# Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab. Pvt. Ltd. & Others

- **Citation:** 2024 INSC 135
- **Court:** Supreme Court of India
- **Decided:** 2024-02-22
- **Case number:** Civil Appeal No. 2878 of 2024
- **Bench:** B.V. Nagarathna, Ujjal Bhuyan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/lucknow-nagar-nigam-others-v-kohli-brothers-colour-lab-pvt-ltd-others-37650
- **Pages:** 88

## Headnote

1)
Whether statutory vesting of property termed as enemy
property under the provisions of the Enemy Property Act,
1968 amounts to expropriation which leads to change of its
status inasmuch as its ownership is transferred to the Union
of India;
2)
If there is a transfer of ownership by its statutory vesting
in the Custodian for Enemy Property, whether the Union
within the meaning of Article 285 of the Constitution would
be entitled to exemption from payment of property or other
local taxes to Municipal Corporation under provisions of
the UP Municipal Corporation Adhiniyam, 1959 (Act of
1959); and
3)
Despite becoming the property of the Union, whether, clause
(2) of Article 285 enables the appellant to impose property or
other local taxes on the respondent, which is lessee of the
subject enemy property.
Headnotes
Enemy Property Act, 1968 - Whether statutory vesting
of enemy property including the subject property in the
Custodian for Enemy Property amounts to expropriation
and transfer of ownership so as to confer ownership of such
enemy property on the Custodian - Enemy Property Rules,
2015 - r.15.
Held: The Custodian for Enemy Property in India, in whom the
enemy properties vest including the subject property, does not
acquire ownership of the said properties - The enemy properties
vest in the Custodian as a trustee only for the management and
848
[2024] 2 S.C.R.
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administration of such properties - The Central Government may,
on a reference or complaint or on its own motion initiate a process
of divestment of enemy property vested in the Custodian to the
owner thereof or to such other person vide Rule 15 of the Rules
- Hence, the vesting of the enemy property in the Custodian is
only as a temporary measure and he acts as a trustee of the said
properties - In view of the position of a Custodian, who under
the Enemy Property Act, 1968, acts as the trustee for the enemy
property under the Act and not as the owner of the property, but
as a protector of the property vested in him, the Custodian can
never be an owner or having any right, title or interest in the enemy
property as owner.[Paras 16.1, 22.4]
Taxation - Of Enemy property - Constitution of India - Art.
285 - If ownership of enemy property is conferred on the
Custodian for Enemy Property, whether such property
becomes Union property within meaning of Art. 285 of
the Constitution and therefore, it is exempt from payment
of property or other local taxes to appellant-Municipal
Corporation under provisions of the Act of 1959 - Whether
despite such enemy property becoming property of the
Union, clause (2) of Article 285 of the Constitution enables
appellant to impose property or other local taxes on the
respondent which is lessee of the subject property - Enemy
Property Act, 1968 - UP Municipal Corporation Adhiniyam,
1959.
Held: Vesting of enemy property in the Custodian does not
transfer ownership of such property in the Custodian and by
that process in the Union or Central Government, but since the
Custodian is only a trustee of the enemy property, the same is
liable to tax in accordance with law, including to the appellant
- The Custodian is only authorised to pay the taxes on the
subject enemy property - The Custodian while doing so is not
acting on behalf of the Union Government being the owner of
the enemy property, rather, the Custodian who is appointed by
the Central Government under the provisions of the Act, which
is a Central legislation only discharges his duties and functions
under the provisions of the Parliamentary legislation i.e. the Act
under consideration - Such discharge of duties and functions,
including the payment of taxes vis-à-vis enemy property vested
in him would not also by the same logic imply that the Custodian
[2024] 2 S.C.R.
849
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
is acting as if the property vested in him has become the Union
property - Mere vesting of enemy property in the

## Text

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* Author
[2024] 2 S.C.R. 847 : 2024 INSC 135
Lucknow Nagar Nigam & Others
v.
Kohli Brothers Colour Lab. Pvt. Ltd. & Others
(Civil Appeal No. 2878 of 2024)
22 February 2024
[B.V. Nagarathna* and Ujjal Bhuyan, JJ.]
Issue for Consideration
1)
Whether statutory vesting of property termed as enemy
property under the provisions of the Enemy Property Act,
1968 amounts to expropriation which leads to change of its
status inasmuch as its ownership is transferred to the Union
of India;
2)
If there is a transfer of ownership by its statutory vesting
in the Custodian for Enemy Property, whether the Union
within the meaning of Article 285 of the Constitution would
be entitled to exemption from payment of property or other
local taxes to Municipal Corporation under provisions of
the UP Municipal Corporation Adhiniyam, 1959 (Act of
1959); and
3)
Despite becoming the property of the Union, whether, clause
(2) of Article 285 enables the appellant to impose property or
other local taxes on the respondent, which is lessee of the
subject enemy property.
