Satish Chandra Agarwalla v. State Bank of India — 1987 DIGILAW 321 (CAL)

Judgment : In this suit a short but interesting question of law calls for determination. The question is whether the Sur-charge levied by the Calcutta Municipal Corporation is the liability of the Landlord or of the occupier. It is agreed by the learned Counsel appearing for the plaintiffs and the State Bank of India, the first defendant, that the Court should proceed to decide the said question of law on the basis of the documents tendered without any oral evidence being adduced. It may be recorded that inspite of Notice issued, to the Calcutta Municipal Corporation, the second defendant, they have not chosen to appear in the suit. The Calcutta Municipal Corporation is a proforma defendant and no relief has been claimed against the Calcutta Municipal Corporation. 2. This suit was instituted by several plaintiffs, seventeen in number, against the State Bank of India and Calcutta Municipal Corporation, first and second defendants respectively. 3. The case of the plaintiffs as appearing from the Plaint is that the Plaintiff Nos. 1 to 14 and one Ramesh Gupta entered into 14 several agreements all dated 10th July, 1979 with Chatterjee Polk Private Limited whereby and whereunder the plaintiffs agreed to purchase 14 several portions on the first floor of the premises No. 33A, Chowringhee Road Calcutta, hereinafter referred to as the 'said Premises'. At the time when the several 14 agreements were entered into the first defendant had already been inducted as tenant of the first floor of the said premises by Chatterjee Polk Pvt. Ltd. 4. By a Decree passed in Suit No. 417 of 1982 in (1) Satish Chandra Agarwalla & Ors. v. Chatterjee Polk Private Limited & Others this Court granted specific performances of the respective agreements entered into by and between the plaintiffs and the said Chatterjee Polk Private Limited. The said decree was passed on October 6, 1982. By and under the said agreements the plaintiffs are entitled to realise the rent and all other dues from the first defendant. On 21st October, 1985 the said Ramesh Gupta the owner of the Flat No. 5A at the said premises No. 33A, Chowringhee Road, Calcutta, died after having made and published his last Will and testament in English language and character dated 15th January, 1983. By and under the said Will the said Ramesh Gupta appointed the Plaintiff Nos. On 21st October, 1985 the said Ramesh Gupta the owner of the Flat No. 5A at the said premises No. 33A, Chowringhee Road, Calcutta, died after having made and published his last Will and testament in English language and character dated 15th January, 1983. By and under the said Will the said Ramesh Gupta appointed the Plaintiff Nos. 3, 6, 10 and 15 as the Executors Trustees of the said Will. The said Flat No. 5A comes within the residuary clause of the said Will whereby the said deceased created a Trust called Ramesh Gupta Trust wherein the said deceased appointed the Plaintiff Nos. 3, 6, 10 and 15 as Trustees of the said Trust. The beneficiaries of the said Trust are the Plaintiff Nos. 15, 16 and 17 are the only heirs and legal representatives of the said deceased. In the premises the plaintiffs became the owners of the said 14 several portions at the first floor of the said premises No. 33A, Chowringhee Road, Calcutta. 5. Under an agreement dated 30th May, 1977 the first defendant State Bank of India became a monthly tenant under the said Chatterjee Polk Pvt. Ltd., the then owners in respect of basement, ground, mezzanine and first floors of the said premises No. 33A, Chowringhee Road, Calcutta on the terms and conditions contained therein. The first defendant carries on banking business on the said tenanted portion and as such has been using the same for commercial purposes. 6. The case of the plaintiffs is that they have received several bills from Calcutta Municipal Corporation, the second defendant, inter alia, claiming surcharge in accordance with the provisions of the Calcutta Municipal Corporation Act, 1980 amounting to Rs. 2,26,911.30 p. The first defendant was liable to pay the said surcharge but inasmuch as it failed and neglected and refused to make payment of the said amount, in order to save the amount on account of interest and also the penalty which the second defendant could have recovered in the event of delay in the payment of the said bills, the plaintiffs without prejudice to their rights and contentions made payments of the said amounts to the second defendant. According to the plaintiffs the first defendant was obliged and bound to pay and bear the entire amount of surcharge on the consolidated rates since the first defendant is using the said premises for commercial purpose. According to the plaintiffs the first defendant was obliged and bound to pay and bear the entire amount of surcharge on the consolidated rates since the first defendant is using the said premises for commercial purpose. The contention of the plaintiffs is that in view of sections 230 and 231 of Calcutta Municipal Corporation Act, 1980 the surcharge levied by the Calcutta Municipal Corporation in respect of the tenanted portion re-amounts occupier's shares of rates and taxes which the first defendant is obliged to pay under the terms and conditions of the tenancy of the first floor of the said premises No. 33A, Chowringhee Road, Calcutta used for commercial purpose. 