Corporation of Calcutta vs Howrah Motor Company (P.) Ltd.

Amaresh Chandra Roy, J.—This appeal by Corporation of Calcutta raises two questions of importance regarding the law applicable to assessment of annual value of premises for ascertaining the municipal taxes payable to the Corporation under the provisions of Section 127 of the old Calcutta Municipal Act of 1923 and also the rights of Corporation to raise an assessment made under that old Act of 1923 by exercise of powers of enhancement under the provisions of Section 188 of the new Calcutta Municipal Act, 1951. For proper appreciation of the contentions raised, recounting of the material facts in some details is necessary.

The premises consisting of a piece of land with structures standing thereon was subject of an agreement for purchase entered into by the intending purchaser, in December 1942, Messrs Howrah Motor Company (P.) Ltd. It was then bearing the number 24 Canal South Road, Calcutta and annual value of the entire premises was at that time Rs. 12,035. The purchase was completed on April 20, 1943.

Soon after that agreement for purchase, on February 20, 1943, the premises was requisitioned by Government of Bengal under the Defence of India Act, 1939. Monthly compensation for the requisitioned property was fixed at Rs. 2,250 by an agreement dated August 9, 1943. By that requisition the premises was occupied by the Controller of Vagrancy, Government of Bengal. After the Respondents had become owners of the premises the Corporation made an Intermediate Valuation of the premises in 1947 u/s 131(2) of the Calcutta Municipal Act, 1923 and by it the annual value was raised to Rs. 21,870 for substantial addition and alteration of the premises. That assessment was operative from April 1, 1947, i.e. first quarter of 1947-48.

Thereafter during Special General Revaluation made in 1950 the annual value of the premises was again assessed at Rs. 21,870 u/s 127(a) calculating on the basis that the premises was actually let at a monthly rent of Rs. 2,250.

The company preferred objection u/s 139 of the Act of 1923. The objection was heard and determined by Special Officer No. IV of the Corporation who by an order dated March 18, 1952, assessed the annual value u/s 127(b) of the Act of 1923 and fixed it at Rs. 11,987. This assessment became effective from third quarter of 1950-51, i.e., commencing from October 1, 1950, for the period of 6 years u/s 131 of Act of 1923 which period was to have ended on September 30, 1956. The Act of 1923 was repealed and replaced by Act of 1951 which came into force on May 1, 1952.

Before the expiry of that period however on December 7, 1954 a notice purporting to be one under proviso (ii) to Sub-section (1) of Section 188 of the Calcutta Municipal Act, 1951, was given to the owner and also the occupier of the premises proposing to increase the annual valuation from Rs. 11,987 to Rs. 21,870 with effect from third quarter of 1950-51. That notice is Ex. 5(a) in the case and is in these terms:

Corporation of Calcutta, Assessment Department, Dated the 7-12-1954

No. A/IV/748

Notice under proviso (ii) to Sub-section (1) of Section 188 of the Calcutta Municipal Act, 1951.

To

M/s. S.K. Sawday and Company,

for the owner of premises No. 24, Canal South Road.

Dear Sirs,

Under orders of the Commissioner, Corporation of Calcutta, I hereby give you notice that in exercise of the power conferred on him by Clause (d) of Sub-section (1) of Section 188 of the Calcutta Municipal Act, 1951, the Commissioner proposes to make an amendment in the entry in the Assessment Book relating to premises No. 24, Canal South Road, by increasing the amount of the annual valuation of the premises from Rs. 11,987 to Rs. 21,870 with effect from the 3rd quarter of 1950-51 as in his opinion, the premises have been substantially under-valued, by reason of mistake or error, with effect from the said quarter.

You are requested to note that the aforesaid amendment is intended to be made by the Commissioner in the room of the Assessor, Corporation of Calcutta, on Thursday the 23rd December, 1954, at 10-30 a.m.

If you have any objection to the proposed amendment you may prefer the same under Sub-section (2) of Section 188 of the Calcutta Municipal Act, 1951, by written application to the Commissioner to be delivered to him at the Central Municipal Office, three clear days before the 23rd December, 1954.

Statement of details of the existing and proposed valuation are enclosed for your information.

Enclo. : 2 details of valuation.

