DELHI MUNICIPAL COUNCIL ETC. ETC. versus ASSOCIATION OF CONCERNED CITIZENS OF NEW DELHI AND OTHERS ETC. ETC. on 22 January 2019

[2019] 2 S.C.R. 331

NEW DELHI MUNICIPAL COUNCIL ETC. ETC.

v.

ASSOCIATION OF CONCERNED CITIZENS OFNEW DELHI AND OTHERS ETC. ETC.(Civil Appeal Nos.903-930 of 2019)

JANUARY 22, 2019

[A. K. SIKRI AND ASHOK BHUSHAN, JJ.]

NDMC (Determination of Annual Rent) Bye-Laws, 2009 –Writ petitions filed by respondents-assesses challenging theconstitutional validity of the 2009 Bye-laws – Impugned Bye-lawslay down the procedure for determining the rateable value inter aliaon the basis of Unit Area Method (UAM) altering the earlier systemof determining the rateable value on the basis of the annual rent –Bye-laws challenged by respondents inter alia on the ground thatthe UAM of fixing the annual value was foreign to s.63 of the 1994Act – NDMC contended that since s.63, 1994 Act does not prescribeany particular method for arriving at annual rent therefore, thisgap was filled by the Bye-laws by prescribing the formula based onUAM – High Court declared the Bye-laws as ultra vires the 1994 Act– On appeal, held: Rateable value means value of any land orbuilding fixed in accordance with the provisions of 1994 Act andthe Bye-laws made thereunder for the purposes of assessment ofproperty taxes – S.63, 1994 Act stipulated that the rateable valueof any land or building assessable to property tax shall inter alia bethe annual rent at which such land and building might reasonablybe expected to let – s.63(1), 1994 Act is not silent on how to determinethe annual rent of a property – This annual rent has to be the onewhich the land or the property ‘might reasonably be expected to letfrom year to year’ – Yardstick is the ‘letting’ – It is the annual lettingvalue which can be the annual rent and not the value of the propertyin question – Manner in which the rateable value is fixed under theBye-Laws is not in sink with the scheme of s.63(1) of the 1994 Act –Bye-Laws are foreign to the methodology provided in s.63 of the1994 Act and thus, ultra vires the provisions of 1994 Act – However,in exercise of powers u/Art.142 of the Constitution, it is directedthat assessees who have paid the tax as per Bye-Laws, 2009, being

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Asatisfied with the assessments under the impugned Bye-laws, theirassessments shall not be reopened – However, this will not apply tothe respondents who were writ petitioners in the High Court – Intheir cases, the direction given by the High Court in the impugnedjudgment shall prevail – New Delhi Municipal Council Act, 1994 –ss.2(42), 60-63, 65-67, 70, 81, 388(1)(A)(9),391(1) and 416(2)(a)B– Delhi Municipal Corporation Act, 1957 – NDMC House TaxBye-Laws, 1962 – Delhi Municipal Corporation (Property Taxes)Bye-Laws, 2004 – Constitution of India – Arts.14 and 142.

New Delhi Municipal Council Act, 1994 – ss.2(42), 61-63,65-67, 70, 72, 73 and 81 – Essence of – Discussed.CWords & Phrases – “annual rent” & “ annual value”–Difference between– Discussed.

Disposing of the appeals, the Court

Conclusion

HELD: 1.1 Under Section 61 (1) of the NDMC Act, 1994Dproperty tax shall be levied on lands and buildings in New Delhiand “shall consist of not less than ten and not more than thirtyper cent of the rateable value of lands and buildings.” The provisoto Section 61(1) of the NDMC Act states that the NDMC may,“when fixing the rate at which the property tax shall be leviedEduring any year, determine the rate leviable in respect of landsand buildings or portions of lands and buildings in which anyparticular class of trade or business is carried on shall be higherthan the rate determined in respect of other lands and buildingsor portion of other lands and buildings by an amount not exceedingone-half of the rate so fixed.” The second proviso to Section 61F(1) states that “the tax may be levied on graduated scale, if theCouncil so determines.” The explanation to Section 61 (1) statesthat “where any portion of a land or building is liable to a higherrate of the tax such portion shall be deemed to be a separateproperty for the purpose of municipal taxation.” Under SectionG61 (2) of the NDMC Act, the NDMC can exempt from tax thelands and buildings where “the rateable value does not exceedRs.1,000.” [Para 21, 22] [355-G-H; 356-A-C]

1.2 The expression ‘rateable value’ is defined under Section2 (42) of the NDMC Act to mean “the value of any land or building H

fixed in accordance with the provisions of this Act and the Bye-laws made thereunder for the purpose of assessment to propertytaxes.” [Para 23] [356-D]

1.3 Section 62 of the NDMC Act relates to the ‘Premisesin respect of which tax is to be levied’. Section 62 (1) lists outsuch lands or buildings or portions thereof which will not be subjectto levy of property tax. This includes lands exclusively occupiedand used for public worship or by a society or body for a charitablepurpose. It also includes lands and buildings vested in the NDMCin respect of which the tax, if levied, would be leviable primarilyon the NDMC and agricultural lands and buildings (other thandwelling houses). Section 62 (3) clarifies that if a portion of theland or building is exempted from property tax by reason of theexclusive use or occupied for public worship or charitable purposethen such portion “shall be deemed to be a separate property forthe purpose of municipal taxation.” [Para 24] [356-E-F]

1.4 Section 63 of the NDMC Act sets out the method ofdetermination of the rateable value of lands and buildingsassessable to property tax. Section 63 (1) provides that therateable value of any land or building assessable to property taxshall be the annual rent at which such land or building mightreasonably be expected to let from year to year less a sum equalto 10% of the said annual rent which shall be in lieu of allallowances for cost of repairs and insurance, and other expensesnecessary to maintain the land or building in a state to commandthat rent. The proviso to Section 63 (1) of the NDMC Act statesthat in respect of any land or building the standard rent of whichhas been fixed under the Delhi Rent Control Act, 1958 (‘DRCAct’), the rateable value thereof “shall not exceed the annualamount of the standard rent so fixed.”. Section 632) of the NDMCAct states that the rateable value of any land which is not builtupon but is capable of being built upon and any land on which abuilding is in process of erection “shall be fixed at five per centof estimated capital value of such land.” Under Section 63(3) theChairperson of the NDMC can by public notice, with the approvalof the NDMC, specify a plant and machinery which will be deemedto form part of such land and building for the purposes of A

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Adetermination of rateable value. Section 65(1) of the NDMC Actclarifies that lands and buildings being properties of the Unionshall be exempt from the property tax specified in Section 61 ofthe NDMC Act. [Paras 25, 26] [356-G-H; 357-A-D]

1.5 Section 66 of the NDMC Act speaks of the incidence ofBthe property tax. It is primarily on the lessor if a building or landis given on lease. It is on the superior lessor if the land or buildingis given on a sub-lease. If it is not leased then on the person onwhom the right to let the same vests. Section 67 of the NDMCAct talks of apportionment of liability of the property tax whenthe premises are let or sub-let. Section 68 clarifies who will beCprimarily liable for the property tax due in respect of any land orbuilding and in the event of default of the person liable to paysuch propertytax as specified in Section 66. It is clarified thatthis would be the occupier of such land or building.[Paras 27, 28] [357-D-F]

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1.6 Section 70 of the NDMC Act deals with the ‘Assessment List’. This is a list of all lands and buildings which contains suchparticulars with respect to each land and building as may beprescribed by the Bye-laws. When such Assessment List isprepared, the Chairperson under Section 70 (2) of the NDMCEAct gives a public notice thereof and every person claiming to bean owner, lessor or occupier of a land or building included in theList shall be at liberty to inspect the List and take extractstherefrom free of charge. Under Section 70 (3), the Chairpersonis to give a public notice of a date not less than one monththereafter when he would proceed to consider the rateable valueFof the lands and buildings entered in the Assessment List. He isalso to give the written notice where the rateable value isproposed to be increased. Section 70 (4) of the NDMC Actprovides for objections to be filed to the Assessment List in writingto the Chairperson. Section 70 (5) of the NDMC Act talks of anGobjection being notified into and investigated, and the personmaking them shall be allowed an opportunity of being heard eitherin person or by authorised agent before the final AssessmentList is prepared under Section 70 (6) of the NDMC Act. Section72 of the NDMC Act provides for amendment of the Assessment H

List and Section 73 for preparation of new Assessment List. UnderSection 81 the Chairperson of the NDMC Act employs valuersto give advice or assistance in respect of valuation of any land orbuilding. [Paras 29, 30] [357-F-H; 358-A-C]

1.7 Section 60, NDMC Act is the charging Section whichauthorizes the NDMC to levy various types of taxes includingproperty tax. As per sub-section (3), tax can be assessed andcollected in accordance with the provisions of the Act and Bye-laws made thereunder, rates at which the property tax can becharged are mentioned in Section 61. This Section, inter alia,provides that the property tax shall be levied on lands andbuildings in New Delhi and shall consistent of not less than 10%and not more than 30% of the rateable value of lands andbuildings. Thus, property tax can be charged on lands andbuildings for which rates can be prescribed and these rates haveto be between 10% to 30%. Further, this percentage is of the‘rateable value’ of lands and buildings. Definition of ‘rateablevalue’ is given in Section 2(42) of the NDMC Act to mean ‘thevalue of any land or building fixed in accordance with theprovisions of this Act and Bye-laws made thereunder for thepurposes of assessment to property taxes’. Various premises,viz: lands and buildings, in respect of which property tax can belevied are mentioned in Section 62. The manner of determinationof rateable value is specified in Section 63 of the Act.[Paras 67, 68] [376-E-H; 377-A-B]

1.8 As per Section 63(1), NDMC Act rateable value of anylands or building assessable to any property taxes is the ‘annualrent’. Further, such annual rent has to be determined ‘at whichsuch land or building might be reasonably be expected to let fromyear to year….’ .The ‘rateable value’, as per Section 2(42) of theNDMC Act is to be fixed in accordance with the provisions of theAct and the Bye-laws made thereunder. Section 63 prescribesthat ‘annual rent’ would be rateable value. This annual rent, asper this provisions, is one such land or building is expected tolet from year to year minus 10% thereof. The Impugned Bye-laws lay down the procedure for fixing of annual rent on UAM.[Paras 69, 70] [377-G-H; 378-A]

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1.9 Section 63(1) is not silent on how to determine theannual rent of a property. This annual rent has to be the onewhich the land or the property ‘might reasonably be expected tolet from year to year’. It is, thus, based on the letting yearly valueof the property. [Para 71] [378-D]

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B1.10 Annual rent is to be the one which the landlord mightrealize if the house was let. The criteria, thus, is the rent realizableby the landlord and not the value of the holding. The testessentially is what rent the premises can lawfully fetch if let outto a hypothetical tenant. [Para 77] [380-C-D]

C1.11 Even in common parlance, simple language of Section63(1) clearly conveys that the rateable value is the annual rentwhich the property is likely to fetch. The yardstick is the ‘letting’.Two words used in this Section convey this meaning very clearly,namely, the word ‘rent’ in the phrase ‘annual rent’ and the word‘let’. Therefore, annual rent is to be determined on the basis ofDthe letting value which is expected reasonably. In cases wherethe property is already let out, actual rate at which the propertyis let out becomes the amount at which the land or building isreasonably expected to fetch. Exception may be those caseswhere the property is let out actually at a rent which is lesserEthan the rent it would be fetched otherwise. In case there is aproof and/or material to find out that the reasonable rent couldhave been more than at which it is actually let out, the actual rentreceipt can be discarded by adopting the expected rent which,on the basis of material, can be said to be reasonable. In thosecases where the property is self-occupied or is vacant and not letFout, it can be gathered from the rent at which a comparableproperty is let out. However, in such a case there would be twosituations. Going by the dicta laid down in Dewan Daulat RaiKapoor and other cases, the reasonable rent would be the standardrent which can be determined under the provisions of Delhi RentGControl Act. However, this principle would be applicable only inrespect of those properties where Delhi Rent Control Act applies.In other cases, the yardstick would be the letting value ofcomparable properties, i.e., the rent at which comparableproperties are let out. However, such criteria of fixation ofstandard rent has lost its relevance after the judgment of theH

Delhi High Court in Raghunandan Saran Ashok Saran (HUF) videwhich Sections 4,6 and 19 of the Delhi Rent Control Act whichdeal with fixation of standard rent, were declared as ultra vires ofthe Constitution of India. The aforesaid decision has beenaffirmed by this Court in State Trading Corporation of India Ltd.Case. [Paras 79, 81] [380-G-H; 381-A, F-H; 382-A-C]

