2017 Judgement 22-Jan-2019

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 903-930 OF 2019

(ARISING OUT OF SLP (C) NO. 23186-23213 OF 2017)
NEW DELHI MUNICIPAL COUNCIL ETC. .....APPELLANT(S)

ETC.
VERSUS
ASSOCIATION OF CONCERNED .....RESPONDENT(S)

CITIZENS OF NEW DELHI AND OTHERS
ETC. ETC.
WITH
CIVIL APPEAL NO(S). 964 OF 2019

(ARISING OUT OF SLP (C) NO. 2305 OF 2019)
(ARISING OUT OF DIARY NO. 35928 OF 2017)
JUDGMENT
A.K. SIKRI, J.
Leave granted.
Introductory Remarks:
Signature Not Verified
Digitally signed by
DEEPAK SINGH
2) These appeals are filed by New Delhi Municipal Council (NDMC)
Date: 2019.04.26
17:37:11 IST
Reason:
against the judgment dated August 10, 2017 rendered by High
Court of Delhi in a batch of writ petitions which were filed by the
Civil Appeals arising out of SLP (C) Nos. 23186-23213 of 2019 & Ors. Page 1 of 72
persons who have their houses/properties in NDMC area. Some
of the petitions were by the associations of residents as well
(hereinafter referred to as the “assessees/respondents”). In
those writ petitions filed by the assessees they had challenged
the constitutional validity of NDMC (Determination of Annual
Rent) Bye-laws, 2009 (hereinafter referred to as the ‘impugned
Bye-laws’). These Bye-laws changed the earlier regime of
determining the rateable value for the purposes of levying
property tax. These Bye-laws seek to alter the earlier system of
determining the rateable value on the basis of he annual rent at
which the land or buildings may reasonably be expected to be let
from year to year. On that basis annual rent used to be fixed and
a particular percentage was prescribed for the purposes of
payment of property tax. The impugned Bye-laws introduced the
system of Unit Area Method (UAM). As per this method Unique
Area Value (UAV) per sq. ft/meter of a property is fixed with
reference to the characteristics of the property such as location,
occupancy, age, structure of the said property. This UAV is then
multiplied by the area of the vacant land or covered space to
arrive at its annual value. When the annual value is determined
on the basis of such a formula, property tax thereupon is to be
paid by the assessees.
3) It may be mentioned at this stage itself that the impugned Bye-
laws have been framed by the Government of India in exercise of
powers conferred by sub-section (1) of Section 391 of the New
Delhi Municipal Council Act, 1994 (hereinafter referred to as the
‘Act’). It is also to be noted that Section 63 of the Act deals with
determination of annual rent. Various grounds were raised
challenging the validity of these Bye-laws and one of the grounds
was that the UAM of fixing the annual value as prescribed in the
Bye-laws was foreign to the provisions of Section 63 of the Act,
meaning thereby that the language of Section 63 did not permit
determination of annual value on such a basis as it prescribed the
method of fixing annual rent on the basis of the rent which the
land or building may reasonably be expected to let from year to
year. It was, thus, argued by the assessees in the writ petitions
that the impugned Bye-laws were ultra vires the provisions of
Section 63 of the Act. The High Court chose to confine itself to
this particular submission and eschewed the discussion on other
grounds on which these bye-laws were also challenged. In the
impugned judgment, the High Court accepts the submission of
the assessees holding that the impugned Bye-laws are ultra vires
the NDMC Act as they are far beyond the scope and ambit of the
powers vested in NDMC under Section 388(1)(A)(9) of the Act.
Section 388 gives rule making power to the NDMC.
4) When the matter was argued before us, initially the parties
confined to the aforesaid aspect on which High court has
rendered its decision. However, arguments were heard on the
other grounds of challenge as well, so that decision is given on
merits, if the circumstances so warrant. We may also mention at
this stage that many applications for intervention/impleadment
have been filed by those assessees who were not parties to the
writ petitions in the High Court. Such assessees are satisfied
with the impugned Bye-laws and, therefore, they have not
supported the case set up by the NDMC.
Factual background:
5) Before adverting to the controversy, it would be appropriate to
take note of some relevant facts:
6) As is well-known, during the period of the British India, Delhi
became the capital of India in the year 1911. Even before it
became the capital, for the first time house tax was made
applicable and levied in Delhi in the year 1902. After becoming
the capital of India, Delhi was detached from Punjab and Delhi
Enclave covering an area of 1240 sq. miles was formed and new
roads were constructed between the temporary capital near Civil
Lines and Raisina. The Punjab Improvement Act was passed in
the year 1922 and it became the town planning legislation. A
large chunk of land was acquired by the Imperial Delhi Committee
and was transferred to the Imperial (New) Delhi Municipal
Committee which was constituted in the year 1916 but came into
effect in the year 1925 when this Delhi Municipal Committee was
upgraded to the level of a second class municipality to be
governed under the Punjab Municipal Act, 1911 (hereinafter
referred to as ‘PMA’). Section 188 of the PMA conferred power
on the Committee to make Bye-laws, inter alia, for carrying out
the purposes of the PMA. In 1932, the Imperial (New) Delhi
Municipal Committee was renamed as ‘New Delhi Municipal
Committee’ (NDMC). After obtaining the independence and with
the adoption of the Constitution of India in the year 1950, Delhi
was shown as Part-C State. However, in the year 1956, vide the
Constitution (Seventh Amendment) Act, 1956, Delhi became a
Union Territory. Immediately, thereafter the Delhi Municipal
Corporation Act, 1957 (DMC Act) was passed whereunder
Municipal Corporation of Delhi (MCD) was constituted to which
first election took place in the year 1958. The jurisdiction of MCD
covers the entire Union Territory of Delhi including the rural areas,
but excluding the New Delhi Municipal Committee and Delhi
Cantonment Areas. However, the area under the jurisdiction of
the NDMC was reduced from 32 sq. miles to 16 sq. miles.
7) In terms of the powers conferred under Section 188(v) of the PMA
which related to assessment and collection of house tax, the
NDMC made the NDMC House Tax Bye-laws, 1962 (‘the 1962
Bye-laws). These were published in the Official Gazette by a
notification dated 24th April, 1964. There are only around 12,000
units which are subject to assessment for property tax in the
NDMC area. 20% of these are residential units and rest are
commercial units. However, only 20% of the properties are
private properties. The remaining 80% are (a) properties
belonging to the Union of India, (b) properties of Diplomatic
Missions and Foreign Embassies, (c) properties of State
Governments and (d) properties of Railways.
8) The above four types of properties are outside the purview of
property tax assessment. This is because Articles 285 and 289 of
the Constitution prohibit levy of taxes on the properties of the
Centre and State by the State and Centre respectively. Except
the properties belonging to the Union of India, the other three
types of properties do not pay even the service charges to the
local authorities. 75% of the property tax demand is collected
from just about 6.25% of the properties in the NDMC area.
Therefore, the tax base for the purpose of collection of property
tax is small compared to the MCD area.
9) For the governance of Union Territory of Delhi, the Parliament
passed the Delhi Administration Act, 1966 which continued to
operate till 1992, when a special status was conferred upon Delhi
by rechristening it as National Capital Territory of Delhi (NCTD).
This happened with the insertion of Article 239AA and 239AB in
the Constitution of India vide Constitution (Sixty-Ninth
Amendment) Act, 1991. Simultaneously, the Parliament also
enacted Government of NCTD Act, 1991 which replaced the
earlier Delhi Administration Act, 1966. With these developments
several provisions of PMA were also brought in tune with the
GNCTD Act, 1991. Subsequently, for the NDMC area, the
Parliament enacted NDMC Act in the year 1994 that replaced
PMA. Hitherto New Delhi Municipal Committee was also replaced
by New Delhi Municipal Council (NDMC).
10) As per Section 60 of the NDMC Act, the power to levy taxes,
including property tax, is vested with the NDMC. The NDMC, in
exercise of powers conferred under Section 416(2)(a) of the
NDMC Act adopted the existing 1962 Bye-laws insofar as levy of
property tax is concerned as it was found that they were not
inconsistent with the NDMC Act. Under these Bye-laws, as noted
above, the method of arriving at annual rent is on the basis of
annual rent which land and building may reasonably be expected
to be let from year to year. It would be significant to mention that
even in the Bye-laws of MCD, identical method of levying the
house tax/property tax was incorporated.
11) There were certain concerns expressed at various quarters about
the said annual rent method in the Bye-laws. Insofar as the MCD
is concerned, it constituted V.K. Malhotra Committee to study and
report upon the efficacy of the property tax assessment and
collection system, so that the faults in the system could be ironed
out. While this Committee was in the process of undertaking that
study, the Union of India circulated ‘Guidelines for Property Tax
Reforms’ in the year 1998 in order to bring needed reforms in the
method of calculation of property tax and to exploit the potential
of property tax as a major source of income for strengthening the
revenue base of these municipalities. The V.K. Malhotra
Committee submitted its report to the MCD in the year 2002.
Based on its recommendations, an Expert Committee under the
Chairmanship of Sh. K. Dharmarajan was constituted by the
Lieutenant Governor of Delhi for recommending the modalities
required for the interpretation of the UAM of property tax
assessment in the MCD area, which was the major
recommendation of the V.K. Malhotra Committee. After receiving
the final report from Dharmarajan Committee, the Delhi Municipal
Corporation (Amendment) Act, 2003 was passed. Further, in
exercise of the powers conferred by the Delhi Municipal
Corporation (Amendment) Act, the Delhi Municipal Corporation
(Property Taxes) Bye-laws, 2004 were also made.
12) With the aforesaid introduction of UAM for the purposes of
property tax assessment in MCD area, the NDMC also
deliberated on this subject, having regard to the
recommendations given by the Dharmarajan Committee. In a
meeting held by NDMC on 27th April, 2005, it was resolved that it
would request GNCTD to amend the provisions of Section 65 of
the NDMC Act.
13) On 13th February, 2006, the NDMC in its meeting discussed that
the rateable value Bye-laws may be prepared in such a way so as
to remove most of the difficulties faced in the present system. It
was suggested to introduce UAM selectively for self-occupied
residential properties in the Bye-laws. Thereafter, on 10 th March,
2006, the Chairperson of the NDMC constituted a committee (the
NDMC Special Committee) under Section 9 of the NDMC Act to
advice upon the property tax. This Special Committee submitted
its final report in February, 2007 which was, in principle, accepted
by the NDMC in its meeting on 12th February, 2007. More
deliberations took place thereafter and it is not necessary to spell
out the same. Suffice it is to mention that amendments in the
Bye-laws were proposed and objections invited. Ultimately on,
24th February, 2009, the GNCTD notified the New Delhi Municipal
Council (Determination of Annual Rent) Bye-laws, 2009
(Impugned Bye-laws) in the Official Gazette. These Bye-laws
were enforced from 1st April 2009 and were made applicable in
the area under the jurisdiction of the NDMC.
Provisions of the Bye-laws and the NDMC Act:
14) It is pertinent to mention that the NDMC Special Committee which
was appointed by the Chairperson, had submitted its final report
in February, 2007. In that report, the Committee noted that it was
difficult to advise a perfect tax system. However, keeping in view
the distinct advantages offered by the UAM, the NDMC Special
Committee recommended a modified form of UAM for NDMC
which attempted to balance the principles of neutrality, stability,
accountability, ease of administration, fairness based on benefits
received and the ability to pay. The NDMC Special Committee
also examined the financial position of the NDMC with special
reference to the profit profile of NDMC wherein a large
percentage of properties are owned by the Government and only
a very small percentage of private properties are liable for
payment of property tax. The NDMC Special Committee stated
that it considered the following options:
“(a) Maintain the status-quo as far as the method of