By order of the Commissioner, Illegible Assessor to the Corporation of Calcutta.

The Controller of Vagrancy to whom notice was given as occupier of the premises, by his letter dated December 13, 1954 [Ex. A and Ex. D(1)] informed the Assessor of the Corporation of Calcutta that the property had been derequisitioned from July 1, 1954. That letter was in these terms:

Government of West Bengal 14098 Office of the Controller of Vagrancy, West Bengal, 162, Lower Circular Road, Calcutta-14

From

The Controller of Vagrancy, West Bengal Subject: Notice under Proviso (ii) to Sub-section (1) of Section 188 of Calcutta Municipal Act, 1954.

Ref.: Your Memo. No. A/IV/747 dated 7-12-1954 No. 4490W dated the 13th December, 1954.

The Assessor to the Corporation of Calcutta, Assessment Department Corporation of Calcutta

Notice which has been sent to this office regarding the (torn) No. 24, Canal South Road, Calcutta, is being sent to the Land Acquisition Collector, Bank shall Street, for information and necessary action. The premises were under occupation by this Directorate after being (torn) through the Land Acquisition Collector. The building has since (been) derequisitioned from 1-7-54.

I would, therefore, request you that such correspondence (torn) now be made to the Land Acquisition Collector in the above matter. This office has nothing to do in this regard as this building was (torn) by this Directorate on a monthly rental of Rs. 2,250 which was paid (torn) M/s Howrah Motor Works through the Land Acquisition Collector, Calcutta.

S. Ghosh 13-12-(torn) Controller of Vagrancy, West Bengal

Objection to the proposal was filed on behalf of the owner of the premises u/s 188(2) on several grounds including the ground of jurisdiction and legality of the proposal. The objection was heard on March 3, 1955 and February 8, 1957. Order was passed by the Commissioner of the Corporation on February 28, 1957, altering and enhancing the valuation to Rs. 20,412 with effect from third quarter of 1950-51. It may be mentioned that before that order was made, the property was sold to Messrs Saxby Farmers (India) Ltd. on August 1, 1955. No notice appears to have been given to that purchaser.

An appeal against the order of the Commissioner dated February 28, 1957, was preferred by Howrah Motor Works Private Ltd. u/s 183 on April 8, 1957, in the Court of Small Causes at Sealdah. It was numbered as M.A. 102/57. Corporation of Calcutta contested the appeal.

Relying upon the undisputed facts we have recounted above the Assessee company raised contentions in the Court of Small Causes at Sealdah in that appeal that assessment of annual valuation made on March 18, 1952, being u/s 127(b) of Calcutta Municipal Act, 1923, it was properly and correctly done and annual valuation fixed at Rs. 11,987 was fair and reasonable. It was also contended that:

(1) Section 188 of Act of 1951 has no application to the facts of this case.

(2) Even if Section 188 applies, Commissioner has no power to alter valuation fixed Under Act of 1923 for the alleged reasons of ''mistake or error'' which are new introductions in Act of 1951 and did not exist in the corresponding Section 146 of Act of 1923.

(3) There was no mistake or error when annual value was determined u/s 127(b) of Act of 1923 because Section 127(a) did not apply.

(4) Possession was taken by requisition under Defence of India Act and the premises was not ordinarily let. So it did not create relationship of landlord and tenant and compensation for requisition is not rent.

(5) Even if there was a wrong decision made by fixing annual value u/s 127(b) and not u/s 127(a) of Act of 1923, it is not a ''mistake or error'' within the meaning of Section 188 of Act of 1951.

(6) In exercise of powers u/s 188 there were irregularities, because

(a) Notice was not issued by the Commissioner.

(b) No indication was given in the notice as to what was the ''mistake or error'' to enable the Assessee to file any effective objection.

The learned Judge of the Small Cause Court, Sealdah, held all these points in favour of the Assessee except that he held that, though the notice was signed by the Assessor, it was not invalid because by effect of Section 553 of Act of 1951 it can be held to be by a person authorised by the Commissioner in that behalf. He allowed the appeal on contest, set aside the valuation made by the Commissioner on February 28, 1957 and refixed the valuation of Rs. 11,987.

Against that judgment and decree passed by the said Judge present appeal has been preferred by the Corporation of Calcutta.

