MUNICIPAL CORPORATION OF DELHI v. A. P. ATTRI — 1997 DIGILAW 980 (DEL)

M. S. A. Siddiqui, J. ( 1 ). The challenge in this writ petition is to the order dated 15-11-1989 passed by the learned Additional District Judge in HTA. No. 15/1989 and HTA No. 16/1989, who while accepting the appeals filed by the respondent has determined the ratable value of the premises bearing No. A-105 Satya Vihar, New Delhi. ( 2 ). It appears that construction of the premises in question was commenced in February, 1980 and it was completed in 1982. The ground floor of the property was occupied in November, 1980 and after completion of the first oor the same was let out to Sh. M. S. Sharma for 2 1/2 months at a monthly rent of Rs. 1,000 w. e. f. 1-8-1982 and thereafter it was let out to Mr. Ashok Raj for 3 years at a monthly rent of Rs. , 2,100 w. e. f. 14-10-1982. A notice u/section 126 of the Delhi Municipal Corporation Act (hereinafter called the Act) was issued to the respondent proposing enhancement of ratable value from Rs. 15,660 to Rs. 33,490. In response to the said notice, the respondent submitted the objections against the proposed enhancement of ratable value, which were rejected by the Assessing Authority vide order dated 8-12-1988. By the said order, the Assessing Authority revised the ratable value to Rs. 33,490 as proposed. In appeal by the respondent, the learned Additional District Judge set aside the assessment order and fixed the ratable value of the property at Rs. 23,140 w. e. f. 1-7-1982 and at Rs. 23,900 w. e. f. 1-8-1982 and at Rs. 23,140 w. e. f. 1-8-1987. ( 3 ). The learned counsel for the petitioner has assailed the impugned judgment of the learned Additional District Judge on the following grounds: (A) that the learned Additional District Judge has committed a patent illegality by determining the cost of land on the basis of land rates notified by the Delhi Administration for Jhilmil Colony. (B) that the learned Additional District Judge has committed a grave error by assessing the annual letting value of the portion let out by the respondent at a figure which does not represent the correct annual letting value of the said portion. ( 4 ). (B) that the learned Additional District Judge has committed a grave error by assessing the annual letting value of the portion let out by the respondent at a figure which does not represent the correct annual letting value of the said portion. ( 4 ). As regards the first point, it is significant that the learned Additional District Judge has observed that the Assessing Authority had taken the value of the land at Rs. 550 per square metre but the assessment order dt. 8-12-1988 is conspicuous by absence of the said finding noticed by the learned Additional District Judge. On the contrary, the learned Additional District Judge has determined the value of the land at Rs. 212 per square metre on the basis of land rates notified by the Government for Jhilmil Colony. The Apex Court has observed in Diwan Daulat Rai Kapoor v. NDMC AIR 1980 SC 541 and Dr. Balbir Singh v. MCD AIR 1985 SC 339 that ratable value of a property should be determined on the cost of the land plus construction i. e. on the basis of standard rent determinable on the principles set out in Section 6 of the Delhi Rent Control Act. Their lordships have also observed that if for any reason the standard rent cannot be so determined, then the Assessing Authority can have recourse to the provisions of section 9 (4) of the Delhi Rent Control Act. In my opinion, the learned Additional District Judge has committed a patent illegality in determining the value of the land on the basis of the rates notified by the Government for Jhilmil Colony. In MCD v. C. P. Gosain CWP 4122/90 decided on 24-10-1991 and MCD v. Jasvinder Singh and Another, CWP-4096/91 decided on 17th May, 1993 and MCD v. N. C. Jain and Another, CWP 1312/90 decided on 24. 7. 1991 and K. P. Gupta CW 438/88 decided on 26-4-1990 it was observed that neither the scheduled rates of the L and D. O. nor auction rates alone can form the basis for determining the market price of the land although both are relevant pieces of evidence which can be taken into consideration by the Assessing Authority along with other evidence which the parties may produce before the Assessing Authority. In MCD v. N. C. Jain (supra); it was observed by the Division Bench that: ". . . In MCD v. N. C. Jain (supra); it was observed by the Division Bench that: ". . . THE Assessing Authority should try and ascertain the market rate of land on the basis of sale deed, auction prices etc. near about the time when the construction taken in the immediate or near vicinity of the land where it is situated. . . "the same view has also been reiterated by another Division Bench of this Court in Sita Nanda v. NDMC and Anr. 1996 (v) AD Delhi 34. It is pertinent to mention that while fixing cost of the land of the said portion of the building the Assessing Authority did not refer to any evidence on the basis of which the same was determined by it. Consequently, the assessment order determining ratable value of the portion of the building under self-occupation of the respondent cannot be sustained in law. In the instant Case, the learned Additional District Judge instead of himself