Sanjay Kishan Kaul, J.
1. The petitioners are the owners of property No. 4-E/11, Ward No. 15, Jhandewalan, New Delhi and are aggrieved by the assessment order dated 02.02.2001 fixing the rateable value of the property at different values from 01.12.1988 onwards. The petitioner have also impugned the consequent bill dated 15.06.2001 raised in pursuance to the order of assessment.
2. The petitioners acquired rights to the property in question in pursuance to a perpetual lease deed executed on 16.11.1973 in favor of petitioners No. 1 and 2 and the husband of petitioner No. 3, who subsequently passed away. The petitioners entered in to a contract with M/s. Indraprastha Builders Pvt. Ltd. for development and construction of a building on the said property. It is stated that in terms of the said agreement, an area of 20000 sq. ft. had to be constructed and the petitioners agreed to lt out 10000 sq. ft. of the area to the said builders on a monthly rent of Rs. 3/- per sq. ft. and the remaining 10000 sq. ft. was to be retained by the petitioners.
3. A copy of the lease deed dated 10.05.1980 has been produced executed by the first two petitioners and Shri Saudagar Singh in favor of M/s. Indraprastha Builders Pvt. Ltd. The lease deed, however, states that the collaboration agreement was executed with one Shri Satish Chand and that the Lessers had agreed to give on lease a portion of the property at a monthly rental of Rs. 3/- per sq. ft. consisting of one-half of the building. In terms of the said document, the lessee was authorized to use the premises for itself or sub-let or sub-lease the property in whole or in part. The lease was initially for a term of 5 years with a clause for renewal whereby the lessee was required to give a notice in writing one month before expiry of the lease for renewal on the same terms and conditions.
4. The petitioners are stated to have let out 9798 sq. ft. of area to Oriental Bank of Commerce @ Rs. 8.50 per sq. ft. in the year 1983 retaining 202 sq. ft. for their own use. Similarly, M/s. Indraprastha Builders Pvt. Ltd. also let out their portion of the premises measuring 10000 sq. ft. to the same Bank at Rs. 8.50 per sq. ft.
5. It is stated that rateable value of the property was assessed at Rs. 20,02,250/- w.e.f. 01.04.1989 vide order dated 03.03.1994 and at Rs. 32,40,000/- w.e.f. 01.04.1993 vide order dated 20.03.1997. In August, 1999, a bill dated 16.07.1999 was issued for the assessment year 1999-2000 based on an order dated 20.03.1997, which was impugned by the petitioner in CWP No. 7211/1999. The said writ petition was allowed on 14.02.2000 on a no objection of the counsel for the respondent Corporation that a fresh assessment order should be passed after the matter is remanded back to the assessing authority. It was provided that the rateable value should be fixed in accordance with law after noticing the ratio of the judgments relied upon and referred to by the counsel appearing for the petitioners. The said judgments are Corporation of Calcutta v. Life Insurance Corporation of India, : [1971]1SCR249 and M.L. Vohra and Anr. v. M.C.D. and Anr., 1997 D.L.T. 13 323. The impugned assessment order has been passed on the said remand.
6. The first contention advanced by learned counsel for the petitioners was that the impugned assessment order has been passed ignoring the two judgments referred to in the order remanding the matter for reassessment. In Corporation of Calcutta's case (supra), the Supreme Court was concerned with determination of annual value of premises under the Calcutta Municipal Corporation Act, 1923 and it was held that the maximum limit of annual value is still annual standard rent. It was held that the consolidated rate depends upon the annual value of the land or building on the gross rent for which the same is reasonably expected to let and not the gross rent at which the subordinate interest of a tenant may be expected to sublet. Thus, in determining the assessment of annual value, the assessing authority is not concerned with the rent which the tenant may receive from a sub-tenant and it is the gross rent which the owner may realize by letting the land or building, which determines the annual value. In M.L Vohra's case (supra), it was held that the rent paid by the sub-lessee was irrelevant for determining the annual value, as the assessing authority is not concerned with the rent, which the tenant may receive from the sub-tenant. Section 121 of the Delhi Municipal Corporation Act, 1957 ( hereinafter to be referred to as, 'the Municipal Act' ) was held as not applicable, since the same deals with apportionment of the liability for property tax when the premises assessed is let or sub-let and not that the assessing authority can take into consideration the rent paid by the sub-lessee.