The learned Advocate for the Appellants Mr. Provat Kumar Sen Gupta attacked the decision of the lower Court on each of the points enumerated above as he frankly and correctly stated that if he failed on any one of those points, the appeal would fail.

First point urged by Mr. Sen Gupta was that the learned Judge of the Small Cause Court was in error in holding that the monthly compensation for requisition received by the owner of the premises was not rent. He contended that it was settled law that compensation for acquisition or requisition be it under Land Acquisition Act or be it under Defence of India Act, was calculated on the basis of income that the owner could have earned from the property. Even if it is calculated on potential value that the owner could have derived and not necessarily on the actual income that the owner was receiving at the time of requisition, the character remains as rent and the requisitioning authority becomes a statutory tenant so to say under the owner. In our view the contention is not sound. The whole argument drawing inspiration from well-known decisions in cases where Section 23 of the Land Acquisition Act fell to be interpreted, suffers from the patent fallacy of assuming that amounts paid or payable for use and occupation wherever calculated on the basis of reasonable rent is rent. That is not so. Mesne profits decreed against a trespasser on another�s land or damages for use and occupation payable u/s 22(2) of Bengal Tenancy Act, 1885, by a co-sharer landlord who has purchased the tenant''s interest to other co-sharer landlord are loud illustrations that reveal the fallacy. Mr. Sen Gupta in his learning and intimate acquaintance with law was not slow to see the fallacy of the contention raised on behalf of his client in the Court below and urged by him before us. This contention must fail and is rejected.

Moreover, the differentiation made by two Clauses (a) and (b) of Section 127 of Calcutta Municipal Act, 1923, was not by the character of income received, by the owner from the land or building, but whether or not ''the building was erected for letting purposes or ordinarily let''. That word ''let'' has fallen for interpretation by this Court in the past and has been firmly held to bear the ordinary dictionary meaning which is a grant of use for rent or hire: See The Corporation of Calcutta Vs. Messrs Shaw Wallace and Co. . There must be a grant by the owner to establish a relationship of landlord and tenant, which alone give the monthly compensation the character of rent. Possession taken upon compulsory requisition (or for the matter of that, acquisition) does not establish the relationship of landlord and tenant because there is no grant. Requisition, therefore, is not letting of the land or building, nor compensation for requisition can be rent, though for fixing the amount of compensation probable rent at which the land or building could reasonably be let may be taken as the basis of calculation.

We, therefore, hold that the learned Court below has rightly held that the premises in question was not ordinarily let and cannot be held to be so merely because it was requisitioned under Defence of India Rules and compensation calculated on the basis of rent was agreed to and received by the owner month by month. Neither the agreement Ex. 3 nor the letter Ex. Dl provides evidence of letting, though the word ''rent'' or ''rental'' has been used in both those documents. There is no evidence that the building was erected for letting purposes. For those reasons Clause (b) of that Section 127 of Act of 1923 will apply and Clause (a) of that section will not apply.

There was, therefore, no mistake or error committed by the Special Officer who fixed the annual value of the premises u/s 127(b) of Calcutta Municipal Act, 1923. The learned Small Cause Court Judge has in our view rightly held that there was no reason for amending the valuation book u/s 188 of Calcutta Municipal Act, 1951. The appeal by the Corporation must therefore fail even if the other contentions raised on their behalf could prevail.

Though it is not necessary to discuss the other points raised, yet those having been argued in full and those points being of great importance and of general application we have been urged to record our decisions on those points of law also. We shall briefly discuss them.

Mr. Sen Gupta has relied on Section 188(1) with particular emphasis on the clause which is now Clause (d) which was Clause (c) as the section stood in the original enactment of Calcutta Municipal Act, 1951) by pointing out that last, two words in that clause ''mistake or error'' did not occur in the previous Act of 1923 wherein corresponding section was Section 146. Mr. Sen Gupta has argued that purpose of addition of those two words was to cover the cases like the one we are dealing with. We do not agree. The whole phrase in Section 146 of Act of 1923 was--

has been substantially Undervalued by reason of fraud or misrepresentation.

