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TMI Blog1979 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 1911, while the other two relate to cases where the building is situate within the limits of the Corporation of Delhi and is assessable to house tax under the Delhi Municipal Corporation Act, 1957. The house tax under both the statutes is levied with reference to the annual value of the building. Section 3(1)(b) of the Punjab Municipal Act, 1911, defines " annual value " to mean, in the case of any house or building, " the gross annual rent at which such house or building ...... may reasonably be expected to let from year to year " subject to certain specified deductions, and the same definition of " annual value " is to be found in s. 116 of the Delhi Municipal Corporation Act, 1957, with only this difference that there is a second proviso to s. 116 which is absent in s. 3(1)(b). That proviso reads : " Provided further that in respect of any land or building the standard rent of which has been fixed under the Delhi and Ajmer Rent Control Act, 1952, the rateable value thereof shall not exceed the annual amount of standard rent so fixed. " It was, however, common ground between the parties that this proviso is immaterial and, in fact, it was so held in Corporation of Calcutt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this approximation may and often does get displaced. It is, therefore, necessary to consider the effect of rent control legislation on the determination of annual value. This is fortunately not a virgin field. There are at least three decisions of this court which have spoken on this subject. The first is the decision in Corporation of Calcutta v. Sm.Padma Debi [1962] 3 SCR 49. The question which arose in that case was whether the "annual value " of a building governed by the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950, could be determined at a figure higher than the standard rent fixed under the provisions of that Act. The definition of " annual value " in s. 127(a) of the Calcutta Municipal Act, 1923, under which the house tax was being levied was the same as in s. 3(1)(b) of the Punjab Municipal Act, 1911, or s.116 of the Delhi Municipal Corporation Act, 1957, without the second proviso and hence in order to determine the "annual value " of the building it was necessary to find out what was the rent at which the building might reasonably be expected to let from year to year. The court, speaking through Subba Rao J., emphasized the use of the word reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und between the parties that Rs. 2,800 per month being the amount of the agreed rent represented the figure at which the standard rent would have been fixed if an application had been made for the purpose under s. 9 and the standard rent of the building was, therefore, Rs. 2,800 per month within the meaning of the second part of the definition of that term. The question which arose for consideration was whether the annual value of the building was liable to be determined on the footing of this standard rent or it could be determined by taking into account the higher rent received by the tenant from its sub-tenants. The principle of the decision in Padma Debi's case [1962] 3 SCR 49 was invoked by the assessee for contending that the annual value of the building could not be determined at a figure higher than the standard rent and this contention was upheld by the court, though there was no fixation of standard rent by the Controller under s. 9 and the statutory prohibition was only against receipt of rent in excess of the standard rent fixed under the Act. The court pointed out that the standard rent stood defined by the latter part of s. 2(10)(b) and by virtue of that provision it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commencement of the judgment that the existence of the proviso in s. 116 of the Delhi Municipal Corporation Act, 1957, is immaterial and we may proceed to deal with the appeals arising under that Act as if the definition of " annual value " did not contain that Proviso. That takes us to the third decision in Guntur Municipal Council v. Guntur Town Rate Payers' Association [1971] 2 SCR 423 ; AIR 1971 SC 353, which extended still further the principle of the decision in Padma Debi's case [1962) 3 SCR 49. This was a case where the annual value was to be determined under the Madras District Municipalities Act, 1920, which applied in the City of Guntur. Section 82, sub-s. (2) of the Act gave a definition of "annual value " practically in the same terms as s. 3(1)(b) of the Punjab Municipal Act, 1911, and s. 116 of the Delhi Municipal Corporation Act, 1957, without the second proviso. There was also in force in the city of Guntur, the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960, which provided, inter alia, for fixation of fair rent of buildings. It is necessary to refer to a few material provisions of this Act. Section 4, sub-s.