the standard rent of the building had not
been fixed under section 9 but it was common ground between the
parties that Rs. 2,800 per month being the amount of the
agreed
rent represented the figure at which the standard rent would have
been fixed if an application had been made for the purpose under
secti6n 9 and the standard rent of
the
building
was
therefore
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SUPREME COURT REPORTS
[1980] 2 S.C.11.
Rs. 2,800 per month within the meaning of the second part of thedefinition of that term.
The qnestion which arose for consideration
was whether the annual value of the building was liable to be determined on the footi'llg of this standard rent or it could be determined·
by taking into account the higher rent received by the tenant from its
sul:>-tenants.
The principle of the decision in Padma Devi's case WM
invoked by the assessee for contending that the annual value of the
buHding could not be determined at a figure higher than the standard
rent and this contention was upheld by the Court, though there WM
no fixation of standard rent by the Controller under section 9 and
the ~tatutory prohibition was only agai'llst receipt of rent in excess
of the standard rent fixed under the Act. The Court pointed out that
the standard rent stood defined by the latter part of section 2(10) (b)
and by virtue of that provision it was statutorily determined
at
Rs. 2,800 per month though not fixed by the Controller under section 9 and proceeded to hold, by applying the principle of the decision in Padma Devi's case, that the landlord conld not
reasonably
expect to receive any rent higher than the standard rent from a hypothetical tenant and the annual value of the building could not, therefore, be fixed
at a figure
than the standard rent. It will
be seen
that this decision marked a step forward from the decision in Padma
Devi's ease because here the standard rent was not
fixed
by
the
Controller under section 9 and it was not penal for the landlord
to
receive any rent in excess of the statutorily determined standard rent
of Rs. 2.800 per. month and yet it was he:d by this Court that the
standard rent determined the upper limit of the rent at which the landlocd could reasonably expect to let the building to a
hypothetical
tenant. It may be pointed out that an attempt was made on behalf
of the Corporation to distinguish the decision in Padma Devi's C3S·~
by contending that that decision was based on the interpretation of
section 127 (a) of the Calcutta Municipal
Corporation Act,
1923
while the provision which fell for interpretation in thi•
case
was
section 168 of the Calcutta Municipal Corporation Act, 1951 which
was different from section 127(a), in that it contained a proviso
that "i'll respect of any land or building the standard rent of which
has been fixed urider section 9 . . . . . . the annual value thereof shall
not exceed the annual amount of the standard rent so fixed" which
was absent in section 127(a).
The argument was that nnder the
proviso the annual value was limited to the standard rent only in
those cases where the standard rent was fixed under section 9 and
H
since in the case before the Court the standard rent of the building
was· not fixed under section 9, the proviso has no application and
the assessing authority was not bound to take into account the Jimi-
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DEWAN DAULAT RAI V. N.D.M.C. (Bhagwati, J.)
615
talion of the standard rent. This argument was negatived by the Court
and it was held that the enactment of the proviso in section 168 of
the Calcutta Municipal Corporation Act, 1951 dkl not alter the law
and by the addition of the proviso, the meaning of the expression
"gross rent at which the land or building might reasonably be expected to let" was not changed. It was for this reason that we pointed out
at the commencement of the judgment that the existence
of
the
proviso in section 116 of the Delhi Municipal Corporation Act, 1957
is immaterial and we may proceed to deal with the appeals arising
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under that Act as if the definition of "annual valne" did not contain
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that proviso.
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That takes us to the third decision in Guntur Municipal Council
v. Guntur Town Rate Payers' Association!!) which extended still
further the principle of the decision in Padma Devr s case.
This
was a case where the annual value was to be determined under the
Madras District Municipalities Act, 1920 which applied in the city
of Guntur.
Section 82 sub-section (2) of the Act gave a definition
of "ammaJ value" practica11y in the same terms as section 3(1) (b)
of the Punjab Municipal Act, 1911 and section 116 of the Delhi
Municipal Corporation Act, 1957 without the second proviso. There
was lllso in force in the city of Guntur, the Andhra Pradesh Buildings (Lease Rent and Eviction) Control Act, 1960, which provided
inter alia for fixation of fair rent of buildings.
It is necessary to
refer to a material provisions of this Act.
Section 4, subsection (1) conferred power on the Controller, on application by
the tenant or landlord of a building, to fix the fair rent for
such
bnilding after holding such inquiry as he thought fit and sub-section
(2) to (5) of section 4 laid down the formulae for determination of
fair rent in different classes of cases.
Sub-section (1) (a) of section 7 gave teeth to the determination of fair rent by providing that
where the Controller has fixed the fair rent of a building, the landlord shall not claim, receive or stipnlate for the !laymen! of anything
in excess of such fair rent and sub-section 2 (a) of that section recognised that where the fair rent of a building has not been fixed by
the Controller, the agreed rent could be lawfully paid by the tenant
to the landlord and it was only payment of a sum in addition to
the agreed rent that was prohibited by that sub-section. Section 29
made it penal for any one to contravene the provisions
of subsections 1 (a) and 2(a) of section 7.