1.12 The expression ‘annual rent’ is to be read incontradistinction to ‘annual value’. Two concepts are altogetherdifferent. Inasmuch as the latter expression relates to annualvalue of the property which may be based on parameters differentfrom fixing the annual rent of the property. After going throughthe Bye-laws and the manner in which the rateable value is fixed,it is observed that it not in sink with the scheme of Section 63(1)of the NDMC Act. Bye-law 4 stipulates that the bona fide annualvalue of land not covered under Bye-law 3 would be the annualvalue of land and bona fide annual value of the covered space ofthe building. Bye-law 3 seeks to fix the entire value of land fallingin the jurisdiction of New Delhi at the circle rate of Rs. 43,000/-(Rupees Forty Three Thousand only) per square meter. Likewise,Bye-law 4(10) where annual rent of any building is determinableunder more than one-sub-bye-law, the annual rent shall be theaggregate of the annual value determined under sub-bye-law ofthis Bye-law. The arguments of the appellants is therefore rejectedand it is not deemed necessary to deal therewith any further.[Paras 82, 83] [382-C-G]

1.13 The Impugned Bye-laws are ultra vires the provisionsof NDMC Act. They are in excess of the scope and ambit ofpowers vested in the NDMC Act under Section 388(1)(A)(9) ofthe NDMC Act. As rightly contended by the assessees, initially,same was the thinking process in the NDMC as well inasmuchas there was a move to amend the Act in order to bring UAM forthe purpose of levying property tax. This is how the MunicipalCorporation of Delhi achieved its objective. However, for thereasons best known to the appellants, without amending theprovisions of the Act it went ahead in bringing Impugned Bye-laws, 2009. [Paras 84, 85] [382-H; 383-A-C]

2.1 In many ways, UAM is a better method in comparisonwith the earlier method based on annual rent. For this reason, A

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Athis method has now been followed for the purpose of levyingproperty tax not only in the areas in Delhi itself covered underthe Municipal Corporation of Delhi but in many other States aswell. However, such a method which may be a better method canbe incorporated in accordance with the law. In the present case,it could be done after amending the provisions of the NDMCBAct. Since, the High Court which has quashed the Impugned Bye-laws as ultra vires is agreed with, it becomes meaningless andirrelevant to go into other issues or other arguments advanced.However, once the appellants take steps for amending the Actand want to reintroduce the Bye-laws of 2009, many aspectsChighlighted by the assessees in respect of Bye-laws would bekept in mind. It is not being suggested that the contentions raisedby the respondents/assessees relating to validity of different Bye-laws are well-founded, nor it is being suggested that they are ill-conceived. Supreme Court has not expressed any views on themerits of these contentions, either way as this Court has not goneDinto the merits of such contentions. At the same time in order toobviate any future challenge the NDMC is expected to keep inmind the arguments of the appellants on these aspects.[Para 86][383-C-G]

2.2 When the matter came up on 6[th] March, 2018, aEstatement on behalf of NDMC that the revised guidelines havebeen framed and put on website, to which objections have beeninvited. It was also stated that after receiving and consideringthe objections, the matter would be finalized at NDMC’s end.The respondent/assessee and some others also submitted theirFobjections to the modified guidelines. These were looked intoby the NDMC and decision thereon was taken by theChairperson, NDMC under Bye-law 5(2) of the Impugned Bye-laws after the Valuation Committee had given its recommendationsfor the year 2018-19. This decision dated 14[th] May, 2018 of theChairperson was handed over to the Court. As per this, variousGobjections of the assessees were considered and decision takenthereon. Many respondents/ assessees are still not satisfied withthe decision taken on various aspects and the arguments.However, it is left to the NDMC to take a final call thereuponhaving due regard to the legal position on these aspects.H[Para 88] [384-F-H; 385-A]

2.3 The declaration of Impugned Bye-laws as ultra vireshas created a difficult situation. These Bye-law were framed inthe year 2009. They were struck down by the High Court videimpugned judgment dated 10[th] August, 2017. They held the fieldfrom 2009-2017. While issuing notice in these Special LeavePetitions on 22[nd] September, 2017, in respect of the direction ofthe High Court to pass re-assessment order, this Court observedthat it would be open to the NDMC not to pass such re-assessmentorders. That interim order has prevailed during the pendency ofthese appeals. Further, as already noted above, 95% of theassessees are agreeable to pay the tax as per Bye-laws 2009.They have even paid the taxes on that basis. In thesecircumstances, to upset the applecart completely may not beappropriate. In such a peculiar situation, in exercise of powersunder Article 142 of the Constitution, it is directed that thoseassessees who have paid the tax as per Bye-Laws, 2009, theirassessments shall not be reopened. Another reason for takingthis course of action is that these assessees are satisfied withthe assessments under Bye-laws, 2009. However, it will not applyto the respondents herein, namely, those assessees who werethe writ petitioners in the High Court. In their cases, the directiongiven by the High Court in the impugned judgment shall prevail.[Para 89] [385-B-E]

State Trading Corporation v. New Delhi MunicipalCouncil(2016) 12 SCC 603 ; The Corporation ofCalcutta v. Smt. Padma Debi and Others [1962] 3 SCR49 ; The Guntur Municipal Council v. The Guntur TownRate Payers’ Association etc. (1970) 2 SCC 803 ;DewanDaulat Rai Kapoor v. New Delhi Municipal Council andOthers (1980) 1 SCC 685 : [1980] 2 SCR 607 ; IndianAutomobiles Ltd. v. Calcutta Municipal Corporation andAnr. (2002) 3 SCC 388 :[2002] 1 SCR 961 –reliedon.

State Trading Corporation of India Ltd. v. New DelhiMunicipal Council AIR 2003 Delhi 295 ;Ashok Singhv. Asstt. Controller of Estate Duty (1992) 3 SCC 169 :[1992] 3 SCR 190 ; Assistant Collector of CentralExcise v. National Tobacco Co. of India Ltd.(1972) 2

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ASCC 560 : [1973] 1 SCR 822 ; Mafatlal Industries &Ors. v. Union of India & Ors. (1997) 5 SCC 536 :[1996] 10 Suppl. SCR 585 ; Raghunandan Saran AshokSaran (HUF) v. Union of India and Others 95(2002)DLT 528 ; P. Ratnakar Rao and Others v. Sate of A.P.and Others (1996) 5 SCC 359 : [1996] 2 Suppl.SCRB866 ; Pradeep Oil Corporation v. MunicipalCorporation of Delhi and Anr.(2011) 5 SCC 270 :[2011] 4 SCR 764 ;Municipal Corporation of Delhi v.Shashank Steel Industries (P) Ltd. 100 (2002) DLT 66(FB)[; ]State of Kerala v. Haji Kutty AIR 1969 SCC378 : [1969] 1 SCR 645 ;NDMC v. State TradingCorporation, 126 (2006) DLT 191 ; GovernmentServant Cooperative House Building Society Limitedand Others v. Union of India and Others (1998) 6 SCC381 : [1998] 3 SCR 996 – referred to.

Case Law Reference

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NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OFCONCERNED CITIZENS OF NEW DELHI

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 903-930 of 2019.

From the Judgment and Order dated 10.08.2017 of the High Courtof Delhi at New Delhi in W.P. (C) Nos. 3348 of 2010, 12689 of 2009,1985, 2315, 3074, 4047, 8679 of 2010, 363, 7296, 7491 of 2011, 728, 729,1153, 1154, 1487, 1492, 1822, 2088, 2091, 2102, 3453, 1759 of 2012, 645,1996, 1997, 1998, 2001 of 2016 and 1581 of 2017

WITH

Civil Appeal No. 964 of 2019.

Prag P. Tripathi, Amit Sibbal, B. B. Gupta, Aman Ahluwalia, GuruKrishna Kumar, Ms. Vibha Dutta Makhija, Sr. Advs., Sanjay Jain,Yoginder Handoo, Ms. Rhea Verma, Nishant Kumar, Arjun Mitra,Mahesh Agarwal, Rishi Agrawala, Ramaswamy Srinivasan, Ankur Saigal,Ms. Devika Mohan, Navjot Singh, E. C. Agrawala, Amitabh Chaturvedi,Trideep Pais, G. V. Chandrashekar, N. K. Verma, Ms. AnjanaChandrashekar, Abhimanyu Mahajan, Ms. Anubha Goel, Jayant KumarMehta, Ms. Ruby Singh Ahuja, Ms. Aakanksha Munjhal, Shravan Sahny,Davesh Bhata, Saurabh Kumar, Apoorv Gupta, Udai Khanna (forM/s Karanjawala & Co.), Saurabh Mishra, Sachit Jolly, Ayush Dhawan,Ms. B. Vijayalakshmi Menon, Abhay Kumar, B. B. Jain, Himanshu Pal,Abhay Jain, Saurabh Mishra, Abhay Kumar, Ms. Aditi Gupta, S. K. Jain,S. S. Ray, Ms. Rakhi Ray, Sanjeev Anand, Abhinav Shrivastava, HimadriM. Mukherjee, Mr. Amitesh Gaurav (for Mr. Ajay Sharma), SangramPatnaik, Swamsiddha Patnaik, Madhav Chaturvedi, Naresh Kumar,Sanjay Kapur, Ms. Megha Karnwal, Ms. Mansi Kapur, Ms. Disha Vaish,Waheb Hussaini, Ms. Asita, Kabir Dixit, Advs. for the appearing parties.

The Judgment of the Court was delivered by

A. K. SIKRI, J.1. Leave granted.

Introductory Remarks:

2. These appeals are filed by New Delhi Municipal Council(NDMC) against the judgment dated August 10, 2017 rendered by HighCourt of Delhi in a batch of writ petitions which were filed by thepersons who have their houses/properties in NDMC area. Some of thepetitions were by the associations of residents as well (hereinafterreferred to as the “assessees/respondents”). In those writ petitions filed A

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Aby the assessees they had challenged the constitutional validity of NDMC(Determination of Annual Rent) Bye-laws, 2009 (hereinafter referredto as the ‘impugned Bye-laws’). These Bye-laws changed the earlierregime of determining the rateable value for the purposes of levyingproperty tax. These Bye-laws seek to alter the earlier system ofdetermining the rateable value on the basis of he annual rent at whichBthe land or buildings may reasonably be expected to be let from year toyear. On that basis annual rent used to be fixed and a particular percentagewas prescribed for the purposes of payment of property tax. Theimpugned Bye-laws introduced the system of Unit Area Method (UAM).As per this method Unique Area Value (UAV) per sq. ft/meter of aCproperty is fixed with reference to the characteristics of the propertysuch as location, occupancy, age, structure of the said property. ThisUAV is then multiplied by the area of the vacant land or covered spaceto arrive at its annual value. When the annual value is determined on thebasis of such a formula, property tax thereupon is to be paid by theassessees.D

3. It may be mentioned at this stage itself that the impugned Bye-laws have been framed by the Government of India in exercise of powersconferred by sub-section (1) of Section 391 of the New Delhi MunicipalCouncil Act, 1994 (hereinafter referred to as the ‘Act’). It is also to benoted that Section 63 of the Act deals with determination of annual rent.EVarious grounds were raised challenging the validity of these Bye-lawsand one of the grounds was that the UAM of fixing the annual value asprescribed in the Bye-laws was foreign to the provisions of Section 63of the Act, meaning thereby that the language of Section 63 did notpermit determination of annual value on such a basis as it prescribed theFmethod of fixing annual rent on the basis of the rent which the land orbuilding may reasonably be expected to let from year to year. It was,thus, argued by the assessees in the writ petitions that the impugnedBye-laws were ultra vires the provisions of Section 63 of the Act. TheHigh Court chose to confine itself to this particular submission andeschewed the discussion on other grounds on which these bye-lawsGwere also challenged. In the impugned judgment, the High Court acceptsthe submission of the assessees holding that the impugned Bye-laws areultra vires the NDMC Act as they are far beyond the scope and ambitof the powers vested in NDMC under Section 388(1)(A)(9) of the Act.Section 388 gives rule making power to the NDMC.

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4. When the matter was argued before us, initially the partiesconfined to the aforesaid aspect on which High court has rendered itsdecision. However, arguments were heard on the other grounds ofchallenge as well, so that decision is given on merits, if the circumstancesso warrant. We may also mention at this stage that many applicationsfor intervention/impleadment have been filed by those assessees whowere not parties to the writ petitions in the High Court. Such assesseesare satisfied with the impugned Bye-laws and, therefore, they have notsupported the case set up by the NDMC.

Factual background:

5. Before adverting to the controversy, it would be appropriate totake note of some relevant facts:

6. As is well-known, during the period of the British India, Delhibecame the capital of India in the year 1911. Even before it became thecapital, for the first time house tax was made applicable and levied inDelhi in the year 1902. After becoming the capital of India, Delhi wasdetached from Punjab and Delhi Enclave covering an area of 1240 sq.miles was formed and new roads were constructed between thetemporary capital near Civil Lines and Raisina. The Punjab ImprovementAct was passed in the year 1922 and it became the town planninglegislation. A large chunk of land was acquired by the Imperial DelhiCommittee and was transferred to the Imperial (New) Delhi MunicipalCommittee which was constituted in the year 1916 but came into effectin the year 1925 when this Delhi Municipal Committee was upgraded tothe level of a second class municipality to be governed under the PunjabMunicipal Act, 1911 (hereinafter referred to as ‘PMA’). Section 188 ofthe PMA conferred power on the Committee to make Bye-laws, interalia, for carrying out the purposes of the PMA. In 1932, the Imperial(New) Delhi Municipal Committee was renamed as ‘New DelhiMunicipal Committee’ (NDMC). After obtaining the independence andwith the adoption of the Constitution of India in the year 1950, Delhi wasshown as Part-C State.However, in the year 1956, vide the Constitution(Seventh Amendment) Act, 1956, Delhi became a Union Territory.Immediately, thereafter the Delhi Municipal Corporation Act, 1957 (DMCAct) was passed whereunder Municipal Corporation of Delhi (MCD)was constituted to which first election took place in the year 1958. Thejurisdiction of MCD covers the entire Union Territory of Delhi includingthe rural areas, but excluding the New Delhi Municipal Committee and A

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ADelhi Cantonment Areas. However, the area under the jurisdiction ofthe NDMC was reduced from 32 sq. miles to 16 sq. miles.