Headnotes
Enemy Property Act, 1968 - Whether statutory vesting
of enemy property including the subject property in the
Custodian for Enemy Property amounts to expropriation
and transfer of ownership so as to confer ownership of such
enemy property on the Custodian - Enemy Property Rules,
2015 - r.15.
Held: The Custodian for Enemy Property in India, in whom the
enemy properties vest including the subject property, does not
acquire ownership of the said properties - The enemy properties
vest in the Custodian as a trustee only for the management and
848
[2024] 2 S.C.R.
Digital Supreme Court Reports
administration of such properties - The Central Government may,
on a reference or complaint or on its own motion initiate a process
of divestment of enemy property vested in the Custodian to the
owner thereof or to such other person vide Rule 15 of the Rules
- Hence, the vesting of the enemy property in the Custodian is
only as a temporary measure and he acts as a trustee of the said
properties - In view of the position of a Custodian, who under
the Enemy Property Act, 1968, acts as the trustee for the enemy
property under the Act and not as the owner of the property, but
as a protector of the property vested in him, the Custodian can
never be an owner or having any right, title or interest in the enemy
property as owner.[Paras 16.1, 22.4]
Taxation - Of Enemy property - Constitution of India - Art.
285 - If ownership of enemy property is conferred on the
Custodian for Enemy Property, whether such property
becomes Union property within meaning of Art. 285 of
the Constitution and therefore, it is exempt from payment
of property or other local taxes to appellant-Municipal
Corporation under provisions of the Act of 1959 - Whether
despite such enemy property becoming property of the
Union, clause (2) of Article 285 of the Constitution enables
appellant to impose property or other local taxes on the
respondent which is lessee of the subject property - Enemy
Property Act, 1968 - UP Municipal Corporation Adhiniyam,
1959.
Held: Vesting of enemy property in the Custodian does not
transfer ownership of such property in the Custodian and by
that process in the Union or Central Government, but since the
Custodian is only a trustee of the enemy property, the same is
liable to tax in accordance with law, including to the appellant
- The Custodian is only authorised to pay the taxes on the
subject enemy property - The Custodian while doing so is not
acting on behalf of the Union Government being the owner of
the enemy property, rather, the Custodian who is appointed by
the Central Government under the provisions of the Act, which
is a Central legislation only discharges his duties and functions
under the provisions of the Parliamentary legislation i.e. the Act
under consideration - Such discharge of duties and functions,
including the payment of taxes vis-à-vis enemy property vested
in him would not also by the same logic imply that the Custodian
[2024] 2 S.C.R.
849
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
is acting as if the property vested in him has become the Union
property - Mere vesting of enemy property in the Custodian
does not transfer ownership of the same from the enemy to the
Union or to the Central Government; the ownership remains with
the enemy but the Custodian only protects and manages the
enemy property and in discharging his duties as the Custodian
or the protector of enemy property he acts in accordance with
the provision of the Act and on the instructions or guidance of
the Central Government - The reason as to why the Central
Government is empowered to issue guidelines or instructions to
the Custodian is because the Custodian is appointed under the
Act which is a Parliamentary legislation and the reason why the
Parliament has passed the said law is in order to have a uniformity
vis-à-vis all enemy properties throughout the length and breadth
of the country in that the same are protected, managed and dealt
with uniformly in accordance with the provisions of the Act - Union
of India cannot assume ownership of the enemy properties once
the said property is vested in the Custodian - This is because,
there is no transfer of ownership from the owner of the enemy
property to the Custodian and consequently, there is no ownership
rights transferred to the Union of India - Therefore, the enemy
properties which vest in the Custodian are not Union properties
- As the enemy properties are not Union properties, clause (1)
of Article 285 does not apply to enemy properties - Clause (2)
of Article 285 is an exception to clause (1) and would apply only
if the enemy properties are Union properties and not otherwise
- High Court was not right in holding that the respondent as
occupier of the subject enemy property, is not liable to pay any
property tax or other local taxes to the appellant - Consequently,
any demand for payment of taxes under the Act of 1959 made
and thereby paid by the respondent to the appellant-authority
shall not be refunded - However, if no demand notices have
been issued till date, the same shall not be issued but from the
current fiscal year onwards (2024-2025), the appellant shall be
entitled to levy and collect the property tax as well as water tax
and sewerage charges and any other local taxes in accordance
with law. [Paras 17.9, 22.4]
Constitution of India - Art.300A - Art. 300A states that no
person shall be deprived of his property save by authority
of law - Expressions "law", "person", "property" and "by
authority of law" - Meaning of - Whether having regard to
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Art. 300A, taking possession of the enemy property for the
purpose of administration of the same by the Custodian, is
an instance of transfer of ownership from the true owner to
the Custodian and thereby to the Union - Enemy Property
Act, 1968.