7. The aforesaid contention of learned counsel for the petitioners arises from the fact that while making assessment of the property and determining the rateable value, the assessing authority has taken into consideration the realization of rent by the sub-tenant at Rs. 8.50 per sq. ft. for the portion which was let out by the petitioners to M/s. Indraprastha Builders Pvt. Ltd. even though the petitioners had let out only for Rs. 3/- per sq. ft. Thus, it was contended that for purposes of determination of tenable value, it is Rs. 3/- per sq. ft. which is material for the said portion and this is the purport of both the judgments referred to above. The assessing authority has, however, proceeded on the basis that the two judgments could not apply to the facts of the case in view of the amendment to the Delhi Rent Control Act, 1958 ( hereinafter to be referred to as, 'the Rent Act' ) effective from 01.12.1988 in terms whereof Section 3(c) was introduced and premises, whether residential or not, whose monthly rent exceeds Rs. 3,500/- was taken outside the purview of the Rent Act. The assessing authority was, thus, of the view that since the rent of the premises even at Rs. 3/- per sq. ft. took the premises outside the purview of the Rent Act, the two judgments would have no application.
8. Section 116 of the Municipal Act prescribes that the rateable value of any land or building assessable to property tax shall be the annual rent at which such land or building might reasonably be expected to let from year to year. Section 120 of the Municipal Act provides that the incidence of property tax in case it is let out will be upon the Lesser and in case it is sub-let upon the superior Lesser. In terms of Section 121 of the Municipal Act, there is apportionment of the liability for property taxes when premises assessed are let or sub-let. The object of this is to protect the owner from a higher incidence of property tax as a consequence of the tenant sub-letting the property and the tenant would have the right to recover the amount in terms of sub-section (2) of Section 121.
9. A reference has also been made by learned counsel for the respondent to the judgment of the learned Single Judge of this Court in Atma Ram Properties (P) Ltd. v. M/s. P.S. Jain Company Ltd. and Others, : 57(1995)DLT131 , in which it was held that the presses whose rent exceeds Rs. 3,500/- whether paid by a tenant to the landlord or by a sub-tenant are covered by Section 3(c) of the Rent Act and would, thus, be outside the purview of the Rent Act.
10. Insofar as the aforesaid submissions and applicability of the two judgments is concerned, it is relevant to note that the judgment in M.L. Vohra's case (supra), which in fact relied upon the judgment of the Supreme Court in Corporation of Calcutta's case (supra) proceeded on the basis that it is the Municipal Act as well as the Rent Act both which will determine the rateable value of a building situate in Delhi and the said rateable value has to be in accordance with both the enactments. In this behalf, reference has been made to the second proviso to sub-section (1) of Section 116 of the Municipal Act, which requires that the rateable value shall not exceed the annual amount of the standard rent so fixed. It was observed that such determination in the context of municipal legislation has to be read with the rent control legislation. It was observed in para 6 as under :-
'' 6. The building in question is situated in Delhi and it is, thereforee, governed by the Delhi Municipal Corporation Act as well as by the Delhi Rent Control Act, and the determination of the rateable value has to be in accordance with both the enactments. This has been recognised in the second proviso to Section 116(1) set out above. Such determination in the context of Municipal legislation read with Rent Control Legislation has been considered in a number of decisions. In Corporation of Calcutta v Smt. Padma Debi. : [1962]3SCR49 , a case that arose under the Calcutta Municipal Act, 1923 S C 153 follows :-
'' The word 'reasonably' is not capable of precise definition. 'Reasonable' signifies 'in accordance with reason'. In the ultimate analysis it is a question of fact. Whether a particular act is reasonable or not depends on the circumstances in a give situation. A bargain between a willing Lesser and a willing lessee uninfluenced by any extraneous circumstances may afford a guiding test of reasonableness. An inflated or deflated rate of rent based upon fraud, emergency, relationship, and such other considerations may take it out of the bounds of reasonableness. Equally it would be incongruous to consider fixation of rent beyond the limits fixed by panel legislation as reasonable ... ... ... ...
