Filmistan Private Limited vs Municipal Commissioner for Greater Bombay

Y. V. Chandrachud, J.—This is a group of 39 appeals arising from the judgment of the learned Chief Judge of the Court of Small Causes, Bombay. Sitting as a persona designata u/s 217 of the Bombay Municipal Corporation Act (Bombay Act No. III of 1888), referred to hereinafter as "the Act", the learned Judge has dismissed the appeals filed by the assessee. The assessee has filed these appeals u/s 218-D of the Act.

The appellants, Filmistan Private Limited, are the owners of a property known as ''Bombay Talkies Studios'' situated at Dady Seth Road, Malad, Bombay. The property covers an extensive area of eighteen acres and odd. Until 1960 the appellants were using the property for their own purposes but in 1960 they gave the various structures situated on the property on what is stated to be a leave and licence basis to various small scale industries. T appellants have provided several amenities to the licensees like the free use electricity, water, electricians, sweepers, pumpmen and watchmen.

For the year 1960-61, a special notice increasing the rateable (sic) of the property was served on the appellants by the Municipal (sic) for Greater Bombay, who is respondent to these appeals. The appellant (sic) a complaint in accordance with the Act protesting against the (sic) rateable value. The complaint was, however, rejected by the (sic) Collector of the Corporation. Being aggrieved thereby, the (sic) an appeal to the Chief Judge of the court of Small Cause under of the Act.

The appellants were heard by the Chief Judge initially in March 1964 when a preliminary objection was raised on behalf of the Corporation that even on the assumption that the occupants of the structures were licensees, the Assessor and Collector was justified in fixing the rateable value on the basis of the licence fee recovered by the appellants and, therefore, it was not open to the appellants to challenge the rateable value fixed by the Assessor and Collector. By his judgment dated March 4, 1964 the Chief Judge held on this preliminary contention that�

".. the rateable value cannot be based on the amounts recovered by the Appellant from the different occupants if such amounts are in excess of the hypothetical rent for which the different properties can reasonably be expected to let from year to year."

The appeals were then fixed for hearing on the remaining issues.

Two other preliminary contentions were also raised before the learned Chief Judge, one before the aforesaid judgment was delivered and another after that judgment, but we are not concerned with those contentions in these appeals.

By his judgment dated November 23, 1964, the learned Chief Judge has held that the comparative rents cannot be taken as a basis for fixing the rateable value of the. property, that the so called licensees were in possession of the structures as tenants of the appellants, that the ''prima facie evidence of the annual letting value furnished by the rent which was being paid by the tenants to the appellants must be taken to be conclusive and that sitting u/s 217 of the Act, it was not competent for him to fix the standard rent of the premises. According to the learned Judge, standard rent of the premises could be fixed only by the Court of exclusive jurisdiction constituted under the Bombay, Rents, Hotel and Lodging House Rates Control Act, 1947 (hereinafter called "the Bombay Rent Act"), that, therefore, the contractual rent must be taken as the standard rent and that must form the basis for fixing the annual letting value of the property. The correctness of this decision is questioned in these appeals.

Before considering the question as to how the rateable value of the property should be fixed, it would be necessary to notice some of the important provisions of the Act, Section 146 (1) provides that property taxes shall be leviable primarily from the actual occupier of the premises upon which the said taxes are assessed, if such occupier holds the said premises immediately from the Government or from the Corporation or from a fazendar. Under Sub section (2) of section 146, in all other cases the property-taxes are, primarily viable from the lessor if the premises are let, from the superior lessor if the premises are let, from the superior lessor if the premises are sub-let and from the person in whom the right to let the premises (sic) if the same are unlet. Section 154 (1) provides that in order to fix the (sic)ble value of any building or land assessable to a property-tax, there shall (sic)ucted from the amount of the annual rent for which such land or build-(sic) reasonably be expected to let from year to year a sum equal to ten (sic) of the said annual rent and the said deduction shall be in lieu of (sic)nces for repairs or on any other account whatsoever. Section 155 the Commissioner of the Corporation to call for information or (sic) owners or occupiers to enable him to determine the rateable value (sic). u/s 156 the Commissioner is required to keep a book called ''the assessment book'' in which for every year he has to enter the various particulars regarding the rateable value of each assessable property. When the entries required by section 156 are made in the assessment book, the Commissioner is required u/s 160 to give public notice thereof and of the place where the assessment book can be inspected. u/s 162 the Commissioner is required to state in the public notice that complaints against the proposed assessments can be made within a period of not less than fifteen days from the publication of the notice. Under sub-section (2) of section 162, in every case in which any premises have for the first time been entered in the assessment book as liable to the payment of property rate or in which the rateable value of any premises has been increased, the Commissioner is required to give a special written notice to the owner or occupier specifying the nature of the entry and informing him that any complaint against the same will be received in the office at any time within fifteen days from the service of the special notice. In the instant case the special notice was given by the Commissioner to the appellants because the rateable value was increased for the year 1960-61. u/s 163 the complaint against the rateable value entered in the assessment book is required to be made in writing and every such application must set forth briefly but fully the grounds on which the valuation is complained against. Under sections 164 and 165 the Commissioner is required to investigate the complaint and dispose it of in the presence of the complainant if he appears or else in his absence.

u/s 217, appeals against any rateable value fixed under the Act lie to the Chief Judge of the Small Causes Court. Section 218-D provides for an appeal to the High Court from the decision of the Chief Judge by which a rateable value in excess of Rs. 2,000 is fixed and from any other decision of the Chief Judge upon a question of law or usage having the force of law or the construction of a document.