assessment is concerned. Thus to continue with the
annual value method of property tax assessment but
address procedural shortcomings.
Or
(b) Selective introduction of Unit Area Method in respect of

residential units that are self-occupied (or for both self
occupied W.P.(C) 3348/2010 & connected matters Page
26 of 40 and rented) and for institutional buildings and
hotels. The remaining properties to continue under the
reasonable rent method of assessment as at present. Or
(c) Levy uniform service charges for all non-residential
properties regardless of their ownership, government or
private. The service charges would be liable for increases
from time to time to keep pace with the inflation and
increased cost of services. The base service charges
would be fixed at some proportion of land values and unit
rate subject to the condition that they will not be lower than
the existing Rateable Value
Or
(d) Introduce a modified form of Unit Area Method for all
properties by fixing the unit rates solely by category of use
and land values. Thus the lowest unit rate (or multiplicative
factors) would be in respect of a self-occupied residential
property in an area where land values are low; the highest
unit rate (or multiplicative factor) would be in respect of
commercial properties/hotels that are located in areas
where land values are the highest (land values to be
computed as per Land & Development Office rate
schedules amended from time to time)”
15) The NDMC Special Committee rejected options (a), (b) and (c). It
recommended acceptance of option (d). However, it
recommended “a formula which is revenue neutral and at the
same time optimizes the objective of vertical equity. The analysis
of data compiled by the tax department suggests that there is
extreme variation in taxation of similarly placed properties for
various reasons discussed earlier. This problem will be
automatically addressed as horizontal equity is inbuilt in the Unit
Area System.”
16) It is significant that the NDMC Special Committee did not touch
upon the manner of bringing about the above change i.e. whether
it should be by amending the Bye-laws or amending the NDMC
Act itself. However, in the position paper submitted to the NDMC,
the Special Committee, while recommending the adoption of a
modified UAM, had suggested that it should be introduced
selectively for “self-occupied residential properties.” It also
added: “However, Bye-laws cannot go beyond what is provided in
the Act. As such, depending upon the final decision in the matter,
an appropriate amendment in the Act appears to be the only
alternative.”
17) Since the impugned Bye-laws are declared by the High Court as
ultra vires the NDMC Act, it would also be necessary to notice
some of the relevant provisions of the NDMC Act. From the
reading of these Bye-laws, it is clear that the UAM for determining
the rateable value has been introduced which is different from
‘annual rent’. Bye-laws 2 of impugned Bye-laws mentions that
the annual rent for which the land and building were expected to
be let would be determined as per Bye-law 3 in respect of special
categories of lands and buildings and as per Bye-law 4 in respect
of other lands and buildings.
18) Some of the relevant provisions of the impugned Bye-laws, may
now be noted:
"2. Determination of Annual Rent – For the purpose of

sub-section (1) of Section 63 of the New Delhi Municipal
Council Act, 1994 (44 of 1994) hereinafter referred to as
the ‘Act’) the annual rent, for which lands and buildings are
expected to let from year, shall be determined as under:-
“(i) Special categories of lands and buildings as per

provisions of bye-law 3 and;
(ii) Other lands and buildings as per provisions of
bye-law 4.
3. Annual Rent of Special Category of land and buildings:-

(1) the annual rent of the lands and buildings, which are
not normally let, being the property of the Union,
Government, State or used as school, college, hostel,
guest house, clubs, cinema hall, hotels and such other
lands and buildings as may be specified by the Valuation
Committee, shall be calculated at such percentage, as
may be determined by the Valuation Committee, being not
less than 5% and not more than 10% of the aggregate of:
(a) value of land falling in the jurisdiction of New

Delhi, at the circle rate of Rs. 43,000 (Rupees forty
three thousand only) per square meter, as increased
by the multiplication factor for user of the land,
specified in sub-bye-law (3); and
(b) value of covered space of the building at Rs.

15,000 (Rupees fifteen thousand only) per square
meter of the covered space of the building as
reduced by the age factor of the building as reduced
by the age factor of the building specified in sub-bye-
law (4).
xxx xxx xxx
(3) The use factor for the land shall be as under:-

Use Factor
Residential, Public Purpose, School, College

Hostel, Hospital 1
Public Utility Government Offices, Embassies 2
Club, Guest Houses, Cinema Halls and Hotels 3
(Other than 5 star hotels)
Explanation:- Use Factor for a particular year shall be

determined based on usage of a particular type for more
than 180 days in a financial year.
(4) Age factor for age of the building shall be as under:-

Age Factor
Constructed upto 1960 0.5

Constructed upto 1960-69 0.6
4. Annual Rent of other land and buildings-

(1) The annual rent of lands and buildings valuation of
which is not covered by bye-law 3 shall be the aggregate
of the bona fide annual value of land and bona fide annual
value of the covered space of the buildings.
xxx xxx xxx
(5) The relevant factors for the increasing on decreasing

or for not increasing or decreasing, the base unit area
values specified in respect of each of the parameters of
type of use, age, type of structure, occupancy status,
average rentals available in the building, location of
covered space and any other relevant factors as may be
necessary for determining the bona fide annual value of
land and building shall be fixed by the Valuation
Committee, from time to time.
(6) Pending fixation of relevant factors and revisions

thereof by the Valuation Committee, the multiplication
factor for use and occupancy of the covered space shall
be as under:
Use of land and covered space of building Factor
Residential 1
Others 6
Occupancy of land and covered space of building Factor
Self-Occupied or Vacant 1
Others 3
Provided that the location factor covered space in

basement used for storage, parking and utilities will be
taken 0.5.
Explanations:-
(i) The premises owned by companies, firm, trust etc.
and used by the directors, employees or partners for
residence or guest house shall not be treated as self-
occupied by the owners.
(ii) For a particular year, the use factor and the

occupancy factor shall be determined on the basis of
usage/occupancy prevailing for more than 180 days in that
year. In case the occupancy factor is determined as
“others” and the premises actually remains vacant for part
of the year, the property will be eligible for vacancy
remission as per provisions below the heading “Remission
and Refund” under Chapter-VIII relating to “Taxation” of
the New Delhi Municipal Council Act, 1994 (44 of 1994).
(7) Age factor for age of the building shall be as under:-
Age Factor
Constructed upto 1960 0.5

(8) Where the land and the covered space of the

building is let and actual rent is in excess of the bona fide
annual value of land and building referred to in sub-bye-
law (1), the rateable value for the purposes of that sub-
bye-law shall be such actual rent.
Provided that this will not apply to residential

properties used by occupier exclusively for residential
purposes.”
19) Let us also scan through the relevant provisions of the Act:
"Section 60 : Levy of Taxes -
1. The Council shall for the purposes of this Act, levy

the following taxes, namely:-
a. Property tax;
b. x x x x x x
2. X X X X X X
3. The taxes specified in sub-section (1) and sub-section
(2) shall be levied, assessed and collected in accordance
with the provisions of this Act and the bye-laws made
thereunder.
Section 61: Rate of Property Tax-
1. Save as otherwise provided in this Act, the property tax

shall be levied on lands and buildings in New Delhi and
shall consist of not less than ten and not more than thirty
per cent of the rateable value of lands and buildings:
provided that the Council may, when fixing the rate at

which the property tax shall be levied during any year,
determine that the rate leviable in respect of lands and
buildings or portions of lands and buildings in which any
particular class of trade or business is carried on shall be
higher than the rate determined in respect of other lands
and buildings or portions of other lands and buildings by
an amount not exceeding one-half of the rate so fixed:
Provided further that the tax may be levied on graduated

scale, if the Council so determines.
Explanation. - Where any portion of a land or building is

liable to a higher rate of the tax such portion shall be
deemed to be a separate property for the purpose of
municipal taxation.
2. The Council may exempt from the tax lands and

buildings of which the rateable value does not exceed one
thousand rupees.
Section 62: Premises in respect of which property tax is to

be levied-
Save as otherwise provided in this Act, the property tax

shall be levied in respect of all lands and buildings in New
Delhi except-
a. lands and buildings or portions of lands and buildings

exclusively occupied and used for public worship or by a
society or body for a charitable purpose:
Provided that such society or body is supported wholly or
in part by voluntary contributions, applies its profits, if any,
or other income in promoting its objects and does not pay
any dividend or bonus to its members.
Explanation. - "Charitable purpose" includes relief of the

poor, education and medical relief but does not include a
purpose which relates exclusively to religious teaching.
b. lands and buildings vested in the Council, in respect of

which the said tax, if levied, would under the provisions of
this Act be leviable primarily on the Council;
c. agricultural lands and buildings (other than dwelling

houses).
2. Lands and buildings or portions thereof shall not be

deemed to be exclusively occupied and used for public
worship or for a charitable purpose within the meaning of
clause (a) of sub-section (1) if any trade or business is
carried on in such lands and buildings or portions thereof
or if in respect of such lands and buildings or portions
thereof, any rent is derived.
3. Where any portion of any land or building is exempt

from the property tax by reason of its being exclusively
occupied and used for public worship or for a charitable
purpose such portion shall be deemed to be a separate
property for the purpose of municipal taxation.
Section 63 : Determination of rateable value of lands and

buildings assessable to property tax-
1. The rateable value of any lands or buildings assessable

to any property taxes shall be the annual rent at which
such land or building might reasonably be expected to let
from year to year less a sum equal to ten per cent of the
said annual rent which shall be in lieu of all allowances for
cost of repairs and insurance, and other expenses, if any,
necessary to maintain the land or building in a state to
command that rent:
Provided that in respect of any land or building the

standard rent of which has been fixed under the Delhi Rent
Control Act, 1958 (59 of 1958) the rateable value thereof
shall not exceed the annual amount of the standard rent so
fixed.
2. The rateable value of any land which is not built upon
but is capable of being built upon and of any land on which
a building is in process or erection shall be fixed at five per
cent of estimated capital value of such land.
3. All plant and machinery contained or situate in or upon

any land or building and belonging to any of the classes
specified from time to time by public notice by the
Chairperson with the approval of the Council, shall be
deemed to form part of such land or building for the
purpose of determining the rateable value thereof under
sub-section (1) but save as aforesaid no account shall be
taken of the value of any plant or machinery contained or
situated in or upon any such land or building.
Section 65 : Taxation of Union Properties-
(1) Notwithstanding anything contained in the foregoing

provisions of this Chapter, lands and buildings being
properties of the Union shall be exempt from the property
tax specified in section 61:
Provided that nothing in this sub-section shall prevent the