7. In terms of the powers conferred under Section 188(v) of thePMA which related to assessment and collection of house tax, the NDMCmade the NDMC House Tax Bye-laws, 1962 (‘the 1962 Bye-laws).BThese were published in the Official Gazette by a notification dated 24[th]April, 1964. There are only around 12,000 units which are subject toassessment for property tax in the NDMC area. 20% of these areresidential units and rest are commercial units. However, only 20% ofthe properties are private properties. The remaining 80% are (a) propertiesbelonging to the Union of India, (b) properties of Diplomatic MissionsCand Foreign Embassies, (c) properties of State Governments and (d)properties of Railways.

8. The above four types of properties are outside the purview ofproperty tax assessment. This is because Articles 285 and 289 of theConstitution prohibit levy of taxes on the properties of the Centre andDState by the State and Centre respectively. Except the propertiesbelonging to the Union of India, the other three types of properties donot pay even the service charges to the local authorities. 75% of theproperty tax demand is collected from just about 6.25% of the propertiesin the NDMC area. Therefore, the tax base for the purpose of collectionEof property tax is small compared to the MCD area.

9. For the governance of Union Territory of Delhi, the Parliamentpassed the Delhi Administration Act, 1966 which continued to operatetill 1992, when a special status was conferred upon Delhi by rechristeningit as National Capital Territory of Delhi (NCTD). This happened withthe insertion of Article 239AA and 239AB in the Constitution of IndiaFvide Constitution (Sixty-Ninth Amendment) Act, 1991. Simultaneously,the Parliament also enacted Government of NCTD Act, 1991 whichreplaced the earlier Delhi Administration Act, 1966. With thesedevelopments several provisions of PMA were also brought in tune withthe GNCTD Act, 1991. Subsequently, for the NDMC area, the ParliamentGenacted NDMC Act in the year 1994 that replaced PMA. Hitherto NewDelhi Municipal Committee was also replaced by New Delhi MunicipalCouncil (NDMC).

10. As per Section 60 of the NDMC Act, the power to levy taxes,including property tax, is vested with the NDMC. The NDMC, in exercise H

of powers conferred under Section 416(2)(a) of the NDMC Act adoptedthe existing 1962 Bye-laws insofar as levy of property tax is concernedas it was found that they were not inconsistent with the NDMC Act.Under these Bye-laws, as noted above, the method of arriving at annualrent is on the basis of annual rent which land and building may reasonablybe expected to be let from year to year. It would be significant to mentionthat even in the Bye-laws of MCD, identical method of levying thehouse tax/property tax was incorporated.

11. There were certain concerns expressed at various quartersabout the said annual rent method in the Bye-laws. Insofar as the MCDis concerned, it constituted V.K. Malhotra Committee to study and reportupon the efficacy of the property tax assessment and collection system,so that the faults in the system could be ironed out. While this Committeewas in the process of undertaking that study, the Union of India circulated‘Guidelines for Property Tax Reforms’ in the year 1998 in order to bringneeded reforms in the method of calculation of property tax and to exploitthe potential of property tax as a major source of income for strengtheningthe revenue base of these municipalities. The V.K. Malhotra Committeesubmitted its report to the MCD in the year 2002. Based on itsrecommendations, an Expert Committee under the Chairmanship of Sh.K. Dharmarajan was constituted by the Lieutenant Governor of Delhifor recommending the modalities required for the interpretation of theUAM of property tax assessment in the MCD area, which was themajor recommendation of the V.K. Malhotra Committee. After receivingthe final report from Dharmarajan Committee, the Delhi MunicipalCorporation (Amendment) Act, 2003 was passed. Further, in exerciseof the powers conferred by the Delhi Municipal Corporation(Amendment) Act, the Delhi Municipal Corporation (Property Taxes)Bye-laws, 2004 were also made.

12. With the aforesaid introduction of UAM for the purposes ofproperty tax assessment in MCD area, the NDMC also deliberated onthis subject, having regard to the recommendations given by theDharmarajan Committee. In a meeting held by NDMC on 27[th] April,2005, it was resolved that it would request GNCTD to amend theprovisions of Section 65 of the NDMC Act.

13. On 13[th] February, 2006, the NDMC in its meeting discussedthat the rateable value Bye-laws may be prepared in such a way so asto remove most of the difficulties faced in the present system. It was AB

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Asuggested to introduce UAM selectively for self-occupied residentialproperties in the Bye-laws. Thereafter, on 10[th] March, 2006, theChairperson of the NDMC constituted a committee (the NDMC SpecialCommittee) under Section 9 of the NDMC Act to advice upon theproperty tax. This Special Committee submitted its final report inFebruary, 2007 which was, in principle, accepted by the NDMC in itsBmeeting on 12[th] February, 2007. More deliberations took place thereafterand it is not necessary to spell out the same. Suffice it is to mention thatamendments in the Bye-laws were proposed and objections invited.Ultimately on, 24[th] February, 2009, the GNCTD notified the New DelhiMunicipal Council (Determination of Annual Rent) Bye-laws, 2009C(Impugned Bye-laws) in the Official Gazette. These Bye-laws wereenforced from 1[st] April 2009 and were made applicable in the area underthe jurisdiction of the NDMC.

Provisions of the Bye-laws and the NDMC Act:

14. It is pertinent to mention that the NDMC Special CommitteeDwhich was appointed by the Chairperson, had submitted its final reportin February, 2007. In that report, the Committee noted that it was difficultto advise a perfect tax system. However, keeping in view the distinctadvantages offered by the UAM, the NDMC Special Committeerecommended a modified form of UAM for NDMC which attempted toEbalance the principles of neutrality, stability, accountability, ease ofadministration, fairness based on benefits received and the ability to pay.The NDMC Special Committee also examined the financial position ofthe NDMC with special reference to the profit profile of NDMC whereina large percentage of properties are owned by the Government and onlya very small percentage of private properties are liable for payment ofFproperty tax. The NDMC Special Committee stated that it consideredthe following options:

“(a) Maintain the status-quo as far as the method of assessmentis concerned. Thus to continue with the annual value method ofproperty tax assessment but address procedural shortcomings.GOr

(b) Selective introduction of Unit Area Method in respect ofresidential units that are self-occupied (or for both self occupiedW.P.(C) 3348/2010 & connected matters Page 26 of 40 andrented) and for institutional buildings and hotels. The remainingH

properties to continue under the reasonable rent method ofassessment as at present. Or (c) Levy uniform service chargesfor all non-residential properties regardless of their ownership,government or private. The service charges would be liable forincreases from time to time to keep pace with the inflation andincreased cost of services. The base service charges would befixed at some proportion of land values and unit rate subject to thecondition that they will not be lower than the existing RateableValue Or (d) Introduce a modified form of Unit Area Method for allproperties by fixing the unit rates solely by category of use andland values. Thus the lowest unit rate (or multiplicative factors)would be in respect of a self-occupied residential property in anarea where land values are low; the highest unit rate (ormultiplicative factor) would be in respect of commercial properties/hotels that are located in areas where land values are the highest(land values to be computed as per Land & Development Officerate schedules amended from time to time)”

15. The NDMC Special Committee rejected options (a), (b) and(c). It recommended acceptance of option (d). However, it recommended“a formula which is revenue neutral and at the same time optimizes theobjective of vertical equity. The analysis of data compiled by the taxdepartment suggests that there is extreme variation in taxation of similarlyplaced properties for various reasons discussed earlier. This problemwill be automatically addressed as horizontal equity is inbuilt in the UnitArea System.”

16. It is significant that the NDMC Special Committee did nottouch upon the manner of bringing about the above change i.e. whetherit should be by amending the Bye-laws or amending the NDMC Actitself. However, in the position paper submitted to the NDMC, the SpecialCommittee, while recommending the adoption of a modified UAM, hadsuggested that it should be introduced selectively for “self-occupiedresidential properties.” It also added: “However, Bye-laws cannot gobeyond what is provided in the Act. As such, depending upon the finaldecision in the matter, an appropriate amendment in the Act appears tobe the only alternative.”

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A17. Since the impugned Bye-laws are declared by the High Courtas ultra vires the NDMC Act, it would also be necessary to notice someof the relevant provisions of the NDMC Act. From the reading of theseBye-laws, it is clear that the UAM for determining the rateable valuehas been introduced which is different from ‘annual rent’. Bye-laws 2of impugned Bye-laws mentions that the annual rent for which the landBand building were expected to be let would be determined as per Bye-law 3 in respect of special categories of lands and buildings and as perBye-law 4 in respect of other lands and buildings.

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18. Some of the relevant provisions of the impugned Bye-laws,may now be noted:

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“2. Determination of Annual Rent – For the purpose of sub-section(1) of Section 63 of the New Delhi Municipal Council Act, 1994(44 of 1994) hereinafter referred to as the ‘Act’) the annual rent,for which lands and buildings are expected to let from year, shallbe determined as under:- D

“(i) Special categories of lands and buildings as per provisionsof bye-law 3 and;

(ii) Other lands and buildings as per provisions of bye-law 4.

3. Annual Rent of Special Category of land and buildings:-

(1) the annual rent of the lands and buildings, which are not normallylet, being the property of the Union, Government, State or used asschool, college, hostel, guest house, clubs, cinema hall, hotels andsuch other lands and buildings as may be specified by the ValuationCommittee, shall be calculated at such percentage, as may bedetermined by the Valuation Committee, being not less than 5%and not more than 10% of the aggregate of:

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(a) value of land falling in the jurisdiction of New Delhi, at thecircle rate of Rs. 43,000 (Rupees forty three thousand only)per square meter, as increased by the multiplication factor foruser of the land, specified in sub-bye-law (3); and (b) value of covered space of the building at Rs. 15,000 (Rupeesfifteen thousand only) per square meter of the covered spaceof the building as reduced by the age factor of the building asreduced by the age factor of the building specified in sub-bye-law (4).

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Explanation:- Use Factor for a particular year shall be determinedbased on usage of a particular type for more than 180 days in afinancial year.

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(4) Age factor for age of the building shall be as under:- E

4. Annual Rent of other land and buildings-

(1) The annual rent of lands and buildings valuation of which isnot covered by bye-law 3 shall be the aggregate of the bona fideannual value of land and bona fide annual value of the coveredspace of the buildings.

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(5) The relevant factors for the increasing on decreasing or fornot increasing or decreasing, the base unit area values specifiedin respect of each of the parameters of type of use, age, type ofstructure, occupancy status, average rentals available in thebuilding, location of covered space and any other relevant factorsas may be necessary for determining the bona fide annual valueof land and building shall be fixed by the Valuation Committee,from time to time.

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(6) Pending fixation of relevant factors and revisions thereof bythe Valuation Committee, the multiplication factor for use andoccupancy of the covered space shall be as under:

Provided that the location factor covered space in basement usedfor storage, parking and utilities will be taken 0.5.

Explanations:-

(i) The premises owned by companies, firm, trust etc. and usedby the directors, employees or partners for residence or guesthouse shall not be treated as self-occupied by the owners.

(ii) For a particular year, the use factor and the occupancy factorshall be determined on the basis of usage/occupancy prevailingfor more than 180 days in that year. In case the occupancy factoris determined as “others” and the premises actually remains vacantfor part of the year, the property will be eligible for vacancyremission as per provisions below the heading “Remission andRefund” under Chapter-VIII relating to “Taxation” of the NewDelhi Municipal Council Act, 1994 (44 of 1994).

(7) Age factor for age of the building shall be as under:-

(8) Where the land and the covered space of the building is letand actual rent is in excess of the bona fide annual value of landand building referred to in sub-bye-law (1), the rateable value forthe purposes of that sub-bye-law shall be such actual rent.

Provided that this will not apply to residential properties used byoccupier exclusively for residential purposes.”

19. Let us also scan through the relevant provisions of the Act:

“Section 60 : Levy of Taxes -

1. The Council shall for the purposes of this Act, levy the followingtaxes, namely:-

a. Property tax;

b. x x x x x x

2. X X X X X X

3. The taxes specified in sub-section (1) and sub-section (2) shallbe levied, assessed and collected in accordance with the provisionsof this Act and the bye-laws made thereunder.

Section 61: Rate of Property Tax-

1. Save as otherwise provided in this Act, the property tax shallbe levied on lands and buildings in New Delhi and shall consist ofnot less than ten and not more than thirty per cent of the rateablevalue of lands and buildings:

provided that the Council may, when fixing the rate at which theproperty tax shall be levied during any year, determine that therate leviable in respect of lands and buildings or portions of landsand buildings in which any particular class of trade or business iscarried on shall be higher than the rate determined in respect ofother lands and buildings or portions of other lands and buildingsby an amount not exceeding one-half of the rate so fixed:

Provided further that the tax may be levied on graduated scale, ifthe Council so determines.