7. The amount of surcharge levied under the provisions of Calcutta Municipal Corporation Act in respect of the tenanted portion and which has already accrned amounts to Rs. 7,93,265,60 p. representing a sum of Rs. 5,66,35430 p. for the period between First Quarter 1978-79 to Fourth Quarter 1983-84 and Rs. 2,26,911.30 for the period between 1st Quarter 1984-85 to the Fourth Quarter 1985-86. The plaintiffs have so far paid a sum of Rs. 2,26,911.30 p. to the second defendant and are entitled to recover the same from the first defendant under section 231 of the Calcutta Municipal Corporation Act, 1980. 8. The first defendant is under an obligation to pay the surcharge amounting to Rs.28,363.65 p. per quarter to the Calcutta Municipal Corporation but in breach of such obligation existing in favour of the plaintiffs the first defendant has failed and neglected and/or refused to make such payment. In the circumstances, the plaintiffs pray also for a decree for a mandatory injunction directing the first defendant to pay the entire amount of surcharge on the consolidated rates in respect of the first floor of the said premises No. 33A, Chowringhee Road, Calcutta on presentation and/or submission of appropriate bills in respect thereof. 9. In this suit the plaintiffs have claimed a decree for a sum of Rs. 2,34,017.02 p. with interest thereon which the plaintiffs have already paid to the second defendant. They have also asked for an injunction directing the first defendant to make payment on account of surcharge or the consolidated rate so long as the first defendant continues to remain as a tenant in respect of the first floor of the said premises. 2,34,017.02 p. with interest thereon which the plaintiffs have already paid to the second defendant. They have also asked for an injunction directing the first defendant to make payment on account of surcharge or the consolidated rate so long as the first defendant continues to remain as a tenant in respect of the first floor of the said premises. As indicated earlier the short question that calls for determination is whether in view of provisions of Calcutta Municipal Corporation Act, 1980 the liability to pay surcharge is on the occupier or on the owner. 10. The contention of the first defendant is that under the agreement dated 30th May, 1977 the first defendant State Bank of India became a monthly tenant of Chatterjee Polk Pvt. Ltd. the then owners of the basement, ground, mezzanine and first floor at premises No. 33A, Chowringbee Road, Calcutta on the terms and conditions contained therein. The contention is that the State Bank of India shall pay the agreed rate of rent and air-conditioning charges which was inclusive of owner's share of monthly rates and taxes and other outgoings and impositions whatsoever payable by the owner shall be borne by the landlord. It is the contention that the plaintiffs claim to be the purchasers of the first floor of the said premises subject to the terms and conditions contained in the said Agreement dated 30th May, 1977. 11. It is not disputed that if surcharge is payable by the owner or the landlord under any agreement by and between the owner or the landlord and the tenant, then it is the owner who shall be liable to pay such surcharge. If, however, the agreement does not provide as to who shall bear the liability of surcharge the question would then arise whether under the provisions of Calcutta Municipal Corporation Act, 1980 liability for payment or surcharge is on the owner or on the occupier. It is, therefore, necessary to consider first the agreement dated 30th May, 1977 entered into by and between the first defendant and the said Chatterjee polk Private Limited. The relevant clause is as follows :- "The monthly rent in respect of the said premises shall commence from the date of delivery of vacant possession and shall be calculated at the rate of 450 p. per sq. The relevant clause is as follows :- "The monthly rent in respect of the said premises shall commence from the date of delivery of vacant possession and shall be calculated at the rate of 450 p. per sq. ft, ---------inclusive, of owner's share of municipal rates, taxes, other