Under the Rent Control Act the receipt of any rent higher than the standard rent fixed under the Act is made penal for the landlord. One may legitimately say under those circumstances that a landlord cannot reasonably be expected to let a building for a rent higher than the standard rent. A law of the land with its penal consequences cannot be ignored in ascertaining the reasonable expectations of a 'landlord' in the matter of rent. In this view, the law of the land must necessarily be taken as one of the circumstances obtaining in the open market placing an upper limit on the rate of rent for which a building can reasonably be expected to let.''
''(7)It is said that Section 127(a) (of the Calcutta Municipal Act, 1923) does not contemplate the actual rent received by a landlord but a hypothetical rent which he can reasonably be expected to receive if the building is let. So stated the proposition is unexceptionable. Hypothetical rent may be described as a rent which a landlord may reasonably be expected to get in the open market. But an open market cannot include a 'black market', a term euphemistically used to commercial transactions entered into between parties in defiance of law. In that situation, a statutory limitation of rent (by the Rent Control Legislation) circumscribes the scope of the bargain in the market. In no circumscribes, the hypothetical rent can exceed that limit.''
In Corporation of Calcutta v. The Life Insurance Corporation of India, : [1971]1SCR249 , after referring to the decision in Padma Debi's case (supra), the Supreme Court observed at page 1418 as follows :-
'' The test of reasonableness of the gross annual rent at which the building may at the time of the assessment reasonably be expected to let in Section 127(a) is the rent which the landlord may realise of the house is let under a bargain between a willing Lesser and a willing lessee, uninfluenced by extraneous considerations, and in determining the reasonableness of the expectation of the landlord in the matter of rent a law which imposes penal consequences cannot be ignored. The law must be taken as one of the circumstances obtaining in the open market placing an upper limit on the rate of rent for which a building can reasonably be expected to let, and since a statutory limitation of rent circumscribes the scope of the bargain in the market, in no circumstances can be hypothetical rent exceed the limit prescribed by the law.''
In Dewan Daulat Ram Kapur v. The New Delhi Municipal Committee, (1973) 1 Delhi 363, a Full Bench of this High Court considered the various situations that are likely to arise in the fixation of the rateable value under the Act, and applied the aforesaid decisions of the Supreme Court to such situations in the light of the provisions of the Delhi Rent Control Act. At page 383, the Full Bench held, inter alia, as under :-
'' In the case of rented premises the annual value shall not exceed the standard rent if fixed by the Controller or statutorily determined under the Delhi Rent Control Act, in other cases, where the standard rent has not been fixed or determined as aforesaid, the annual value shall not exceed the agreed rent unless the agreed rent is tainted by fraud, collusion, emergency relationship and such other considerations.''
In M.L. Vohra's case (supra), the standard rent had not been fixed. The observations, thus, made to the effect that in determination of assessment of annual value, the assessing authority is not concerned with the rent, which a tenant may receive from the sub-tenant, has to be understood in the context of a property being protected under the Rent Act. The premise was that a landlord cannot realize more than the standard rent. Para 6 of the said judgment itself states that the determination of the rateable value has to be governed by the Municipal Act and the Rent Act and the determination in the context of the municipal legislation read with the rent control legislation has been considered in a number of cases which were referred to in the said judgment. It is in these circumstances that the observations in the judgment of the Supreme Court in Corporation of Calcutta's case (supra) to the effect that it would be incongruous to consider fixation of rent beyond the limit fixed by penal legislation has to be considered as under the Rent Act, the receipt of rent higher than standard rent fixed under the Act is made penal for the landlord. Thus, the landlord cannot reasonably be expected to let a building for a rent higher than the standard rent and the law of the land with penal consequences for the landlord cannot be ignored, as an upper limit on the rate of rent can reasonably be expected to let has been fixed.