Council from levying property tax on such lands and
buildings to which immediately before the 26th January,
1950, they were liable or treated as liable, so long as that
tax continues to be levied by the Council on other lands
and buildings.
(2) Where the possession of any land or building, being

property of the Union, has been delivered in pursuance of
section 20 of the Displaced Persons (Compensation and
Rehabilitation) Act, 1954 (44 of 1954) to a displaced
persons, or any association of displaced person, whether
incorporated or not, or to any other person [hereafter in
this sub-section and the proviso to sub-section (1) of
section 66 referred to as the transferee], the property tax
specified in section 61 shall be leviable and shall be
deemed to have been leviable in respect of such land or
building with effect from the 7th day of April, 1958 or the
date on which possession thereof has been delivered to
the transferee, whichever is later, and such property tax
shall, notwithstanding anything contained in any other
provision of this Act, be recoverable with effect from that
day or date, as the case may be.
Section 66: Incidence of Property Tax-
(1) The property tax shall be primarily leviable as follows:-
(a) if the land or building is let, upon the lessor;
(b) If the land or building is seb-let, upon the superior

lessor
(c) if the land or building is unlet, upon the person in

whom the right to let the same vests:
Provided that the property tax in respect of land or

building, being property of the Union, possession of which
has been delivered in pursuance of section 20 of the
Displaced Persons (Compensation and Rehabilitation) Act,
1954 (44 of 1954) shall be primarily leviable upon the
transferee.
(2) If any land has been let for a term exceeding one
year to a tenant and such tenant has built upon the land,
the property tax assessed in respect of that land and
building erected thereon shall be primarily leviable upon
the said tenant, whether the land and building are in the
occupation of such tenant or a sub-tenant of such tenant.
Explanation. - The term "tenant" includes any person

deriving title to the land or the building erected upon such
land from the tenant whether by operation of law or by
transfer intervivos.
3. The liability of the several owners of any buildings

which is, or purports to be, severally owned in parts or flats
or rooms, for payment of property tax or any installment
thereof payable during the period of such ownership shall
be joint and several.
Section 67 : Apportionment of liability for property tax

when the premises are let or sub-let-
(1) If any land or building assessed to property tax is let,

and its rateable value exceeds the amount of rent payable
in respect thereof to the person upon whom under the
provision of section 66 the said tax is leviable, that person
shall be entitled to receive from his tenant the difference
between the amount of the property tax levied upon him
and the amount which would be leviable upon him if the
said tax was calculated on the amount of rent payable to
him.
(2) If the land or building is sub-let and its rateable value
exceeds the amount of rent payable in respect thereof to
the tenant by his sub-tenant, or the amount of rent payable
in respect thereof to a sub-tenant by the person holding
under the sub-tenant, the tenant shall be entitled to receive
from his sub-tenant or the sub-tenant shall be entitled to
receive from the person holding under him, as the case
may be, the difference between any sum recovered under
this section from such tenant or sub-tenant and the
amount of property tax which would be liable in respect of
the said land or building if the rateable value thereof were
equal to the difference between the amount of rent which
such tenant or sub-tenant receives and the amount of rent
which he pays.
(3) Any person entitled to receive any sum under this

section shall have, for the recovery thereof, he same rights
and remedies as if such sum were rent payable to him by
the person from whom he is entitled to receive the same.”
20) Though some other provisions may also be relevant, instead of
reproducing those provisions, the gist thereof can be mentioned.
It is extracted from the discussion from the impugned judgment
as it correctly captures the essence of these provisions.
21) Under Section 61 (1) of the NDMC Act, property tax shall be
levied on lands and buildings in New Delhi and "shall consist of
not less than ten and not more than thirty per cent of the rateable
value of lands and buildings.” The proviso to Section 61(1) of the
NDMC Act states that the NDMC may, "when fixing the rate at
which the property tax shall be levied during any year, determine
the rate leviable in respect of lands and buildings or portions of
lands and buildings in which any particular class of trade or
business is carried on shall be higher than the rate determined in
respect of other lands and buildings or portion of other lands and
buildings by an amount not exceeding one-half of the rate so
fixed.” The second proviso to Section 61 (1) states that “the tax
may be levied on graduated scale, if the Council so determines.”
The explanation to Section 61 (1) states that “where any portion
of a land or building is liable to a higher rate of the tax such
portion shall be deemed to be a separate property for the purpose
of municipal taxation.”
22) Under Section 61 (2) of the NDMC Act, the NDMC can exempt
from tax the lands and buildings where “the rateable value does
not exceed Rs.1,000.”
23) The expression ‘rateable value’ is defined under Section 2 (42) of
the NDMC Act to mean “the value of any land or building fixed in
accordance with the provisions of this Act and the Bye-laws made
thereunder for the purpose of assessment to property taxes.”
24) Section 62 of the NDMC Act relates to the 'Premises in respect of
which tax is to be levied'. Section 62 (1) lists out such lands or
buildings or portions thereof which will not be subject to levy of
property tax. This includes lands exclusively occupied and used
for public worship or by a society or body for a charitable
purpose. It also includes lands and buildings vested in the NDMC
in respect of which the tax, if levied, would be leviable primarily
on the NDMC and agricultural lands and buildings (other than
dwelling houses). Section 62 (3) clarifies that if a portion of the
land or building is exempted from property tax by reason of the
exclusive use or occupied for public worship or charitable
purpose then such portion “shall be deemed to be a separate
property for the purpose of municipal taxation.”
25) Section 63 of the NDMC Act sets out the method of determination
of the rateable value of lands and buildings assessable to
property tax. Section 63 (1) provides that the rateable value of
any land or building assessable to property tax shall be the
annual rent at which such land or building might reasonably be
expected to let from year to year less a sum equal to 10% of the
said annual rent which shall be in lieu of all allowances for cost of
repairs and insurance, and other expenses necessary to maintain
the land or building in a state to command that rent. The proviso
to Section 63 (1) of the NDMC Act states that in respect of any
land or building the standard rent of which has been fixed under
the Delhi Rent Control Act, 1958 (‘DRC Act’), the rateable value
thereof "shall not exceed the annual amount of the standard rent
so fixed.".
26) Section 632) of the NDMC Act states that the rateable value of
any land which is not built upon but is capable of being built upon
and any land on which a building is in process of erection “shall
be fixed at five per cent of estimated capital value of such land.”
Under Section 63(3) the Chairperson of the NDMC can by public
notice, with the approval of the NDMC, specify a plant and
machinery which will be deemed to form part of such land and
building for the purposes of determination of rateable value.
Section 65(1) of the NDMC Act clarifies that lands and buildings
being properties of the Union shall be exempt from the property
tax specified in Section 61 of the NDMC Act.
27) Section 66 of the NDMC Act speaks of the incidence of the
property tax. It is primarily on the lessor if a building or land is
given on lease. It is on the superior lessor if the land or building is
given on a sub-lease. If it is not leased then on the person on
whom the right to let the same vests.
28) Section 67 of the NDMC Act talks of apportionment of liability of
the property tax when the premises are let or sub-let. Section 68
clarifies who will be primarily liable for the property tax due in
respect of any land or building and in the event of default of the
person liable to pay such propertytax as specified in Section 66. It
is clarified that this would be the occupier of such land or building.
29) Section 70 of the NDMC Act deals with the ‘Assessment List’.
This is a list of all lands and buildings which contains such
particulars with respect to each land and building as may be
prescribed by the Bye-laws. When such Assessment List is
prepared, the Chairperson under Section 70 (2) of the NDMC Act
gives a public notice thereof and every person claiming to be an
owner, lessor or occupier of a land or building included in the List
shall be at liberty to inspect the List and take extracts therefrom
free of charge. Under Section 70 (3), the Chairperson is to give a
public notice of a date not less than one month thereafter when
he would proceed to consider the rateable value of the lands and
buildings entered in the Assessment List. He is also to give the
written notice where the rateable value is proposed to be
increased. Section 70 (4) of the NDMC Act provides for objections
to be filed to the Assessment List in writing to the Chairperson.
Section 70 (5) of the NDMC Act talks of an objection being
notified into and investigated, and the person making them shall
be allowed an opportunity of being heard either in person or by
authorised agent before the final Assessment List is prepared
under Section 70 (6) of the NDMC Act. Section 72 of the NDMC
Act provides for amendment of the Assessment List and Section
73 for preparation of new Assessment List.
30) Under Section 81 the Chairperson of the NDMC Act employs
valuers to give advice or assistance in respect of valuation of any
land or building.
The Impugned Judgment:
31) After taking note of the aforesaid provisions of the Act as well as
Bye-laws, the Delhi High Court, inter alia, observed that insofar
as definition of ‘rateable value’ given under Section 2(42) of the
NDMC Ac is concerned, it means ‘value of any land or building
fixed in accordance with the provisions of this Act and the Bye-
laws made thereunder for the purposes of assessment of
property taxes’. According to it, the conjunction “and” used in the
above definition makes the legislative intent explicit, namely, the
rateable value has to be fixed both in accordance with the NDMC
Act as well as the Bye-laws. Consequently, it is inconceivable
that the manner of determination of the rateable value under the
Bye-laws could be inconsistent or different from that provided
under the Act. Therefore, the rateable value has to be fixed, both
in accordance with the provisions of the Act and in accordance
with the Bye-laws. Further, Section 63, which prescribes the
method for determination of the rateable value of lands and
building stipulated that the rateable value of any land or building
assessable to property tax shall be the annual rent at which such
land and building might reasonably be expected to let from year
after year less a sum equal to 10% of the said annual rent. Also,
the proviso to Section 63(1) of the NDMC Act states that in
respect of any land or building the standard rent of which has
been fixed under the Delhi Rent Control Act, 1958, the rateable
value thereof ‘shall not exceed the annual amount of the standard
rent so fixed.”
32) Further in the opinion of the High Court though under Section 81
of the NDMC Act, the Chairperson can employ valuers to give
advice or assistance in respect of valuation of land and building,
this is different from the determination of the rateable value. Such
value becomes relevant when there is attachment of the property
to cover the arrears of municipal taxes and the value of such land
and building has to be determined to ascertain what could be
recovered towards the arrears. By reading these provisions in
the aforesaid manner, the High Court has held insofar as NDMC
Act is concerned that the legislative scheme envisages
determination of rateable value only on one basis, i.e., on the
basis of the ‘annual rent’ at which the land or building might
reasonably be expected to let from year to year. In contrast,
holds the High Court, the impugned Bye-laws seek to introduce a
completely different system of rateable value than what is
provided under the NDMC Act. As it provides UAM which
envisages fixing UAV with reference to the characteristics of a
property and then multiplying the UAV by area of the vacant land
or covered space to find out ‘annual value’. This method of levy
assessment collection of tax is entirely different from what is
provided under the NDMC Act and, therefore, could not have
been introduced by the Bye-laws in terms of Section 388(1)(A)(9)
which confers power to make Bye-laws relating to the levy,
assessment, collection, refund or imposition of taxes ‘under this
Act’.
33) Such a course of action could not be taken without amending the
provisions of NDMC Act. Relevant discussion in this behalf is
reproduced below:
"Analysis of the new impugned Bye-laws