outgoings and impositions whatsoever payable by the owner which shall be borne by the landlords." (Emphasis added) 12. The said agreement only provides that the owner's share of municipal rates, taxes, other outgoings and impositions whatsoever payable by the owner shall be borne by the landlords. The question is what is payable by the owner? If surcharge is payable by the owner, it is the owner who is only liable to pay the same. On the other hand if surcharge is not payable by the owner, it has to be paid by the tenant. The agreement does not throw any light on the respective contentions raised. It only indicates that the owner will be liable to pay whatever is payable by the owner. Accordingly it is necessary to consider the relevant provisions of the Calcutta Municipal Corporation Act to find out whether the liability to pay surcharge is on the owner or on the occupier. 13. The contention of the plaintiffs is that under section 230 of the Calcutta Municipal Corporation Act, 1980 they are entitled to recover the surcharge paid on the consolidated rate assessed by the Corporation. According to the plaintiffs the State Bank of India, the first defendant has been paying without any objection the occupier's share of rates and taxes. Surcharge is payable only when the occupier is using the premises for commercial purposes and forms parts of the occupier's share of rates and taxes. Therefore in view of the Calcutta Municipal Corporation Act and inasmuch a. the State Bank of India is using the premises only for commercial purposes, the same has to be paid by the occupier. If the landlord has paid the same he can realise the amount so paid by him on account of the occupier from the occupier as the arrears of rent ,He recoverable by the landlord. 14. If the landlord has paid the same he can realise the amount so paid by him on account of the occupier from the occupier as the arrears of rent ,He recoverable by the landlord. 14. On the other hand the contention of the first defendant is that the rent payable by the first defendant is inclusive of other 'outgoings and impositions' and accordingly no further liability is on the occupier to pay any surcharge which is levied by the Calcutta Municipal Corporation. The liability is on the owner. 15. Surcharge is an enhancement of consolidated rate and is not a new imposition. Reliance has been placed on a decision of the Supreme Court of India in the case of (2) Bisra Stone Line Company Limited v. Orissa State Electricity Board, reported in AIR 1976 SC 127 . 16. Reliance has also been placed in the case of (3) Tridswell v. Whitworth reported in Law Reports 2 Common Pleas Cases 326. In that case under the relevant Act, the local Council was empowered to recover costs and charges for putting sewers and pavement to street from the landlords and/or owners of the buildings. The Council having put the sewers and paved the street claimed the costs from the landlords, the plaintiff. The plaintiffs in its turn claimed the amount from the defendants, their tenants, relying on the terms of the tenancy, which was to the effect that the defendant would pay 'yearly rent' of £90 and also 'pay and discharge all taxes rates assessments and impositions whatsoever (except property-tax) which during the term should became payable in respect of the demised premises. It was held that 'impositions' in the covenant of the tenant mean impositions of a nature similar to that of taxes, rates and assessments and the expression does not comprise the charges levied by the Council on the plaintiff, landlord. It was also held that the covenant in question related to the money payments charged upon the tenant in respect of the premises and not to duties or burdens imposed upon the landlord. In my view this case does not help the tenant. The question here is what amounts to occupier's share under the agreement. It is not that all the liabilities have to be discharged by the landlords. Landlord will bear only the owners share of all rates, taxes and impositions. In my view this case does not help the tenant. The question here is what amounts to occupier's share under the agreement. It is not that all the liabilities have to be discharged by the landlords. Landlord will bear only the owners share of all rates, taxes and impositions. Unless it can be shown that surcharge is a liability imposed upon the landlord, it cannot be said that it is the landlord who shall bear the burden of surcharge. 