Held: The word "law" is with reference to an Act of Parliament or
of a State Legislature, a rule or a statutory order having the force
of law - Although, to hold property is not a fundamental right, yet
it is a constitutional right - The expression person in Article 300-A
covers not only a legal or juristic person but also a person who is
not a citizen of India - The expression property is also of a wide
scope and includes not only tangible or intangible property but also
all rights, title and interest in a property - Before a person can
be deprived of his right to property, the law must expressly and
explicitly state so - Thus, the expression by authority of law means
by or under a law made by the competent Legislature - Having
regard to the salutary principles of Art. 300-A, one cannot construe
the taking of possession of the enemy property for the purpose
of administration of the same by the Custodian, as an instance of
transfer of ownership from the true owner to the Custodian and
thereby to the Union - This position is totally unlike the position
under the provisions of the Land Acquisition Act, 1894 or the
subsequent legislation of 2013 which are expropriatory legislations
under which acquisition of land would inevitably result in transfer
of the ownership of the land from the owner to the State which is
the acquiring authority, but the same would be subject to payment
of a reasonable and fair compensation to the owner. [Paras 18
and 18.2]
Words and Phrases - Expression "vest" and "vesting" -
Meaning of.
Held: The expression 'vest' or 'vesting' has no precise definition
and it would depend upon the context in which the expression is
used under a particular enactment - The word 'vesting' is a word
of variable input and has more than one meaning which must be
discerned and the exact connotation must be found by looking
into the scheme of law and the context in which it is used - The
setting in which it is used would lend colour to it and divulge the
legislative intent - Vesting of property in a person or authority does
not always mean transfer of absolute title in the property. [Para 16]
[2024] 2 S.C.R.
851
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
Enemy Property Act, 1968 - Jurisprudential aspects of
ownership of property vis-à-vis the status of the Custodian
of Enemy Property for India under the Act - Jurisprudential
aspects of vesting or taking possession as per provisions of
the Act - Relationship between possession and ownership.
[Paras 14 to 14.16]
Constitution of India - Article 285 - Scope and ambit of the
two clauses of Art. 285 - Discussed. [Paras 21.1 to 21.10]
Case Law Cited
Union of India v. Raja Mohammad Amir Mohammad
Khan, [2005] Suppl. 4 SCR 390 : (2005) 8 SCC 696;
Delhi Administration v. Madan Lal Nangia, [2003]
Suppl. 4 SCR 360 : (2003) 10 SCC 321; Lieutenant
Governor of Delhi v. Matwal Chand (Dead) through LRs,
[2015] 10 SCR 346 : (2015) 15 SCC 576; Municipal
Commissioner of Dum Dum Municipality v. Indian
Tourism Development Corporation, [1995] Suppl. 2
SCR 433 : (1995) 5 SCC 251; Electronics Corporation
of India v. Secretary, Revenue Department, Govt. of
Andhra Pradesh, [1999] 2 SCR 1078 : (1999) 4 SCC
458; Union of India v. State of Uttar Pradesh, [2007]
11 SCR 792 : (2007) 11 SCC 324; Rajkot Municipal
Corporation v. Union of India, (2013) 14 SCC 599;
State of Uttar Pradesh v. Uttar Pradesh Rajya Khanij
Vikas Nigam Sangharsh Samiti, (2008) 12 SCC 675;
NDMC v. State of Punjab, [1996] Suppl. 10 SCR 472 :
(1997) 7 SCC 339; Fruit and Vegetable Merchants
Union, Subzi Mandi, Delhi v. Delhi Improvement Trust,
Regal Buildings, Cannaught Place, [1957] 1 SCR 1 :
AIR 1957 SC 344; Maharaj Singh v. State of Uttar
Pradesh, [1977] 1 SCR 1072 : (1977) 1 SCC 155; Dr.
M. Ismail Faruqui vs. Union of India, [1994] Suppl.
5 SCR 1 : (1994) 6 SCC 360; Indian Handicrafts
Emporium v. Union of India, [2003] Suppl. 3 SCR
43 : (2003) 7 SCC 589; Chandigarh Housing Board
v. Major-General Devinder Singh (Retd.), [2007] 3
SCR 1049 : (2007) 9 SCC 67; KT Plantation Pvt. Ltd.
v. State of Karnataka, [2011] 13 SCR 636 : (2011)
9 SCC 1; Union of India v. City Municipal Council,
Bellary, [1979] 1 SCR 573 : AIR 1978 SC 1803; Kohli
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Brothers v. Amir Mohammad Khan, (2012) 12 SCC
625 - referred to.
State of Andhra Pradesh v. V. Subba Rao, 2011
SCC OnLine AP 838; State of Gujarat v. The Board
of Trustees of Port of Kandla, (1979) 1 GLR 732;
Bibhutibhushan Datta v. Anadinath Datta, AIR 1934
Cal 87; The Governor-General of India in Council v.
The Corporation of Calcutta, AIR 1948 Cal 116; The
Corporation of Calcutta v. Governors of St. Thomas'
School, Calcutta, AIR 1949 FC 121 - referred to.
List of Acts
Enemy Property Act, 1968; Enemy Property Rules, 2015; Defence
of India Act, 1971; UP Municipal Corporation Adhiniyam, 1959;
Constitution of India.