11. A reading of the provisions of Section 116 of the Municipal Act shows that the rateable value has to be determined on the basis of the annual rent at which such land or building might reasonably be expected to let. In the present case, the premises were sub-let at Rs. 8,50 per sq. ft. This would, thus, be at least the rent at which a building would be expected to let. The expression ' let' or ' sub-let' would make no difference even though the word ' sub-let' has not been used in Section 116 of the Municipal Act.
12. It is the value which has to be determined at which the property may be expected to be let and when the realisation itself in respect of the property is Rs. 8.50 per sq. ft., it is this value which has to be the value on which a building is reasonably expected to be let.
13. In my considered view, the crucial difference, as noted above, is the absence of applicability of the provisions of the Rent Act to the property in question. As noticed above, in Atma Ram Properties (P) Ltd.'s case (supra), even where the letting was for less than Rs. 3,500/- and the property was sub-let in excess of Rs. 3,500/-, the property was held to be outside the purview of the Rent Act.
14. There is also another aspect of the matter inasmuch as there are no protections to the tenant from eviction if the premises are Realizing rent in excess of Rs. 3,500/-. The lease agreement was originally for 5 years, which could be renewed after expire. Thus, the tenant was not a protected tenant having the benefit of the Rent Act after 12.01.1988.
15. In my considered view, the assessing authority has rightly held that the two judgments referred to would not apply to the facts of the case. The direction passed by the learned Single Judge of this Court in CWP No. 7211/1999 does not mandate that it is only the letting value and not the sub-letting value which should apply. The mandate is only to determine the rateable value in accordance with law after noticing the ratio of the judgments relied upon and referred to. This has been done by the assessing authority.
16. Learned counsel for the petitioners also referred to the fact that the assessing authority had sent the matter to the Legal Department for advice on the effect of the two judgments and the legal advice received was that the said judgments would not apply since the property was outside the purview of the Rent Act. It was, thus, contended that it was not open to the assessing authority to pass order on the basis of the advice received.
17. I am unable to accept the aforesaid contention of learned counsel for the petitioners since the assessing authority has only sought advice of the Legal Department on the ramification of the two judgments. It was not bound to follow the same. In any case, the effect of the two judgments have now been examined in the present case and the said contention is of little significance.
18. It is also relevant to note that the Delhi Municipal Corporation (Determination of Rateable Value) Bye-Laws, 1994 ( hereinafter to be referred to as, `the said Bye-Laws' ) were enacted and brought into force vide notification dated 24.10.1994. Bye-la 3(1)(b) of the said Bye-Laws provides as under :-
'' 3. Determination of rateable value of lands and buildings.- (1) For the purposes of sub-section (1) of section 116 of the Act, the annual rent shall be determined as under:-
(b) in case of the premises which are sub-let, the rent paid or payable by the occupier shall be the annual rent. ... ... ... ... ... ...''
19. A specific provision has, thus, been made under the said Bye-Laws providing for the annual rent to be taken as the amount paid by the occupier. Learned counsel for the petitioners contended that in terms of Section 481 of the Municipal Act, the power to make bye-laws is confined to the matters stated therein and the bye-law 3(1)(b) framed was beyond the provisions made in the Municipal Act since under Section 116, the expression used is only 'let' and not 'sub-let'. A reading of the Section 481 of the Municipal Act, however, shows that in sub-section 1(9), reference is made to any matter relating to levy, assessment, collection, refund or remission of taxes under the Municipal Act. The said Bye-Laws have been made in respect of assessment of properly tax and cannot be said to be beyond the provisions of the Municipal Act.
20. Learned counsel for the petitioners also referred to the provisions of bye-law 2(1)(f), which defines 'rent', which is as under :-
'' 2. Definitions. - (1) In these bye-laws - ... ... ... ... ...
