Ahmedabad Municipal Corporation vs Sanjaybhai Biharilal

J.C. Upadhyaya, J.—Challenge in this appeal filed u/s 411 of the Bombay Provincial Municipal Corporations Act, 1949 (for short ''the Act'') is to the judgment and order dated 10/3/1999 rendered in M.V.A. No. 2407 of 1996 by the Ld. Judge, Small Causes Court No. 10, Ahmedabad, whereby in the aforesaid appeal preferred by the respondent herein, the Gross Rateable Value (for short ''GRV'') of the premises situated in Ward Shahpur-2/B, bearing survey No. 1362/3, which was fixed by the appellant - Ahmedabad Municipal Corporation at Rs. 72,622/ - was reduced to Rs. 7,929/ - by partly allowing the aforementioned M.V. Appeal No. 2407/1996.

We have considered submissions advanced by Mr. Maulin Raval, Ld. Advocate for the appellant - Municipal Corporation. He has taken us through the discussions made by the Ld. Judge of the Small Causes Court in para. 2 of the impugned judgment and order and submitted that the valuer''s report relied upon by the learned Judge in the impugned judgment and order was in dispute. That nothing emerges that the valuer''s report was of which date and when the valuation of the property in question was made. It is further submitted that there is no universal rule that GRV should be 7% of the total valuation of the property.

2.1 Mr. Raval, learned advocate for the appellant relied upon a decision in the case of Ahmedabad Municipal Corporation v. Dena Bank reported in 24(2) G.L.R. 1171 and more particularly paras. 18 and 19 of the judgment and submitted that the criteria of 7% cannot be applied uniformly and, therefore, submitted that the impugned judgment and order rendered by the Ld. Judge, Small Causes Court deserves to be set aside and the matter is required to be remanded to hear and decide the same afresh.

The respondent though duly served with the notice, has chosen not to remain present.

Bare perusal of the impugned judgment and order rendered by the Ld. Judge, Small Causes Court, would suggest that relying upon a report of the Valuer, the net valuation of property in question was considered at Rs. 1,13,274/ - and formula of 7% was adopted and accordingly the GRV was fixed at Rs. 7,929/ -.

In the aforesaid background, if the judgment rendered in Ahmedabad Municipal Corporation v. Dena Bank (supra) is considered and more particularly considering paras. 18 and 19 of the aforesaid judgment, we are of the considered opinion that there is the substance in the submissions made by the learned advocate Mr. Raval for the appellant - Corporation.