List of Keywords
Statutory vesting; Enemy property; Expropriation; Ownership;
Possession; Transfer; Custodian; Exemption; Tax; Municipal;
Trustee; Central legislation; Union property; Parliamentary
legislation; Property tax; Law, Person, Property; Authority of law;
Fundamental right; Constitutional right; Citizen; Expropriatory
legislation; Compensation; Vest; Vesting; Connotation; Absolute
title; Jurisprudential aspect.
Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2878 of 2024
From the Judgment and Order dated 29.03.2017 of the High Court of
Judicature at Allahabad, Lucknow Bench in WPMB No. 2317 of 2012
Appearances for Parties
Kavin Gulati, Sr. Adv., Yash Pal Dhingra, Mukesh Verma, Pankaj
Kumar Singh, Dushyant Sharma, Advs. for the Appellants.
Balbir Singh, A.S.G., S. Gurukrishna Kumar, Rana Mukherjee, Sr.
Advs., Sunil Kumar Jain, Rajan Kumar Chourasia, Ms. Aakanksha
Kaul, Ms. Suhasini Sen, Ms. Gargi Khanna, Rupesh Kumar, Bhuvan
Kapoor, Arvind Kumar Sharma, Randhir Singh, Devesh Tuli, Dr.
Vijendra Singh, Deepak Goel, Ms. Apurva Singh, Sagar Mehlawat,
Kapil Prajapati, Advs. for the Respondents.
[2024] 2 S.C.R.
853
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
Judgment / Order of the Supreme Court
Judgment
Nagarathna, J.
Leave granted.
2.
The present Civil Appeal has been filed by the Lucknow Nagar
Nigam ('Municipal Corporation') impugning the judgment of the
High Court of Allahabad that has allowed the Writ Petition filed by
respondent herein ('the assessee'), thereby holding that the assessee
is exempt from payment of property tax under the provisions of the
UP Municipal Corporation Adhiniyam, 1959 (hereinafter referred to
as "Act of 1959", for brevity sake).
Bird's Eye View of the Controversy:
3.
Whether statutory vesting of property termed as enemy property
under the provisions of the Enemy Property Act, 1968 (hereinafter
referred to as "the Act" for the sake of convenience) amounts to
expropriation which leads to the change of its status inasmuch as its
ownership is transferred to the Union of India, is a question that has
arisen in the present appeal. If there is a transfer of ownership by its
statutory vesting in the Custodian for Enemy Property, whether the
Union within the meaning of Article 285 of the Constitution of India
would be entitled to exemption from payment of property or other
local taxes to Municipal Corporation under the provision of the Act
of 1959 is another question that has arisen in the present appeal.
Further, despite becoming the property of the Union, whether, clause
(2) of Article 285 enables the appellant herein to impose property
or other local taxes on the respondent, which is the lessee of the
subject property is the third question which arises in this appeal.
Relevant Facts of the Case:
4.
The subject property is an Enemy Property within the meaning of
the Act bearing House No.31/28/04(31/59) located on Mahatma
Gandhi Marg, Lucknow, owned by the Raja of Mahmudabad, who
migrated to Pakistan in the year 1947. A portion of the property is
currently occupied and utilized for profit-generating purposes by the
respondent-assessee, in this case.
4.1 Historically, prior to the fiscal year 1998-1999, the appellantMunicipal Corporation imposed and collected taxes in
854
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accordance with Rule No.174 'ka' of the Act of 1959 from the
assessee. However, in the fiscal year 1998-1999, it came to
the Municipal Corporation's attention that the assessee was
operating a commercial establishment within the premises.
Consequently, the appellant-Municipal Corporation conducted
an assessment based on Capital Value and issued a notice to
the assessee regarding the assessed Annual Value.
4.2 It is pertinent to note that respondent No.2, Office of the
Custodian of Enemy Property for India (for short 'the Custodian'),
under the Ministry of Commerce, Government of India, issued
a Certificate on 03.10.2002, stating that the subject property
bearing premises No.53-54, Lawrie Building Hazaratganj,
Lucknow, is Enemy Property vested with the Custodian. The
Certificate also explicitly stated that the Custodian was obligated
to pay house tax and other local taxes on behalf of this property.
4.3 The assessee, along with other tenants, inter-alia, contested
the assessment orders issued by the Municipal Corporation and
approached the High Court of Allahabad at Lucknow by filing
Writ Petition being Misc. Bench No. 3979 of 2003. However,
this legal action was ultimately uncontested by the tenants and
was subsequently dismissed vide order dated 30.03.2017.
4.4 Due to outstanding dues of Rs.1,621,987.00/- under the
head of House Tax concerning the Enemy Property No.31/58
Hazaratganj, the Municipal Corporation, vide letter dated
28.03.2005 notified the District Magistrate, Lucknow, of its
intention to proceed with attachment and sealing of the said
premises under Sections 506-509 of the Act of 1959.