52. The new impugned Bye-laws in the present case seek
to introduce a completely different system of rateable
value than what is provided under the NDMC Act. While
the NDMC Act provides for rateable value to be
determined on the basis of the annual rent at which the
land or building might reasonably be expected to let from
year to year, the UAM envisages fixing the UAV with
reference to the characteristics of a property and then
multiplying the UAV by the area of the vacant land or
covered space to find out the ‘annual value'.
53. It is not as if the NDMC was unaware that this could be

done only by amending the NDMC Act. Yet only because
this might be a time consuming process it chose the short
cut of making the new impugned Bye-laws without
amending the NDMC Act. Section 388 (1) of the NDMC Act
begins with the expression “Subject to the provisions of
this Act”. Clearly, therefore, the legislative intent was to
confer upon the NDMC the power to make Bye-laws which
were subject to and consistent with the provisions of the
Act.
54. Secondly, Section 388 (1) A (9) of the NDMC Act

confers powers to make Bye-laws relating to the levy,
assessment, collection, refund or imposition of taxes
"under this Act". The expression 'relating to' preceding the
words “levy, assessment, collection...” clearly means,
therefore, that Bye-laws will have to be consistent with
what is already provided under the NDMC Act. A method of
levy, assessment, collection of taxes which is different
from what is provided under the NDMC Act cannot
possibly be introduced by the Bye-laws in terms of Section
388 (1) A (9) of the NDMC Act. That would make the Bye-
laws inconsistent with and contrary to the NDMC Act.
55. There are specific provisions of the NDMC Act which

have been sought to be supplanted by the Bye-laws.
Illustratively, the whole system of determination of annual
rent under Section 63(1) of the NDMC Act is sought to be
substituted by the UAM. There is no provision in the new
impugned Bye-laws that could be related to Section 63(1)
of the NDMC Act. The new impugned Bye-laws create
classification among assessees which are different from
the classification envisaged under the NDMC Act and in
particular classification of property as spelt out in Sections
62 and 65 of the NDMC Act. Section 66 of the NDMC Act
contemplates imposition of the property tax in respect of
three categories of properties i.e. the property that has
been let, sub-let and properties that are not let out at all.
There is no further classification contemplated in the
NDMC Act on the basis of nature of rights which are
created in respect of such land and buildings.
56. Under the proviso to Section 63(1) of the Act, the

rateable value cannot exceed the standard rent fixed
under the DRC Act. This is sought to be overwritten by the
impugned new Bye-laws. Under the explanation to Section
61(1) of the Act where a portion of a land or building is
liable to a higher rate of tax then such portion will be
deemed to be a separate property for the purpose of
municipal taxation. This is sought to be substituted under
the UAM which seeks to aggregate the value of land as a
whole with the value of the space covered on such land.
57. While categorising the occupancy factor, the impugned

Bye-laws create only two categories i.e. (i) self-occupied or
vacant buildings or lands and (ii) others. Thereby the
letting out of a property for use by a person other than the
owner for no consideration is treated at par with the letting
out such property for consideration. These are only the
illustrations of changes brought about by the new
impugned Bye-laws.
58. In State Trading Corporation India Limited v. New Delhi

Municipal Council (supra), the Supreme Court emphasised
that the manner of determination of rateable value has to
be only in terms of Section 63 of the NDMC Act even in
respect of properties that have been sub-let and not in
terms of Bye-law 12 of the 1962 Bye-laws which were
found to be inconsistent with the provisions of the NDMC
Act.
59. Consequently, as far as the present case is concerned

it is plain that the new impugned Bye-laws are ultra vires
the NDMC Act. They require to be invalidated on this
ground alone.”
Submission of the Counsel:
34) Mr. Sanjay Jain, learned senior counsel appeared on behalf of the
appellant, NDMC. After referring to the various provisions of the
NDMC Act as well as the impugned Bye-laws, he submitted that
as per Bye-law 5 the valuation committee sits every year and lays
down the standards for fixing the annual rent. The process
undertaken is with a purpose to arrive at ‘annual rent’ which
according to him is in consonance with Section 63 of the NDMC
Act. He read Section 63 to emphasise that even as per that
provision it is the rateable value on which tax is to be imposed on
lands and building which are assessable to any property tax.
This rateable value, the provisions sates, shall be the ‘annual
rent’. Thus, the tax has to be on the annual rent which is the
rateable value and no particular method is given under Section 63
of the NDMC Act for fixing such annual rent. Therefore, it was
permissible to lay down a method of fixing annual rent in the Bye-
laws which would not be contrary to Section 63 of the Act. He
also submitted that UAM provided in the Bye-laws is more
rationale and takes care of many anomalies of the old system.
According to him, the High Court committed certain errors in
approaching the subject. In the first instance it referred to the
provisions of Delhi Rent control Act and application thereof which
is without any basis. Other error was to wrongly assume that
there are three categories of properties where the Bye-laws
create only two categories. Thirdly, methodology which is worked
out and mentioned in para 22 of the judgment (relating to
interpretation that is to be given to Section 181 of the NDMC Act)
is contrary to Section 63 of the NDMC Act.
35) Mr. Jain also submitted that the observations of the Delhi High
Court in State Trading Corporation of India Ltd. vs. New Delhi
Municipal Council1 are wrongly interpreted as the Court did not
hold in that case that determination of rateable value has to be
only in terms of Section 63 of the NDMC Act. He further argued
that even in respect of those properties which are let out, still
exercise is to be dome to find out the annual value inasmuch as
the ‘rent’ which it is likely to fetch has to be determined as per
Section 63. On the other hand, in respect of the properties which
are self-occupied, in any case annual rent has to be arrived at.
The impugned Bye-laws seek to achieve that purpose only, which
was very much in consonance with Section 63 of the NDMC Act.
He also submitted that the judgment in question has created a
void insofar as intervening period is concerned as the NDMC has
taxed the properties, after coming into force the Bye-laws, in
accordance with the new Bye-laws which have been struck down
and thereby leaving the properties in question without any tax for
the intervening period.
1 104(2003) DLT 808 = AIR 2003 Delhi 295
36) Mr. Jain also submitted that UAM introduced by the MCD has
been upheld by this Court.
37) In a nutshell, it is the case of NDMC that the impugned Bye-laws
are not ultra vires the NDMC Act. The NDMC has contended that
the finding of the impugned judgment that the Bye-laws of NDMC
as ultra vires the NDMC Act, on the premise that the same
instead of supplementing Section 63(1), supplants the same is
erroneous.
38) NDMC has also contended that the entire functioning and
activities of NDMC is dependent on its revenue collections.
Property tax accounts for the major individual source of revenue
of NDMC. In the event the Bye-laws are struck down in their
entirety, as has been done by the impugned judgment dated 10 th
August, 2017 of the Delhi High Court, NDMC will stand to lose a
huge portion of its revenue, in the absence of which NDMC will
not be in a position to provide the services that it currently
provides in the New Delhi area.
39) As per NDMC, no particular method is prescribed under Section
63(1) for arriving at annual rent and the said gap has been filed
up by the Bye-laws of 2009. It claims that what has been
prescribed by Section 63 (1) is only the broad principle on which
the rateable value would be determined, which is the annual rent
that the property “might reasonably be expected to let from year
to year.
40) Section 63(1) is silent on how to determine the annual rent of a
property and for calculation of annual rent, NDMC can employ
any method which is reasonable to arrive at the hypothetical rent
which a property might reasonably be expected to let from year to
year. Using the current Bye-laws to arrive and determine the
annual rent, cannot be said to be unreasonable or ultra vires of
the provisions of the NDMC Act.
41) Mr. Parag Tripathi, who appeared in the civil appeal arising out of
Special Leave Petition (Civil) No. 35938 of 2017, supported the
case set up by the NDMC. He also argued that Section 63
provides for the determination of rateable value for buildings
assessable to property tax which is on the basis of annual rent
which the land or building might reasonably be expected to let
from year to year. There is no statutory formula provided and
indeed there can be non to determine the value of rent at which
any land or building might reasonably be expected to let from
year to year. It is for this reason that Section 388(1)(A)(9) of the
NDMC Act, 1994 vests power on the Council to make bye-laws I
n all matters relating to levy, assessment, collection, refund or
remission of taxes under the Act. It is a well-settled position of
law that the term ‘levy’ is a term of wide import and includes
charge as well as imposition of tax, as laid down in the followings
judgments:
(I) Ashok Singh vs. Asstt. Controller of Estate Duty 2
(ii) Assistant Collector of Central Excise vs. National
Tobacco Co. of India Ltd.3
(iii) Mafatlal Industries & Ors. vs. Union of India & Ors. 4
42) Analyzing the Impugned Judgment dated 10.08.2017 of the High
Court, he argued that it has proceeded on the basis that the
concept of annual value sought to be introduced by the NDMC
(Determination of Annual Rent) Bye-laws, 2009 is completely
alien to the statutory scheme of the NDMC Act on the following
basis:
(i) Bye-law 2 of the 2009 Bye-laws provides that ‘for the
purposes of Section 63(1)” the annual rent for which the lands
and buildings are expected to let from year to year shall be
determined in terms of Bye-laws 3 and 4.,
2 (1992) 3 SCC 169