The question as to how the rateable value should be fixed in localities governed by Rent Control Acts has been decided by the Supreme Court in The Corporation of Calcutta Vs. Sm. Padma Debi and Others, . The respondents before the Supreme Court were owners of a property in Calcutta of which the Corporation of Calcutta had fixed the annual letting value at Rs. 14,093. In fixing this value, the Corporation took Rs. 1,450 to be the monthly rental value of the premises. Under the West Bengal Premises Rent Control Act, 1950, the standard rent of the premises was fixed by the Rent Controller at Rs. 550 per month from April 1951 and at Rs. 632-8-0 per month from August 1951. The principal contention raised on behalf of the assessee was that the Corporation had no power to fix the annual letting value at a figure higher than the standard rent. The Corporation rejected that contention but in appeal to the Chief Judge of the Court of Small Causes, the annual letting value for the purpose of assessment was fixed at Rs. 6,831 on the basis that the standard rent of the premises was Rs. 632-8-0 per month. The Corporation questioned the correctness of that judgment by preferring an appeal to the High Court of Calcutta. The High Court, by a majority, dismissed the appeal.

It was contended before the Supreme Court on behalf of the Corporation that u/s 127 (a) of the Calcutta Municipal Act, 1923, the Corporation has to ascertain only the hypothetical rent realisable from a hypothetical tenant at the time of assessment and not the actual rent payable at that time by any tenant and therefore it was not bound to take into consideration the standard rent fixed under the Rent Control Act. This contention was rejected by the Supreme Court

It was held that u/s 127(a) of the Calcutta Municipal Act the criterion of the annual letting value was the rent realisable by tie landlord and not the value of the holding in the hands of the tenant. Their Lordships then considered the provisions of the West Bengal Premises Rent Control Act and held that since section 127 (a) speaks of the hypothetical rent at which the property might reasonably be expected to let from year to year, it would be incongruous to consider fixation of rent beyond the limit fixed by the Rent Control Act as reasonable. In no circumstances the hypothetical rent could exceed that limit. Towards the end of para. 11 of the judgment Subba Rao J., as he then was, who delivered the judgment of the Court says that "the rental value cannot be fixed higher than the standard rent under the Rent Control Act."

The learned Chief Judge has distinguished this decision on the ground that in the instant case the standard rent has not been fixed and since under the Bombay Rent Act the standard rent can be fixed only by a Court constituted under that Act, he had no jurisdiction to go into the question as to what would be the standard rent of the premises. This distinction is unsustainable. The ratio of the decision of the Supreme Court is that the rateable value of a property cannot be fixed higher than its standard rent under the Rent Control Act. This is not dependent upon whether the standard rent has been actually fixed under the Rent Control Act. It is true, as observed by the learned Chief Judge, that in Bombay, the Small Cause Court alone could fix the standard rent and sitting as a persona designata he could not arrogate to himself that power. But once it is clear that for the purpose of determining the annual letting value of a property, regard must be had to the standard rent of that property under the Rent Control Act, it must follow that while fixing the rateable value one must consider what would be the standard rest of the property. As persona designata the learned Chief Judge could not fix the standard rent under the Bombay Rent Act but there is a distinction between fixing the standard rent under the Rent Control Act and considering for the purpose of fixing the rateable value as to what the standard rent would be. The result of the enquiry conducted by the Chief Judge for ascertaining the standard rent may not bind the parties for the purposes of the Rent Act, but in order to determine what is the rateable value of the property the learned Judge must apply his mind to die question as to what would be the standard rent of the property.

As observed by the Supreme Court, the peculiar principle of rating obtaining in England under which the value of occupation to a tenant is the criterion for fixing the rateable value under the rating law, is fundamentally different from that accepted under the several Indian Acts. What is required to be determined under the Act with which we are concerned is the letting value of the building to the landlord and that can never exceed the standard rent which he can recover from the tenant. u/s 7 of the Bombay Rent Act it is not lawful for a landlord to claim or receive on account of rent anything more than the standard rent. u/s 18, the landlord is liable to be convicted and sentenced if directly or indirectly he receives any consideration other than the standard rent or the permitted increases in respect of the lease of any premises. Therefore, in the language of the Supreme Court, it would be incongruous to consider fixation of rent beyond the limits fixed by a penal legislation as reasonable.