4.5 At this juncture, it is necessary to state that Raja Mohammed
Amir Mohammad Khan, the son of the Raja of Mahmudabad,
who remained in India as an Indian citizen, had been actively
seeking the release of enemy properties owned by his late
father. He contended that these properties should no longer be
vested with the Custodian after his father's demise as they were
now vested in him, an Indian citizen. While the Government
had agreed to release 25% of these properties, it had not yet
acted upon this commitment. In response, Raja Mohammed
Amir Mohammad Khan approached the Bombay High Court
by way of filing WP No.1524 of 1997. The High Court ruled
[2024] 2 S.C.R.
855
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
in his favor, directing the Custodian to surrender possession
of the properties to him. Being aggrieved with this decision,
the Union of India approached this Court by way of filing SLP
(C) No.22452 of 2001, which was converted to Civil Appeal
No.2501 of 2002. This Court by its judgment dated 21.10.2005
reported in Union of India vs. Raja Mohammad Amir
Mohammad Khan, (2005) 8 SCC 696 ('Amir Mohammad
Khan'), dismissed the appeal preferred by the Union of India
and directed the Union of India to get the buildings (residence
or offices) vacated from such officers and handover the
possession to Raja Mohammed Amir Mohammad Khan within
eight weeks. The Court further directed that the officers who
are in occupation of buildings for their residences or for their
offices shall immediately vacate and hand over the buildings
or the properties to the Custodian to enable him to hand over
the possession.
4.6 As a result of these orders, proceedings were initiated by
various tenants, including respondent No.1. This Court, in SLP
(Civil) No.14943 of 2006 vide order dated 08.09.2006, clarified
its earlier judgment dated 21.10.2005 passed in Civil Appeal
No.2501 of 2002. It was clarified by this Court that individuals
who were allotted properties by the Custodian or who came
into possession after 1965, i.e., following the declaration of
Raja Mahmudabad's property as an enemy property and the
appointment of the Custodian, were required to vacate these
properties. However, persons claiming possession prior to the
Custodian's appointment, based on valid tenancy agreements
established by Raja Mahmudabad or his General Power of
Attorney, were exempted from this directive. The enquiry
conducted in pursuance to the above orders of this Court
dated 08.09.2006 resulted in a report in favour of respondent
No.1 herein as well as other similarly situated tenants. Ergo,
they continued to remain in possession vide Amir Mohammad
Khan.
4.7 Following these events, on 28.05.2011, the appellant No.3,
issued a notice to the assessee, demanding payment of Rs.
7,57,239.00/-. The notice warned of proceedings for recovery
and attachment through the District Magistrate under Section
64 if the payment was not settled within three days.
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4.8 Aggrieved by the aforesaid action, the assessee approached
the High Court of Allahabad at Lucknow by filing Writ Petition
being Misc. Bench No.2317 of 2012 seeking the following reliefs:
"(a) issue a writ of prohibition or a writ, order or direction
in the nature of prohibition prohibiting the opposite
parties no.1 & 2 not to make any assessment or
raise bill for payment of House Tax or Water Tax/
or the property in the name and style of Lawrie
Building situated at 50, Hazratganj, Lucknow being
the property of Union of India and exempted from
State taxation;
(b) issue a writ of certiorari or a writ, order or direction in
the nature of certiorari quashing the impugned bills/
recovery notice in respect of payment of House Tax
for the year 2010-11, issued by the opposite party no.I,
contained in Annexure Number 1 to the writ petition;
(c)
issue a writ of certiorari or a writ, order or direction
in the nature of certiorari quashing the impugned
bills/recovery notice dated 28.5.2011, issued by the
opposite party no.2, contained in Annexure Number
2 to the writ petition; and
(d) issue a writ of mandamus or a writ, order or direction
in the nature of mandamus commanding _the
respondent numbers 1 to 3 to refund the amount
of Rs.7,29,7461- and Rs.2 lacs deposited by the
petitioner along with interest at the rate of 18%
per annum and within such time as may kindly be
stipulated by this Hon'ble Court"
4.9 During the pendency of the said proceedings, appellants' counsel
conceded that, as per the provisions of the Constitution of India,
the appellants could not levy taxes on property belonging to
the Government of India or Union properties. However, the
appellants reserved the right to demand applicable fees for
services rendered, such as water and sewerage charges.
4.10 By virtue of the impugned judgment and order dated 29.03.2017,
the High Court allowed the writ petition and quashed the recovery
notice dated 28.05.2011 on the ground that this case pertained
[2024] 2 S.C.R.
857
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
exclusively to taxes, namely House Tax and Water Tax, which
are not applicable to the respondent No.1 since the property in
question is an enemy property. The High Court further directed
respondent No.1 to make representations for the recovery of
any amounts previously paid to the appellants.
Hence, the appellants have preferred this civil appeal.
Respondent No.2 has filed his counter affidavit which we have
perused.
Submissions:
Submissions of the appellants:
5.