Now there could be no doubt
that if the fair rent of a building were fixed under section 4, subsection (1), the decision in Padma Devi's case would be clearly
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applicable and the annual value would be limited to the fair rent so
fixed.
But. would the same principle apply where the fair rent were
not fixed '!
Would the annual value in such a case be liable to be
assessed in the ligh'. of the provisions contained in the Re'nt Act ?
That was the question which arose before the Court in the Gunlur
Municipal Council's case.
The Guntur Municipal Council urged
that the decision in Padma Devi's case was not applicable and
attempted to distinguish it by saying that under
section 7,
subsection ( 1) it was only after the fixation of fair rent of a building
that the landlord was debarred from claiming or receiving payment
of any rent in excess of such fair rent and since the fair rent of the
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building in that case had not been fixed, it was not penal for the
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landlord to receive any higher rent and the assessment of
annual
value was,. therefore, not "limited or governed by the measure provided by the provisions of the Act for determination of the fair rent"
This attempt. however, did not find favour with the court and it was
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held that there was no distinction "between buildings the fair rent
of which has been actually fixed by the Controller and
those in
respect of which no such rent has been fixed."
The Court pointed
out: "It is perfectly clear that the landlord cannot lawfully expect
to get more rent than the fair rent which is payable in accordance
with the principles laid down in the Act. The assessment of valuation must take into account the measure of fair rent as determinable
under the Act. It may be that where the Controller has not fixed
the fair rent, the municipal authorities will have to arrive at their
own figure of fair rent but that can be done without any difficulty
by keeping in view the principles laid down in section 4 of the Act
for determination of fair rent." It will thus be seen
that even
though fair rent had not been fixed under the Act as in Padma
Devi's case, nor was it statutorily determined as in the Life lllsurance
Corporation's case (there being no provision in the Andbra Pradesh
Rent Act similar to the latter part of section 2(10){b) of the West
Benga1 Rent Act) and it was clear from the provisions of the Rent
Act that it was only after the fair rent of a building was fixed by
G
the Controller that the prohibition against receipt of any amount Jn
excess of fair rent became applicable and so long as the fair rent
was not fixed by the Controller it was open to the landlord to receive
the agreed rent even though it might be higher than the fair renf,
yet it was held by the court that in view of the provisions in the
H
Rent Act in regard to fair rent, the landlord could not reasonably
expect to receive from a hypothetical tenant anything more than the
fair rent payable in accordance with the principles laid down in the
Rent Act and the annual value was liable to be detennined on tbe
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DEWAN DAULAT RAJ V. N.D.M.C. (Bhdgwati, J.)
617
basis of fair rent as determinable under the Rent Act. The Court
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observed that the assessing authority would have to arrive at its
own figure of fair rent by applying the principles laid down in subsections (2) to (5) of section 4 for determination of fair rent.
This
decision clearly represented a further extension of the
principle in
Padma Devi's case to a situation where no standard rent has been
fixed by the Controller and in the absence of fixation of standard
rent, there is no prohibition against receipt of higher rent by the
landlord.
It is in the light of these decisions that we must consider whether
"' in case if a building in respect of which no standard rent has been
fixed by the Controller under the Delhi Rent Control Act, 1958
the annual value must be limited to the measure of standard rent
determinable under that Act or it can be determined on the basis
of the higher rent actually received by the landlord from the tenant.
But before we proceed to examine this question, we must refer to
a recent decision of this Court in Municipal Corporation, Indore &
Ors. v. Smt. Ratnaprabha & Ors.( 1) which apparently seems to
strike a different note.
That was a case relating to
a building
situated in Indore and subject to the provisions
of
the Madhya
Pradesh Aecommodation Control Act, 1961.
The building was self
occupied and hence there was no occasion to have its standard rent
fixed by the Controller. The annual value of the
building
was
sought to be assessed for rating purposes under the Madhya Pradesh
Municipal Cor~ration Act, 1956 and section 138(b) of that Act
provided that the annual value of any building shall, notwithstanding
anything contained in any other law for the time being in force be
deemed to be the gross annual rent at which such building might
reasonably be expected to let from year to year, subject to certain
specified deductions.
The argument of the assessee was that even
though no standard rent in respect of the buildi!ll.g was fixed by
the Controller, the reasonable rent contemplated by section 138(b)
could not exceed the standard rent determinable under the Act and
it was incumbent on the Municipal Commissioner to determine the
annual ~'alue of the building on the same basis on which its standard
rent was required to be fixed under the Act.
This argument was
~ought to be supported by relying ou the three decisions to which·
we have already made a reference,
Now it would appear that the
decision in Guntur Municipal Council's case was clearly applicable
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ou the facts of this case and following that decision the Court ought
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to have held that the annual value of the building could not exceed
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SUPREME COURT REPORTS
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the standard rent determinable under section 7 of the Act and the
assessing authority should have arrived at its own estimate of the
standard rent by applying the principles laid down in that section
and determine the annual value on the basis of such standard rent.