Explanation. - Where any portion of a land or building is liable toa higher rate of the tax such portion shall be deemed to be aseparate property for the purpose of municipal taxation.

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2. The Council may exempt from the tax lands and buildings ofwhich the rateable value does not exceed one thousand rupees.

Section 62: Premises in respect of which property tax is to belevied- Save as otherwise provided in this Act, the property tax shall belevied in respect of all lands and buildings in New Delhiexcept-

a. lands and buildings or portions of lands and buildingsexclusively occupied and used for public worship or by a societyor body for a charitable purpose:

Provided that such society or body is supported wholly or in partby voluntary contributions, applies its profits, if any, or otherincome in promoting its objects and does not pay any dividend orbonus to its members.

Explanation. - “Charitable purpose” includes relief of the poor,education and medical relief but does not include a purpose whichrelates exclusively to religious teaching.

b. lands and buildings vested in the Council, in respect of whichthe said tax, if levied, would under the provisions of this Act beleviable primarily on the Council;

c. agricultural lands and buildings (other than dwelling houses).

2. Lands and buildings or portions thereof shall not be deemed tobe exclusively occupied and used for public worship or for acharitable purpose within the meaning of clause (a) of sub-sec-tion (1) if any trade or business is carried on in such lands andbuildings or portions thereof or if in respect of such lands andbuildings or portions thereof, any rent is derived.

3. Where any portion of any land or building is exempt from theproperty tax by reason of its being exclusively occupied and usedfor public worship or for a charitable purpose such portion shallbe deemed to be a separate property for the purpose of municipaltaxation.

Section 63 : Determination of rateable value of lands andbuildings assessable to property tax-

1. The rateable value of any lands or buildings assessable to anyproperty taxes shall be the annual rent at which such land or buildingmight reasonably be expected to let from year to year less a sumequal to ten per cent of the said annual rent which shall be in lieuof all allowances for cost of repairs and insurance, and otherexpenses, if any, necessary to maintain the land or building in astate to command that rent:

Provided that in respect of any land or building the standard rentof which has been fixed under the Delhi Rent Control Act, 1958(59 of 1958) the rateable value thereof shall not exceed theannual amount of the standard rent so fixed.

2. The rateable value of any land which is not built upon but iscapable of being built upon and of any land on which a building isin process or erection shall be fixed at five per cent of estimatedcapital value of such land.

3. All plant and machinery contained or situate in or upon anyland or building and belonging to any of the classes specified fromtime to time by public notice by the Chairperson with the approvalof the Council, shall be deemed to form part of such land orbuilding for the purpose of determining the rateable value thereofunder sub-section (1) but save as aforesaid no account shall betaken of the value of any plant or machinery contained or situatedin or upon any such land or building.

Section 65 : Taxation of Union Properties-

(1) Notwithstanding anything contained in the foregoingprovisions of this Chapter, lands and buildings being properties ofthe Union shall be exempt from the property tax specified in sec-tion 61:

Provided that nothing in this sub-section shall prevent the Councilfrom levying property tax on such lands and buildings to whichimmediately before the 26th January, 1950, they were liable ortreated as liable, so long as that tax continues to be levied by theCouncil on other lands and buildings.

(2) Where the possession of any land or building, being propertyof the Union, has been delivered in pursuance of section 20 of the A

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SUPREME COURT REPORTS

Displaced Persons (Compensation and Rehabilitation) Act, 1954(44 of 1954) to a displaced persons, or any association ofdisplaced person, whether incorporated or not, or to any otherperson [hereafter in this sub-section and the proviso tosub-section (1) of section 66 referred to as the transferee], theproperty tax specified in section 61 shall be leviable and shall bedeemed to have been leviable in respect of such land or buildingwith effect from the 7th day of April, 1958 or the date on whichpossession thereof has been delivered to the transferee,whichever is later, and such property tax shall, notwithstandinganything contained in any other provision of this Act, berecoverable with effect from that day or date, as the case maybe.

Section 66: Incidence of Property Tax-

(1) The property tax shall be primarily leviable as follows:- (a) if the land or building is let, upon the lessor; (b) If the land or building is seb-let, upon the superior lessor

(c) if the land or building is unlet, upon the person in whom theright to let the same vests:

Provided that the property tax in respect of land or building, beingproperty of the Union, possession of which has been delivered inpursuance of section 20 of the Displaced Persons (Compensationand Rehabilitation) Act, 1954 (44 of 1954) shall be primarilyleviable upon the transferee.

(2) If any land has been let for a term exceeding one yearto a tenant and such tenant has built upon the land, the propertytax assessed in respect of that land and building erected thereonshall be primarily leviable upon the said tenant, whether the landand building are in the occupation of such tenant or a sub-tenantof such tenant.

Explanation. - The term “tenant” includes any person derivingtitle to the land or the building erected upon such land from thetenant whether by operation of law or by transfer intervivos.

3. The liability of the several owners of any buildings which is, orpurports to be, severally owned in parts or flats or rooms, for payment of property tax or any installment thereof payable duringthe period of such ownership shall be joint and several.

Section 67 : Apportionment of liability for property tax when thepremises are let or sub-let-

(1) If any land or building assessed to property tax is let, and itsrateable value exceeds the amount of rent payable in respectthereof to the person upon whom under the provision of section66 the said tax is leviable, that person shall be entitled to receivefrom his tenant the difference between the amount of theproperty tax levied upon him and the amount which would beleviable upon him if the said tax was calculated on the amount ofrent payable to him.

(2) If the land or building is sub-let and its rateable value exceedsthe amount of rent payable in respect thereof to the tenant by hissub-tenant, or the amount of rent payable in respect thereof to asub-tenant by the person holding under the sub-tenant, the tenantshall be entitled to receive from his sub-tenant or the sub-tenantshall be entitled to receive from the person holding under him, asthe case may be, the difference between any sum recoveredunder this section from such tenant or sub-tenant and the amountof property tax which would be liable in respect of the said land orbuilding if the rateable value thereof were equal to the differencebetween the amount of rent which such tenant or sub-tenantreceives and the amount of rent which he pays.

(3) Any person entitled to receive any sum under this sectionshall have, for the recovery thereof, he same rights and remediesas if such sum were rent payable to him by the person from whomhe is entitled to receive the same.”

20. Though some other provisions may also be relevant, insteadof reproducing those provisions, the gist thereof can be mentioned. It isextracted from the discussion from the impugned judgment as it correctlycaptures the essence of these provisions.

21. Under Section 61 (1) of the NDMC Act, property tax shall belevied on lands and buildings in New Delhi and “shall consist of not lessthan ten and not more than thirty per cent of the rateable value of landsand buildings.” The proviso to Section 61(1) of the NDMC Act states A

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Athat the NDMC may, “when fixing the rate at which the property taxshall be levied during any year, determine the rate leviable in respect oflands and buildings or portions of lands and buildings in which anyparticular class of trade or business is carried on shall be higher than therate determined in respect of other lands and buildings or portion ofother lands and buildings by an amount not exceeding one-half of theBrate so fixed.” The second proviso to Section 61 (1) states that “the taxmay be levied on graduated scale, if the Council so determines.” Theexplanation to Section 61 (1) states that “where any portion of a land orbuilding is liable to a higher rate of the tax such portion shall be deemedto be a separate property for the purpose of municipal taxation.”C22. Under Section 61 (2) of the NDMC Act, the NDMC canexempt from tax the lands and buildings where “the rateable value doesnot exceed Rs.1,000.”

23. The expression ‘rateable value’ is defined under Section 2(42) of the NDMC Act to mean “the value of any land or building fixedDin accordance with the provisions of this Act and the Bye-laws madethereunder for the purpose of assessment to property taxes.”

24. Section 62 of the NDMC Act relates to the ‘Premises in respectof which tax is to be levied’. Section 62 (1) lists out such lands or buildingsor portions thereof which will not be subject to levy of property tax. ThisEincludes lands exclusively occupied and used for public worship or by asociety or body for a charitable purpose. It also includes lands and buildingsvested in the NDMC in respect of which the tax, if levied, would beleviable primarily on the NDMC and agricultural lands and buildings(other than dwelling houses). Section 62 (3) clarifies that if a portion ofFthe land or building is exempted from property tax by reason of theexclusive use or occupied for public worship or charitable purpose thensuch portion “shall be deemed to be a separate property for the purposeof municipal taxation.”

25. Section 63 of the NDMC Act sets out the method ofGdetermination of the rateable value of lands and buildings assessable toproperty tax. Section 63 (1) provides that the rateable value of any landor building assessable to property tax shall be the annual rent at whichsuch land or building might reasonably be expected to let from year toyear less a sum equal to 10% of the said annual rent which shall be inlieu of all allowances for cost of repairs and insurance, and otherH

expenses necessary to maintain the land or building in a state to commandthat rent. The proviso to Section 63 (1) of the NDMC Act states that inrespect of any land or building the standard rent of which has been fixedunder the Delhi Rent Control Act, 1958 (‘DRC Act’), the rateable valuethereof “shall not exceed the annual amount of the standard rent sofixed.”.

26. Section 632) of the NDMC Act states that the rateable valueof any land which is not built upon but is capable of being built upon andany land on which a building is in process of erection “shall be fixed atfive per cent of estimated capital value of such land.” Under Section63(3) the Chairperson of the NDMC can by public notice, with theapproval of the NDMC, specify a plant and machinery which will bedeemed to form part of such land and building for the purposes ofdetermination of rateable value. Section 65(1) of the NDMC Act clarifiesthat lands and buildings being properties of the Union shall be exemptfrom the property tax specified in Section 61 of the NDMC Act.

27. Section 66 of the NDMC Act speaks of the incidence of theproperty tax. It is primarily on the lessor if a building or land is given onlease. It is on the superior lessor if the land or building is given on asub-lease. If it is not leased then on the person on whom the right to letthe same vests.

28. Section 67 of the NDMC Act talks of apportionment of liabilityof the property tax when the premises are let or sub-let. Section 68clarifies who will be primarily liable for the property tax due in respectof any land or building and in the event of default of the person liable topay such property tax as specified in Section 66. It is clarified that thiswould be the occupier of such land or building.

29. Section 70 of the NDMC Act deals with the ‘AssessmentList’. This is a list of all lands and buildings which contains such particularswith respect to each land and building as may be prescribed by theBye-laws. When such Assessment List is prepared, the Chairpersonunder Section 70 (2) of the NDMC Act gives a public notice thereof andevery person claiming to be an owner, lessor or occupier of a land orbuilding included in the List shall be at liberty to inspect the List and takeextracts therefrom free of charge. Under Section 70 (3), the Chairpersonis to give a public notice of a date not less than one month thereafterwhen he would proceed to consider the rateable value of the lands and A

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Abuildings entered in the Assessment List. He is also to give the writtennotice where the rateable value is proposed to be increased. Section 70(4) of the NDMC Act provides for objections to be filed to the AssessmentList in writing to the Chairperson. Section 70 (5) of the NDMC Act talksof an objection being notified into and investigated, and the person makingthem shall be allowed an opportunity of being heard either in person orBby authorised agent before the final Assessment List is prepared underSection 70 (6) of the NDMC Act. Section 72 of the NDMC Act providesfor amendment of the Assessment List and Section 73 for preparationof new Assessment List.

30. Under Section 81 the Chairperson of the NDMC Act employsCvaluers to give advice or assistance in respect of valuation of any land orbuilding.

The Impugned Judgment:

31. After taking note of the aforesaid provisions of the Act asDwell as Bye-laws, the Delhi High Court, inter alia, observed that insofaras definition of ‘rateable value’ given under Section 2(42) of the NDMCAc is concerned, it means ‘value of any land or building fixed inaccordance with the provisions of this Act and the Bye-laws madethereunder for the purposes of assessment of property taxes’. Accordingto it, the conjunction “and” used in the above definition makes theElegislative intent explicit, namely, the rateable value has to be fixed bothin accordance with the NDMC Act as well as the Bye-laws.Consequently, it is inconceivable that the manner of determination of therateable value under the Bye-laws could be inconsistent or differentfrom that provided under the Act. Therefore, the rateable value has toFbe fixed, both in accordance with the provisions of the Act and inaccordance with the Bye-laws. Further, Section 63, which prescribesthe method for determination of the rateable value of lands and buildingstipulated that the rateable value of any land or building assessable toproperty tax shall be the annual rent at which such land and buildingmight reasonably be expected to let from year after year less a sumGequal to 10% of the said annual rent. Also, the proviso to Section 63(1)of the NDMC Act states that in respect of any land or building thestandard rent of which has been fixed under the Delhi Rent Control Act,1958, the rateable value thereof ‘shall not exceed the annual amount ofthe standard rent so fixed.”