Sri Kavin Gulati, learned senior counsel appearing on behalf of the
Municipal Corporation, at the outset, submitted that the High Court
erroneously held that the House Tax and Water Tax levied herein
are not leviable on the assessee respondent herein in respect of
property which is admittedly an enemy property and not property
of the Union or Central Government. Therefore, it was submitted:
a)
that the property is merely in the custody of the Custodian as
specified under the Act. That the preamble of the Act provides
that this is "An Act to provide for the continued vesting of
Enemy Property". That there is no declaration by the Union
Government through any legislation declaring the properties to
be the property of the Union Government. The only declaration
that is contained is to vest the property in the Custodian without
a further declaration that the property vests absolutely in the
Union Government free from all encumbrances. That whenever
the legislature desired that any property vests absolutely in the
Central Government, it would be specifically provided so as in
the case of Sections 16 and 17 of the Land Acquisition Act,
1984 as well as in the case of Section 269 of the Income Tax
Act, 1961. But the same is conspicuous by its absence under
the Act under consideration;
b)
that a perusal of the scheme of the Act, more particularly, the
Preamble, Section 2(c) and its proviso, Sections 15(1), 17(1)(c),
and 18 read with Rule 5(1) and proviso 2, 5(2), 5(3) and 15(1)
cumulatively would establish that the Custodian has certain
obligations regarding Enemy Property. However, the Central
Government or the Custodian is not vested with ownership of
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the same. Section 2(c), which defines enemy property reads
that it "means any property for the time being belonging to or
held or managed on behalf of an enemy...". That the expression
"for the time being" would show that the nature of vesting is not
permanent and that the vesting is only for the management of
the enemy property;
c)
that for the Union Government to claim ownership of enemy
property, it must follow the tenets of Article 300-A of the
Constitution of India as well as other relevant provisions of the
Constitution, which allow the acquisition of private properties
only on payment of a fair compensation. This constitutional
right is available to all persons and not just to citizens of India.
Being aware of the aforesaid position that enemy properties
do not become properties of the Union of India, the legislature
has under Section 8(2)(vi) of the Act permitted the Custodian
for Enemy Property to deposit Municipal Taxes vis-à-vis enemy
property vested in him;
d)
that even though the Union of India may have overarching
control over Enemy Properties, the status of the Union or
Central Government is not that of an owner. The Custodian is a
statutory authority in whom there is vesting of enemy property,
which is different from having ownership over the same. The
fact that the Custodian can sell properties to third parties is akin
to the powers available to a Receiver or a Liquidator who can
exercise similar powers of sale [vide Delhi Administration vs.
Madan Lal Nangia, (2003) 10 SCC 321 ("Madan Lal Nangia")
Paras 14,15; Lieutenant Governor of Delhi vs. Matwal Chand
(Dead) through LRs, (2015) 15 SCC 576 ("Matwal Chand"),
Para 14; Municipal Commissioner of Dum Dum Municipality
vs. Indian Tourism Development Corporation, (1995) 5 SCC
251 ("Dum Dum Municipality"), Paras 14,18, 22 and 35 and
State of Andhra Pradesh vs. V.Subba Rao, 2011 SCC OnLine
AP 838 ("Subba Rao"), Paras 23-25];
e)
that Article 285 (1) is not attracted to the present case as the bar
under Article 285 (1) is only applicable to the properties 'of the
Union'. Even when the property is given on lease by the Union
to a private party, then under Section 179 of the Act of 1959,
tax is to be levied on the 'occupier'. Reliance was placed on the
judgment of the Constitution Bench of this Court in Electronics
[2024] 2 S.C.R.
859
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
Corporation of India vs. Secretary, Revenue Department,
Govt. of Andhra Pradesh, (1999) 4 SCC 458 ("Electronics
Corporation") wherein it was held that Article 285 will not be
applicable in cases when the land belonging to the Government
of India was leased out to a Government Company;
f)
that this Court in Union of India vs. State of Uttar Pradesh,
(2007) 11 SCC 324 held that service charges are a fee and
cannot be said to be hit by Article 285 of the Constitution;
g)
that pursuant to this Court's orders dated 19.11.2009 in Rajkot
Municipal Corporation vs. Union of India, Civil Appeal
No.9458-63 of 2003 ("Rajkot Municipal Corporation"), the
Ministry of Urban Development, Government of India issued
clarification/instructions dated 17.12.2009 to all Secretaries
(Urban Development) of all State Governments. The relevant
portion of the said clarification/instructions dated 17.12.2009
is as follows:
"(1) The UOI & its Departments will pay service
charges for the services provided by appellant
Municipal Corporations. No Property Tax. will be paid
by UOI but service charges calculated @ 75%, 50%
or 33 1/3% of Property Tax levied on property owners
will be paid, depending upon utilisation of full or partial
or Nil Services. For this, purpose agreements will
be entered into by UOI represented by concerned
Departments with respective Municipal Corporation."
h)
that due to non-payment of taxes since the year 1998-1999, Jal
Sansthan Lucknow appellant No.3 herein, served final Notice
under the provisions of the Land Revenue Act of the State of
UP to respondent No.1 to pay the pending bills of Water Tax/
Sewer Tax/Water price of Rs. 7,57,239/- by 31.03.2011;
i)
that it is settled law that the exemption from state taxation of
property of the Union Government is only against property
taxes and not against all taxes including the commercial taxes
and services by local administration/authorities. However, the
High Court in its final Judgment and Order dated 29.03.2017,
erroneously equated the commercial tenancy of a private
person in Enemy Property with the property of the Central
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[2024] 2 S.C.R.