But the Court negatived the applicability of the decision in Guntur
B
El
Municipal Council's case and the earlier two cases by relying
on
the words "notwithstanding anything contained in any other law for
the time being in force" in section 138(b). The Court pointed out
that while 'the requirement of the law is that the reasonable letting
value
should
determine the annual value of the building, it has
also been specifically provided that this would be so "notwithstand- "
ing anything contained in any other law for the time being in force"
and observed that it would be a proper interpretation of these words
"to hold that in a case where the standard rent of a building has
been fixed under section 7 of the Madhya Pradesh Accommodation
Control Act, and there is nothing to show that there has been fraud
or collusion, that would be its reasonable letting value, but where
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this is not so, and the building has never been let out and is being
used in n manner where the question of fixing its standard
rent
does not arise, it would be permissible to fix its reasonable rent
without regard to the provisions of the Madhya Pradesh Accommodation Control Act, 1961. This view will, in our
opinion,
give
proper effect to the non-obstante clause in clause (b), with
due
E regard to its other provision that the letting value should be "rea!onable".
The Court leaned heavily on the non-0bstante clause
in
section 138(b) and distinguished the decision in Guntur Municipal
Council's case and the earlier two cases on the ground that in none
of the three
Mintlcipal Acts which came up
for
coni1''
deration before the Conrt in these cases, there was any such nonobstante clause.
We are not at all sure whether this decision represents the correct interpretation of section 138 (b) because it is
rather difficult to see how the non-obstante clause in that section
can possibly affect the interpretation of the words "the annual value
of any buHding shall ...................... be deemed to be the
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gross annual rent at which such building .... might reasonably ....
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........ be expected to be let from year to year." The meaning
of these words cannot be different in section 138(b) than what i'
is in section 127(a) of the Calcutta Municipal Corporation
Act,
1923 and section 82(2) of the Madras District, Municipality Act,
1920 and the only effect of the non-obstante clause would bo that
even if there is anything contrary in any other law for the tim$
being in force, that should not detract from full effect being giTen
to these words according to their proper meaning.
But it is uot
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DEWAN DAULAT RA! V. N.D.M.C. (Bhagwati, J.)
619
necessary for the purpose of the present appeals to probe further
into the question of correctness of this decision, since there is
no
non-obstante clause either in section 3(l)(b) of the Punjab Municipal Act, 1911 or in section 116 of the Delhi Municipal Corporation Act, 19 5 7 · and this decision has therefore, no application.
Now let us turn to the present appeals and see how far the
trilogy of decisions referred to earlier throws light on the solution
of the problem before us.
We may first refer to the relevant provisions of the Delhi Rent Control Act, 1958 for that was the Jaw in
" force at the material time relating to restrictions of rent of buildings
situate within the jurisdiction of the Delhi Municipal Corporation
and the New Delhi Municipal Committee. Section 2(k)
defined
'standard rent' in relation to any premises to mean "the standard
rent referred to in section 6 or where the standard rent has been
increased under section 7, such increased
rent." Sub-section (1)
of section 4 provided that, subject to a single
narrow exception
whoch is not material for our purpose, "no tenant shall, notwithstanding any agreement to the contrary be liable to pay to his landlord
for the occupation of any premises any amount in excess of the
standard rent of the premises" and sub-section (2) of section 4
declared that, subject to provision of sub-section ( 1) "any agreement
for the payment of rent in excess of the standard rent shall be
construed as if it were an agreement for the payment of the standard
rent only''. Section 5 sub-section (1) enacted a prohibitiPn injuncting that "no person shall claim or receive any rent in excess
of the standard rent, notwithstanding any agreement to the contrary."
Then, section 6 proceeded to set out different formulae for determination of standard rent in different classes of cases and each formula
gave a precise and clearcut method of computation yieldmg a definite
figure of standard rent in respect of building
falling
within
its
coverage. Section 9 sub-section (1) provided that the Controller
shall, on an application made to him in this behalf either by the
landlord or by the tenant, fix in respect of any premises the standard
rent referred to in section 6 and sub-section (2) of section 9 laid
down that in fixing the standard rent of any premises, the Controller
shall fix an amount which appears to him to be reasonable having
regard to the provisions of section 6 and the ci~cumstances of the
caee. Sub-section ( 4) of section 9 provided for determination of
standard rent in a case where for any reason it was not possible to
determine the standard rent on the principles set forth under ~ec
tiOlt 6 and said that in such a case "the Controller may fix such
rent as would be reasonable having regard to the situation, locality
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and condition ofl the premises and the amenities provided 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". Section 9 sub-section (7) enjoined the Controller,
while fixing the standard rent of any premises, to specify a date
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from which the standard rent so fixed shall be deemed to have effect
and added a proviso that in no case the date so specified shall
be
earlier than one year prior to the date of the application for the
fixation of the standard rent.
Lastly, section 12 laid down a period
of limitation within which an application for fixation of the standard
i:ent may be made by the landlord or the tenant by providing that Y
such application must be made within 2 years from the date of
commencement of the Act in case of premises let prior to
such
commencement and if the premises were let after such commencement, then within 2 years from the date on which the premises
were let to the tenant.
The proviso to section 12 empowered the
Controller to entertain the application after the expiry of the period
of limitation if he was satisfied that the applicant was prevented by
sufficient cause from filing the application in time.