Madras High Court
Chellammal vs Alandur Municipality, Represented By ... on 8 February, 1991
Equivalent citations: (1992)2MLJ299
JUDGMENT Thangamani, J.
1. The plaintiff who has lost in both the courts below has preferred this Second Appeal. She is the owner of the premises bearing door No. 33, Kothawal Street, Alandur. The property tax for this property which was originally Rs. 92-70 per half year was suddenly increased to Rs. 927.00 per half year. There was no notice served on the appellant before revision. Besides the assessment No. 9217 was split into three bearing numbers as 92/7, 92/8, 92/9. The plaintiff filed revision and appeal to the Municipality on which the Municipality did not pass any orders. So she instituted O.S.No.505 of 1972 in the court of District Munsif, Poonamalle for declaration that the enhanced assessment is illegal and void and for permanent injunction restraining the respondent municipality from collecting tax at the enhanced rate.
2. The municipality resisted the suit contending that when their Bill Collector inspected the premises he found that the appellant has converted the premises into 17 tenements. He was able to gather information from 15 tenants that applicant was collecting a rent of Rs. 623 per month from them. On the basis of the information gathered at the time of inspection of the Bill Collector the annual rental value was fixed at Rs. 7,200 and the tax was enhanced accordingly. Special notice was issued to the appellant prior to the enhancement and the same has been acknowledged by the appellant's husband. A personal enquiry was held at the instance of the appellant in the revision preferred by her and the enhanced assessment was confirmed after another inspection by the Municipal Authorities. The appellant has not preferred any appeal under Rule 23(c) of Schedule 4 of Tamil Nadu District Municipalities Act. The respondent Municipality has followed-the procedure prescribed in the District Municipalities Act in increasing the assessment.
3. In both the courts below it was argued on behalf of the appellant that in arriving at the rental value of the premises, the Municipality has not followed the provisions of District Municipalities Act and the Tamil Nadu Buildings (Lease and Rent Control) Act and hence the enhancement should be held to be illegal on the basis of the judgment in Guntur Municipal Council v. Guntur Town Rate Payers' Association . However both the courts below took the view that the evidence of D.W.I that the Commissioner examined the tenants of the premises and took into consideration the provisions of the Rent Control Act was sufficient even though no document was available to show that such procedure as required under the Rent Control Act had been followed. The lower Appellate Court held that the decision in Guntur Municipal Council v. Guntur Town Rate Payers' Association , will not apply to the facts of this case, since the impugned building herein has been rented out to the tenants and accordingly it dismissed the appeal and confirmed the assessment.
4. The substantial questions of law that have been formulated for consideration in this Second Appeal are:
(1) Whether the Courts below erred in not, applying the ratio decidendi of the Supreme Court in Guntur Municipal Council v. Guntur Town Rate Payers' Association ?
(2) Whether the Courts below are right in holding that the municipality can make an assessment on the basis of rent and not in accordance with the fair rent fixed under the Tamil Nadu Act 18 of 1960?
5. Relying on the decision of the Supreme Court in Guntur Municipal Council v. Guntur Town Rate Payers' Association , the appellant herein contended before the lower Appellate Court that the Municipality has not followed the basis prescribed under the provisions of the Rent Control Act in arriving at the rental value of the building. The Municipality on its part argued that though it has taken into consideration the provisions of the Rent Control Act before fixing the rental value of the premises, it is not necessary to take the actual measurements and note down the other features. It is enough if the assessing authority bears in mind the (sic) factors prescribed under the Rent Control Act before determining the rental value of the building. The lower appellate court accepted this contention and relying on the evidence of D.W.I that the Commissioner took into consideration the provisions of the Rent Control Act besides examining the tenants of the premises upheld the assessment.
6. Thiru R.Sundaravaradan the learned Senior Counsel for the appellant argued that the basis of assessment should be only the fair rent which can be fixed according to the rules under the Rent Control legislation and it is immaterial whether the building has been actually leased out or not. The lower appellate Court has erred in thinking that there was evidence of higher rental income derived by the Appellant and that the same can be basis of municipal assessment, In Guntur Municipal Council v. Guntur Town Rate Payers' Association , suits were instituted for a declaration that the general revision of the rental values of the houses and buildings effected by the Guntur Municipality in the year 1960, for the purpose of assessment of tax is illegal and ultra vires and for a consequential relief of a permanent injunction restraining the Municipality from acting on the special notices issued on the tax payers. The Supreme Court was called upon to decide whether before the fixation of fair rent of any premises the Municipality was bound to make assessment in the light of the provisions contained in the Rent Control Acts. It held Section 62(2) of the District Municipalities Act makes provisions for the fixation of annual value according to the rent at which lands and buildings may reasonably be expected to be let from month to month or from year to year less the specified deductions. The test essentially is what rent the premises can lawfully fetch if let out to a hypothetical tenant. The Municipality is thus not free to assess any arbitrary annual value and has to look to and is bound by the fair or the standard rent which would be payable for a particular premises under the Rent Control Act in force during the year of assessment.
7. It was urged before the Supreme Court that it is only after fixation of fair rent of a building that the landlord is debarred from claiming and receiving payment of any amount in excess of such fair rent. SO long as the fair rent of a building is not fixed the assessment or valuation by a municipality need not be limited or governed by the measures provided by the provisions of the Act for determination of fair rent. The Supreme Court repelled this argument and laid down that on the language of Section 62(2) of the Municipalities Act no distinction can be made between buildings the fair rent of which has been actually fixed by the Controller and those in respect of which no such rent has been fixed. It has made it clear that the landlord cannot lawfully expect to get more rent than the fair rent which is payable in accordance with the principles laid down in the Act. The assessment of valuation must take into account the measure of fair rent as determinable under the Act. It may be that where the Controller has not fixed the fair rent the municipal authorities will have to arrive at the figure of fair rent but that can be done without any difficulty by keeping in view the principles laid down in Section 4 of the Act for determination of fair rent. A reading of this decision would make it clear that the basis of assessment should only be the fair rent worked out as provided in Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) .Act. The mere fact that the Commissioner also took into consideration the provisions of the Rent Control Act while arriving at the annual value on the basis of actual rent realised by the landlord from the tenant would not suffice. In the absence of evidence to indicate that the Municipality assessed the properties on the basis of fair rent worked out under the provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act the assessment cannot stand and it will be contrary to the dicta laid down by the Supreme Court in the decision referred to above.
8. The learned Senior Counsel for the appellant next argument that even if the landlord actually receives more than the fair rent that would be applicable to the building that cannot form the basis for arriving at the annual value. The decision in Corporation of Calcutta v. Padma Debi , supports his claim. In this case the Calcutta Corporation in fixing the annual valuation of the respondent's premises took as basis of Rs. 1450 as the monthly value of the premises. The respondent filed objection to the said assessment and meanwhile, under the West Bengal Premises Rent Control (Temporary Provision) Act 1950, the standard rent of the said premises was fixed by the Rent Controller at Rs. 632/8 per month. One of the objections raised was that the Corporation had no power to fix the annual valuation at a figure higher than the standard rent. It was held the rental value cannot be fixed higher than the standard rent under the Rent Control Act.
9. The learned senior counsel for the appellant also cited decision in Ramaswami v. The Commissioner Corporation of Madras (1977)2 M.L.J. 457: 90 L. W. 713. In this case no fair rent was fixed in respect of the building in question. The petitioner contended that the rent which he was receiving is the fair rent and therefore the rental value should be fixed with reference to the actual rent received by him. The Municipality proceeded on the basis that the rent received by the landlord did not represent the reasonable rent and that the building may fetch a higher rent if let to be fixed with reference to the fair rent, if any, fixed under the statutory provisions for the building and if no fair rent has been fixed by the Rent Controller the Municipal Authorities have to apply the provisions of the Rent Control Act and determine the fair rent for the building before assessing the property to tax. It was not the actual rent received by the landlord but the hypothetical rent which could be expected if the building is to be let, is the legal yardstick for determination of the reasonable rent. The decisions are to the effect that as a landlord cannot reasonably be expected to let a building for a rent higher than the fair rent in contravention of the Rent Restriction Laws, it should be taken that an upper limit has been fixed on the rate of rent, that a transaction entered into between the parties in defiance of the law cannot be taken to be the basis for determining the rent which can reasonably be expected if the building is to be let. This decision also pointed out that the Supreme Court has taken consistently the view that the standard of reasonableness has to be judged not from the expectation of a landlord who takes the risk of prosecution and punishment which the violation of the law involves, but the expectation of the landlord who is prudent enough to abide by the law and that therefore, even in cases where the rents actually collected by the landlords are higher than the standard rent the assessment could not be made on the basis of the actual rents received by the landlord but by the fair rent which alone the landlord is entitled to collect legally from the tenants.
10. Thiru C. Chinnaswami, the learned senior counsel for the respondent contended that the Municipal Authorities have taken into account the provisions of Rent Control Act while determining the annual rental value. Whether the formula prescribed under the Rent Control Act has been properly applied is not the criterion. Once the provisions of Rent Control Act have been invoked, it cannot be said that the Municipality has acted arbitrarily or capriciously in which case alone the matters could be agitated before a civil court. But we have already seen that there is only the ipsi dixits of D.W.I that the Commissioner has also taken into account the provisions of the Rent Control Act in arriving at the annual rental value. Without producing the working sheet to indicate that the fair rent was arrived at as per the provisions of Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, a mere verbal statement in the witness box that the provisions of the Act have been followed is of little consequence. In the course of his monthly visit during July 1976, the Bill Collector of the Municipality found that the premises of the appellant has been under assessed and sent his monthly report Ex.B-5 of the Municipality. On the report Ex.B-5 of the Revenue Inspector, the Commissioner of the Municipality has issued the notice under the original of (sic.) annual value was worked out only on the basis of the information collected by the Bill Collector from the tenants at the time of inspection and no fair rent was in fact arrived at as per the procedure prescribed in Section 4 of the Rent Control Act. So it cannot be said that the Municipal Authority has complied with the provisions of the Act, the civil court has no jurisdiction to go into the question whether the levy is excessive or not. But it is equally well settled that when the basis of the levy itself is wrong or that there is no basis at all for the levy and in that sense there is no substantial compliance with the provisions of the Municipalities Act, it is open to the Civil Court to declare the levy as illegal and in fact it is its duty to do so.
11. In these circumstances, it is seen that the courts below have erred in not applying the ratio decidendi of the Supreme Court in Guntur Municipal Counsel v. Guntur Town Rate Payers' Association , and in holding that the Municipality can make an assessment on the basis of rent not in accordance with the fair rent fixed under the Tamil Nadu Act 18 of 1960.
12. In the result, the second appeal is allowed and the judgments and decrees of the lower courts are set aside and the suit is decreed as prayed for with costs throughout.