Digital Supreme Court Reports
Government and accordingly, has quashed the recovery notice
dated: 28.05.2011;
j)
that the Enemy Property occupied by private persons for private
business interests is not synonymous with the interest of the
State and is starkly in contrast to the objectives and scheme
of the Constitution. Accordingly, it was contended that the
interest or property of a private person i.e. respondent No.1
is not exempted from property taxes under Article 285 of the
Constitution of India;
k)
that the Custodian under the Act is empowered to realize from
occupants all taxes, fees and charges and pay to the local
authority. In the present case, it is admitted by the Custodianrespondent No.2 that local taxes are payable to the local authority
in respect of the enemy property in question vide Certificate
dated 03.10.2002;
l)
that although the Municipal Commissioner granted a concession
before the High Court, the said concession was due to a threat
of summoning him to file a personal affidavit. In this regard,
learned senior counsel argued that there can be no concession
or estoppel against the statute. The power to levy tax is plenary.
If the State is held to be bound by a concession made in one
case, it would result in serious consequences for the State as
such a concession is against public interest. That it was held
in State of Uttar Pradesh vs. Uttar Pradesh Rajya Khanij
Vikas Nigam Sangharsh Samiti, (2008) 12 SCC 675 that
statement, assurance, or even an undertaking of any officer
or counsel is irrelevant and that there can be no estoppel
against the statute.
With the aforesaid submission, learned senior counsel prayed that
the impugned order passed by the High Court may be set aside.
Submissions of the respondent No.1-assessee:
6.
Per contra, learned senior counsel Sri Guru Krishna Kumar, appearing
for the assessee, supported the impugned judgment and submitted
that the High Court has proceeded to pass the impugned order on
a sound appreciation of the facts of the matter and the applicable
law and the same would not call for any interference by this Court.
It was further contended as under:
[2024] 2 S.C.R.
861
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
a)
that the appellant-Municipal Corporation has approached the
court with unclean hands and has deliberately suppressed
critical facts. The Municipal Corporation's reliance on the case
of Amir Mohammad Khan is misleading. In this regard, it was
submitted that the Municipal Corporation has conspicuously
omitted to disclose that the judgment in the aforementioned
case has been rendered nugatory due to the promulgation
of an Ordinance and the enactment of the Enemy Property
(Amendment and Validation) Act, 2017 (hereinafter referred to
as, "Amendment Act, 2017"). Further, as a result of the said
judgment and various tenants' claims, respondent No.1 herein
approached this Court seeking a clarification. This Court by
order dated 08.09.2006, clarified that persons in possession
of properties based on duly authenticated tenancy agreements
before the appointment of the Custodian declaring the property
as enemy property would not be covered by the judgment in
Amir Mohammad Khan. Accordingly, the respondent No.1 has
continued to be in possession.
b)
Reliance was placed on the Amendment Act, 2017 as per
which the enemy property vested in the Custodian will remain
vested in the Custodian regardless of change in circumstances
such as the death of the enemy; the extinction of the enemy
status; the winding up of business or a change in nationality
of the legal heir and successor. The Act further clarifies that
"enemy property vested in the Custodian" includes all rights,
titles, and interests in or benefits arising from such property.
It includes the right of expropriation of the enemy property, in
exercise of the police powers of the State. Also, the principles
of acquisition or requisition and payment of compensation will
not apply to such a legislation.
c)
that the property in question unequivocally belongs to the Central
Government, specifically the Custodian; Enemy Property is thus
'property of the Union.' The assessee is merely a tenant of the
Custodian of the Enemy Property and therefore, no taxes can
be levied on this property.
d)
that Article 285 of the Constitution provides exemption from
State taxation in respect of properties of the Union of India.
He buttressed his submission by stating that how the property
sought to be taxed is being used is irrelevant consideration
862
[2024] 2 S.C.R.
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as far as the interpretation of Article 285 of the Constitution of
India was concerned, vide NDMC vs. State of Punjab, (1997)
7 SCC 339 ("NDMC"). There is an absolute and emphatic ban
on state taxation on the property of the Union and the use of
such property is irrelevant.
e)
that apart from Article 285, Section 172 of the Act of 1959
specifically provides that the Corporation may impose taxes
subject to the provisions of Article 285 of the Constitution.