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32. Further in the opinion of the High Court though under Section81 of the NDMC Act, the Chairperson can employ valuers to give adviceor assistance in respect of valuation of land and building, this is differentfrom the determination of the rateable value. Such value becomes relevantwhen there is attachment of the property to cover the arrears of municipaltaxes and the value of such land and building has to be determined toascertain what could be recovered towards the arrears. By readingthese provisions in the aforesaid manner, the High Court has held insofaras NDMC Act is concerned that the legislative scheme envisagesdetermination of rateable value only on one basis, i.e., on the basis of the‘annual rent’ at which the land or building might reasonably be expectedto let from year to year. In contrast, holds the High Court, the impugnedBye-laws seek to introduce a completely different system of rateablevalue than what is provided under the NDMC Act. As it provides UAMwhich envisages fixing UAV with reference to the characteristics of aproperty and then multiplying the UAV by area of the vacant land orcovered space to find out ‘annual value’. This method of levy assessmentcollection of tax is entirely different from what is provided under theNDMC Act and, therefore, could not have been introduced by theBye-laws in terms of Section 388(1)(A)(9) which confers power to makeBye-laws relating to the levy, assessment, collection, refund or impositionof taxes ‘under this Act’.

33. Such a course of action could not be taken without amendingthe provisions of NDMC Act. Relevant discussion in this behalf isreproduced below:

“Analysis of the new impugned Bye-laws

52. The new impugned Bye-laws in the present case seek tointroduce a completely different system of rateable value thanwhat is provided under the NDMC Act. While the NDMC Actprovides for rateable value to be determined on the basis of theannual rent at which the land or building might reasonably beexpected to let from year to year, the UAM envisages fixing theUAV with reference to the characteristics of a property and thenmultiplying the UAV by the area of the vacant land or coveredspace to find out the ‘annual value’.

53. It is not as if the NDMC was unaware that this could be doneonly by amending the NDMC Act. Yet only because this might be A

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a time consuming process it chose the short cut of making thenew impugned Bye-laws without amending the NDMC Act.Section 388 (1) of the NDMC Act begins with the expression“Subject to the provisions of this Act”. Clearly, therefore, thelegislative intent was to confer upon the NDMC the power tomake Bye-laws which were subject to and consistent with theprovisions of the Act.

54. Secondly, Section 388 (1) A (9) of the NDMC Act conferspowers to make Bye-laws relating to the levy, assessment,collection, refund or imposition of taxes “under this Act”. Theexpression ‘relating to’ preceding the words “levy, assessment,collection...” clearly means, therefore, that Bye-laws will have tobe consistent with what is already provided under the NDMCAct. A method of levy, assessment, collection of taxes which isdifferent from what is provided under the NDMC Act cannotpossibly be introduced by the Bye-laws in terms of Section 388(1) A (9) of the NDMC Act. That would make the Bye-lawsinconsistent with and contrary to the NDMC Act.

55. There are specific provisions of the NDMC Act which havebeen sought to be supplanted by the Bye-laws. Illustratively, thewhole system of determination of annual rent under Section 63(1)of the NDMC Act is sought to be substituted by the UAM. Thereis no provision in the new impugned Bye-laws that could be relatedto Section 63(1) of the NDMC Act. The new impugned Bye-laws create classification among assessees which are differentfrom the classification envisaged under the NDMC Act and inparticular classification of property as spelt out in Sections 62 and65 of the NDMC Act. Section 66 of the NDMC Act contemplatesimposition of the property tax in respect of three categories ofproperties i.e. the property that has been let, sub-let and propertiesthat are not let out at all. There is no further classificationcontemplated in the NDMC Act on the basis of nature of rightswhich are created in respect of such land and buildings.

56. Under the proviso to Section 63(1) of the Act, the rateablevalue cannot exceed the standard rent fixed under the DRC Act.This is sought to be overwritten by the impugned new Bye-laws.Under the explanation to Section 61(1) of the Act where a portionof a land or building is liable to a higher rate of tax then such portion will be deemed to be a separate property for the purposeof municipal taxation. This is sought to be substituted under theUAM which seeks to aggregate the value of land as a whole withthe value of the space covered on such land.

57. While categorising the occupancy factor, the impugned Bye-laws create only two categories i.e. (i) self-occupied or vacantbuildings or lands and (ii) others. Thereby the letting out of aproperty for use by a person other than the owner for noconsideration is treated at par with the letting out such propertyfor consideration. These are only the illustrations of changesbrought about by the new impugned Bye-laws.

58. In State Trading Corporation India Limited v. New DelhiMunicipal Council (supra), the Supreme Court emphasised thatthe manner of determination of rateable value has to be only interms of Section 63 of the NDMC Act even in respect of propertiesthat have been sub-let and not in terms of Bye-law 12 of the 1962Bye-laws which were found to be inconsistent with the provisionsof the NDMC Act.

59. Consequently, as far as the present case is concerned it isplain that the new impugned Bye-laws are ultra vires the NDMCAct. They require to be invalidated on this ground alone.”

Submission of the Counsel:

34. Mr. Sanjay Jain, learned senior counsel appeared on behalf ofthe appellant, NDMC. After referring to the various provisions of theNDMC Act as well as the impugned Bye-laws, he submitted that as perBye-law 5 the valuation committee sits every year and lays down thestandards for fixing the annual rent. The process undertaken is with apurpose to arrive at ‘annual rent’ which according to him is in consonancewith Section 63 of the NDMC Act. He read Section 63 to emphasisethat even as per that provision it is the rateable value on which tax is tobe imposed on lands and building which are assessable to any propertytax. This rateable value, the provisions sates, shall be the ‘annual rent’.Thus, the tax has to be on the annual rent which is the rateable value andno particular method is given under Section 63 of the NDMC Act forfixing such annual rent. Therefore, it was permissible to lay down amethod of fixing annual rent in the Bye-laws which would not be contraryto Section 63 of the Act. He also submitted that UAM provided in the A

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ABye-laws is more rationale and takes care of many anomalies of the oldsystem. According to him, the High Court committed certain errors inapproaching the subject. In the first instance it referred to the provisionsof Delhi Rent control Act and application thereof which is without anybasis. Other error was to wrongly assume that there are three categoriesof properties where the Bye-laws create only two categories. Thirdly,Bmethodology which is worked out and mentioned in para 22 of thejudgment (relating to interpretation that is to be given to Section 181 ofthe NDMC Act) is contrary to Section 63 of the NDMC Act.

35. Mr. Jain also submitted that the observations of the DelhiHigh Court in State Trading Corporation of India Ltd. vs. New DelhiCMunicipal Council[1]are wrongly interpreted as the Court did not hold inthat case that determination of rateable value has to be only in terms ofSection 63 of the NDMC Act. He further argued that even in respect ofthose properties which are let out, still exercise is to be dome to find outthe annual value inasmuch as the ‘rent’ which it is likely to fetch has toDbe determined as per Section 63. On the other hand, in respect of theproperties which are self-occupied, in any case annual rent has to bearrived at. The impugned Bye-laws seek to achieve that purpose only,which was very much in consonance with Section 63 of the NDMCAct. He also submitted that the judgment in question has created a void insofar as intervening period is concerned as the NDMC has taxed theEproperties, after coming into force the Bye-laws, in accordance with thenew Bye-laws which have been struck down and thereby leaving theproperties in question without any tax for the intervening period.

36. Mr. Jain also submitted that UAM introduced by the MCDhas been upheld by this Court.F

37. In a nutshell, it is the case of NDMC that the impugned Bye-laws are not ultra vires the NDMC Act. The NDMC has contended thatthe finding of the impugned judgment that the Bye-laws of NDMC asultra vires the NDMC Act, on the premise that the same instead ofsupplementing Section 63(1), supplants the same is erroneous.G

38. NDMC has also contended that the entire functioning andactivities of NDMC is dependent on its revenue collections. Propertytax accounts for the major individual source of revenue of NDMC. Inthe event the Bye-laws are struck down in their entirety, as has been H 1 104(2003) DLT 808 = AIR 2003 Delhi 295

done by the impugned judgment dated 10[th] August, 2017 of the DelhiHigh Court, NDMC will stand to lose a huge portion of its revenue, inthe absence of which NDMC will not be in a position to provide theservices that it currently provides in the New Delhi area.

39. As per NDMC, no particular method is prescribed underSection 63(1) for arriving at annual rent and the said gap has been filedup by the Bye-laws of 2009. It claims that what has been prescribed bySection 63 (1) is only the broad principle on which the rateable valuewould be determined, which is the annual rent that the property “mightreasonably be expected to let from year to year.

40. Section 63(1) is silent on how to determine the annual rent ofa property and for calculation of annual rent, NDMC can employ anymethod which is reasonable to arrive at the hypothetical rent which aproperty might reasonably be expected to let from year to year. Usingthe current Bye-laws to arrive and determine the annual rent, cannot besaid to be unreasonable or ultra vires of the provisions of the NDMCAct.

41. Mr. Parag Tripathi, who appeared in the civil appeal arisingout of Special Leave Petition (Civil) No. 35938 of 2017, supported thecase set up by the NDMC. He also argued that Section 63 provides forthe determination of rateable value for buildings assessable to propertytax which is on the basis of annual rent which the land or building mightreasonably be expected to let from year to year. There is no statutoryformula provided and indeed there can be non to determine the value ofrent at which any land or building might reasonably be expected to letfrom year to year. It is for this reason that Section 388(1)(A)(9) of theNDMC Act, 1994 vests power on the Council to make bye-laws I n allmatters relating to levy, assessment, collection, refund or remission oftaxes under the Act. It is a well-settled position of law that the term‘levy’ is a term of wide import and includes charge as well as impositionof tax, as laid down in the followings judgments:

(I) Ashok Singh vs. Asstt. Controller of Estate Duty[2]

(ii) Assistant Collector of Central Excise vs. National TobaccoCo. of India Ltd.[3]

(iii) Mafatlal Industries & Ors. vs. Union of India & Ors.[4]

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42. Analyzing the Impugned Judgment dated 10.08.2017 of theHigh Court, he argued that it has proceeded on the basis that the conceptof annual value sought to be introduced by the NDMC (Determinationof Annual Rent) Bye-laws, 2009 is completely alien to the statutoryscheme of the NDMC Act on the following basis:

(i) Bye-law 2 of the 2009 Bye-laws provides that ‘for the purposesof Section 63(1)” the annual rent for which the lands and buildings areexpected to let from year to year shall be determined in terms of Bye-laws 3 and 4., B

(ii) Bye-law 4 provides that the annual rent of lands and buildingsCnot covered by Bye-law 3 shall be the aggregate of the bona fide annualvalue of land and bona fide annual value of covered space of the building.In terms of sub- bye-law 3 of Bye-law 4 the annual value of any coveredspace shall be the amount arrived at by multiplying the total area by thebase unit area value of such covered space and the relevant factorsstipulated in sub-bye laws 5,6 and 7.D

(iii) ‘Annual value” for the purpose of arriving at the annual rentwhich a property may reasonably expected to fetch is not a new conceptand has been applicable to the NDMC area until the enactment of theNDMC Act in 1994. In this regard, reference may also be had to thedefinition of “annual value” in Section 3(1)(b) of the Punjab MunicipalEAct which provides that annual value shall mean the gross annual rentwhich a house or building may reasonably be expected to let from yearto year.

(iv) It is, therefore, clear that the term ‘annual value’, which isarrived at by taking into account factors such as area, usage of theFproperty, age factor and also occupancy, is only an indicator of the rentwhich a particular property would fetch when let for use or enjoyment.

43. Mr. Tripathi further submitted that the impugned judgmentalso proceeds on the basis that the 2009 Bye-laws have overwritten theproviso to Section 63(1) which provides that the rateable value shall notGexceed the standard rent fixed under the Delhi Rent Control Act.Questioning this approach, he submitted that the High Court has, withrespect, lost sight of the fact that concept of standard rent is no longeravailable under the Delhi Rent Control Act, 1958 since the Delhi HighCourt was pleased to strike down Sections 4,6 and 9 of the said Act H

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dealing with Standard Rent in Raghunandan Saran Ashok Saran(HUF) vs. Union of India and Others[5] , which judgment was neverchallenged in appeal and has thus attained finality.

44. This aspect was also noted by this Court in State TradingCorporation vs. New Delhi Municipal Council[6]. In that view of thematter, there was no occasion for the High Court to strike down theBye-laws on the ground that the Bye-laws have overwritten the provisoto Section 63(1).

45. Mr. Tripathi also submitted that various judgments relied uponby the High Court on the aspect of excessive delegation were notapplicable in the facts of the present case.

46. One additional submission was made by Mr. Parag Tripathideviating from the NDMC stand. Learned senior counsel referred tothe provisions of Section 63(2) of the NDMC as well as Section388(1)(A)(9) of the Act which read as under:

“Section 63(2): The ratable value of any land which is not builtupon but is capable of being built upon and of any land on which abuilding is in process of erection shall be fixed at five per cent ofestimated capital value of such land.

Section 388(1)(A)(9) : any other matter relating to the levy,assessment, collection, refund or remission of taxes underthis Act.”