3 (1972) 2 SCC 560
4 (1997) 5 SCC 536
(ii) Bye-law 4 provides that the annual rent of lands and
buildings not covered by Bye-law 3 shall be the aggregate of the
bona fide annual value of land and bona fide annual value of
covered space of the building. In terms of sub- bye-law 3 of Bye-
law 4 the annual value of any covered space shall be the amount
arrived at by multiplying the total area by the base unit area value
of such covered space and the relevant factors stipulated in sub-
bye laws 5,6 and 7.
(iii) ‘Annual value” for the purpose of arriving at the annual rent
which a property may reasonably expected to fetch is not a new
concept and has been applicable to the NDMC area until the
enactment of the NDMC Act in 1994. In this regard, reference
may also be had to the definition of “annual value” in Section 3(1)
(b) of the Punjab Municipal Act which provides that annual value
shall mean the gross annual rent which a house or building may
reasonably be expected to let from year to year.
(iv) It is, therefore, clear that the term ‘annual value’, which is
arrived at by taking into account factors such as area, usage of
the property, age factor and also occupancy, is only an indicator
of the rent which a particular property would fetch when let for
use or enjoyment.
43) Mr. Tripathi further submitted that the impugned judgment also
proceeds on the basis that the 2009 Bye-laws have overwritten
the proviso to Section 63(1) which provides that the rateable
value shall not exceed the standard rent fixed under the Delhi
Rent Control Act. Questioning this approach, he submitted that
the High Court has, with respect, lost sight of the fact that
concept of standard rent is no longer available under the Delhi
Rent Control Act, 1958 since the Delhi High Court was pleased to
strike down Sections 4,6 and 9 of the said Act dealing with
Standard Rent in Raghunandan Saran Ashok Saran (HUF) vs.
Union of India and Others 5 , which judgment was never
challenged in appeal and has thus attained finality.
44) This aspect was also noted by this Court in State Trading
Corporation vs. New Delhi Municipal Council 6. In that view of
the matter, there was no occasion for the High Court to strike
down the Bye-laws on the ground that the Bye-laws have
overwritten the proviso to Section 63(1).
45) Mr. Tripathi also submitted that various judgments relied upon by
the High Court on the aspect of excessive delegation were not
applicable in the facts of the present case.
5 95(2002)DLT 528
6 (2016) 12 SCC 603
46) One additional submission was made by Mr. Parag Tripathi
deviating from the NDMC stand. Learned senior counsel referred
to the provisions of Section 63(2) of the NDMC as well as Section
388(1)(A)(9) of the Act which read as under:
"Section 63(2): The ratable value of any land which is not

built upon but is capable of being built upon and of any
land on which a building is in process of erection shall be
fixed at five per cent of estimated capital value of such
land.
Section 388(1)(A)(9) : any other matter relating to the

levy, assessment, collection, refund or remission of taxes
under this Act.”
47) His submission was that from a conjoint reading of the aforesaid
provisions it is clear that that provisions of Section 388(1)(A)(9)
sufficiently empower NDMC to make Bye-laws in respect of
matters covered under Section 63, i.e., Sections 63(1) and 63 (2).
His further submission was that this Court has, time and again,
held while interpreting taxing statute that percentage of tax or
charges or penalties provided is to be treated not as a mandatory
provision but merely as indicative of a ceiling. For this
submission, he invited the attention of this Court to the following
passage in P. Ratnakar Rao and Others vs. Sate of A.P. and
Others7:
"4. The contention raised before the High Court and

repeated before us by Shri Rajeev Dhavan, the learned
7 (1996) 5 SCC 359
Senior Counsel for the petitioners is that the discretion
given in Section 200(1) of the Act is unguided, uncanalised
and arbitrary. Until an accused is convicted under Section
194, the right to levy penalty thereunder would not arise.
When discretion is given to the court for compounding of
the offence for the amount mentioned under Section 200, it
cannot be stratified by specified amount. It would,
therefore, be clear that the exercise of power to prescribe
maximum rates for compounding the offence is illegal,
arbitrary and violative of Article 14 of the Constitution. We
find no force in the contention. For violation of Sections
113 to 115, Section 194 accords penal sanction and on
conviction for violation thereof, the section sanctions
punishment with fine as has been enumerated
hereinbefore. The section would give guidance to the State
Government as a delegate under the statute to specify the
amount for compounding the offences enumerated under
sub-section (1) of Section 200. It is not mandatory that the
authorised officer would always compound the offence. It
is conditional upon the willingness of the accused to have
the offences compounded. It may also be done before the
institution of the prosecution case. In the event of the
petitioner's willing to have the offence compounded, the
authorised officer gets jurisdiction and authority to
compound the offence and call upon the accused to pay
the same. On compliance thereof, the proceedings, if
already instituted, would be closed or no further
proceedings shall be initiated. It is a matter of volition or
willingness on the part of the accused either to accept
compounding of the offence or to face the prosecution in
the appropriate court. As regards canalisation and
prescription of the amount of fine for the offences
committed, Section 194, the penal and charging section
prescribes the maximum outer limit within which the
compounding fee would be prescribed. The discretion
exercised by the delegated legislation, i.e., the executive is
controlled by the specification in the Act. It is not
necessary that Section 200 itself should contain the details
in that behalf. So long as the compounding fee does not
exceed the fine prescribed by the penal section, the same
cannot be declared to be either exorbitant or irrational or
bereft of guidance.”
48) On that basis, he argued that the 5% rate stipulated under
Section 63(2) should be treated as the ceiling which can be used
to determine the rateable value. Section 63(2) on a fair reading
thereof and in view of the various judgments of this Court does
not mandate rateable value fixed at 5% of the capital value of the
land. This is only the ceiling and has to be dealt with accordingly.
49) He also argued that the whole idea behind Section 63(2) is to
determine the property tax. When there is no enjoyment of the
property itself and the building is in the process of erection, then
the land falls in the category of ‘not built up but is capable of
being built up’ or is actually being built up.
50) In these circumstances once a building is demolished and a fresh
building is constructed after obtaining sanction plans from the
NDMC, the rateable value can be determined under Section 63(2)
only for the period during which the building is fully demolished,
i.e., the land in question becomes fully vacant till such time as the
roof of the ground floor is constructed. Once such construction is
made after obtaining the sanction plan, by no stretch of
imagination can the land be said to be vacant, as it now contains
a building, with a constructed roof in accordance with the
sanctioned plan. According to him, any other interpretation will
create a huge discrimination between those parties who are
seeking to construct a building and others who are enjoying the
benefit of a constructed building. In the case of a newly
constructed building, once the construction is complete, the
rateable value will not exceed Rs. 1 to 4 lakhs whereas a
percentage of the capital value of the land at 5%, the same would
be in the region of Rs. 3 to 4 crores. This discrimination which is
60-80 times would be totally without any justification because no
new or additional benefit are accruing to a party which is
demolishing and reconstructing the property, rather a great health
hazard will be created with the old building are continued to be
used in that dilapidated stage.
51) He, thus, argued that a 5% levy is wholly arbitrary and does not
serve any purpose also for the reason that no municipal services
whatsoever whether sewerage, water or electricity are really
being provided by the NDMC to a demolished property because
there is no resident, but only a limited extent of water and
electricity is used for the purposes of construction. Emphasizing
that property tax is really in the nature of a fee on account of the
services rendered by the Municipal Authority. (See: Pradeep Oil
Corporation vs. Municipal Corporation of Delhi and Anr.;
(2011) 5 SCC 270).
52) He submitted that the levy must commensurate to the services
rendered by the authority. On that basis, Mr. Tripathi has sought a
direction from this Court to the NDMC to formulate Bye-laws in
respect of Section 63(2) as well and/or laid down guidelines in the
case of those building where pursuant to sanction plan existing
building is demolished and a fresh building is constructed, the
property tax during the period of vacancy of the land due to the
demolition of the building, be determined at the same rate, as the
building upon construction based on the sanction plans would be
subject to. Further, any in any case this period during which
rateable value would be determined under Section 63(2) should
be limited to from the period of demolition of the existing
structure/building till such time as the roof of the ground floor is
laid and constructed.
53) Ms. Maninder Acharya, M/s. Mukul Rohatgi, Sanjay R. Hegde,
Huzefa Ahmadi, B.B. Gupta, Ms. Vibha Datta Makhija, learned
senior counsel, M/s. Sanjeev Anand, B.B. Jain and many other
counsel appeared on behalf of the different respondents/
assessees and defended the judgment of the High Court. It may
not be necessary to separately state the arguments advanced by
these counsel. Instead the arguments of these counsel are noted
below in a consolidated manner.
54) Before concentrating on the main issue of ultra vires, the counsel
for the respondents highlighted that under the impugned Bye-
laws NDMC is demanding/collecting property taxes on
unconstructed/vacant land which are otherwise incapable of
being constructed upon. This is notwithstanding the fact that
Section 63 of the NDMC Act stipulates the annual rateable value
(ARV) can only be determine don the basis of constructed/vacant
land which is capable of being constructed upon. In order to
show that a large portion of land falling under the jurisdiction of
NDMC cannot be built upon, following aspects are highlighted:
A. A majority of the properties of NDMC are situated in the
Lutyens’ Bungalow Zone (“LBZ” and are governed by the LBZ
Guidelines dated 8th February, 1988, which not only prohibit
construction on a large part of the plots falling in LBZ but also
severely restrict new development and construction beyond the
area previously constructed upon.
B. Similar restrictions exist for properties falling within the
‘prohibited areas’ and ‘regulated areas’ declared by the
Archaeological Survey of India (ASI) under the Ancient
Monuments and Archaeological Sites and Remains Act, 1958 and
amendments thereto.
C. Given limitations of building bye-laws, such a legally
required setbacks, it is quite clear that there are portions of the
property that owners are compelled by law to leave vacant.
Larger plots of land also require larger setbacks and lesser
ground coverage.
55) It is submitted that the above three restrictions make it impossible
to construct on the entire plot of land, and result in large portions
of these plots becoming unconstructed/vacant land that are not
capable of being built upon. In fact, over 50% of properties falling
with the NDMC jurisdiction are governed by either LBZ Guidelines
and/or by ASI regulations. The respondents argue that, it is
completely discriminatory vis-a-vis properties situated outside
such areas to levy heavy taxes on such vacant land when
development thereupon is strictly prohibited.
56) It is also argued that on such properties, no property tax can be
levied. Support from the judgment of the High Court of Delhi, in
the case of Municipal Corporation of Delhi vs. Shashank
Steel Industries (P) Ltd.8 is taken in this behalf wherein the
Court interpreted the expression ‘capable of being built upon’
appearing in Section 116(2) of the Delhi Municipal Corporation
Act, 1957, which is stated to be in pari materia with Section 63(2)
of the NDMC Act. Therein, that High Court has held that property
tax is leviable only in respect of land which is otherwise ‘capable
of being built upon’ and where construction is permission. It was
submitted that the civil appeal filed by the Municipal Corporation
of Delhi against the decision of the Full Bench was dismissed by
this Court.
57) The impugned Bye-laws are also questioned as violative of Article
14 of the Constitution of India on the ground that they lack
reasonable classification. All areas under the NDMC from B.K.
Dutt Colony to Golf Links to Bengali Market to Prithviraj Road, are
treated at par in that the same base UAV Rs. 1,000/- per sq. mtr.
(later increased by 20% to Rs. 1,1200/- per sq. mtr. w.e.f.
01.04.2013) is imposed on them even though the rent that they
would fetch is in no way comparable. The Annual Rateable Value
for two buildings/houses (of say 1,000 sq. mtr. each built between
2000-09 on plots below between 500 to 1,000 sq. mtrs.) one in
B.K. Dutt Colony and the other on Golf Links, where both are
8 100 (2002) DLT 66 (FB)
used as a residence by the individuals who own them, would be
the same, calculated by the formula below:
bona fide Annual Rateable Value of the Covered Space
=Base unite Area Value x Covered Space x Age factor x Use
Factor x Occupancy Factor
=1,200x1,000x1x1x1.5x1=18,00,000/- less 10% deduction
= Rs. 16,20,000/-
58) It is submitted that fixing the same base unit area value for all the
colonies falling within the jurisdiction of the appellant ignores the
roles, location and social factors play in determining annual rent
and thus tax, and accordingly treat unequals as equals. This is
argued as discriminatory, as held in State of Kerala vs. Haji
Kutty9 wherein this Court held that “imposing a uniform tax on
objects, persons or transaction essentially dissimilar may result in
discrimination”. Comparison is made with the Scheme adopted
by the MCD, which has divided the area under its jurisdiction into
six different zones and has provided a separate location factor for
each zone for calculating the property tax.
59) Further submissions predicated on Article 14 of the Constitution
are as under:
9 AIR 1969 SC 378
(i) The impugned Bye-laws seek to impose onerous terms
upon firms, companies, trusts etc. by denying the benefit of self-
occupation use to their properties in which their
partners/directors/employees/trustees reside, and charging three
times the property tax being charged from individual assessees.
Such impermissible impugned Bye-laws have been made in utter
disregard of Section 66 of the NDMC Act, sub-section (1) of which
clearly mandates that:
"The property tax shall be primarily leviable as follows:-