That fraud or misrepresentation clearly was contemplated to be perpetrated by the owner of the premises; undervaluing could not be fraud or misrepresentation on the part of the Corporation or their officers. The phrase in present Section 188 of Act of 1951 is--

has been substantially undervalued by reason of fraud, misrepresentation, mistake or error.

Whose mistake or error the section does not say. Can it be mistake or error on the part of the owner? In our view, no, because it is not possible to contemplate that owner can bring about undervaluation of his property by his own mistake or error though he may do so by fraud or misrepresentation. Mistake or error can, therefore, be only of the assessing authority.

In the process of assessment of consolidated rate there are three important documents prescribed by the Act at three stages. First is the Valuation List prepared u/s 178. u/s 179 this list can be amended by the Commissioner for reason to be recorded in writing at any time before the time specified in the notice to the objector u/s 182, Sub-section (1).

Second is the Register of Orders passed on determination of objection u/s 182, Sub-section (3). This order is subject to appeals u/s 183, preferred by any person dissatisfied with any order. Then the valuation becomes final u/s 184.

Third important document is the Assessment Book prescribed by Section 185. In it shall be entered the annual value fixed which fixation may be by decision in the appeals u/s 182. Assessment book alone can be amended by the Commissioner u/s 188 at any time.

It is noticeable that u/s 188 the Commissioner cannot touch Valuation List (after it has become final u/s 184) nor can he alter or amend the Order Register. He cannot certainly touch the decisions in the appeals u/s 182.

It follows that decisions arrived at in the process of assessment, on hearing objection u/s 182 and also decisions in the appeals, if any under that section, even if erroneous for reasons either of error of fact or of law could not have been intended by the Legislature to be subjected to revisional power of the Commissioner u/s 188. That intention clearly appears from the opening words of Section 188--"Notwithstanding anything contained in Section 184". That non-obstante clause does not mention Section 172, 181, 182 or 183. It is true Section 184 mentions those sections to provide that finality of valuation made u/s 172 is subject to the provisions of those other sections. Yet those sections cannot be read into Section 188 to give the Commissioner power to override the decision arrived at on hearing objection u/s 182 or the decision of High Court on appeal under Sub-section (3) of Section 183. That is made clear by the language in Clause (d) of Section 188 which is in these terms:

By increasing the amount of the valuation of any premises where, in his opinion, such premises at the time of the last general valuation, have been substantially undervalued by reason of fraud, misrepresentation, mistake or error.

The words ''at the time of the last general valuation'' which we have underlined in the quotation above do not occur in Clause (c) which gives power of reduction. In Clause (d) which gives power to increase the amount of valuation, those are words of limitation of the power to increase the amount of valuation to cases where substantial undervaluation occurred by reason of fraud, misrepresentation, mistake or error at the time of the last general valuation, i.e., at the stage of general valuation proper under Sub-section (2) of Section 182. The stage of decision on hearing objection u/s 182 or the decisions on appeals u/s 183 are not stages within general valuation but are stages that follow general valuation u/s 172. Decisions arrived at on hearing objection u/s 182 is not, therefore, subjected to power of amendment u/s 188. It has to be noticed, however, that in the second proviso u/s 188, Clause (iii) specifically provides that Clause (d) shall not apply to any valuation of any premises determined on appeal to the Court of Small Causes or to the High Court, as the case may be, but that clause does not specifically mention determination of valuation on hearing objection u/s 182. In our view, reason for that omission is that power to hear objection is primarily vested in the Commissioner himself though it may be exercised by a Deputy Commissioner or an officer specially appointed by the Corporation with the approval of the State Government as provided in Sub-section (2) of Section 182. Section 188 gives power to the Commissioner to correct his own mistake or error. Ordinarily that extends to correct arithmetical or clerical errors and does not include 1 power to review his own decision at any time by invoking the reason that he had committed errors. Even if it does, it can only mean errors apparent on the face of record and not erroneous view of law.

In our view that is the scope of Section 188 and therefore, the facts of the present case do not attract that section. The mistake or error which is said to be the reason for exercise of power u/s 188 in this case is said to be erroneous view of law by the Special Officer who being so authorised by the Commissioner u/s 182 had heard the objection and fixed valuation under Clause (b) of Section 127 of Act of 1923 instead of Clause (a) of that section. Such error even if there be any is not within the scope of Section 188. We have held that the view taken by the Special Officer was not erroneous but correct view of law.

