The Municipal Corporation, Greater Bombay; Bombay v. State Bank of India, M. Cama Road, Bombay

JUDGMENT: JUDGMENT: . The present first appeal impugns the Judgment of the Small Causes Court in the appeal filed by the First Respondent Bank under section 217 of the Mumbai Municipal Corporation Act, 1888. Appellant No.1 is the Municipal Corporation of Greater Bombay and Appellant Nos.2 and 3 are its officers. The facts giving rise to the present appeal are as follows. : 2 :

The respondents No.2 to 5 i.e. Original Respondents No.4 to 7 are the owners of the building bearing No.A Ward No.1315(3) Street No.158, Maharshi Karve Road, Bombay 400 020. The said building consists of Ground and six upper floors. Respondent No.1 which is State Bank of India occupies one of the flats on the ground floor of the building as a tenant of respondent Nos.2 to 5. The bank came into possession of the flat on 1st April, 1980 when respondent Nos. 2 to 5 let out the flat to the respondent No.1 bank for a term of 9 1/2 years on payment of Rs.11,970/- per month. The Bank agreed to pay municipal taxes besides monthly rent of Rs.11,970/-. The appellants fixed rateable value of the property at Rs.1,60,280/-. In 1983-84 rateable value fixed by the appellants was raised to Rs.2,20,975/-.

The Bank filed a complaint with Assessor and Collector of the Appellant Corporation on 7th April, 1984 complaining of the increase in the rateable value. The Investigating Officer reduced the rateable value to Rs.2,20,350/-. Aggrieved by this decision, the Respondent Bank filed Municipal Appeal No.70 of 85 in the Court of the Chief Judge, Small Causes Court.

The Respondent Bank contended that the building was in existence since 1940 and was first let out in : 3 :

1948. According to the Bank, the standard rent had already been fixed in respect of the flat at the rate of Rs.264.47 per month sometime in 1966 and therefore, the rateable value could be computed only on the basis of this amount and not on the actual rent paid by the bank to the landlords. The Bank contended that rateable value charged on the property was exorbitant as residential and office premises in the area were charged at a much lower rate.

The appellants resisted the appeal preferred by the bank, by contending that they had correctly assessed the rateable value and there was no need for the Court of Small Causes to reduce the amount claimed by them. According to the appellants, the flat was initially let out to some other tenant at a lower monthly rent. The standard rent had been fixed for the flat at Rs.264.47 in 1966 on the basis of the application for standard rent filed by the erstwhile tenant. After the termination of the tenancy of the erstwhile tenant, the bank was inducted as a tenant on a monthly rent of Rs.11,970/-. The bank had also agreed to pay Municipal Taxes besides the monthly rent and therefore, according to the appellants the computation made by the corporation was correct. The Corporation also contended in its reply that the Standard Rent fixed in 1966 could : 4 : not be considered as the basis for fixing of the rateable value when tenancy has changed hands.

After evidence was led before the Small Causes Court, the appeal was allowed and the rateable value of the property was fixed at Rs.35,350/-. The Small Causes Court held that since the Standard Rent had already been fixed at Rs.264.46, the rateable value could be assessed only on this amount and not on the actual rent paid by the respondent bank to the landlords. As regards the contentions of the corporation that the bank had no locus standi to file the appeal, the Small Causes Court held that since the bank had accepted the liability of paying Municipal Taxes under section 154 of the Mumbai Municipal Corporation Act, the bank was in fact the person who was really affected and aggrieved by the fixation of the rateable value and therefore, it had locus to file the appeal. The Small Causes Court also negatived the contention of the Corporation that the appeal was not maintainable since the landlord had not been joined as a party to the appeal. The small causes Court fixed the rateable value at Rs.35,350/-.

Being aggrieved by this Judgment, the Corporation has preferred the present appeal. : 5 :

The advocate appearing for the bank submits that the bank is no longer in possession of the premises as it vacated the same in 1995. There has been no real opposition on behalf of the bank to the present appeal.

Mr.Walawalkar, appearing for the Corporation submits that the bank had no locus standi to challenge annual letting value and rateable value of the premises. He further submits that the standard rent once fixed could not be the basis for computation of annual letting value and rateable value for all times in future even when the old tenant had left premises and new tenancy had been created on a higher contractual rent. The learned advocate urges that the standard rent fixed between the old tenant and the landlord cannot remain the same when new a tenancy on different terms and higher rent is created.

While considering the submissions of the learned advocate that the bank had no locus to file the appeal under section 217 of the Mumbai Municipal Corporation Act, certain provisions of law would have to be borne in mind. The primary responsibility of payment of property taxes is that of the landlord except where the premises which are possessed, are held from the Government or from the Corporation. However, if the tenant agrees to : 6 : pay the taxes, he is entitled to credit of the same if H.N.Mirachandani V/s. he is rent payer. In the case of H.N.Mirachandani V/s. H.N.Mirachandani V/s. Mumbai Municipal Corporation & Anr. reported in 1995 Mumbai Municipal Corporation & Anr. reported in 1995 Mumbai Municipal Corporation & Anr. reported in 1995 Mah. L.J.422, a learned single Judge of this Court Mah. L.J.422 Mah. L.J.422 (Dhanuka,J) has taken view that a party who is genuinely aggrieved by the Judgment and Order can always file appeal before the Appellate Court. While construing position of section 217 of the Act it has been held that the section cannot be interpreted in a narrow restrictive manner. The learned Judge has held that the individual holder of an ownership flat or a tenant thereof has locus standi to file appeal against the impugned order, to reduce rateable value or for enhancing the same, in so far as his flat is concerned, whether held on ownership basis or as a tenant. It has also been held that even though party who were genuinely aggrieved by the order in the original proceedings can always move the Appellate Court without making the parties to the original proceedings party to the appellate proceedings. Therefore, the submissions of Mr. Walawalkar that the bank had no locus standi to file the municipal appeal cannot be accepted. The bank was the genuinely affected party since it had agreed to pay property tax besides the rent payable to the landlord. Any increase in the property tax on account of the rateable value being increased would obviously : 7 : affect the bank prejudicially and therefore, it has locus to file municipal appeal under section 217 of the Act.

This takes me to the main submission of Mr. Walawalkar that the standard rent fixed in 1966 could not be the basis for computing the rateable value when the tenancy had changed hands and a new tenant namely the bank in this case had been inducted as tenant from 1980 onwards. There is no dispute that in earlier suit filed by the landlords i.e., Respondent Nos.2 to 5 herein against the erstwhile tenant in respect of the same flat as the one occupied by the bank, standard rent of the premises was fixed at Rs.264.47 per month. After termination of that tenancy, the bank entered into an agreement of tenancy with the landlord. The bank agreed to pay the monthly rent of Rs.11,970/- plus municipal taxes. Therefore, there is no dispute that the contractual rent had been increased after the bank was inducted into the premises. The question is whether the rateable value can be restricted to the standard rent which was fixed between the erstwhile tenant and the landlord.

Section 154 of the Mumbai Municipal Corporation Act lays down the methodology of determining the : 8 : rateable value. It is to be fixed on the basis of the annual letting value for which a land or building might reasonably be expected to be let out from year to year. In determining annual letting value of a building, it is necessary to ascertain what the building is capable of fetching in terms of rent. The annual rent paid for the property is exclusive evidence of the value of the property though such annual rent may serve as an indication as to what hypothetical tenant can afford to pay. It is the hypothetical rent which would be paid that is required to be considered as the annual letting value on which basis rateable value could be computed. By a catena of judgments of the Supreme Court, it has been laid down that the rateable value has to be based on the standard rent of the premises and could not be in excess of such standard rent.