(a) if the land or building is let, upon the lessor;
(b) if the land or building is sub-let, upon the superior
lessor;
(c) if the land or building is unlet, upon the person in
whom the right to let the same vests.”
This Section clearly contemplates the classification of unlet
land or building as a single category if there is no lease/sub-
lease, therefore, suggesting that such properties owned by firms,
companies or trusts etc. fall in the same class as self-occupied
properties. Such unequal treatment is indubitably discriminatory.
(ii) Furthermore, the impugned Bye-laws seek to tax the
property not on the basis of its user but on the basis of the legal
status of the owner, which goes against the principle that property
tax is a tax on a property and not a tax on the owner. This is also
discriminatory as many beneficial owners of the property hold the
same through a firm, company, trust, etc. for reasons such as
estate planning, family settlements, synergies of business, court
decrees, business exigencies etc. and they cannot be penalised
on the basis of nature of ownership and that too for a historic and
irreversible act done by them or their predecessors-in-it.
(iii) The service provided by NDMC towards sewage, public
health, streets, roads, drainage, parks etc. does not change and
there is no qualitative and quantitative difference in the same for
firms, companies, trusts etc.
(iv) The impugned Bye-laws [Bye-law 4(6)] seek to impose
unreasonably and discriminatory onerous terms upon the
assessees putting their property to any permissible use “other
than residential” by charging a six times factor for calculating the
Annual Rateable Value of covered space. This omnibus category
of “Other than Residential” does not envisage multiple diverse
uses that a property may be put to an unreasonably and
arbitrarily clubs all uses “other than residential” into one category
without providing any distinction between a use which is likely to
yield profits and/or cause more burden on the infrastructural
facilities of the appellant and other uses which may be non-profit
and/or do not cause an additional excess burden on the
infrastructure as compared to residential use. This is in stark
contrast to the MCD Act, which, in Section 116A classifies vacant
land and buildings into colonies and groups and specifies base
area value thereafter. In this calculation, use wise categorization
is done, nut just into ‘residential’ and ‘other than residential’, but
into categories like business building, mercantile building, building
for recreation, public purpose building, etc. Bye-law 6 of the Delhi
Municipal Corporation (Property Taxes) Bye-laws 2004 goes so
far as to exempt land or buildings used for charitable purposes
such as orphanages, hospitals and schools that are free of cost,
etc. This demonstrates a significant application of mind by the
MCD in contrast to the appellant herein.
The outcome of the Impugned Bye-laws is that if a trust
owns a property which is used partly for the residential purpose of
its trustees and partly for running a charity, the tax obligation
would be many times the amount of tax payable by a house next
door which is owned by the individual who resides in it, both on
account of the multipliers for non-self occupied and ownership not
by an individual. This scenario is unreasonable and violative of
Article 14.
(v) Properties which are designated for residential use [as per
the city master plan] and are put to ‘residential cum office use’ by
foreign/diplomatic missions operating out of such properties as
permitted under applicable law (whether as owner or tenant)
cannot be treated as “other than residential” and consequently be
subjected to higher factor for calculating the Annual Rateable
Value of covered space.
(vi) Rationality of the impugned Bye-laws is also questioned on
the ground that under the impugned Bye-laws, if some portion of
the covered space of the property is partly rented and the
remaining covered space of the property is self-occupied, the
impugned Bye-laws do not give a self occupation rebate on the
unconstructed/vacant land {i.e. applying the current base unit
area of Rs. 1,200/- per sq. mtr. Instead of Rs. 600/- per sq. mtr.)
even though the unconstructed/vacant land may be I n complete
occupation/enjoyment of the owners. Even in cases where as
little as one room in the barsati floor or outhouse is rented and the
tenant is not given any access to the unconstructed/vacant land
(except right of entry/ingress from the main gate/driveway), the
landlord/owners would be obligated to pay an inexplicably and
substantially higher amount of property tax.
(vii) As per the Bye-law 4(8) of the impugned Bye-laws, in case
of commercial properties, the Annual Rateable Value of the
covered space as per the impugned Bye-laws is the value arrived
under the Impugned Bye-laws or the actual rent fetched,
whichever is higher. Grievance is that in this way, the NDMC is
trying to achieve best of both worlds, which is not consistent with
the “optionality” underlying the impugned Bye-laws. Moreover,
after the NDMC has taken the stand that the impugned-Bye-Laws
seek only to provide a method by which to calculate the annual
rent, it is incongruous that the actual rent be taken into
consideration.
(viii) Given that Delhi is one state, there is no reason for different
systems between the NDMC and MCD areas. For this purpose,
reference is made to the case of State Trading Corporation of
India Ltd. case wherein a Single Judge of the High court of Delhi
observed as under:
"37. Before parting with this judgment, I must express my

anguish at the fact that though Delhi is one city, different
parameters are being followed by Municipal authorities in
the same town. It is only for purposes of convenience that
jurisdiction have been divided among NDMC, MCD and
Delhi Cantonment Board. The least that is expected is that
all these Municipal authorities should act at tandem and
follow similar principles in determination of rateable value.
Merely because the house of one person falls in one area
or the other, which may even be adjacent, and a different
Municipal authority is dealing with the issue of
determination of rateable value, should not imply totally
different concepts in determination of such rateable value.
It is appropriate that all the Municipal authorities must
meet and consider this aspect to bring a uniformity in the
system of determination of the rateable value in parts of
Delhi when they fall within one jurisdiction or the other.
This is more so as the provisions under said Act and the
DMC Act are para materia. The MCD, in fact, now
proposed to apply a different concept of a unit method of
taxation, but so far, the NDMC has not finalised any
proposal in the same terms.”
It is argued that although the appeal against the said
decision was allowed by a Division Bench of the High Court of
Delhi in NDMC vs. State Trading Corporation10, the aforesaid
observations were neither overruled nor commented upon by the
Division Bench and do hold good. In any case, appeal against
the judgment of the Division Bench was thereafter allowed by this
Court in State Trading Corporation case. Therefore, as per the
respondents, these observations do hold the field.
(ix) It is also submitted that the impugned Bye-laws seek to
penalise private citizens at the cost of the union and state
instrumentalities. Out of the total NDMC area of land about 90%
of the land is owned by the Government itself and the rest 10% is
owned by the individuals, body corporates etc. As the
Government has been exempted from paying taxes, therefore the
burden to pay tax is on the persons, who occupy only 10% land of
the total NDMC area. This according to the respondents is
discriminatory and in violation of Article 14 of the Constitution of
India.
60) Adverting to the issue of ultra vires which has appealed to the
High Court thereby quashing the impugned Bye-laws, the

10 126(2006) DLT 191
respondents supported the reasons given by the High Court in
this behalf. Emphasizing the fact that as per Section 63(1) of the
NDMC Act, annual rent to be arrived at has to be the rent which
such land or building might reasonably be expected to be let from
year to year. Respondents emphasised that Section 63(1) uses
the word ‘rent’ and not ‘value’ and, therefore, the only way for
determining the annual rent is to see the ‘rent’ which the
properties likely to reasonably fetch. The respondents have
submitted that this language contained in Section 63(1) of the
NDMC Act has come up for interpretation before this Court in
number cases and interpreted in the same manner in which the
High Court has dealt with the issue. The respondents, in this
behalf, referred to the following judgments:
(i) The Corporation of Calcutta vs. Smt. Padma Debi and
Others11;
(ii) The Guntur Municipal Council vs. The Guntur Town

Rate Payers’ Association etc.12
(iii) Dewan Daulat Rai Kapoor vs. New Delhi Municipal

Council and Others13
(iv) Indian Automobiles Ltd. vs. Calcutta Municipal

Corporation and Anr.14
(v) State Trading Corporation case
11 (1962) 3 SCR 49
12 (1970) 2 SCC 8703
13 (1980) 1 SCC 685
14 (2002) 3 SCC 388
61) It is thus argued that the High Court has rightly held that the UAM
is not a means or method of collecting the rent for which a
property might reasonably be expected to let. In support of this
contention, the respondents referred to some of the Bye-laws and
the position thereunder which according to the respondents
makes it clear that UAM introduced in the impugned Bye-laws is
completely foreign to the methodology of ‘annual rent’ provided
under Section 63. The Bye-laws referred to are as below:
62) Bye-laws 4(6) introduces a “multiplication factor for use and
occupancy of the covered space”, wherein the multiplication
factor for residential use is 1 but all other use is 6. Similarly, for
self occupied or vacant properties, the multiplication factor is 1
whereas for others it is 3. As per the explanation to this Bye-law.
"premises owned by companies, firms, trusts, etc. and