determining the rate of the land ought to have set aside the order of the assessment and remanded the case of the Assessing Authority with the direction to determine the market price of the land in accordance with law. ( 5 ). This takes me to the next point urged by the learned counsel for the petitioner. It is undisputed that the first floor of the property in question was first let out to Sh. M. S. Sharma for 2 1/2 months at a monthly rent of Rs. 1,000 per month w. e. f. 1-8-1982 and thereafter it was let out to Sh. Ashok Raj for 3 years at a monthly rent of Rs. 2,100. The Assessing Authority had determined the annual letting value of the said portion of the building on the basis of monthly rent of Rs. 2,100 and the learned Additional District Judge has disagreed with it and had preferred to assess the annual letting value on the basis of rent of Rs. 1,000 per month received by the respondent from his tenant for two and a half months only. The question is how to determine the annual letting value of the property in such a situation? ( 6 ). In Dr. 1,000 per month received by the respondent from his tenant for two and a half months only. The question is how to determine the annual letting value of the property in such a situation? ( 6 ). In Dr. Balbir Singh v. MCD (supra), their lordships of the Supreme Court have observed: "now, what is reasonable is a question of fact and it depends on the facts and circumstances of a given situation. Ordinarily, "a bargain between a willing lessor and a willing lessee uninfluenced by extraneous circumstances may afford a guiding test of reasonableness" and in normal circumstances, the actual rent payable by a tenant to the landlord would afford reliable evidence of what the landlord may reasonably expect to get from the hypothetical tenant, unless the rent is inflated or depressed by reason of extraneous considerations such as relationship, expectation of some other benefit etc. There would ordinarily be close approximation between the actual rent received by the landlord and the rent which he might reasonably expect to receive from a hypothetical tenant". ( 7 ). In Government Servants Cooperative house building society Ltd. v. Union of India AIR 1994 Delhi 112=51 (1993) DLT 334 a Division Bench of this court has held that: "in respect of a building not subject to any such rent control/legislation the actual rent payable by a tenant to the landlord would afford reliable evidence of what the landlord reasonably expect to get from a hypothetical tenant, unless the rent is inflated or depressed by reason of extraneous considerations, such as, relationship, expectation of some other benefit and the like. There would ordinarily be, in a free market, close approximation between the actual rent received by the landlord and the rent which he might reasonably expect to receive from hypothetical tenant". The Apex Court has observed in Dewan Daulat Ravi v. MDMC and Dr. Balbir Singh v. MCD (Supra) that the ratable value can only be the rent which a owner can legally receive. The rent which can be legally received is controlled by the provisions of the Delhi Rent Control Act and it is not permissible for an owner/landlord to receive more than the standard rent determinable under the said Act. It has further been held that the standard rent has to be determined by applying the provisions of section 6 of the Delhi Rent Control Act. It has further been held that the standard rent has to be determined by applying the provisions of section 6 of the Delhi Rent Control Act. Section 116 of the Act provides that ratable value is to be the rent at which the building might reasonably be `expected to let . Thus, the ratable value would be the actual rent received subject to the maximum of the standard rent. In the case of first letting, however, the actual rent received by the landlord from his tenant itself becomes the standard rent under sub-section (2) of section 6 of the Delhi Rent Control Act for five years. After five years period of the first letting is completed, then the standard rent will have to be fixed by applying the provisions of section 6 (1) (b ). The deeming provisions in sub-section (2) of section 6 has to be given its full effect. This full effect can be given if after the first letting the standard rent is to be taken to be that which is determined under sub-section (2) of section 6 and not what is determined u/section 6 (1) (b) of the Delhi Rent Control Act. In this view of the matter, I am fortified by the decision rendered by the Apex Court in Mrs. Shiela Kaushik v. Commissioner of Income Tax, AIR 1981 (SC) 1729 . Thus, it is apparent that sub-section (2) of section 6 of Delhi Rent Control Act seeks to lay down mode of working out the annual letting value of the property. According to the said provisions, it is to be worked out by taking the actual rent realised as the basis. The Act does not define the expression `annual letting value . But section 2 (1) of the Gujarat Municipalities Act, 1964 defines the expression `annual letting value as follows: "annual letting value means the annual rent for any building or land, exclusive of furniture or machinery contained or situated therein might reasonably be expected to let from year to year, and shall