There is yet another reason in our view why Section 188 will not apply to this case. The annual valuation was determined under the provisions of Act of 1923. Section 172(1) of Act of 1951 provides the continuation of that annual valuation after Act of 1951 ''until a fresh valuation is made under this Act''. That is a special provision in Act of 1951 in respect of valuation ''which was made before the commencement of this Act''. The general provision in Section 188 cannot override that special provision and therefore, valuation made under Act of 1923 cannot be revised u/s 188 of Act of 1953 and it ''shall...until fresh valuation is made under this Act''. Amendment of Assessment Book u/s 188 is not fresh valuation which can only be done by general valuation under Sub-section (2) of Section 172.

A procedural defect was contended on behalf of the Respondent by pointing out that notice purported to be u/s 188 was not addressed to the owner of the premises but to their agent who had represented them in the proceeding of hearing of objection. Mr. Sen Gupta for the Appellant Corporation argued that notice to authorised agent is substantial compliance of Section 188. But the section by clear language requires the notice to be given to the owner. For initiating the proceeding u/s 188, it is an indispensable necessity and in our view the whole procedure has suffered from that fundamental defect also.

For the reason above discussed, the appeal must fail and is dismissed with costs.

Bagchi, J.

I fully agree with what has fallen from my Lord in this appeal. I would like to add a few words of mine.

Section 127, Clauses (a) and (b) of the Calcutta Municipal Act, 1923, relate to assessment of land and buildings to the consolidated rate. The relevant part of Clause (a) says:

The annual value of land and the annual value of any building erected for letting purposes or ordinarily let, shall be deemed to be the gross annual rent at which the land or building might at the time of assessment reasonably be expected to let from year to year....

Clause (b) relates to

the annual value of any building not erected for letting purposes and not ordinarily let shall be deemed to be five per cent on the sum obtained by adding the estimated present cost of erecting the building, less a reasonable amount to be deducted on account of depreciation, if any, to the estimated present value of the land valued with the building as part of the same premises.

Section 127, Clauses (a) and (b) run on two different principles for the purpose of assessing land and buildings to the consolidated rate, one excluding the other. In the present appeal, the land with the building before Appellant''s purchase in 1943, was in actual physical occupation of the seller. So soon as the purchaser-Appellant purchased the land with the building assessed to consolidated rate, the State Government requisitioned the building u/s 19 of the Defence of India Act, read with Rule 75A of 1939 and it was under requisition upto July 17, 1954 Section 18, Sub-section (1) of the Defence of India Act in Clause (a) says that the compensation can be fixed by agreement between the State and the person whose property is requisitioned. If the compensation, as the Clause (b) of the section says, cannot be readied at by agreement, an Arbitrator appointed will fix the compensation Section 19, Sub-section (1), Clause (e)(i) of the Act says that the Arbitrator in making his award relating to the compensation shall have regard to the provisions of Sub-section (1) of Section 23 of the Land Acquisition Act, 1894. In the present appeal, compensation was fixed upon the agreement between the present Appellant and the State of West Bengal. In the wake of the compulsory requisition, made by the State Government u/s 19, Sub-section (1) of the Defence of India Act read with Rule 75A of the Rules made under the Defence of India Act, the property in question, the land with the building could not in fact and in law be leased by the Appellant to the State Government. A lease of immoveable property is a transfer of a right to enjoy such property made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The consideration for the transfer is called rent within the meaning of Section 105 of the Transfer of Property Act. Under the Defence of India Act, 1939, Section 19 read with Rule 75A, the owner of the property does not transfer to the State Government for consideration, being what is called rent, within Section 105 of the Transfer of Property Act. The State Government compulsorily requisitioned for a limited purpose and for a limited period on payment of compensation. Rent is payable for an immoveable property, such as land with building, when the owner-lessor voluntarily transfers within Section 105 of the Transfer of Property Act certain right of enjoyment of such property as defined in Section 105 of the Transfer of Property Act to the lessee for consideration which is called rent; while under the Defence of India Act, Section 19 read with Rule 75A of the Defence of India Rules, 1939, the State compulsorily acquires or requisitions the owner''s property upon payment of compensation. The owner has no volition in case where the property is requisitioned or acquisitioned by the State under the Defence of India Act, 1939 and Rules made thereunder. But in case of a lease the owner-lessor upon his own volition at the behest of the lessee voluntarily transfers the property as u/s 105 of the Transfer of Property Act for consideration which is called rent. Compensation has not been defined in the Defence of India Act and the Rules. Section 19 of the Defence of India Act lays down the principles in accordance with which compensation is to be determined by the Arbitrator. If the owner and the State agree to the rate of compensation the matter is ended if not, the Arbitrator shall make an award relating to the compensation following certain principles. In making his award for compensation the Arbitrator shall have regard to the provisions of Sub-section (1) of Section 23 of the Land Acquisition Act, 1894, so far as the same can be made applicable in the case, a property is acquisitioned or requisitioned under the Defence of India Act, 1939 and the Rules made thereunder. Compensation has not also been defined in the Land Acquisition Act, 1894 Section 23, Sub-section (1) of the Land Acquisition Act lays down the principle following which the amount of compensation is to be determined by the Court for land including buildings standing thereon. Compensation payable for requisition or acquisition under the Defence of India Act, 1939 and the Rules made thereunder is to be determined under certain legal principles, while rent of a property let out by a willing lessor to a willing lessee depends upon their mutual agreement. Section 19, Sub-section (1), Clause (a) of the Defence of India Act, 1939, does not use the word ''rent'', but the word ''compensation'' and compensation in Clause (a), Sub-section (1) of Section 19 of the Defence of India Act, 1939, payable under an agreement, arrived at between the State and the owner in regard to a requisitioned property cannot be rent, since the property is compulsorily requisitioned u/s 19, Sub-section (1) of the Defence of India Act read with Rule 75A of 1939, while letting or leasing of land with building u/s 105 of the Transfer of Property Act is done by the willing lessor to a willing lessee, on an agreed consideration which is called rent. In Section 127, Clause (a) of the Calcutta Municipal Act, 1923, the expression amongst other expressions used are:

gross annual rent at which the land or building might at the time of assessment reasonably be expected to let from year to year.

In the present appeal, the land upon which the building was erected was never meant to be let out nor was let out during the relevant period. Calcutta Municipal Act, 1923, does not define the expression rent. So, the expression ''rent'' in Section 127, Clause (a) of the Calcutta Municipal Act, 1923, should be interpreted as being rent of an immoveable property as defined in Section 105 of the Transfer of Property. Act. The land and the buildings constitute an immoveable property within Section 127, Clauses (a) and (b) of the Calcutta Municipal Act, 1923. The Appellant purchased the land with the building for using it as their godown and soon after such purchase the State Government requisitioned the building u/s 19 read with Rule 75A of the Defence of India Act and the Rules. The land with the building had never been let out. The State Government offered and the Appellant agreed to receive Rs. 2,250 per month being the compensation payable for the requisition of the land and the buildings by the State Government. The sum of Rs. 2,250 fixed under the agreement payable by the State Government to the Appellant per month is compensation u/s 19, Sub-section (1), Clause (a) of the Defence of India Act, 1939 and is not rent within Section 105 of the Transfer of Property Act read with Section 127, Clause (a) of the Calcutta Municipal Act, 1923. Accordingly, Section 127, Clause (a) of the Calcutta Municipal Act, 1923, was not attracted in respect of the land and the buildings requisitioned u/s 19, Sub-section (1) of the Defence of India Act, 1939 and Rule 75A made under the Act. No evidence came before the Commissioner as to the gross annual rent at which the land and the buildings might, at the relevant time of the assessment, reasonably be expected to let from year to year. There was a clear error of law in the Commissioner for equating compensation fixed on agreement u/s 19, Sub-section (1), Clause (a) of the Defence of India Act with rent within the meaning of Section 105 of the Transfer of Property Act read with Section 127, Clause (a) of the Calcutta Municipal Act, 1923 and in considering compensation as mentioned above as rent within Clause (a) of Section 127 of the Calcutta Municipal Act, 1923. Accordingly, the Commissioner''s order complained of in this appeal had been thoroughly illegal and without jurisdiction.