17. It is contended by Mr. Bachawat, learned Counsel for the State Bank of India that section 193 of the Calcutta Municipal Corporation Act makes the owner primarily liable to pay the consolidated rates and taxes inclusive of surcharge, which is mealy an enhancement of such rates, and not a new imposition. It is therefore submitted that under the terms and conditions of tenancy the plaintiffs being the landlords are liable to pay the enhancement of consolidated rates and taxes being the surcharge and impositions. He has also drawn my attention to section 230 of the Act which provides "that the person primarily liable to pay consolidated rates in respect of any land or building may recover surcharge". The provisions are not mandatory and do not have the effect of abrogating the express terms of tenancy, which in this case c1eady provide that the landlords shall be liable to pay the same. In other words the section merely permits the landlord to recover the surcharge if it is otherwise entitled to recover the same under the terms of the tenancy. In any event it is contended that the Act was to amend and consolidate the law relating to the Municipal affairs of Calcutta. The act was not intended to regulate not it regulate the contractual relationship between the landlord and the tenant. It is also contended that in many cases the tenancy agreement provides that both the owners and occupier's of taxes would be payable by the landlord. In such a case the landlord cannot recover surcharge from the occupier because the same would be contrary to the terms of the tenancy. It is therefore clear that the provisions of section 230 of the Act of necessity are subject to the contract between a landlord and a tenant. 18. I am, however, unable to accept the contentions of Mr. Bachawat, learned Counsel for the State Bank. It is therefore clear that the provisions of section 230 of the Act of necessity are subject to the contract between a landlord and a tenant. 18. I am, however, unable to accept the contentions of Mr. Bachawat, learned Counsel for the State Bank. The Calcutta Municipal Corporation Act came into force on 4th January, 1984. Under section 2(20) consolidated rate includes the surcharge levied on the consolidated rate under the said Act. Under section 2(60) occupier includes any person for the time being paying or liable to pay to the owner the rent or any portion of the rent of the land or building in respect of which the word is used or for damages on account of the Occupation of such land or building, and also a rent-free tenant PROVIDED that an owner living in or otherwise using his own land or building shall be deemed to be the occupier thereof. Section 2(62) provides that owner includes the person for time being receiving the rent of any land or building or of any part of land or building, whether on his own account or as agent or trustee for any person or society or for any religious or charitable purpose or as a receiver who would receive such rent if the land or building or of any Part of the land or building were let to a tenant. 19. Section 170 of the Act empowers the Corporation to levy taxes on several items. This power includes the power of levying consolidated tax assessed a rate en lands and buildings. Though the incidence of consolidated rate is upon the owner he can in certain circumstances shift a part of the burden thereof to his tenant or subtenant. In case of failure on the part of the owner to pay the consolidated rate the law empowers the recovery of the slim due, from the tenant who may eventually adjust the same against the rent payable to the owner. 20. Section 171(1) provides that a consolidated rate on lands and buildings in Calcutta shall be imposed by the Corporation and section 171(4) enumerates the power to levy a surcharge on the consolidated rate on such land and building where a land or building or portion thereof is used for commercial or non-residential purposes. 21. A surcharge is in fact an additional tax on the building. 21. A surcharge is in fact an additional tax on the building. According to the decision of the Supreme Court in Bisra Stone Line Co. Ltd, (Supra), surcharge is a part of consolidated rate and it is really and enhancement of consolidated rate and not a new tax. In view of the definition of the consolidated rate in section 2(20) of the Calcutta Municipal Corporation Act, 1980 there cannot he any controversy that consolidated rate includes the surcharge. Section 193 of the Act speaks of the incidence and payment of consolidated rate on lands and buildings. It, inter alia, provides that consolidated rate on lands and buildings shall be primarily leviable if the land or building is let, upon the lessor, Although an agreement for payment of Municipal rates and taxes etc. between the owner and the occupier where the Corporation is not a party, is not binding on the Corporation but the landlord and the tenant can always by an agreement share the burden of the Municipal taxes. 