include all payments made or agreed to be made by a tenant to the owner of the building or land on account of occupation, taxes under any law for the time being in force, insurance or other charges incidental to his tenancy". Thus, the expression `annual letting value unmistakably indicates the annual rent received annually by the landlord from his tenant. Thus, the expression `annual letting value unmistakably indicates the annual rent received annually by the landlord from his tenant. It is the annual standard rent which, alone, therefore, can form the basis of the assessment of the property tax by the Assessing Authority. for purposes of sub-section (2) of section 6 of the Delhi Rent Control Act, the annual letting value should always be based upon the actual annual rent received by the landlord from his tenant and not on the standard or fair rent fixed under section 6 (1) (b), Delhi Rent Control Act. In other words, the annual rent received by the landlord from his tenant shall be deemed to be the annual rent from which such building etc. might reasonably be expected to let from year to year. So far as the Act is concerned, the annual rent is the actual rent received by the landlord from his tenant and it determines the basis for determining the annual letting value, ratable value and property tax. That is the plain effect and meaning of sub-section (2) of section 6 of the Delhi Rent Control Act. In may opinion, the rent of Rs. 1,000 per month does not represent the correct annual letting value of the first floor of the property in question. As stated earlier, the said portion of the building was first let out to Sh. M. S. Sharma for 2 1/2 months at a monthly rent of Rs. 1,000 and thereafter it was let out to Mr. Ashok Raj for 3 years at a monthly rent of Rs. 2,100. The difference between duration and the amount of rent between the two tenancies gives rise to an inference that the said portion of the building was let out to Mr. M. S. Sharma to have the benefit of sub-section (2) of section 6 of the Delhi Rent Control Act in Sir Shobha Singh and Sons (P) Ltd. v. NDMC 1996 (iv) AD (Delhi) 56=63 (1996) DLT 319 (DB) a Division Bench of this Court has quoted few instances which may contribute for depression of the rent. The same are as under: (1) The landlord has collected huge amount as "pagri" and is charging nominal rent. The same are as under: (1) The landlord has collected huge amount as "pagri" and is charging nominal rent. (2) The premises are shown to have been let out for a month or so on nominal rent to have the benefit of section 6 (2) (b) of the DRC Act and after expiry of the period of alleged tenancy, the real tenant pays much more than the alleged tenant. Say the premises were agreed to be let out to one of the sister concern at Rs. 20,000 per month for a period of three years. However, after the expiry of just three months the premises were let out at Rs. 75,000 per month to a Public Sector Undertaking. Or to say, the premises were shown to have been let out at Rs. 9,000 p. m. for a period of two years, but the tenancy was terminated within a period of less than two months and the premises were let out at Rs. 36,000 per month. On enquiries, it was found that even the completion certificate was not applied for when the alleged rent of Rs. 9,000 per month was shown. (3) The landlord collects huge amounts as interest free security and lets out the premises at nominal rent with permission to sub-let. The tenant, after taking over possession, lets out the premises at exorbitant rent. (4) The premises are let out to a sister concern at low rent with permission to sub-let, and the sister concern lets out the premises for huge amounts. (5) The owner with his family members is staying in the premises and the same have been let out to either his employer or the employer of his son, to have benefit of rent. However, the rent is depressed as it cannot be more than the House Rent entitlement of himself or his son. ( 8 ). In my opinion, the learned Additional. District Judge has committed a patent illegality in determining the annual letting value of the said portion of the property in question on the basis of rent of Rs. 1,000 per month which does not represent the correct annual letting value of the property. ( 9 ). For the foregoing reasons, the writ petition is allowed. District Judge has committed a patent illegality in determining the annual letting value of the said portion of the property in question on the basis of rent of Rs. 1,000 per month which does not represent the correct annual letting value of the property. ( 9 ). For the foregoing reasons, the writ petition is allowed. The impugned judgment of the learned Additional District Judge is set aside and the assessment order fixing the ratable value of the portion of the building let out by the respondent is restored. However, the assessment order of the Assessing Authority is set aside to the extent it determines the ratable value of the portion of the property under self-occupation of the respondent. The case is remanded to the Assessing Authority with the direction to redetermine the ratable value of the said portion of the property in accordance with law, keeping in view the observations in this behalf. No order as to costs.