used by the directors, employees or partners for residence
or guest house shall not be treated as self occupied by the
owners.”
63) Thus, by way of illustration, a property owned by a trust and used
by it as a guest house or to run a charity would be taxed 18 times
what an identical self occupied residential property would be
taxed. Properties fetch the same rent whether they are owned by
an individual or a trust, whether they are used as a residence or a
guest house. This Bye-law is thus directly contrary to the
contention that the Impugned Bye-laws are a method of
computing rent.
64) The impugned Bye-laws provide for the calculation of tax to begin
by multiplying the total covered area by an assigned base UAV of
Rs. 1,000/- per sq. mtr. (revised to Rs. 1200/- per sq. mtr. w.e.f.
01.04.2013), irrespective of location. The appellant thus seems
to be inexplicably equating the rent a property which a house in
B.K. Dutt would fetch with one in Golf Links or Prithviraj Road.
65) Factors such as location, neighborhood, corner plot, architectural
style, etc. which play a significant role in ascertaining the rent a
property would fetch are ignored in the impugned Bye-laws.
66) It is, thus, argued that the Impugned Bye-laws are not a means of
calculating the rent a property would fetch. To the contrary, they
lay out a method that is entirely different from the parent
legislation. Respondents also point out difference in the following
manner:
(a) Firstly, Section 63(2) of the NDMC Act provides for taxation
only on land capable of being built upon. Given that parts of the
NDMC area fall under the Lutyens’ Bungalow Zone (‘LBZ’) or
‘prohibited’ or ’regulated area’ declared by the Archaeological
Survey of India under the Ancient Monuments and Archaeological
Sites and Remains Act, 1958 (including the rules framed
thereunder), and given that building bye-laws require certain
setbacks to be left vacant, the unconstructed/vacant land is often
not capable of being built upon. Bye-law 4(2), which provides for
calculation of bona fide value of land not constructed upon,
ignores this aspect and thus contradicts the parent legislation.
(b) Secondly, the categories created under the Bye-law 4(6) are
different from the classification envisaged under the NDMC Act
and in particular classification of property in Section 62 and 65 of
the NDMC Act. Section 66 of the NDMC Act creates three
categories of properties – those which have been let, those which
have been sub-let and those that are not let out at all. The
impugned Bye-laws, however, create an entirely different method
of categorization.
(c) Furthermore, the Impugned Bye-laws confer extensive
powers upon the Valuation Committee in Bye-Law 5, which
amounts to excessive delegation of power in a manner that has
not even been envisaged in the parent statute.
Consideration of the arguments:
67) In the first place, we take up the fundamental issue, namely,
whether the impugned Bye-laws are ultra vires Section 63 of the
NDMC Act? As noted above, judgment of the High Court is
confined to this issue alone. As can be seen from the legislative
scheme contained in various provisions pertaining to property tax,
Section 60 is the charging Section which authorizes the NDMC to
levy various types of taxes including property tax. As per sub-
section (3), tax can be assessed and collected in accordance with
the provisions of the Act and Bye-laws made thereunder, rates at
which the property tax can be charged are mentioned in Section
61. This Section, inter alia, provides that the property tax shall be
levied on lands and buildings in New Delhi and shall consistent of
not less than 10% and not more than 30% of the rateable value of
lands and buildings. Thus, property tax can be charged on lands
and buildings for which rates can be prescribed and these rates
have to be between 10% to 30%. Further, this percentage is of
the ‘rateable value’ of lands and buildings. Definition of ‘rateable
value’ is given in Section 2(42) of the NDMC Act to mean ‘the
value of any land or building fixed in accordance with the
provisions of this Act and Bye-laws made thereunder for the
purposes of assessment to property taxes’.
68) Various premises, viz: lands and buildings, in respect of which
property tax can be levied are mentioned in Section 62. Insofar
as rateable value is concerned, the manner of determination
thereof is specified in Section 63 of the Act. Since, the method of
determination is the fulcrum of the dispute, Section 63 assumes
importance for the purposes of deciding the issue in these
appeals. It is also an accepted position that the interpretation that
is to be given to this provision would lead to the outcome of the
case. For these reasons and for the sake of continuity and clarity,
we reproduce Section 63(1) and (2) thereunder:
"Section 63 : Determination of rateable value of lands and

buildings assessable to property tax-
1. The rateable value of any lands or buildings assessable to

any property taxes shall be the annual rent at which such land
or building might reasonably be expected to let from year to
year less a sum equal to ten per cent of the said annual rent
which shall be in lieu of all allowances for cost of repairs and
insurance, and other expenses, if any, necessary to maintain
the land or building in a state to command that rent:
Provided that in respect of any land or building the standard

rent of which has been fixed under the Delhi Rent Control Act,
1958 (59 of 1958) the rateable value thereof shall not exceed
the annual amount of the standard rent so fixed.
2. The rateable value of any land which is not built upon but is
capable of being built upon and of any land on which a building
is in process or erection shall be fixed at five per cent of
estimated capital value of such land.”
69) As per Section 63(1) rateable value of any lands or building
assessable to any property taxes is the ‘annual rent’. Further,
such annual rent has to be determined ‘at which such land or
building might be reasonably be expected to let from year to
year….’ .
70) The ‘rateable value’, as per Section 2(42) of the NDMC Act is to
be fixed in accordance with the provisions of the Act and the Bye-
laws made thereunder. Therefore, the first question is as to what
are the provisions made in this behalf in the Act. For this Section
63 comes into play which prescribes that ‘annual rent’ would be
rateable value. This annual rent, as per this provisions, is one
such land or building is expected to let from year to year minus
10% thereof. The Impugned Bye-laws lay down the procedure for
fixing of annual rent on UAM. This leads us to the question as to
whether this UAM can be stated to be the method of arriving at
annual rent which land or building is reasonably expected o let
from year to year? Here it may be noted that as per NDMC,
Section 63 does not prescribe any particular method for arriving
at annual rent and, therefore, this gap has been filled up by the
Impugned Bye-laws by prescribing the formula based on UAM. It
would be difficult to accept such an interpretation of Section 63(1)
as sought to be given by the learned senior counsel for NDMC.
71) Section 63(1) is not silent on how to determine the annual rent of
a property. This annual rent has to be the one which the land or
the property ‘might reasonably be expected to let from year to
year’. It is, thus, based on the letting yearly value of the property.
Such a conviction has come up for interpretation before this Court
in a series of cases right from 1960s till date. It would be relevant
to note that similar language was used in the unamended
provisions of Delhi Municipal Corporation Act as well as similar
acts of some other states.
72) The Corporation of Calcutta vs. Smt. Padma Debi and
Others15 has analyzed the words ‘gross annual rent at which the
land or building might reasonably be expected to let from year to
year”. In a similar provision under the Calcutta Municipal Act,
1923 as Section 63(1) and held as under:
"We shall first look at the provisions of the section to ascertain

the meaning: The crucial words 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". The dictionary meaning of
the words "to let", is "'grant use of for rent or hire". It implies that
the rent which the landlord might realise if the house was let is
the basis for fixing the annual value of the building. The
criterion, therefore, is the rent realisable by the landlord and not
the value of the, holding in the hands of the tenant. This aspect
has been emphasized by the Judicial Committee in Bengal
Nagpur Railway Company Limited v. Corporation of Calcutta
(AIR 1942 Calcutta 455)(1).
15 (1962) 3 SCR 49
73) In the case of The Guntur Municipal Council case, this Court
again analyzing similar provision under the Madras District
Municipalities Act, 1920 held as under :
"……………Section 82 gives the method of assessment. It

is provided by sub-section (2) of that section that the
annual value of lands and buildings shall be deemed to be
the gross annual rent at which they may reasonably be
expected to let from month to month or from year to year
less certain deductions. …..
…………..Now Section 82(2) of the Municipalities Act, as

stated before, makes provision for the fixation of annual
value according to the rent at which lands and buildings
may reasonably be expected to be let from month to
month or from year to year less the specified deduction.
The test essentially is what rent the premises can lawfully
fetch if let out to a hypothetical tenant. The municipality is
thus not free to assess any arbitrary annual value and has
to look to and is bound by the fair or the standard rent
which would be payable for a particular premises under
the Rent Act in force during the year of assessment…….”
74) In Dewan Daulat Rai Kapoor case, this Court held as under:
" …..The criterion is the rent realisable by the landlord and

not the value of the holding in the hands of the tenant. The
rent which the landlord might realise if the building were let
is made the basis for fixing the annual value of the
building. The word “reasonably” in the definition is very
important. What the landlord might reasonably expect to
get from a hypothetical tenant, if the building were let from
year to year, affords the statutory yardstick for determining
the annual value. Now, what is reasonable is a question of
fact and it would depend on the facts and circumstances of
a given situation. …...”
75) Similarly, in Indian Automobiles Ltd. case, it was held that the
criterion for calculating annual valuation must be the rent
realizable by the landlord and not the value of holdings, and that
the word ‘reasonably’ in the Section was a question of fact.
76) In State Trading Corporation case, while dealing with certain
other Bye-laws as against the NDMC Act came to the conclusion
that:
"7. …...Since there is a provision and procedure under

Section 63 of the NDMC Act for calculating the annual
rent, one need not refer at all to the bye-laws as quoted
above since they are apparently inconsistent with the
provisions of the NDMC Act. In short, it is impermissible to
refer to the bye-laws framed under the Punjab Act in view
of specific provisions made under the NDMC Act providing
for the levy, assessment and collection of property tax.
8. Therefore, the only basis for fixation of rateable value is

the annual rent at which the land or building might
reasonably be expected to be let from year to year, subject
to the deductions provided under the Act.”
77) The aforesaid judgments give a clear message that annual rent is
to be the one which the landlord might realize if the house was
let. The criteria, thus, is the rent realizable by the landlord and not
the value of the holding. The test essentially is what rent the
premises can lawfully fetch if let out to a hypothetical tenant. In
the Guntur Municipal Council case, this Court made it clear that
having regard to the provision in the Act, the municipality was not
free to assess any arbitrary annual value and has to look to and
is bound by the fair or standard rent which would be payable for a
particular premises under the Rent Act in force during the
assessment.
78) In State Trading Corporation, which was a case directly dealing
with this very provisions, namely, Section 63 of the NDMC Act,
the Court again reiterated in unambiguous terms ‘the only basis
for fixation of rateable value is the annual rent at which the land
or building might reasonably be expected to let from year to year,
subject to the deductions provided under the Act’.
79) Even in common parlance, simple language of Section 63(1)
clearly conveys that the rateable value is the annual rent which
the property is likely to fetch. The yardstick is the ‘letting’. Two
words used in this Section convey this meaning very clearly,
namely, the word ‘rent’ in the phrase ‘annual rent’ and the word
‘let’. Therefore, annual rent is to be determined on the basis of
the letting value which is expected reasonably. In cases where
the property is already let out, actual rate at which the property is
let out becomes the amount at which the land or building is
reasonably expected to fetch. Exception may be those cases
where the property is let out actually at a rent which is lesser than
the rent it would be fetched otherwise. This is the ratio of
Mehrasons Jewellers Private Limited2. It was a case in
respect of premises not controlled by Delhi Rent Control Act.
This Court held that the annual rent received by the landlord is
what willing lessee uninfluenced by other circumstances would
pay to the willing lessor; actual annual rent in these
circumstances can be taken as the annual rateable value of the
property for assessment of property tax.
80) The question directly arose for consideration in Government
Servant Cooperative House Building Society Limited and
Others vs. Union of India and Others16, this Court noticed the
1988 amendment to the Delhi Rent Control Act and various
judgments referred to hereinabove by us and concluded as
under:
“8. Therefore, the annual rent actually received by the