22. Under section 194 there can be apportionment of liability of the consolidated rate on land or building when the premises assessed is let or sub-let. But the question still remains who shall bear the liability. The liability to pay surcharge arises only when land or building is used for commercial or non-residential purposes. Chapter XVI of the Act enumerates the provisions regarding the payment and recovery of taxes. In the matter of incidence of consolidated rates on lands and buildings it is primarily leviable upon the owner under section 193(1) of the Act. Corporation is primarily concerned with the recovery of taxes from the owner and several modes of recovery have been provided for in Chapter XVI. But the law also empowers the person primarily liable to pay the consolidated rate i.e., the owner of the lands and buildings, to recover from the occupier half of the rates as well as the amount of surcharge. 23. But the law also empowers the person primarily liable to pay the consolidated rate i.e., the owner of the lands and buildings, to recover from the occupier half of the rates as well as the amount of surcharge. 23. Section 230 of the Act provides as follows : "Save as otherwise provided in this Act, the person; primarily liable to pay the consolidated rate in respect of any land or building may recover- (a) If there be but one occupier of the land or building, from such occupier half of the rate so paid, and may, if there be more than one occupier, recover from each occupier half of such sum as bears to the entire amount of rate so paid by the owner the same proportion as the value of the portion of the land or building in the occupation of such occupier bears to the entire value of such land or building. Provided that if there be more than one occupier, such half of the amount may be apportioned and recovered from each occupier in such proportion as the annual value of the portion occupied by him bears to the total annual value of such land or buildings; (b) the entire amount of the surcharge on the consolidated rote on any land or building from the occupier of such land or building who uses it for commercial or non-residential purposes; provided that if there is more than one such occupier, the amount of surcharge on the consolidated rate may be apportioned and recovered from each such occupier in such proportion as the annual value of the portion occupied by him bears to the total annual value of such land or building." (Emphasis Supplied) 24. Thus it appears to me that under section 193 of the Calcutta Municipal corporation Act, 1980 the landlord is primarily liable to pay the consolidated rates and taxes including the surcharge. This has been done as a. matter of convenience so that the Calcutta Municipal Corporation is not compelled to run after the various occupiers for collection of occupier's share of rates and taxes. If the liability could not have been apportioned and recovered from the tenant, no provision would have been made under section 230 of the Act for apportionment. 25. If the liability could not have been apportioned and recovered from the tenant, no provision would have been made under section 230 of the Act for apportionment. 25. Section 230(b) gives an indication that the entire amount of the surcharge on the consolidated rate on any land or building can be recovered from the occupier if such land or building is used for commercial or non-residential purposes and if there is more than one occupier it can be apportioned and recovered from each such occupier in such proportion as the annual value of the portion occupier by him bears to the total annual value of such land or building. 26. It is a common knowledge that if a land and building is used for commercial purposes or for (non-residential purposes the rate of consolidated rates and taxes would be enhanced as the annual value would be determined as a higher figure. The tenant by using the premises for commercial purpose or for non-residential purpose gets a benefit as it can carryon the business or profession in the tenanted portion. Surcharge although leviable on the land or building but it is on the commercial use or non-residential use of the building. The question of payment of surcharge would not have arisen had the land or building not been used for commercial or non-residential purposes. Therefore, however shall use the premises for commercial or nonresidential purposes shall be liable to pay the surcharge. The owner and occupier however may enter into an agreement to make an apportionment of the surcharge if they so desire. But if the agreement does not specifically provide who shall pay the surcharge, the person, whether occupier or tenant who uses the premises for commercial or nonresidential purposes shall be liable to pay such surcharge. Inasmuch as surcharge is a levy on the user of land or building. 