(f) 'rent' includes -
(i) license fee, commission, supervision charges, ware-housing charges or such other payments, by whatever name called, made by the occupier for use of the premises and the amenities provided therein;
(ii) charges for fixtures and fittings, air-conditioning, lifts, elevators, etc., and other similar payments;
(iii) where the property taxes are borne wholly or in part by the occupier, the property taxes borne or to be borne by the occupier;
(iv)where the occupier has paid any amount of security or deposit (not being advance payment towards rent for a period up to one year being adjusted on month to month basis or a security deposit up to a period of six months), an amount calculated at such rate as is being fixed by the bank (for the fixed deposits) such security or deposit (in excess of one year adjustable advance rent and six months security deposit) for the duration for which the security or deposit has been paid by the occupier;''
Learned counsel contended that in the absence of inclusion of a specific clause, bye-law 3(1)(b) cannot expand the definition clause.
21. I am unable to accept the aforesaid contention of learned counsel for the petitioners since the expression 'rent' has been defined to include payments made by occupier. The amount paid by the sub-tenant is undoubtedly a payment made by the occupier ad, thus, comes within the said definition.
22. It is apparent that the said Bye-Laws, taking note of the amendment to the Rent Act, have attempted to cover various consequences of the same more specifically. However, this does not imply that the position existing prior to the said Bye-Laws coming into force would ipso facto be different. The said Bye-Laws undoubtedly have prospective effect. However, the very fact that the premises is taken outside the purview of the Rent Act w.e.f. 01.12.1988 would have its own ramification irrespective of the said Bye-Laws coming into force subsequently. The rateable value of a premises, which has been let out, has to be determined taking into consideration the annual rent at which it is expected to be let. In the present case, it is not the comparable rent of another property which has been taken into account, but it is the realisation in respect of the same portion which has been taken into account. The fact that the amount is being realised from a sub-tenant by the tenant would not be of consequence for determination of the rateable value once the property is outside the purview of the Rent Act as the rent not being more than the standard rent and the protection granted under the Rent Act would no more be available.
23. It may lastly be noted that the petitioners had filed earlier a CM No. 3274/2003 seeking the matter to be placed before the Division Bench on the ground that the petitioners were seeking quashing of bye-law 3 of the said Bye-Laws. There is admittedly no such prayer made in the writ petition and learned counsel for the petitioners sought to rely on the pleas raised in the rejoinder to contend that validity of the said Bye-Laws can be gone into in view of the allegation in the rejoinder that the said By-Laws are ultra virus the provisions of the Municipal Act. This plea of the petitioners was rejected by dismissing the said application on 14.05.2003. The writ petition has not been amended thereafter nor has any order of the appellate authority been bought to notice of this Court superseding the said Order. Thus, it is not even really open to the petitioners to challenge virus of bye-law 3 of the said Bye-Laws.
24. In any event, the legality and validity of the said Bye-Laws was impugned and in terms of the decision in Delhi Urban House owner's Welfare Association and Anr. v. Union of India and Ors., : 60(1995)DLT644 , the said Bye-Laws have been upheld except bye-laws 3(1)(a), 3(1)(c)(ii) Explanationn and part of Explanationn (ii) to 3(1)(e) of the said Bye-Laws. The Special Leave Petition was filed against the said judgment and a decision was rendered by the Supreme Court in Municipal Corpn. of Delhi v. Delhi Urban House owners Welfare Assn., 69 (1997) DLT 391 upholding the- bye-law 3(1)(a) of the said Bye-Laws, which had been struck down. However, insofar as the Explanationn and part of the Explanationn to other two bye-laws referred to above are concerned, the same were not impugned before the Supreme Court and, thus, the law laid down in the Division Bench judgment of this Court in Delhi Urban House owner's Welfare Association's case (supra) remains unaltered. This aspect has been discussed in CWP No. 73 of 2002 titled 'Municipal Corporation of Delhi v. Smt. Lila Bhide and Anr.' decided on 24.07.2003.
25. In view of the aforesaid, I find no merit in the writ petition and the same is dismissed leaving the parties to bear their own costs.