Atma Ram Properties Pvt. Ltd. vs The Oriental Insurance Co. Ltd. on 6 December, 2017

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                                                                  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.                      … APPELLANT

                         VERSUS

          THE ORIENTAL INSURANCE CO. LTD.                    …RESPONDENT


                                          JUDGMENT

S.ABDUL NAZEER, J.

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
Signature Not Verified

seeking eviction or ejectment of such tenant who defaults in
Digitally signed by
VISHAL ANAND
Date: 2017.12.06
16:29:08 IST
Reason:

payment of such recoverable tax as rent and when the rent
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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. The
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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”.

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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 the
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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.
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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 suit
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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 in
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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 in
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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 for
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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.

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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:

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“(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.

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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.

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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.

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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 also
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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 prevail
17

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 latter
18

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……….”
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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
20

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
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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.

Article source: Supreme Court

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