(1), conferred power on the Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is perfectly clear that the landlord cannot lawfully expect to get more rent than the fair rent which is payable in accordance with the principles laid down in the Act. The assessment of valuation must take into account the measure of fair rent as determinable under the Act. It may be that where the Controller has not fixed the fair rent the municipal authorities will have to arrive at their own figure of fair rent but that can be done without any difficulty by keeping in view the principles laid down in section 4 of the Act for determination of fair rent. " It will thus be seen that even though fair rent had not been fixed under the Act as in Padma Debi's case [1962] 3 SCR 49, nor was statutorily determined as in the Life Insurance Corporation's case, AIR 1970 SC 1417, (there being no provision in the Andhra Pradesh Rent Act similar to the latter part of s. 2(10)(b) of the West Bengal Rent Act) and it was clear from the provisions of the Rent Act that it was only after the fair rent of a building was fixed by the Controller that the prohibition against receipt of any amount in excess of fair rent became applicable and so long as the fair rent was not fixed by the Controller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh no standard rent in respect of the building was fixed by the Controller, the reasonable rent contemplated by s. 138(b) could not exceed the standard rent determinable under the Act and it was incumbent on the Municipal Commissioner to determine the annual value of the building on the same basis on which its standard rent was required to be fixed under the Act. This argument was sought to be supported by relying on the three decisions to which we have already made a reference. Now, it would appear that the decision in Guntur Municipal Council's case [1971] 2 SCR 423 was clearly applicable on the facts of this case and following that decision the court ought to have held that the annual value of the building could not exceed the standard rent determinable under s. 7 of the Act and the assessing authority should have arrived at its own estimate of the standard rent by applying the principles laid down in that section and determine the annual value on the basis of such standard rent. But the court negatived the applicability of the decision in Guntur Municipal Council's case [1971] 2 SCR 423 and the earlier two cases by relying on the words "notwithstanding anything contained in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present appeals to probe further into the question of correctness of this decision, since there is no non-obstante clause either in s. 3(1)(b) of the Punjab Municipal Act, 1911, or in s. 116 of the Delhi Municipal Corporation Act, 1957, and this decision has, therefore, no application. Now, let us turn to the present appeals and see how far the trilogy of decisions referred to earlier has thrown light on the solution of the problem before us. We may first refer to the relevant provisions of the Delhi Rent Control Act, 1958, for that was the law in force at the material time relating to restrictions on rent of buildings situate within the jurisdiction of the Delhi Municipal Corporation and the New Delhi Municipal Committee. Section 2(k) defined " standard rent " in relation to any premises to mean " the standard rent referred to in section 6 or where the standard rent has been increased under section 7, such increased rent ". Sub-section (1) of s. 4 provided that, subject to a single narrow exception which is not material for our purpose, " no tenant shall, notwithstanding any agreement to the contrary, be liable to pay to his landlord for the occupation of any premises any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd if the premises were let after such commencement, then within 2 years from the date on which the premises were let to the tenant. The proviso to s.12 empowered the Controller to entertain the application, after the expiry of the period of limitation, if he was satisfied that the applicant was prevented by sufficient cause from filing the application in time. These provisions of the Delhi Rent Control Act, 1958, came up for consideration before this court in M. M. Chawla v J. S. Sethi [1970] 2 SCR 390, where the question was whether in answer to a suit for eviction filed by the landlord, the tenant was entitled by way of defence to ask the Controller to fix the standard rent of the premises and to resist eviction by paying or depositing the standard rent so fixed even though on the date of the filing of the defence, the period of limitation for making an application for fixation of the standard rent had expired. The argument of the tenant was that by reason of the prohibition enacted in s. 4, and sub-s. (1) of s. 5, it was not competent to the landlord to claim or receive any amount in excess of the standard rent and even though the period of limitation prescribed for making an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard rent was operative only after the standard rent was fixed by the Controller under s. 9 and, until the standard rent was so fixed, it was lawful for the landlord to receive the contractual rent from the tenant and if the period of limitation prescribed for making an application for fixation of the standard rent had expired, the tenant could not, thereafter, get the standard rent fixed by the Controller and would continue to be liable to pay the contractual rent to the landlord. The revenue relied heavily on this decision and contended that, since in each of the present appeals the building was let out to the tenant, but its standard rent was not fixed by the Controller under s. 9 and the period of limitation for making an application for fixation of the standard rent had expired, the landlord was entitled to continue to receive the