47. His submission was that from a conjoint reading of the aforesaidprovisions it is clear that that provisions of Section 388(1)(A)(9)sufficiently empower NDMC to make Bye-laws in respect of matterscovered under Section 63, i.e., Sections 63(1) and 63 (2). His furthersubmission was that this Court has, time and again, held while interpretingtaxing statute that percentage of tax or charges or penalties provided isto be treated not as a mandatory provision but merely as indicative of aceiling. For this submission, he invited the attention of this Court to thefollowing passage in P. Ratnakar Rao and Others vs. Sate of A.P. andOthers[7][:]

“4. The contention raised before the High Court and repeatedbefore us by Shri Rajeev Dhavan, the learned Senior Counsel for 5 95(2002)DLT 528

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the petitioners is that the discretion given in Section 200(1) of theAct is unguided, uncanalised and arbitrary. Until an accused isconvicted under Section 194, the right to levy penalty thereunderwould not arise. When discretion is given to the court forcompounding of the offence for the amount mentioned underSection 200, it cannot be stratified by specified amount. It would,therefore, be clear that the exercise of power to prescribemaximum rates for compounding the offence is illegal, arbitraryand violative of Article 14 of the Constitution. We find no force inthe contention. For violation of Sections 113 to 115, Section 194accords penal sanction and on conviction for violation thereof, thesection sanctions punishment with fine as has been enumeratedhereinbefore. The section would give guidance to the StateGovernment as a delegate under the statute to specify the amountfor compounding the offences enumerated under sub-section (1)of Section 200. It is not mandatory that the authorised officerwould always compound the offence. It is conditional upon thewillingness of the accused to have the offences compounded. Itmay also be done before the institution of the prosecution case. Inthe event of the petitioner’s willing to have the offencecompounded, the authorised officer gets jurisdiction and authorityto compound the offence and call upon the accused to pay thesame. On compliance thereof, the proceedings, if already instituted,would be closed or no further proceedings shall be initiated. It is amatter of volition or willingness on the part of the accused eitherto accept compounding of the offence or to face the prosecutionin the appropriate court. As regards canalisation and prescriptionof the amount of fine for the offences committed, Section 194,the penal and charging section prescribes the maximum outer limitwithin which the compounding fee would be prescribed. Thediscretion exercised by the delegated legislation, i.e., the executiveis controlled by the specification in the Act. It is not necessarythat Section 200 itself should contain the details in that behalf. Solong as the compounding fee does not exceed the fine prescribedby the penal section, the same cannot be declared to be eitherexorbitant or irrational or bereft of guidance.”

48. On that basis, he argued that the 5% rate stipulated underSection 63(2) should be treated as the ceiling which can be used to determine the rateable value. Section 63(2) on a fair reading thereofand in view of the various judgments of this Court does not mandaterateable value fixed at 5% of the capital value of the land. This is onlythe ceiling and has to be dealt with accordingly.

49. He also argued that the whole idea behind Section 63(2) is todetermine the property tax. When there is no enjoyment of the propertyitself and the building is in the process of erection, then the land falls inthe category of ‘not built up but is capable of being built up’ or is actuallybeing built up.

50. In these circumstances once a building is demolished and afresh building is constructed after obtaining sanction plans from theNDMC, the rateable value can be determined under Section 63(2) onlyfor the period during which the building is fully demolished, i.e., the landin question becomes fully vacant till such time as the roof of the groundfloor is constructed. Once such construction is made after obtaining thesanction plan, by no stretch of imagination can the land be said to bevacant, as it now contains a building, with a constructed roof in accordancewith the sanctioned plan. According to him, any other interpretation willcreate a huge discrimination between those parties who are seeking toconstruct a building and others who are enjoying the benefit of aconstructed building. In the case of a newly constructed building, oncethe construction is complete, the rateable value will not exceed Rs. 1 to4 lakhs whereas a percentage of the capital value of the land at 5%, thesame would be in the region of Rs. 3 to 4 crores. This discriminationwhich is 60-80 times would be totally without any justification becauseno new or additional benefit are accruing to a party which is demolishingand reconstructing the property, rather a great health hazard will becreated with the old building are continued to be used in that dilapidatedstage.

51. He, thus, argued that a 5% levy is wholly arbitrary and doesnot serve any purpose also for the reason that no municipal serviceswhatsoever whether sewerage, water or electricity are really beingprovided by the NDMC to a demolished property because there is noresident, but only a limited extent of water and electricity is used for thepurposes of construction. Emphasizing that property tax is really in thenature of a fee on account of the services rendered by the MunicipalAuthority. (See: Pradeep Oil Corporation vs. Municipal Corporationof Delhi and Anr.; (2011) 5 SCC 270).

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A52. He submitted that the levy must commensurate to the servicesrendered by the authority. On that basis, Mr. Tripathi has sought a directionfrom this Court to the NDMC to formulate Bye-laws in respect of Section63(2) as well and/or laid down guidelines in the case of those buildingwhere pursuant to sanction plan existing building is demolished and afresh building is constructed, the property tax during the period of vacancyBof the land due to the demolition of the building, be determined at thesame rate, as the building upon construction based on the sanction planswould be subject to. Further, any in any case this period during whichrateable value would be determined under Section 63(2) should be limitedto from the period of demolition of the existing structure/building till suchCtime as the roof of the ground floor is laid and constructed.

53. Ms. Maninder Acharya, M/s. Mukul Rohatgi, Sanjay R. Hegde,Huzefa Ahmadi, B.B. Gupta, Ms. Vibha Datta Makhija, learned seniorcounsel, M/s. Sanjeev Anand, B.B. Jain and many other counsel appearedon behalf of the different respondents/ assessees and defended theDjudgment of the High Court. It may not be necessary to separately statethe arguments advanced by these counsel. Instead the arguments ofthese counsel are noted below in a consolidated manner.

54. Before concentrating on the main issue of ultra vires, thecounsel for the respondents highlighted that under the impugned Bye-Elaws NDMC is demanding/collecting property taxes on unconstructed/vacant land which are otherwise incapable of being constructed upon.This is notwithstanding the fact that Section 63 of the NDMC Actstipulates the annual rateable value (ARV) can only be determine donthe basis of constructed/vacant land which is capable of being constructedupon. In order to show that a large portion of land falling under theFjurisdiction of NDMC cannot be built upon, following aspects arehighlighted:

A. A majority of the properties of NDMC are situated in theLutyens’ Bungalow Zone (“LBZ” and are governed by the LBZGuidelines dated 8[th] February, 1988, which not only prohibit constructionGon a large part of the plots falling in LBZ but also severely restrict newdevelopment and construction beyond the area previously constructedupon.

B. Similar restrictions exist for properties falling within the‘prohibited areas’ and ‘regulated areas’ declared by the ArchaeologicalH

Survey of India (ASI) under the Ancient Monuments and ArchaeologicalSites and Remains Act, 1958 and amendments thereto.

C. Given limitations of building bye-laws, such a legally requiredsetbacks, it is quite clear that there are portions of the property thatowners are compelled by law to leave vacant. Larger plots of land alsorequire larger setbacks and lesser ground coverage.

55. It is submitted that the above three restrictions make itimpossible to construct on the entire plot of land, and result in largeportions of these plots becoming unconstructed/vacant land that are notcapable of being built upon. In fact, over 50% of properties falling withthe NDMC jurisdiction are governed by either LBZ Guidelines and/orby ASI regulations. The respondents argue that, it is completelydiscriminatory vis-a-vis properties situated outside such areas to levyheavy taxes on such vacant land when development thereupon is strictlyprohibited.

56. It is also argued that on such properties, no property tax canbe levied. Support from the judgment of the High Court of Delhi, in thecase of Municipal Corporation of Delhi vs. Shashank Steel Industries(P) Ltd.[8] is taken in this behalf wherein the Court interpreted theexpression ‘capable of being built upon’ appearing in Section 116(2) ofthe Delhi Municipal Corporation Act, 1957, which is stated to be in parimateria with Section 63(2) of the NDMC Act. Therein, that High Courthas held that property tax is leviable only in respect of land which isotherwise ‘capable of being built upon’ and where construction ispermission. It was submitted that the civil appeal filed by the MunicipalCorporation of Delhi against the decision of the Full Bench was dismissedby this Court.

57. The impugned Bye-laws are also questioned as violative ofArticle 14 of the Constitution of India on the ground that they lackreasonable classification. All areas under the NDMC from B.K. DuttColony to Golf Links to Bengali Market to Prithviraj Road, are treated atpar in that the same base UAV Rs. 1,000/- per sq. mtr. (later increasedby 20% to Rs. 1,1200/- per sq. mtr. w.e.f. 01.04.2013) is imposed onthem even though the rent that they would fetch is in no way comparable.The Annual Rateable Value for two buildings/houses (of say 1,000 sq.mtr. each built between 2000-09 on plots below between 500 to 1,000

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Asq. mtrs.) one in B.K. Dutt Colony and the other on Golf Links, whereboth are used as a residence by the individuals who own them, would bethe same, calculated by the formula below:

bona fide Annual Rateable Value of the Covered Space =Base unite Area Value x Covered Space x Age factor x UseBFactor x Occupancy Factor =1,200x1,000x1x1x1.5x1=18,00,000/- less 10% deduction = Rs. 16,20,000/-

58. It is submitted that fixing the same base unit area value for allCthe colonies falling within the jurisdiction of the appellant ignores theroles, location and social factors play in determining annual rent and thustax, and accordingly treat unequals as equals. This is argued asdiscriminatory, as held in State of Kerala vs. Haji Kutty[9]wherein thisCourt held that “imposing a uniform tax on objects, persons or transactionDessentially dissimilar may result in discrimination”. Comparison is madewith the Scheme adopted by the MCD, which has divided the area underits jurisdiction into six different zones and has provided a separate locationfactor for each zone for calculating the property tax.

59. Further submissions predicated on Article 14 of the Constitutionare as under:E

(i) The impugned Bye-laws seek to impose onerous terms uponfirms, companies, trusts etc. by denying the benefit of self-occupationuse to their properties in which their partners/directors/employees/trusteesreside, and charging three times the property tax being charged fromindividual assessees. Such impermissible impugned Bye-laws have beenFmade in utter disregard of Section 66 of the NDMC Act, sub-section (1)of which clearly mandates that:

“The property tax shall be primarily leviable as follows:- (a) if the land or building is let, upon the lessor; G

(b) if the land or building is sub-let, upon the superior lessor;

(c) if the land or building is unlet, upon the person in whom theright to let the same vests.”

9 AIR 1969 SC 378H

This Section clearly contemplates the classification of unlet landor building as a single category if there is no lease/sub-lease, therefore,suggesting that such properties owned by firms, companies or trusts etc.fall in the same class as self-occupied properties. Such unequal treatmentis indubitably discriminatory.

(ii) Furthermore, the impugned Bye-laws seek to tax the propertynot on the basis of its user but on the basis of the legal status of theowner, which goes against the principle that property tax is a tax on aproperty and not a tax on the owner. This is also discriminatory as manybeneficial owners of the property hold the same through a firm, company,trust, etc. for reasons such as estate planning, family settlements, synergiesof business, court decrees, business exigencies etc. and they cannot bepenalised on the basis of nature of ownership and that too for a historicand irreversible act done by them or their predecessors-in-it.

(iii) The service provided by NDMC towards sewage, publichealth, streets, roads, drainage, parks etc. does not change and there isno qualitative and quantitative difference in the same for firms, companies,trusts etc.

(iv) The impugned Bye-laws [Bye-law 4(6)] seek to imposeunreasonably and discriminatory onerous terms upon the assesseesputting their property to any permissible use “other than residential” bycharging a six times factor for calculating the Annual Rateable Value ofcovered space. This omnibus category of “Other than Residential” doesnot envisage multiple diverse uses that a property may be put to anunreasonably and arbitrarily clubs all uses “other than residential” intoone category without providing any distinction between a use which islikely to yield profits and/or cause more burden on the infrastructuralfacilities of the appellant and other uses which may be non-profit and/ordo not cause an additional excess burden on the infrastructure ascompared to residential use. This is in stark contrast to the MCD Act,which, in Section 116A classifies vacant land and buildings into coloniesand groups and specifies base area value thereafter. In this calculation,use wise categorization is done, nut just into ‘residential’ and ‘other thanresidential’, but into categories like business building, mercantile building,building for recreation, public purpose building, etc. Bye-law 6 of theDelhi Municipal Corporation (Property Taxes) Bye-laws 2004 goes sofar as to exempt land or buildings used for charitable purposes such as A

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Aorphanages, hospitals and schools that are free of cost, etc. Thisdemonstrates a significant application of mind by the MCD in contrastto the appellant herein.

The outcome of the Impugned Bye-laws is that if a trust owns aproperty which is used partly for the residential purpose of its trusteesBand partly for running a charity, the tax obligation would be many timesthe amount of tax payable by a house next door which is owned by theindividual who resides in it, both on account of the multipliers for non-self occupied and ownership not by an individual. This scenario isunreasonable and violative of Article 14.

C(v) Properties which are designated for residential use [as per thecity master plan] and are put to ‘residential cum office use’ by foreign/diplomatic missions operating out of such properties as permitted underapplicable law (whether as owner or tenant) cannot be treated as “otherthan residential” and consequently be subjected to higher factor forcalculating the Annual Rateable Value of covered space.D

(vi) Rationality of the impugned Bye-laws is also questioned onthe ground that under the impugned Bye-laws, if some portion of thecovered space of the property is partly rented and the remaining coveredspace of the property is self-occupied, the impugned Bye-laws do notgive a self occupation rebate on the unconstructed/vacant land {i.e.Eapplying the current base unit area of Rs. 1,200/- per sq. mtr. Instead ofRs. 600/- per sq. mtr.) even though the unconstructed/vacant land maybe I n complete occupation/enjoyment of the owners. Even in caseswhere as little as one room in the barsati floor or outhouse is rented andthe tenant is not given any access to the unconstructed/vacant landF(except right of entry/ingress from the main gate/driveway), the landlord/owners would be obligated to pay an inexplicably and substantially higheramount of property tax.

(vii) As per the Bye-law 4(8) of the impugned Bye-laws, in caseof commercial properties, the Annual Rateable Value of the coveredGspace as per the impugned Bye-laws is the value arrived under theImpugned Bye-laws or the actual rent fetched, whichever is higher.Grievance is that in this way, the NDMC is trying to achieve best of bothworlds, which is not consistent with the “optionality” underlying theimpugned Bye-laws. Moreover, after the NDMC has taken the standthat the impugned-Bye-Laws seek only to provide a method by which to H

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calculate the annual rent, it is incongruous that the actual rent be takeninto consideration.

(viii) Given that Delhi is one state, there is no reason for differentsystems between the NDMC and MCD areas. For this purpose,reference is made to the case of State Trading Corporation of IndiaLtd. case wherein a Single Judge of the High court of Delhi observed asunder:

“37. Before parting with this judgment, I must express my anguishat the fact that though Delhi is one city, different parameters arebeing followed by Municipal authorities in the same town. It isonly for purposes of convenience that jurisdiction have been dividedamong NDMC, MCD and Delhi Cantonment Board. The leastthat is expected is that all these Municipal authorities should actat tandem and follow similar principles in determination of rateablevalue. Merely because the house of one person falls in one areaor the other, which may even be adjacent, and a different Municipalauthority is dealing with the issue of determination of rateablevalue, should not imply totally different concepts in determinationof such rateable value. It is appropriate that all the Municipalauthorities must meet and consider this aspect to bring a uniformityin the system of determination of the rateable value in parts ofDelhi when they fall within one jurisdiction or the other. This ismore so as the provisions under said Act and the DMC Act arepara materia. The MCD, in fact, now proposed to apply a differentconcept of a unit method of taxation, but so far, the NDMC hasnot finalised any proposal in the same terms.”

It is argued that although the appeal against the said decision wasallowed by a Division Bench of the High Court of Delhi in NDMC vs.State Trading Corporation[10], the aforesaid observations were neitheroverruled nor commented upon by the Division Bench and do hold good.In any case, appeal against the judgment of the Division Bench wasthereafter allowed by this Court in State Trading Corporation case.Therefore, as per the respondents, these observations do hold the field.

(ix) It is also submitted that the impugned Bye-laws seek topenalise private citizens at the cost of the union and state instrumentalities.Out of the total NDMC area of land about 90% of the land is owned by 10 126(2006) DLT 191

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Athe Government itself and the rest 10% is owned by the individuals,body corporates etc. As the Government has been exempted from payingtaxes, therefore the burden to pay tax is on the persons, who occupyonly 10% land of the total NDMC area. This according to the respondentsis discriminatory and in violation of Article 14 of the Constitution of India.

B60. Adverting to the issue of ultra vires which has appealed to theHigh Court thereby quashing the impugned Bye-laws, the respondentssupported the reasons given by the High Court in this behalf. Emphasizingthe fact that as per Section 63(1) of the NDMC Act, annual rent to bearrived at has to be the rent which such land or building might reasonablybe expected to be let from year to year. Respondents emphasised thatCSection 63(1) uses the word ‘rent’ and not ‘value’ and, therefore, theonly way for determining the annual rent is to see the ‘rent’ which theproperties likely to reasonably fetch. The respondents have submittedthat this language contained in Section 63(1) of the NDMC Act hascome up for interpretation before this Court in number cases andDinterpreted in the same manner in which the High Court has dealt withthe issue. The respondents, in this behalf, referred to the followingjudgments:

(i) The Corporation of Calcutta vs. Smt. Padma Debi andOthers[11]; E(ii) The Guntur Municipal Council vs. The Guntur Town RatePayers’ Association etc.[12]

(iii) Dewan Daulat Rai Kapoor vs. New Delhi MunicipalCouncil and Others[13]

F(iv) Indian Automobiles Ltd. vs. Calcutta MunicipalCorporation and Anr.[14]

(v) State Trading Corporation case

61. It is thus argued that the High Court has rightly held that theUAM is not a means or method of collecting the rent for which a property Gmight reasonably be expected to let. In support of this contention, therespondents referred to some of the Bye-laws and the position thereunder 11 (1962) 3 SCR 4912 (1970) 2 SCC 870313 (1980) 1 SCC 685H14 (2002) 3 SCC 388

which according to the respondents makes it clear that UAM introducedin the impugned Bye-laws is completely foreign to the methodology of‘annual rent’ provided under Section 63. The Bye-laws referred to areas below:

62. Bye-laws 4(6) introduces a “multiplication factor for use andoccupancy of the covered space”, wherein the multiplication factor forresidential use is 1 but all other use is 6. Similarly, for self occupied orvacant properties, the multiplication factor is 1 whereas for others it is 3.As per the explanation to this Bye-law.

“premises owned by companies, firms, trusts, etc. and used bythe directors, employees or partners for residence or guest houseshall not be treated as self occupied by the owners.”

63. Thus, by way of illustration, a property owned by a trust andused by it as a guest house or to run a charity would be taxed 18 timeswhat an identical self occupied residential property would be taxed.Properties fetch the same rent whether they are owned by an individualor a trust, whether they are used as a residence or a guest house. ThisBye-law is thus directly contrary to the contention that the ImpugnedBye-laws are a method of computing rent.

64. The impugned Bye-laws provide for the calculation of tax tobegin by multiplying the total covered area by an assigned base UAV ofRs. 1,000/- per sq. mtr. (revised to Rs. 1200/- per sq. mtr. w.e.f.01.04.2013), irrespective of location. The appellant thus seems to beinexplicably equating the rent a property which a house in B.K. Duttwould fetch with one in Golf Links or Prithviraj Road.

65. Factors such as location, neighborhood, corner plot, architecturalstyle, etc. which play a significant role in ascertaining the rent a propertywould fetch are ignored in the impugned Bye-laws.

66. It is, thus, argued that the Impugned Bye-laws are not a meansof calculating the rent a property would fetch. To the contrary, they layout a method that is entirely different from the parent legislation.Respondents also point out difference in the following manner:

(a) Firstly, Section 63(2) of the NDMC Act provides for taxationonly on land capable of being built upon. Given that parts of the NDMCarea fall under the Lutyens’ Bungalow Zone (‘LBZ’) or ‘prohibited’ or A

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A’regulated area’ declared by the Archaeological Survey of India underthe Ancient Monuments and Archaeological Sites and Remains Act, 1958(including the rules framed thereunder), and given that building bye-laws require certain setbacks to be left vacant, the unconstructed/vacantland is often not capable of being built upon. Bye-law 4(2), which providesfor calculation of bona fide value of land not constructed upon, ignoresBthis aspect and thus contradicts the parent legislation.

(b) Secondly, the categories created under the Bye-law 4(6) aredifferent from the classification envisaged under the NDMC Act and inparticular classification of property in Section 62 and 65 of the NDMCAct. Section 66 of the NDMC Act creates three categories of propertiesC– those which have been let, those which have been sub-let and thosethat are not let out at all. The impugned Bye-laws, however, create anentirely different method of categorization.

(c) Furthermore, the Impugned Bye-laws confer extensive powersupon the Valuation Committee in Bye-Law 5, which amounts to excessiveDdelegation of power in a manner that has not even been envisaged in theparent statute.

Consideration of the arguments:

67. In the first place, we take up the fundamental issue, namely,Ewhether the impugned Bye-laws are ultra vires Section 63 of the NDMCAct? As noted above, judgment of the High Court is confined to thisissue alone. As can be seen from the legislative scheme contained invarious provisions pertaining to property tax, Section 60 is the chargingSection which authorizes the NDMC to levy various types of taxesincluding property tax. As per sub-section (3), tax can be assessed andFcollected in accordance with the provisions of the Act and Bye-lawsmade thereunder, rates at which the property tax can be charged arementioned in Section 61. This Section, inter alia, provides that the propertytax shall be levied on lands and buildings in New Delhi and shall consistentof not less than 10% and not more than 30% of the rateable value ofGlands and buildings. Thus, property tax can be charged on lands andbuildings for which rates can be prescribed and these rates have to bebetween 10% to 30%. Further, this percentage is of the ‘rateable value’of lands and buildings. Definition of ‘rateable value’ is given in Section2(42) of the NDMC Act to mean ‘the value of any land or building fixed in accordance with the provisions of this Act and Bye-laws madethereunder for the purposes of assessment to property taxes’.

68. Various premises, viz: lands and buildings, in respect of whichproperty tax can be levied are mentioned in Section 62. Insofar asrateable value is concerned, the manner of determination thereof isspecified in Section 63 of the Act. Since, the method of determination isthe fulcrum of the dispute, Section 63 assumes importance for thepurposes of deciding the issue in these appeals. It is also an acceptedposition that the interpretation that is to be given to this provision wouldlead to the outcome of the case. For these reasons and for the sake ofcontinuity and clarity, we reproduce Section 63(1) and (2) thereunder:

“Section 63 : Determination of rateable value of lands and buildingsassessable to property tax-

1. The rateable value of any lands or buildings assessable to anyproperty taxes shall be the annual rent at which such land or buildingmight reasonably be expected to let from year to year less a sumequal to ten per cent of the said annual rent which shall be in lieuof all allowances for cost of repairs and insurance, and otherexpenses, if any, necessary to maintain the land or building in astate to command that rent:

Provided that in respect of any land or building the standard rentof which has been fixed under the Delhi Rent Control Act, 1958(59 of 1958) the rateable value thereof shall not exceed theannual amount of the standard rent so fixed.

2. The rateable value of any land which is not built upon but iscapable of being built upon and of any land on which a building isin process or erection shall be fixed at five per cent of estimatedcapital value of such land.”

69. As per Section 63(1) rateable value of any lands or buildingassessable to any property taxes is the ‘annual rent’. Further, such annualrent has to be determined ‘at which such land or building might bereasonably be expected to let from year to year….’ .

70. The ‘rateable value’, as per Section 2(42) of the NDMC Actis to be fixed in accordance with the provisions of the Act and theBye-laws made thereunder. Therefore, the first question is as to what A

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Aare the provisions made in this behalf in the Act. For this Section 63comes into play which prescribes that ‘annual rent’ would be rateablevalue. This annual rent, as per this provisions, is one such land or buildingis expected to let from year to year minus 10% thereof. The ImpugnedBye-laws lay down the procedure for fixing of annual rent on UAM.This leads us to the question as to whether this UAM can be stated to beBthe method of arriving at annual rent which land or building is reasonablyexpected o let from year to year? Here it may be noted that as perNDMC, Section 63 does not prescribe any particular method for arrivingat annual rent and, therefore, this gap has been filled up by the ImpugnedBye-laws by prescribing the formula based on UAM. It would be difficultCto accept such an interpretation of Section 63(1) as sought to be givenby the learned senior counsel for NDMC.71. Section 63(1) is not silent on how to determine the annual rentof a property. This annual rent has to be the one which the land or theproperty ‘might reasonably be expected to let from year to year’. It is,Dthus, based on the letting yearly value of the property. Such a convictionhas come up for interpretation before this Court in a series of cases rightfrom 1960s till date. It would be relevant to note that similar languagewas used in the unamended provisions of Delhi Municipal CorporationAct as well as similar acts of some other states.

72. The Corporation of Calcutta vs. Smt. Padma Debi andEOthers[15]has analyzed the words ‘gross annual rent at which the land orbuilding might reasonably be expected to let from year to year”. In asimilar provision under the Calcutta Municipal Act, 1923 as Section 63(1)and held as under:

“We shall first look at the provisions of the section to ascertainFthe meaning: The crucial words are “gross annual rent at whichthe land or building might at the time of assessment reasonably beexpected to let from year to year”. The dictionary meaning of thewords “to let”, is “‘grant use of for rent or hire”. It implies thatthe rent which the landlord might realise if the house was let is thebasis for fixing the annual value of the building. The criterion,Gtherefore, is the rent realisable by the landlord and not the valueof the, holding in the hands of the tenant. This aspect has beenemphasized by the Judicial Committee in Bengal Nagpur RailwayCompany Limited v. Corporation of Calcutta (AIR 1942 Calcutta455)(1).H15 (1962) 3 SCR 49

73. In the case of The Guntur Municipal Council case, thisCourt again analyzing similar provision under the Madras DistrictMunicipalities Act, 1920 held as under :

“……………Section 82 gives the method of assessment. It isprovided by sub-section (2) of that section that the annual valueof lands and buildings shall be deemed to be the gross annual rentat which they may reasonably be expected to let from month tomonth or from year to year less certain deductions. …..