27. The contention is that in the instant agreement it has been provided that whatever is payable by the owner or the landlord whether it is any imposition tax, etc., shall be payable by the owner. But that does not mean that owner although is primarily liable to pay consolidated rate and surcharge to the Corporation, the entire liability can be fixed on the landlord. Had it been so the Act would not have provided for any primary liability. But that does not mean that owner although is primarily liable to pay consolidated rate and surcharge to the Corporation, the entire liability can be fixed on the landlord. Had it been so the Act would not have provided for any primary liability. There would have been absolute liability of the landlord and landlord alone without any scope for apportionment. 28. Reference may be made also to section 231 which provides follows. 29. If any person is primarily liable to pay any consolidated rate on any land or building and is entitled to recover any sum from an occupier of such land or building, be shall have, for recovery thereof, the same right and remedies as if such sum were rent payable to him by the person from whom he is entitled to recover such sum. 30. This is also an indication that primary liability is for the purpose of payment to the Corporation but it does not exclude the liability of the occupier or tenant to pay surcharge if he uses land or building for commercial or non-residential purpose unless such liability is excluded or limited by any agreement between the landlord and the occupier or tenant. 31. On a correct reading of the various provisions which are mentioned hereinabove and particularly in view of sections 230 and 231 in my judgment it is the occupier or the tenant who uses the premises for commercial or non-residential purposes shall be liable to pay the surcharge. Since the bill includes the consolidated rate including the surcharge it may be that the owner has to pay at the first instance but it will be recoverable from the occupier. 32. It may be mentioned that in (4) Alhaj Amit Hussain v. Corporation of Calcutta reported in 1979 (2) CHN 361 the Division Bench of this Court held that Corporation cannot as a matter of right recover surcharge as a part of the consolidated rate payable either by the owner or the occupier. It has to adopt other method according to law. It was held that consolidated late is a tax based on annual value and annual value is linked to the capital value of the property. The actual rate is therefore fraction of the capital value. Surcharge is not on lands and buildings. It operates on a field different from the field delineated for consolidated rate. It was held that consolidated late is a tax based on annual value and annual value is linked to the capital value of the property. The actual rate is therefore fraction of the capital value. Surcharge is not on lands and buildings. It operates on a field different from the field delineated for consolidated rate. The matter went before the Supreme Court and the Supreme Court disposed of the appeal with the modification that the Municipal Corporation of Calcutta is permitted to recover and/or collect the surcharge payable under section 165 read with section 191A of the Calcutta Municipal Act, 1951 by including the same in the occupier's share to the rate bills and treating it to be a part of the consolidated rate for the purpose of such recovery with the modification that the bills submitted by the Calcutta Corporation will show separately the total amount payable by the occupier. This has become mere academic in view of the defination of consolidated rate now contained in Section 2(20) of the Calcutta Municipal Corporation Act, 1980 which provides that consolidated rate includes surcharge levied on the consolidated rate under the Act. The incidence of surcharge is made co-terminus with the consolidated rate. But surcharge though a primary liability of the landlord, the real and ultimate liability to pay surcharge is of the occupier who uses the premise for commercial purpose or non-residential purpose. If such occupier does not pay the surcharge, the landlord or the owner has to initially discharge such liability and the landlord has the right under the provisions of the Act to recover the same from the occupier or tenant. 33. The agreement by and between the State Bank of India and the erstwhile owner of the premises does not provide as to who shall bear the liability for surcharge. The State Bank of India has been using the premises occupied by it for commercial purposes. Accordingly the State Bank of India shall pay and bear the surcharge for the premises for commercial purpose. For the reasons aforesaid, there will be a decree in terms of prayers (a), (b) and (c). Interim interest and interest on judgment at the rate of 10 percent per annum and costs.