contractual rent from the tenant without any legal impediment and hence the annual value of the building was not limited to the standard rent determinable in accordance with the principles laid down in the Act, but was liable to be assessed by reference to the contractual rent recoverable by the landlord from the tenant. The argument of the revenue wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eared to him to be reasonable having regard to the provisions of s. 6 and the circumstances of the case and, hence, until the standard rent was fixed by the Controller, it could not be said what would be the standard rent of the building. Now, undoubtedly, there is some difference in the provisions of the two statutes but this difference is not of such a character as to affect the applicability of the decision in the Life Insurance Corporation's case, AIR 1970 SC 1417, because in that case too, the prohibition against the landlord to receive any rent in excess of the standard rent was operative only after the fixation of the standard rent by the Controller and, so long as the standard rent was not fixed, it was not unlawful or penal for the landlord to receive any rent in excess of the standard rent. If the standard rent, though not fixed and hence not legally enforceable, could provide the measure for the reasonable expectation of the landlord to receive rent from a hypothetical tenant in the Life Insurance Corporation's case, AIR 1970 SC 1417, there is no reason why it should not equally be held to provide such measure in the present cases ; as in the one case so also in the othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untur, in the absence of fixation of the fair-rent, it was lawfully competent to the landlord to recover rent in excess of the fair rent determinable under that Act. Moreover, the Andhra Pradesh Rent Act did not prescribe any clear-cut formula to be applied mechanically for statutorily determining the standard rent, but it was left to the Controller to fix the standard rent having regard to, (a) the prevailing rates of rent in the locality for the same or similar accommodation in similar circumstances during the 12 months prior to 5th April, 1944 ; (b) the rental value entered in the property tax assessment book of the concerned local authority relating to the period mentioned in clauses (a) and (e) and the circumstances of the case, including any amount paid by the tenant by way of premium or any other like sum in addition to rent after 5th April, 1944, with a provision for allowance of increase depending on the quantum of the rent so arrived at. The discretion left to the Controller to fix the fair rent was thus much larger than that under the Delhi Rent Control Act, 1958, and yet it was held that, even though the fair rent was not fixed by the Controller, the annual value was li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s precluded by s. 12 from making an application for fixation of the standard rent with the result that the landlord was lawfully entitled to continue to receive the contractual rent from the tenant without any let or hindrance. But from this fact-situation which prevailed in each of the cases, it does not follow that the landlord could, therefore, reasonably expect to receive the same amount of rent from a hypothetical tenant. The existing tenant may be barred from making an application for fixation of the standard rent and may, therefore, be liable to pay the contractual rent to the landlord, but the hypothetical tenant to whom the building is hypothetically to be let would not suffer from this disability created by the bar of limitation and he would be entitled to make an application for fixation of the standard rent at any time within two years of the hypothetical letting and the limit of the standard rent determinable under the Act would, therefore, inevitably enter into the bargain and circumscribe the rate of rent at which the building could reasonably be expected to let. This position becomes absolutely clear if we take a situation where the tenant goes out and the building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? The legislature obviously regards recovery of rent in excess of the standard rent as exploitative of the tenant and would it be proper for the court to say that it would be reasonable on the part of the landlord to expect to recover such exploitative rent from the tenant ? We are, therefore, of the view that, even if the standard rent has not been fixed by the Controller, the landlord cannot reasonably expect to receive from a hypothetical tenant anything more than the standard rent determinable under the Act and this would be so equally whether the building has been let out to a tenant who has lost his right to apply for fixation of the standard rent or the building is self-occupied by the owner. The assessing authority would, in either case, have to arrive at its own figure of the standard rent by applying principles laid down in the Delhi Rent Control Act, 1958, for determination of standard rent and determine the annual value of the building on the basis of such figure of standard rent. It is, therefore, clear that in each of the present cases, the annual value of the building must be held to be limited by the measure of the standard rent determinable on the principles laid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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