1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL JURISDICTION FIRST APPEAL NO.2166 OF 2008 IN MUNICIPAL APPEAL NO.141 OF 1997 WITH CIVIL APPLICATION NO.6047 OF 2008 Municipal Corporation of Greater Mumbai Having their office at Mahapalika Marg, Fort, Mumbai 400 001 ...Appellants. (Org. Respondents) vs. M/s. Arco Micaver Pvt. Ltd., Plot No.123, Phase II, M.I.D.C., Marole, Andheri (East), Mumbai 400 059 ...Respondents. (Org. Appellants) Mr.A.Y.Sakhare and N.V.Walawalkar, Special Counsel a/w J.J.Xavier, advs. For the Appellants/B.M.C. Mr.S.C.Naidu, Y.C.Naidu and N.P.Dalvi i/by M/s.C.R.Naidu & Co., advs. For the Respondents. CORAM : J.H. BHATIA, J. JUDGMENT RESERVED ON : 14th August, 2009 PRONOUNCED ON: 1st September, 2009. JUDGMENT: 1 This appeal is filed by the Municipal Corporation challenging the order dated 4.12.1999 passed by the Additional Chief Judge Court of Small Causes whereby he allowed the Municipal Appeal No.141 of 1997 filed by the respondent and set aside the assessment 2 order dated 28.11.1996 passed by the Investigating Officer. 2 Heard the learned counsel for the Parties. Perused the impugned judgment and the relevant documents. