Friday, 8 December 2017

Whether property tax recoverable from tenant can be considered as part of rent for seeking eviction of tenant?

Therefore, we are of the view that though the Rent Act is an
earlier Act when compared to the NDMC Act, it is a special
enactment with regard to the matter in issue and has a
non-obstante clause. The NDMC Act is not a special enactment
insofar as landlord-tenant issue is concerned and it contains
Section 411 which provides that other laws not to be disregarded.
Section 67(3) of the NDMC Act merely gives a right to recover the
tax in respect of the premises as rent. It does not override the
Rent Act insofar as obviating the effect of Section 7(2) of the Rent
Act. In our opinion, the tax recoverable from the tenant under
Section 67(3) of the NDMC Act as arrears of rent by the appellant
cannot be considered to be forming part of the rent for the
purpose of seeking eviction/ejectment of the respondent who
defaults in payment of such recoverable tax as rent.
 REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURSIDCITON
CIVIL APPEAL NO.20913 OF 2017
(Arising out of S.L.P. (Civil) No.17117 of 2016)
ATMA RAM PROPERTIES PVT. LTD.
V
THE ORIENTAL INSURANCE CO. LTD.
Dated:December 06, 2017.

1. Leave granted.
2. This appeal involves an important question of law as to
whether property tax recoverable from the tenant under Section
67(3) of the New Delhi Municipal Council Act, 1994 (for short
‘NDMC Act’) as arrears of rent by the landlord/owner can be
considered to be forming part of the rent for the purpose of
seeking eviction or ejectment of such tenant who defaults in
payment of such recoverable tax as rent and when the rent2
including recoverable tax in respect of the tenanted premises
exceeds Rs.3500/- per month, thereby losing protection of the
Delhi Rent Control Act, 1958 (for short ‘Rent Act’).
3. The appellant/plaintiff is the owner/landlord of the building
known as Atma Ram Mansion (previously known as Scindia
House), Connaught Circus, New Delhi-110001 by virtue of a
registered sale-deed dated 31.5.1980 executed by previous
owners in favour of the plaintiff. The respondent/defendant has
been a tenant in respect of a portion of the aforesaid property.
The rent of tenanted premises prior to termination of tenancy was
Rs.1438/- per month exclusive of electricity and water charges.
The defendant has been paying service tax of Rs.148/- on the
said amount of Rs.1438/- and thus the last paid rent was
Rs.1586/- per month.
4. Pursuant to the amendment of the New Delhi Municipal
Council (Determination of Annual Rent) Byelaws, 2009, (for
brevity ‘the Byelaws 2009’) the house tax on the properties
situated in the New Delhi Municipal Council (for short ‘NDMC’)
area was assessable on the basis of Unit Area System. The3
tenanted premises in occupation of the defendant fell within the
jurisdiction of NDMC. The house tax payable on the said property
in accordance with the Unit Area System comes to Rs.9,64,710/-
per annum, i.e. Rs.80,392.50 per month. According to the
plaintiff, the defendant was liable to pay the said amount. The
plaintiff issued a notice dated 6.7.2009 calling upon the
defendant to pay the entire house tax or pay its monthly
installment. However, the defendant neither replied to the same
nor deposited/paid house tax to the plaintiff. The plaintiff issued
a further notice dated 8.12.2009 calling upon the defendant to
pay the house tax. The defendant did not come forward to make
payment of the house tax. In order to safeguard its property and
to avoid any penal action, the plaintiff deposited the total house
tax of Rs.2,94,23,237/- on the basis of self-assessment of the
property tax with NDMC. After payment of the house tax, the
plaintiff again sent a notice dated 7.4.2010 calling upon the
defendant to pay the said amount of tax. The notice was returned
with the report “left without address”.4
5. According to the plaintiff, the tax paid on the suit property
was far more than the initial rent, the amount of property tax
levied by NDMC and the initial rent became recoverable as
arrears of rent and the suit property having fetched rent above
Rs.3500/- per month has ceased the protection of the Rent Act.
As such the plaintiff vide legal notice dated 16.6.2010,
terminated the tenancy of the defendant without prejudice to its
legal rights. The defendant sent a reply dated 23.7.2010 denying
its liability to pay the rent. Therefore, plaintiff filed the aforesaid
suit for a decree for possession of the tenanted premises, for
damages/mesne profits of Rs.6,24,600/- per month w.e.f.
1.5.2011 till 31.5.2011 and for directing an enquiry under Order
XX Rule 12 of the Code of Civil Procedure, 1908 (for short ‘CPC’)
for assessment of future damages/mesne profits till the delivery
of vacant possession of the tenanted premises.
6. The defendant filed the written statement denying its liability
to pay the enhanced rent. It was contended that the plaintiff has
no authority or power to increase the rent on its own. It was
further contended that the tenanted premises is governed by the5
Rent Act and that the defendant is a protected tenant. The NDMC
byelaws cannot govern the relationship of landlord and tenant by
by-passing the provisions of the Rent Act. It was further
contended that the house tax cannot be treated as arrears of
rent, which takes away the premises from the ambit of the Rent
Act. It was denied that the premises are governed by the Transfer
of Property Act. It was contended that Section 67 of the NDMC
Act speaks of apportionment of liability of tax when the premises
are let out and sub-let. It is only the right to recover the house
tax for which the landlord is entitled to. He cannot go for eviction
of the tenant on any ground which is not specified under the Rent
Act. Therefore, the suit for possession filed by the plaintiff in a
court other than the court of Rent Controller is barred by the
provisions of Section 50 of the Rent Act.
7. The plaintiff filed an application under Order XII Rule 6 read
with Section 151 of the CPC for passing a decree for possession
of the tenanted premises for the reasons mentioned therein. The
defendant opposed the application by filing objections. 6
8. The trial Court passed an order dated 12.8.2013 granting
decree of possession of the tenanted premises in favour of the
plaintiff. The High Court by the order dated 30.5.2016 has set
aside the order of the trial Court and has remanded the matter to
the trial Court. The appellant has called in question the legality
and correctness of the said order in this appeal.
9. Shri Dushyant Dave, learned senior counsel appearing for
the appellant/plaintiff, submits that after coming into force of the
Byelaws 2009, the property tax in the NDMC area was to be
assessed on the basis of unit area system instead of previous
basis of property tax on actual rent. As a result, the annual
property tax payable for the area occupied by the respondent
worked out at Rs.9,64,710/- p.a. i.e Rs.80,392.50/- per month
when divided over twelve months period. The respondent failed to
pay the house tax despite repeated request of the appellant;
therefore the appellant was left with no alternative but to deposit
entire arrears of tax. The appellant issued a notice dated
16.06.2010 terminating the tenancy on the failure of the
respondent to pay the said amount of rent and instituted the suit7
under the provisions of the Transfer of Property Act. It is
contended that the rate of rent per month was Rs.1438/- and
after adding the tax, it exceeded Rs.3500/- per month. Therefore,
the tenant lost protection of the Rent Act. It is argued that the
full Bench of the Delhi High Court in Ganga Ram v. Mohd.
Usman reported in ILR (1978) 1 Delhi page 139, has laid down
that the amount of tax on building or land becomes part of the
rent. Section 121(1) of the Delhi Municipal Corporation Act, 1957
(for short ‘the Corporation Act’) enables the landlord to recover
from the tenant in excess of the amount of house tax which has
been levied on the building and which is in excess of the amount
which would be leviable on the amount of contracted rent
received from the tenant. The Full Bench held that the landlord is
entitled to recover, under Section 121(1) of the said Act, the
enhanced amount of house tax from the tenant notwithstanding
the contract of tenancy and the provisions of Section 7(2) and
Section 4 of the Rent Act. Sub-sections (1) and (3) of Section
121 of the Corporation Act is in pari materia with sub-sections (1)
and (3) of Section 67 of the NDMC Act. For the reasons set out in8
the judgment of the Full Bench in Ganga Ram (supra), the High
Court ought to have dismissed the appeals.
10. It is further argued that Section 7(2) of the Rent Act could
not be the basis for denying the benefit of Section 67(3) of the
NDMC Act. The tax component becomes a part of the rent. If the
tax component is added to the monthly rent, the total rent of the
premises exceeds Rs.3,500/-. It is submitted that the property
tax has to be fictionally treated as rent under Section 67(1) of the
NDMC Act because in the absence of the same; the landlord
would be compelled to pay the whole amount of tax which is
recoverable from him and would be left to an expensive and
cumbersome remedy of filing a civil suit for recovery of such tax.
It is submitted that the liability to pay excess property tax is
solely that of tenant and the landlord has been provided with
‘rights and remedies’ for recovery of such amounts as rents.
Therefore, the High Court was not justified in holding that the
property tax will not constitute rent to enable the appellant to
seek ejectment/possession of the suit property. In this
connection, he has relied on the decisions of this Court in9
Karnani Properties Ltd. v. Augustine, (1957) SCR 20,
Bombay Municipal Corporation v. Life Insurance
Corporation, Bombay (1970) 1 SCC 791, Raju Kakara Shetty
v. Ramesh Prataprao Shirole, (1991) 1 SCC 570, D.C. Bhatia
v. Union of India, (1995) 1 SCC 104 and Calcutta Gujarati
Education Society v. Calcutta Municipal Corpn., (2003) 10
SCC 533.
11. Shri Vikas Singh, learned senior counsel appearing for the
respondent submits that the contractual rent of the suit property
was Rs.1,586/- per month. The Rent Act is a special enactment,
and has a non-obstante clause and the NDMC Act does not
contain a non-obstante clause. Section 411 of the NDMC Act
provides that other laws not to be disregarded. The primacy of
the statue would have to be determined on the basis of the
intention of the legislature. The NDMC Act is a general enactment
and the special enactment prevails over the general enactment. It
is pointed out that Section 67(3) of NDMC Act permits the
landlord to recover rent. However, for non-payment of the rent
which includes tax component, the landlord cannot sue for10
eviction/ejectment of the tenant. Alternatively, it is argued that
even if the NDMC Act prevailing over the Rent Act, still this Court
has to harmoniously construe the provisions so as to ensure that
latter enactment does not violate the Rent Act. Section 67(3) of
the NDMC Act merely gives a right to recover the rent and even if
the latter enactment was to override the earlier enactment in so
far as obviating the effect of Section 7(2) of the Rent Act, still the
tax could not be added as a rent for the purpose of determining
as to whether the tenant will lose the protection under the Rent
Act by adding the said rent to the contractual rent so as to
consider it above Rs.3,500/- per month.
12. The issue which arises for consideration in the present
matter is regarding the interplay of Section 67(3) of the NDMC
Act vis-à-vis Section 7(2) of the Rent Act. Under Section 67(3)
the landlord has been given the right to recover the house tax
from the tenant as if the same were rent whereas under Section
7(2) of the Rent Act, there is a specific bar to recover any tax as
rent from the tenant. 11
13. Having regard the contentions urged, let us first consider as
to whether in Ganga Ram (supra) Delhi High Court has taken a
view that the tax recoverable under the Corporation Act can be
made a part of the rent for the purpose of eviction/ejectment of a
tenant. In Ganga Ram (supra) the tenant had sub-let a portion
of the property and was receiving rents from the sub-tenant.
After taking into consideration the rents received by the tenant
from the sub-tenant and the rent payable by him to the landlord,
the corporation determined the rateable value on the basis that
the premises was fetching higher rent than that of the rent paid
by the tenant to the landlord. It was the case of the landlord that
he was entitled, under Section 121(1) of the Corporation Act, to
recover from the tenant the difference between the amount of
property tax levied on the property and the amount of tax which
would be leviable upon the premises if the tax was calculated only
on the amount of rent paid by the tenant to the landlord without
taking into consideration the rent received by the tenant from the
sub-tenant. Taking into consideration this plea, the Court framed
second question for determination as under: 12
“(2) If so, whether the landlord is entitled to recover
under section 121 of the Corporation Act the
enhanced amount of house tax from the tenant
notwithstanding the contract of tenancy and the
provisions of sub-section (2) of Section 7 and 4 of
the Delhi Rent Control Act?”
14. It was held that the bar created by the provisions in the
Rent Control Act pertains to “normal tax on a building” occupied
by tenant. Bar containing in Section 7(2) in the Rent Act pertains
to normal tax on a building occupied by a tenant while Section
121(1) of the Corporation Act deals with the particular
contingency where the property tax levied for the tenanted
premises if more than the amount which would have been levied,
had the assessment been made on the basis of the rent payable
by the tenant to the landlord. The Court held that landlord is
entitled to recover, under Section 121 of the Corporation Act, the
enhanced amount of house tax from the tenant notwithstanding
the contract of tenancy and the provisions of sub-section (2) of
Section 7 and Section 4 of the Rent Act. The Court has not
considered the question relating to eviction of a tenant under the
provisions of Rent Act where protection is accorded to the tenant
from eviction. 13
15. The question for consideration in this appeal is entirely
different. The question is whether non-payment of property tax
recoverable from the tenant as rent can be a ground for his
eviction/ejectment from the premises. The Rent Act is beneficial
and also restrictive in nature. It is primarily an Act to provide for
the control of rents and evictions. It is settled that while
interpreting the provisions of this Act, the Courts are under a
legal compulsion to harmoniously read the provisions of the Act
so as to balance the rights of the landlord and the obligations of
the tenant towards each other, keeping in mind that one of the
objects of the legislature while enacting the Rent Act was to curb
the tendency of the greedy landlords to throw out the tenants
paying lower rent and to rent out the premises at the market
rate. Section 14 occurring in Chapter 3 of the Rent Act provides
for controlling of eviction of tenants. It puts an embargo as
regards recovery of possession of any premises at the instance of
the landlord unless the Controller satisfies himself as regards
existence of any of the grounds specifically referred to in the
proviso appended thereto. 14
16. Section 2(i) of the Rent Act defines the “premises”. Section
3(c) states, “nothing in the Act shall apply to any premises
whether residential or not, whose monthly rent exceeds Rs.
3,500/-“. Sub-section (2) of Section 7 puts an embargo on the
landlord not to recover from the tenant any amount of tax on the
building or land imposed in respect of the premises occupied by
the tenant. This provision is as under:
“(2) Where a landlord pays in respect of the
premises any charge for electricity or water
consumed in the premises or any other charge levied
by a local authority having jurisdiction in the area
which is ordinarily payable by the tenant, he may
recover from the tenant the amount so paid by him;
but the landlord shall not recover from the tenant
whether by means of an increase in rent or
otherwise the amount of any tax on building or land
imposed in respect of the premises occupied by the
tenant.”
17. Section 50 of the Rent Act bars the civil court to entertain
any suit or proceedings insofar as it relates to the fixation of
standard rents in relation to any premises to which the Rent Act
applies or to eviction of any tenant therefrom or to any other
matter which the controller is empowered by or under the said
Act.15
18. It is also relevant to notice two provisions of the NDMC Act
namely; sub-sections (1) and (3) of Section 67 which are as
under:
“67. Apportionment of liability for property tax
when the premises are let or sub-let.-(1) If any
land or building assessed to property tax is let, and
its rateable value exceeds the amount of rent
payable in respect thereof to the person upon whom
under the provision of section 66 the said tax is
leviable, that person shall be entitled to receive from
his tenant the difference between the amount of the
property tax levied upon him and the amount which
would be leviable upon him if the said tax was
calculated on the amount of rent payable to him.
(2) .................
(3) Any person entitled to receive any sum under
this section shall have, for the recovery thereof, the
same rights and remedies as if such sum were rent
payable to him by the person from whom he is
entitled to receive the same.”
19. Yet another provision which requires consideration is Section
411 of the NDMC Act, which reads as under:
“411. Other laws not to be disregarded.- Save as
provided in this Act nothing contained in this Act
shall be construed as authorising the disregard by
the Council or the Chairperson or any municipal
officer or other municipal employee of any laws for
the time being in force.”
20. While the normal principle is that the latter enactment will
prevail in cases where the latter enactment has a non-obstante
clause, that is, giving it overriding effect and secondly, if it is also16
held to be a special enactment with regard to the matter in issue.
In the instant case, the earlier enactment has a non-obstante
clause in Section 14 which grants protection to the tenant from
being evicted from any premises “notwithstanding anything to the
contrary contained in any other law or contract, no order of
decree for the recovery of possession of any premises shall be
made by any Court or Controller in favour of the landlord against
a tenant.” Thus the earlier enactment which is a special
enactment has a non-obstante clause and the latter enactment
which is not a special enactment as far as landlord tenant issue is
concerned and the same does not have a non-obstante clause
and in fact, has a section namely Section 411 which provides that
other laws not to be disregarded.
21. In Life Insurance Corporation of India v. D.J. Bahadur
and Ors., (1981)1 SCC 315, this Court was considering a conflict
between the Industrial Disputes Act, 1947 and the Life Insurance
Act, 1956. It was held that so far as matters concerning industrial
dispute are concerned, the Industrial Disputes Act would prevail17
over the latter enactment i.e. Life Insurance Corporation of India
Act.
22. In Sanwarmal Kejriwal v. Viswa Co-operative Housing
Society Ltd. and Ors., (1990) 2 SCC 288, it was held that Rent
Act of 1947 will prevail over the Maharashtra Co-operative
Societies Act, 1960, so far as the protection of the tenant from
eviction is concerned. Here also, both the Acts held a
non-obstante clause but still the earlier enactment was held to
cover the field and hence, was to be given primacy over the latter
enactment.
23. As seen from the abovementioned judgments, this Court has
held that an earlier enactment will prevail over a latter enactment
even if, there is a non-obstante clause in the latter enactment, if
it were to be held that the earlier enactment is a special
enactment on the particular subject being in issue.
24. Assuming that the latter enactment prevailing over the
earlier enactment were to apply to this case, the two enactments
have to be harmoniously construed so as to ensure that the latter18
enactment does not cause violence to the intent of the earlier
enactment.
In St Stephen’s College v. University of Delhi, (1992)1 SCC
558, it has been held thus:-
“140. … The golden rule of interpretation is
that words should be read in the ordinary,
natural and grammatical meaning and the
principle of harmonious construction merely
applies the rule that where there is a general
provision of law dealing with a subject, and a
special provision dealing with the same
subject, the special prevails over the general.
If it is not constructed in that way the result
would be that the special provision would be
wholly defeated”.
Similarly, in Gobind Sugar Mills Ltd. v. State of Bihar and
Ors. (1999) 7 SCC 76 this Court has held as under:
“10. While determining the question whether a
statute is a general or a special one, focus must be
on the principal subject-matter coupled with a
particular perspective with reference to the
intendment of the Act. Keeping in mind this basic
principle, we will have to examine the provisions of
the two Acts to find out whether it is possible to
construe harmoniously the provisions of Section 4 of
the Finance Act and Section 49 of the Sugarcane
Act……….”19
25. In Commercial Tax Officer, Rajasthan v. Binani
Cements Limited and Anr. (2014) 8 SCC 319, it was held that
when a general law and a special law dealing with the same
aspect dealt with by the general law are in question, the general
law to the extent dealt with by the special law is impliedly
repealed.
26. The object of the Rent Act is to provide protection to tenants
who under common law, including Transfer of Property Act could
be evicted from the premises let out to them at any time by the
landlord on the termination of their tenancy. It restricts the right
of the landlord to evict the tenant at their will. It is a special law
in relation to landlord and tenant issue. Therefore, the Rent Act
has to prevail insofar as landlord and tenant issue is concerned.
27. Let us now consider the judgments relied upon by Shri
Dushyant Dave. In Karnani Property Ltd. (supra) by agreement
of the parties, the rent fixed included payment of the additional
amenities and services. In Bombay Municipal Corporation
(supra) the question relating to eviction of a tenant has not been
considered. In Raju Kakara Shetty (supra) the statutory right to
recover the education cess in respect of demised premises from
the occupant–tenant was quantified by agreement of the parties.
In D.C. Bhatia (supra) this Court has considered the validity of
Section 3(c) of the Delhi Rent Control Act, 1958. In Calcutta
Gujarati Education Society (supra) this Court has not
considered the eviction of a tenant nor the interplay between a
provision similar to sub-section (2) of Section 7 of the Rent Act
and Section 231 of the Calcutta Municipal Corporation Act, 1980
which is pari materia with Section 67(3) of the NDMC Act. Hence,
these judgments have no application to the facts of the instant
case.
28. Therefore, we are of the view that though the Rent Act is an
earlier Act when compared to the NDMC Act, it is a special
enactment with regard to the matter in issue and has a
non-obstante clause. The NDMC Act is not a special enactment
insofar as landlord-tenant issue is concerned and it contains
Section 411 which provides that other laws not to be disregarded.
Section 67(3) of the NDMC Act merely gives a right to recover the
tax in respect of the premises as rent. It does not override the
Rent Act insofar as obviating the effect of Section 7(2) of the Rent
Act. In our opinion, the tax recoverable from the tenant under
Section 67(3) of the NDMC Act as arrears of rent by the appellant
cannot be considered to be forming part of the rent for the
purpose of seeking eviction/ejectment of the respondent who
defaults in payment of such recoverable tax as rent.
29. The appeal is devoid of merit and is accordingly dismissed
with no orders as to costs.

 …………………………………………J.
 (J. CHELAMESWAR)

 …………………………………………J.
 (S. ABDUL NAZEER)
New Delhi;
December 06, 2017.

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