…………..Now Section 82(2) of the Municipalities Act, as statedbefore, makes provision for the fixation of annual value accordingto the rent at which lands and buildings may reasonably be expectedto be let from month to month or from year to year less thespecified deduction. The test essentially is what rent the premisescan lawfully fetch if let out to a hypothetical tenant. Themunicipality is thus not free to assess any arbitrary annual valueand has to look to and is bound by the fair or the standard rentwhich would be payable for a particular premises under the RentAct in force during the year of assessment…….”

74. In Dewan Daulat Rai Kapoor case, this Court held as under:

“ …..The criterion is the rent realisable by the landlord and notthe value of the holding in the hands of the tenant. The rent whichthe landlord might realise if the building were let is made the basisfor fixing the annual value of the building. The word “reasonably”in the definition is very important. What the landlord mightreasonably expect to get from a hypothetical tenant, if the buildingwere let from year to year, affords the statutory yardstick fordetermining the annual value. Now, what is reasonable is a questionof fact and it would depend on the facts and circumstances of agiven situation. …...”

75. Similarly, in Indian Automobiles Ltd. case, it was held thatthe criterion for calculating annual valuation must be the rent realizableby the landlord and not the value of holdings, and that the word‘reasonably’ in the Section was a question of fact.

76. In State Trading Corporation case, while dealing with certainother Bye-laws as against the NDMC Act came to the conclusion that:

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A“7. …...Since there is a provision and procedure under Section63 of the NDMC Act for calculating the annual rent, one need notrefer at all to the bye-laws as quoted above since they areapparently inconsistent with the provisions of the NDMC Act. Inshort, it is impermissible to refer to the bye-laws framed underthe Punjab Act in view of specific provisions made under theBNDMC Act providing for the levy, assessment and collection ofproperty tax.

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8. Therefore, the only basis for fixation of rateable value is theannual rent at which the land or building might reasonably beexpected to be let from year to year, subject to the deductionsprovided under the Act.”

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77. The aforesaid judgments give a clear message that annualrent is to be the one which the landlord might realize if the house was let.The criteria, thus, is the rent realizable by the landlord and not the valueof the holding. The test essentially is what rent the premises can lawfullyDfetch if let out to a hypothetical tenant. In the Guntur Municipal Councilcase, this Court made it clear that having regard to the provision in theAct, the municipality was not free to assess any arbitrary annual valueand has to look to and is bound by the fair or standard rent which wouldbe payable for a particular premises under the Rent Act in force duringEthe assessment.

78. In State Trading Corporation, which was a case directlydealing with this very provisions, namely, Section 63 of the NDMC Act,the Court again reiterated in unambiguous terms ‘the only basis forfixation of rateable value is the annual rent at which the land or buildingFmight reasonably be expected to let from year to year, subject to thedeductions provided under the Act’.

79. Even in common parlance, simple language of Section 63(1)clearly conveys that the rateable value is the annual rent which theproperty is likely to fetch. The yardstick is the ‘letting’. Two wordsGused in this Section convey this meaning very clearly, namely, the word‘rent’ in the phrase ‘annual rent’ and the word ‘let’. Therefore, annualrent is to be determined on the basis of the letting value which is expectedreasonably. In cases where the property is already let out, actual rate atwhich the property is let out becomes the amount at which the land orbuilding is reasonably expected to fetch. Exception may be those cases H

where the property is let out actually at a rent which is lesser than therent it would be fetched otherwise. This is the ratio of MehrasonsJewellers Private Limited[2]. It was a case in respect of premises notcontrolled by Delhi Rent Control Act. This Court held that the annualrent received by the landlord is what willing lessee uninfluenced by othercircumstances would pay to the willing lessor; actual annual rent in thesecircumstances can be taken as the annual rateable value of the propertyfor assessment of property tax.

80. The question directly arose for consideration in GovernmentServant Cooperative House Building Society Limited and Othersvs. Union of India and Others[16], this Court noticed the 1988 amendmentto the Delhi Rent Control Act and various judgments referred tohereinabove by us and concluded as under:

“8. Therefore, the annual rent actually received by the landlord,in the absence of any special circumstances, would be a goodguide to decide the rent which the landlord might reasonably expectto receive from a hypothetical tenant. Since the premises in thepresent case are not controlled by any rent control legislation, theannual rent received by the landlord is what a willing lessee,uninfluenced by other circumstances, would pay to a willing lessor.Hence, actual annual rent, in these circumstances, can be takenas the annual rateable value of the property for the assessment ofproperty tax. The municipal corporation is, therefore, entitled torevise the rateable value of the properties which have been freedfrom rent control on the basis of annual rent actually receivedunless the owner satisfies the municipal corporation that thereare other considerations which have affected the quantum of rent.”

81. In case there is a proof and/or material to find out that thereasonable rent could have been more than at which it is actually let out,the actual rent receipt can be discarded by adoptingthe expected rentwhich, on the basis of material, can be said to be reasonable. In thosecases where the property is self-occupied or is vacant and not let out, itcan be gathered from the rent at which a comparable property is let out.However, in such a case there would be two situations. Going by thedicta laid down in Dewan Daulat Rai Kapoor and other cases, thereasonable rent would be the standard rent which can be determined 16 (1998) 6 SCC 381

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Aunder the provisions of Delhi Rent Control Act. However, this principlewould be applicable only in respect of those properties where DelhiRent Control Act applies. In other cases, the yardstick would be theletting value of comparable properties, i.e., the rent at which comparableproperties are let out. However, such criteria of fixation of standardrent has lost its relevance after the judgment of the Delhi High Court inBRaghunandan Saran Ashok Saran (HUF) vide which Sections 4,6and 19 of the Delhi Rent Control Act which deal with fixation of standardrent, were declared as ultra vires of the Constitution of India. Theaforesaid decision has been affirmed by this Court in State TradingCorporation of India Ltd. case.C

82. Be as it may, in the context of the issue at hand, we emphasizethat it is the annual letting value fixed in the aforesaid manner which canbe the annual rent and not the value of the property in question. Theexpression ‘annual rent’ is to be read in contradistinction to ‘annual value’.Two concepts are altogether different. Inasmuch as the latter expression Drelates to annual value of the property which may be based on parametersdifferent from fixing the annual rent of the property.

83. Having cleared the aforesaid aspect, we need to discuss as towhether UAM specified in the impugned Bye-laws aims to strive atascertaining ‘annual rent’? If the answer is in the affirmative, only thenEone can say that the impugned Bye-laws are in tune with the provisionsof Section 63(1) of the NDMC Act. After going through the Bye-lawsand the manner in which the rateable value is fixed, we are constrainedto observe that it is not in sink with the scheme of Section 63(1) of theNDMC Act. To recapitulate in brief, Bye-law 4 stipulates that the bonafide annual value of land not covered under Bye-law 3 would be theFannual value of land and bona fide annual value of the covered space ofthe building. Bye-law 3 seeks to fix the entire value of land falling in thejurisdiction of New Delhi at the circle rate of Rs. 43,000/- (Rupees FortyThree Thousand only) per square meter. Likewise, Bye-law 4(10) whereannual rent of any building is determinable under more than one-sub-Gbye-law, the annual rent shall be the aggregate of the annual valuedetermined under sub-bye-law of this Bye-law. We, therefore, rejectthe arguments of the appellants and do not deem it necessary to dealtherewith any further.

84. Thus, we agree with the High Court that the Impugned Bye-Hlaws that provide UAM which is based on value of the property that on rental which the property is likely to fetch and are, there, foreign to themethodology provided in Section 63 of the NDMC Act. Such Bye-lawsare, thus, ultra vires the provisions of NDMC Act. They are in excess ofthe scope and ambit of powers vested in the NDMC Act under Section388(1)(A)(9) of the NDMC Act.

85. As rightly contended by the assessees, initially, same was thethinking process in the NDMC as well inasmuch as there was a move toamend the Act in order to bring UAM for the purpose of levying propertytax. This is how the Municipal Corporation of Delhi achieved its objective.However, for the reasons best known to the appellants, without amendingthe provisions of the Act it went ahead in bringing Impugned Bye-laws,2009.

86. No doubt, in many ways, UAM is a better method in comparisonwith the earlier method based on annual rent. For this reason, this methodhas now been followed for the purpose of levying property tax not onlyin the areas in Delhi itself covered under the Municipal Corporation ofDelhi but in many other States as well. However, such a method whichmay be a better method can be incorporated in accordance with the law.In the present case, it could be done after amending the provisions of theNDMC Act. Since, we are agreeing with the High Court which hasquashed the Impugned Bye-laws as ultra vires, it becomes meaninglessand irrelevant to go into other issues or other arguments advanced beforeus. However, we may only add that once the appellants take steps foramending the Act and want to reintroduce the Bye-laws of 2009, manyaspects highlighted by the assessees in respect of Bye-laws would bekept in mind. We are not suggesting that the contentions raised by therespondents/assessees relating to validity of different Bye-laws are well-founded, nor are we suggesting that they are ill-conceived. This Courthas not expressed any views on the merits of these contentions, eitherwaym as this Court has not gone into the merits of such contentions. Atthe same time in order to obviate any future challenge the NDMC isexpected to keep in mind the arguments of the appellants on these aspects.

87. We may record here that when the matter was heard at astage when the counsel for NDMC had argued the matter and evenrespondents have made their submissions in reply thereto, learned counselfor the NDMC before giving rejoinder made a statement on 16[th] January,2018 that the new Bye-laws had been accepted by approximately 95%assessees. Further, because of the interim order passed by this Court A

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Apermitting such assessees to deposit the property tax on the basis ofthese Bye-laws, they had voluntarily deposited the property tax as wellon the basis of self-assessment. Having regard to this, the learned counselfor the NDMC submitted that the grievances of the respondents/assessees can be looked into by the Valuation Committee. Based onthis statement, following order was passed on 16[th] January, 2018.B

“Learned counsel for the respondents have completed theirsubmissions. The petitioner(s) have to give rejoinder thereto.Before making the submissions in rejoinder Mr. Yoginder Handoo,learned counsel appearing for petitioner(s), has stated thatapproximately 95% assessees have accepted the new bye-lawsCand pursuant to the order passed by this Court, they have comeforward voluntarily and deposited the property tax on the basis of4 self-assessment. He submits that some of the grievances whichare stated by the respondents herein in respect to their propertieswhich according to them are in the impugned bye-laws can beDlooked into by the Valuation Committee. He further submits thatValuation Committee may be having its sitting within two weeksand may give its report in this behalf within five weeks. He,therefore, makes a request to adjourn the matters for five weeks.The matters stand adjourned to 06.03.2018.

EWe make it clear that the aforesaid exercise would be withoutprejudice to the rights and contentions of the parties. Thepetitioners may file its written submissions during this period. Inthe meantime, interim order to continue.”

88. When the matter came up on 6[th] March, 2018, Mr. SanjayFJain made a statement on behalf of NDMC that the revised guidelineshave been framed and put on website, to which objections have beeninvited. He also stated that after receiving and considering the objections,the matter would be finalized at NDMC’s end. The respondent/assesseeand some others also submitted their objections to the modified guidelines.These were looked into by the NDMC and decision thereon was takenGby the Chairperson, NDMC under Bye-law 5(2) of the Impugned Bye-laws after the Valuation Committee had given its recommendations forthe year 2018-19. This decision dated 14[th] May, 2018 of the Chairpersonwas handed over to the Court. As per this, various objections of theassessees were considered and decision taken thereon which areHreflected in the tabulated form. Many respondents/ assessees are still not satisfied with the decision taken on various aspects and the arguments.We, however, leave it to the NDMC to take a final call thereupon havingdue regard to the legal position on these aspects.

89. One last but very significant aspect is still required to be dealtwith. The declaration of Impugned Bye-laws as ultra vires has createda difficult situation. These Bye-law were framed in the year 2009. Theywere struck down by the High Court vide impugned judgment dated 10[th]August, 2017. They held the field from 2009-2017. While issuing noticein these Special Leave Petitions on 22[nd] September, 2017, in respect ofthe direction of the High Court to pass re-assessment order, this Courtobserved that it would be open to the NDMC not to pass suchre-assessment orders. That interim order has prevailed during thependency of these appeals. Further, as already noted above, 95% of theassessees are agreeable to pay the tax as per Bye-laws 2009. Theyhave even paid the taxes on that basis. In these circumstances, to upsetthe applecart completely may not be appropriate. In such a peculiarsituation, in exercise of powers under Article 142 of the Constitution, wedirect that those assessees who have paid the tax as per Bye-Laws,2009, their assessments shall not be reopened. Another reason for takingthis course of action is that these assessees are satisfied with theassessments under Bye-laws, 2009. However, it will not apply to therespondents herein, namely, those assessees who were the writ petitionersin the High Court. In their cases, the direction given by the High Courtin the impugned judgment shall prevail.

90. The appeals stand disposed of in the aforesaid terms.

Divya Pandey

Appeals disposed of.

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