5.1. Para. 18 in Dena Bank''s case (supra) runs as under:

The last but not the least factor that is required to be referred to is whether 7% formula applied by the Court of Small Causes is proper. Sufficient discussions have been made on this aspect by this Court in the decisions of Rajnikant and Oriental Fire and General Insurance Co. (supra). It also appears from the judgments delivered by the Small Causes Court in different present municipal appeals to fix the return of the property, criteria of 7% has been adopted. It has been submitted before us that considering change of circumstances, this aspect is required to be reconsidered. In our opinion, the principles evolved in these decisions with regard to determining the fair return of the property cannot undergo any change and they would by and large remain the same. However, it is the economic condition prevailing at the time is the principal criteria for determining the rate of return. The word "economic condition" in its fold would embrace different aspects concerning the real estate market, the cost of living, the return received from Government securities, etc. Since for determination of the fair rent, value of the property is required to be fixed and on the basis of that value the fair return of the said property, having regard to the different circumstances, can be decided. The word ''value'' has different meanings and even in the world of economics it is always said that value is a highly subjective economic term and it is somewhat abstract in nature. Obviously there is variance between the words "value of the property" and the "cost of the property". The word "price" has also different meaning. The cost of the property is the actual expenditure that has been made on account of the purchase of materials, labour and other sundry expenditure made for erection of the property. So far the value is concerned, it would depend on (1) utility, (2) scarcity, (3) demand and (4) transferability. So far the price is concerned, the essential elements are the actual cost plus the commissions and the reasonable profit that could be expected in sale of the property keeping in view the demand. Thus so far the value of the property is concerned, the essential criteria are not only demand and supply but its utility also. The value of immovable property is, therefore, governed by, so far the economic aspect is concerned, several factors which can be (1) demand and supply, (2) the economic policy of the State as well as Central Government, (3) inflation and deflation, (4) general money market situation, (5) boom or recession in real estate market, (6) the paying capacity of the people of the locality in which the property is situated, etc. Ofcourse, there are several other legal as well as technical and social aspects which may have their own bearings on this question. However, for the purpose of dealing with these appeals the same are not required to be gone into in detail. Suffice it to say that the aspects like the size of the land, shape, the area of the property, quality of construction, infrastructure facilities, environmental conditions, the locality, the population or density of the area, etc. are some of the relevant factors. So far the city of Ahmedabad is concerned, it is a matter of common knowledge and certainly judicial notice can be taken of such fact that the real estate market is passing through recession period for the last several years and to add to that the devastating earthquake which occurred on 26th January, 2001 has brought further recession in the said market since the people are now scared of having residence in multi-storeyed buildings. Needless to say that the city is having number of such buildings. It may also be noted here that so far the gilt-edged securities of the Government are concerned, the rates of interest have been curtailed substantially. Of-course, the rate of interest prevailing for such securities as on today are higher than the rate of return that may be had on immovable property. This, however, has its adverse effect on the paying capacity of the buyer. It is obvious that rate of return yielded by the residential property is normally lesser than the rate of interest yielded by commercial properties. The Court of Small Causes has without application of mind adopted the formula of 7% in most of the cases which are before us. If the Court had applied its mind to aforesaid aspects, it could have realised that considering variety of reasons, the criteria of 7% cannot be applied uniformly, irrespective of the facts of the case. It is quite possible that considering the then economic condition and the commencement of process of recession in real estate market, as submitted by counsels for the respondents, the rate of interest by way of yield on the property may be lesser than 7%. For this reason also, the cases in these appeals are required to be reconsidered.

So far the other incidental submissions such as that the appellant has determined the rateable value already fixed in the previous year to a higher amount in the subsequent year, which is not permissible, etc. are concerned, these questions have already been dealt with by this Court in the case of Oriental Fire and General Insurance Co. (supra) and in the case of Ahmedabad Municipal Corporation v. Dineshchandra C. Desai by the Division Bench of this Court in First Appeal No. 3503 of 2001 dated 1/2/2002 and, therefore, they have not been dealt with here.

5.2. Ultimately, in para. 19 of the said judgment, it is observed as under:

In the result, these appeals are allowed and the impugned judgments in the appeals, other than mentioned in para. 20, are quashed and set aside. The appeals are remanded back for reconsideration of the Court of Small Causes in the light of the discussions made in this judgment. No order as to costs.

Seen in the above context, it appears to us that the impugned judgment and order rendered by the Ld. Judge, Small Causes Court, Ahmedabad deserves to be set aside and the M.V.A. No. 5113 of 1998 deserves to be remanded to decide the issues involved in this matter afresh on merits after giving opportunity of being heard to both the sides.

For the foregoing reasons, the appeal is allowed. The impugned judgment and order dated 10/3/1999 rendered in M.V.A. No. 2407/1996 by the Ld. Judge, Small Causes Court No. 13, Ahmedabad, is set aside. M.V.A. No. 2407/1996 is remanded to the said Court with the direction that the appeal to be heard and decided afresh after giving proper opportunity of hearing to both the sides, in light of the discussions made by us in this judgment.

Record and proceedings of M.V.A. No. 2407/1996 shall be sent back to the Small Causes Court, Ahmedabad, forthwith.

Since the appeal is disposed of today, Civil Application No. 346 of 2000 filed by the appellant for stay does not assume any survival value now and, accordingly, same stands disposed of.

No order as to costs.