Section 154 of the Act provides that rateable value of a building must be fixed on the basis of the annual rent for which the building might reasonably be expected to let from year to year. The reasonable expectation of a landlord in regard to the rent which his property would fetch cannot exceed what he can lawfully recover from his tenant under the Rent Act and therefore while considering what a hypothetical tenant can reasonably be expected to pay for the property by way of rent, regard must necessarily be had to what would be the standard rent of the premises. The learned Chief Judge is therefore not right in taking the view that he could not consider the question as to what would be the standard rent of the premises and that therefore the agreed rent between the parties must be deemed to be the standard rent.

Mr. Banaji appearing for the Corporation, urges that the learned Chief Judge has ultimately considered the evidence led by the parties on the question of standard rent and since he has held that the contractual rent would be the standard rent, his finding should not be set aside in these appeals. Now, the learned Chief Judge has considered the evidence on the question of comparative rents but his treatment of that evidence seems to us to be inadequate. Having held that he had no jurisdiction to consider what was the standard rent of the premises, he probably thought that it was irrelevant to consider what would be the standard rent of the premises. He has, therefore, considered the evidence on the question of comparative rents somewhat cursorily. But what is more relevant is that the attention of the parties themselves was not focussed on the central question that the reasonable rent of the premises would have to be fixed in relation to the standard rent of the premises. As we look at the evidence, we are left with the feeling that no serious attempt was made to establish by appropriate evidence as to what would be the standard rent of the premises. An expert called Narvekar was examined on behalf of the appellants on the question of the valuation of the property for the purpose of fixing the rateable value. His evidence has become useless for all practical purposes because he was not available for being cross-examined. An adjournment was sought on the ground of some illness in his family but that adjournment was refused by the learned Chief Judge. We have no doubt that the learned Chief Judge refused the adjournment because he felt, in view of his finding that he had no jurisdiction to fix the standard rent of the premises, that the evidence of the expert was really irrelevant on the issue which arose before him.

The learned Chief Judge is right that he had jurisdiction to find whether the several occupants of the structures were lessees and not mere licensees. He was entitled to consider this question no less than was he entitled to consider for the purpose of fixing the annual letting value as to what would be the standard rent of the premises. As stated earlier, these findings may, not govern the rights and liabilities of the parties under the Bombay Rent Act but these findings have to be recorded for the purpose of fixing the annual Jetting value of the property.

The finding of the learned Chief Judge that the contractual rent can be taken to be the standard rent may seem to receive support from the observations in a judgment of the Supreme Court in Motichand Hirachand and Others Vs. Bombay Municipal Corporation, , but those observations have to be considered in the context of the facts of that case and the passage in which the observations occur has to be read as a whole. In para. 5 of the judgment, Shelat J. who delivered the judgment of the Court observes that the actual rent would ordinarily be the rent expected from a hypothetical tenant. It must, however, be remembered that immediately before this observation and indeed as a part of the very sentence in which the observation occurs, it has been stated that no hypothetical tenant would pay rent higher than the standard rent. The learned Chief Judge held that he, had no jurisdiction to fix the standard rent because of the provisions of the Bombay Rent Act and as a sequitur to that finding he came to the conclusion that the agreed rent between the parties should be deemed to be the standard rent.

It is necessary to clarify that the agreed rent could, in conceivable cases, constitute a true measure of the standard rent. For example, the circumstance that a particular tenant has paid a particular amount of rent over a long course of years without resorting to the valuable remedy of having the standard rent fixed would be a relevant circumstance to be taken into consideration for the purpose of seeing what is the standard rent of the premises. The error into which the learned Judge has fallen is that he assumed that in the instant case the agreed rent was the measure of the standard rent No such assumption can be made because what is the. standard rent of the particular premises is an issue which has to be decided like any other issue of fact.

It was urged before us by Mr. Chitale who appears on behalf of the appellants that the rateable value of the property has been increased by the Corporation for the year 1960-61 without any apparent justification and. therefore, the burden must rest on the Corporation to show that the increase is justified. This contention is not borne out by the provisions of the Act. We have set out the relevant sections earlier from which it is clear that the scheme envisaged by the Act is that an appropriate entry is to be made in the assessment book by the Commissioner, notice thereof, sometimes specially, is to be given to the person affected by the entry and the burden is cast on the person challenging the entry to show that the rateable value fixed by the Commissioner or the increase proposed by him is not justified. That is why the assessee is required to file a complaint and if the Commissioner finds on investigation that the complaint is unjustified, the assessee has been given a right u/s 217 to file an appeal to the Chief Judge of the Court of Small Causes. If is open to the assessee to satisfy the Chief Judge, if necessary by examining an expert valuer u/s 218B of the Act, that the Commissioner has not fixed the rateable value of the property correctly. If the appeal to the Chief Judge fails, the assessee is given a further opportunity to file an appeal to the High Court u/s 218D. The burden, however, must always rest on the assessee to establish that the rateable value has not been properly fixed by the Commissioner.

In the circumstances, it would be necessary to call for a finding from the learned Chief Judge on two issues. He shall have to find whether the occupants of the structures though called licensees are truly tenants, and secondly he shall have to find as to what would be the standard rent of the premises. The learned Judge shall give opportunity to both the sides to lead evidence on these issues and shall forward his findings to us within three months from the receipt of the record by him.