landlord, in the absence of any special circumstances,
would be a good guide to decide the rent which the
landlord might reasonably expect to receive from a
hypothetical tenant. Since the premises in the present
case are not controlled by any rent control legislation, the
annual rent received by the landlord is what a willing
lessee, uninfluenced by other circumstances, would pay to
a willing lessor. Hence, actual annual rent, in these
circumstances, can be taken as the annual rateable value
of the property for the assessment of property tax. The
municipal corporation is, therefore, entitled to revise the
rateable value of the properties which have been freed
from rent control on the basis of annual rent actually
received unless the owner satisfies the municipal
corporation that there are other considerations which have
affected the quantum of rent.”
16 (1998) 6 SCC 381
81) In case there is a proof and/or material to find out that the
reasonable rent could have been more than at which it is actually
let out, the actual rent receipt can be discarded by adopting the
expected rent which, on the basis of material, can be said to be
reasonable. In those cases where the property is self-occupied
or is vacant and not let out, it can be gathered from the rent at
which a comparable property is let out. However, in such a case
there would be two situations. Going by the dicta laid down in
Dewan Daulat Rai Kapoor and other cases, the reasonable rent
would be the standard rent which can be determined under the
provisions of Delhi Rent Control Act. However, this principle
would be applicable only in respect of those properties where
Delhi Rent Control Act applies. In other cases, the yardstick
would be the letting value of comparable properties, i.e., the rent
at which comparable properties are let out. However, such
criteria of fixation of standard rent has lost its relevance after the
judgment of the Delhi High Court in Raghunandan Saran Ashok
Saran (HUF) vide which Sections 4,6 and 19 of the Delhi Rent
Control Act which deal with fixation of standard rent, were
declared as ultra vires of the Constitution of India. The aforesaid
decision has been affirmed by this Court in State Trading
Corporation of India Ltd. case.
82) Be as it may, in the context of the issue at hand, we emphasize
that it is the annual letting value fixed in the aforesaid manner
which can be the annual rent and not the value of the property in
question. The expression ‘annual rent’ is to be read in
contradistinction to ‘annual value’. Two concepts are altogether
different. Inasmuch as the latter expression relates to annual
value of the property which may be based on parameters
different from fixing the annual rent of the property.
83) Having cleared the aforesaid aspect, we need to discuss as to
whether UAM specified in the impugned Bye-laws aims to strive
at ascertaining ‘annual rent’? If the answer is in the affirmative,
only then one can say that the impugned Bye-laws are in tune
with the provisions of Section 63(1) of the NDMC Act. After going
through the Bye-laws and the manner in which the rateable value
is fixed, we are constrained to observe that it is not in sink with
the scheme of Section 63(1) of the NDMC Act. To recapitulate in
brief, Bye-law 4 stipulates that the bona fide annual value of land
not covered under Bye-law 3 would be the annual value of land
and bona fide annual value of the covered space of the building.
Bye-law 3 seeks to fix the entire value of land falling in the
jurisdiction of New Delhi at the circle rate of Rs. 43,000/- (Rupees
Forty Three Thousand only) per square meter. Likewise, Bye-law
4(10) where annual rent of any building is determinable under
more than one-sub-bye-law, the annual rent shall be the
aggregate of the annual value determined under sub-bye-law of
this Bye-law. We, therefore, reject the arguments of the
appellants and do not deem it necessary to deal therewith any
further.
84) Thus, we agree with the High Court that the Impugned Bye-laws
that provide UAM which is based on value of the property that on
rental which the property is likely to fetch and are, there, foreign
to the methodology provided in Section 63 of the NDMC Act.
Such Bye-laws are, thus, ultra vires the provisions of NDMC Act.
They are in excess of the scope and ambit of powers vested in
the NDMC Act under Section 388(1)(A)(9) of the NDMC Act.
85) As rightly contended by the assessees, initially, same was the
thinking process in the NDMC as well inasmuch as there was a
move to amend the Act in order to bring UAM for the purpose of
levying property tax. This is how the Municipal Corporation of
Delhi achieved its objective. However, for the reasons best
known to the appellants, without amending the provisions of the
Act it went ahead in bringing Impugned Bye-laws, 2009.
86) No doubt, in many ways, UAM is a better method in comparison
with the earlier method based on annual rent. For this reason,
this method has now been followed for the purpose of levying
property tax not only in the areas in Delhi itself covered under the
Municipal Corporation of Delhi but in many other States as well.
However, such a method which may be a better method can be
incorporated in accordance with the law. In the present case, it
could be done after amending the provisions of the NDMC Act.
Since, we are agreeing with the High Court which has quashed
the Impugned Bye-laws as ultra vires, it becomes meaningless
and irrelevant to go into other issues or other arguments
advanced before us. However, we may only add that once the
appellants take steps for amending the Act and want to
reintroduce the Bye-laws of 2009, many aspects highlighted by
the assessees in respect of Bye-laws would be kept in mind. We
are not suggesting that the contentions raised by the
respondents/assessees relating to validity of different Bye-laws
are well-founded, nor are we suggesting that they are ill-
conceived. This Court has not expressed any views on the
merits of these contentions, either waym as this Court has not
gone into the merits of such contentions. At the same time in
order to obviate any future challenge the NDMC is expected to
keep in mind the arguments of the appellants on these aspects.
87) We may record here that when the matter was heard at a stage
when the counsel for NDMC had argued the matter and even
respondents have made their submissions in reply thereto,
learned counsel for the NDMC before giving rejoinder made a
statement on 16th January, 2018 that the new Bye-laws had been
accepted by approximately 95% assessees. Further, because of
the interim order passed by this Court permitting such assessees
to deposit the property tax on the basis of these Bye-laws, they
had voluntarily deposited the property tax as well on the basis of
self-assessment. Having regard to this, the learned counsel for
the NDMC submitted that the grievances of the
respondents/assessees can be looked into by the Valuation
Committee. Based on this statement, following order was passed
on 16th January, 2018.
"Learned counsel for the respondents have completed

their submissions. The petitioner(s) have to give rejoinder
thereto. Before making the submissions in rejoinder Mr.
Yoginder Handoo, learned counsel appearing for
petitioner(s), has stated that approximately 95%
assessees have accepted the new bye-laws and pursuant
to the order passed by this Court, they have come forward
voluntarily and deposited the property tax on the basis of 4
self-assessment. He submits that some of the grievances
which are stated by the respondents herein in respect to
their properties which according to them are in the
impugned bye-laws can be looked into by the Valuation
Committee. He further submits that Valuation Committee
may be having its sitting within two weeks and may give its
report in this behalf within five weeks. He, therefore,
makes a request to adjourn the matters for five weeks. The
matters stand adjourned to 06.03.2018.
We make it clear that the aforesaid exercise would be

without prejudice to the rights and contentions of the
parties. The petitioners may file its written submissions
during this period. In the meantime, interim order to
continue.”
88) When the matter came up on 6 th March, 2018, Mr. Sanjay Jain
made a statement on behalf of NDMC that the revised guidelines
have been framed and put on website, to which objections have
been invited. He also stated that after receiving and considering
the objections, the matter would be finalized at NDMC’s end. The
respondent/assessee and some others also submitted their
objections to the modified guidelines. These were looked into by
the NDMC and decision thereon was taken by the Chairperson,
NDMC under Bye-law 5(2) of the Impugned Bye-laws after the
Valuation Committee had given its recommendations for the year
2018-19. This decision dated 14 th May, 2018 of the Chairperson
was handed over to the Court. As per this, various objections of
the assessees were considered and decision taken thereon
which are reflected in the tabulated form. Many respondents/
assessees are still not satisfied with the decision taken on various
aspects and the arguments. We, however, leave it to the NDMC
to take a final call thereupon having due regard to the legal
position on these aspects.
89) One last but very significant aspect is still required to be dealt
with. The declaration of Impugned Bye-laws as ultra vires has
created a difficult situation. These Bye-law were framed in the
year 2009. They were struck down by the High Court vide
impugned judgment dated 10th August, 2017. They held the field
from 2009-2017. While issuing notice in these Special Leave
Petitions on 22nd September, 2017, in respect of the direction of
the High Court to pass re-assessment order, this Court observed
that it would be open to the NDMC not to pass such re-
assessment orders. That interim order has prevailed during the
pendency of these appeals. Further, as already noted above,
95% of the assessees are agreeable to pay the tax as per Bye-
laws 2009. They have even paid the taxes on that basis. In
these circumstances, to upset the applecart completely may not
be appropriate. In such a peculiar situation, in exercise of powers
under Article 142 of the Constitution, we direct that those
assessees who have paid the tax as per Bye-Laws, 2009, their
assessments shall not be reopened. Another reason for taking
this course of action is that these assessees are satisfied with the
assessments under Bye-laws, 2009. However, it will not apply to
the respondents herein, namely, those assessees who were the
writ petitioners in the High Court. In their cases, the direction
given by the High Court in the impugned judgment shall prevail.
90) The appeals stand disposed of in the aforesaid terms.
.............................................J.
(A.K. SIKRI)
.............................................J.
(ASHOK BHUSHAN)
NEW DELHI;
JANUARY 22, 2019.

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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(S). 903-930 OF 2019

NEW DELHI MUNICIPAL COUNCIL ETC. .....APPELLANT(S)

ASSOCIATION OF CONCERNED .....RESPONDENT(S)

CIVIL APPEAL NO(S). 964 OF 2019

against the judgment dated August 10, 2017 rendered by High

Court of Delhi in a batch of writ petitions which were filed by the

of the petitions were by the associations of residents as well

(hereinafter referred to as the “assessees/respondents”). In

those writ petitions filed by the assessees they had challenged

the constitutional validity of NDMC (Determination of Annual

Rent) Bye-laws, 2009 (hereinafter referred to as the ‘impugned

Bye-laws’). These Bye-laws changed the earlier regime of

determining the rateable value for the purposes of levying

property tax. These Bye-laws seek to alter the earlier system of

determining the rateable value on the basis of he annual rent at

which the land or buildings may reasonably be expected to be let

a particular percentage was prescribed for the purposes of

payment of property tax. The impugned Bye-laws introduced the

system of Unit Area Method (UAM). As per this method Unique

Area Value (UAV) per sq. ft/meter of a property is fixed with

reference to the characteristics of the property such as location,

occupancy, age, structure of the said property. This UAV is then

multiplied by the area of the vacant land or covered space to

arrive at its annual value. When the annual value is determined

on the basis of such a formula, property tax thereupon is to be

paid by the assessees.

laws have been framed by the Government of India in exercise of

powers conferred by sub-section (1) of Section 391 of the New

Delhi Municipal Council Act, 1994 (hereinafter referred to as the

‘Act’). It is also to be noted that Section 63 of the Act deals with

determination of annual rent. Various grounds were raised

challenging the validity of these Bye-laws and one of the grounds

Bye-laws was foreign to the provisions of Section 63 of the Act,

meaning thereby that the language of Section 63 did not permit

determination of annual value on such a basis as it prescribed the

land or building may reasonably be expected to let from year to

year. It was, thus, argued by the assessees in the writ petitions

that the impugned Bye-laws were ultra vires the provisions of

Section 63 of the Act. The High Court chose to confine itself to

this particular submission and eschewed the discussion on other

grounds on which these bye-laws were also challenged. In the

impugned judgment, the High Court accepts the submission of

Section 388 gives rule making power to the NDMC.

confined to the aforesaid aspect on which High court has

rendered its decision. However, arguments were heard on the

other grounds of challenge as well, so that decision is given on

merits, if the circumstances so warrant. We may also mention at

this stage that many applications for intervention/impleadment

writ petitions in the High Court. Such assessees are satisfied

with the impugned Bye-laws and, therefore, they have not

supported the case set up by the NDMC.

5) Before adverting to the controversy, it would be appropriate to

take note of some relevant facts:

6) As is well-known, during the period of the British India, Delhi

became the capital of India in the year 1911. Even before it

applicable and levied in Delhi in the year 1902. After becoming