Likewise, Section 177 of the said Act provides exceptions in
respect of the levy of tax amongst others to buildings and land
vesting in the Union of India. However, Section 8(2)(vi) of the
Act and/or Section 173 of the Act of 1959 cannot amount to
"law" authorizing levy of property tax on Union property in terms
of Article 285(1) of the Constitution.
f)
that property vested in the Union was expressly excluded from
the scope of general tax on land and building. In this regard,
it was submitted that the impugned judgment was incorrect to
the extent that it allows Union property to be taxed on the basis
of an extended definition of 'owner', and is in conflict with the
judgment of this Court in NDMC and therefore, not good law.
The property in question is indisputably 'property of the Union'
as per Article 285 of the Constitution.
g)
that the declaration of a property as enemy property would be by
exercise of police power of the State. In other words, Article 300-A
only limits the powers of the State inasmuch as no person shall
be deprived of his property save by authority of law, implying that
there can be no deprivation without any sanction of law. Deprivation
by any other mode is not acquisition or taking possession under
Article 300-A. It was submitted that war between two or more
countries is a reason for which no compensation is payable for
acquisition of enemy property. The Act as amended has not been
(and cannot be) challenged by the Municipal Corporation and has
to be treated as valid and be given its full effect.
h)
that the joint submission of Municipal Corporation and the Union
of India that Section 8(2)(vi) of the Act is a law relatable to Article
285 of the Constitution of India was neither raised before the
High Court nor in any pleading before this Court and is a clear
afterthought raised for the first time during oral replies;
[2024] 2 S.C.R.
863
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
i)
in the alternative, this Court may balance the equities to make
the demand prospective considering the grave hardship that
the demand of entire past amount would cause to respondent
No.1 in case this Court holds against respondent No.1.
With the aforesaid submissions, it was prayed that the present
appeal be dismissed as being devoid of any merit and the
impugned order of the High Court be affirmed.
Submissions of the respondent No.2:
7.
Learned counsel Sri Rupesh Kumar, appearing on behalf of the
Custodian of the subject Enemy Property, respondent No.2 herein,
submitted as under:
a)
that the subject property belongs to a Pakistani National namely,
Raja of Mahmudabad and therefore, the property is vested in
the Custodian of Enemy Property for India under the Act as
amended by the Amendment Act, 2017 and is an undisputed
enemy property;
b)
that the property belonging to the Union Government is exempted
from state taxation under article 285(1) of the Constitution of
India. However, there is no such exemption in respect of fee/
service charges or other charges and this position has been
conclusively decided by this Court in Union of India vs. State
of Uttar Pradesh, (2007) 11 SCC 324. Further, this stand has
been reiterated by this Court in Rajkot Municipal Corporation.
Consequently, the Ministry of Urban Development, Government
of India vide order No.11025/ 26/2003 UCD dated l7.l2.2009
issued a clarification/direction regarding the levy of taxes and
service charges in light of the judgments passed by this Court.
c)
that the respondent No.2 Custodian vide his certificate dated
03.10.2002 has already clarified that it is under an obligation
to pay house tax and other local taxes as respondent No.1 is
running a private business for profit from the said premises
and therefore, not similar to a Central Government enterprise
and accordingly is liable for taxation by the local authorities;
d)
that this Court in the case of NDMC has held that private parties
are not exempted from taxation. Therefore, the private person
in occupancy of enemy property for personal benefit is neither
864
[2024] 2 S.C.R.
Digital Supreme Court Reports
synonymous with Central Government nor can he agitate it
before the Court.
Learned ASG Sri Balbir Singh also made submissions in the matter
later on.
With the aforesaid submissions, it was prayed for this Court to pass
orders as this Court may think fit and proper.
Submissions of the respondent No.3 - State of Uttar Pradesh:
8.
State of Uttar Pradesh, at the outset, adopted the contentions raised
by the appellant-Municipal Corporation and further submitted as under:
a)
Admittedly, respondent No.1-assessee is a private entity and a
lessee of the Custodian of the enemy property in question and
the demand was raised by the appellant-Municipal Corporation
on the assessee and not on the Custodian or the Central
Government. A private entity, that is running its business, on a
property and continuing on lease under the Custodian as per
the provisions of the Act cannot claim the benefit of Article 285
of the Constitution of India;
b)
that the Union of India has also taken a strident stand that
though the property is vested in the Custodian for the enemy
property in India, the running of the business by respondent
No.1 is not akin or synonymous with the running of the business
by the Central Government and that therefore tax is payable
by respondent No.1 to the appellant herein;
c)
that vesting, as envisaged under the Act does not make such
properties as properties owned by the Central Government or
Union properties. In this connection, reference was made to the
observations of this Court in Amir Mohammad Khan, which
shall be discussed later in the judgment.
In light of the aforesaid submissions, it was urged that the view
taken by the Hon'ble High Court in the impugned judgment and
order needs to be set aside.
Points for consideration:
9.
Having heard learned senior counsel and learned counsel for
the respective parties, the following points would arise for our
consideration:
[2024] 2 S.C.R.
865
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd.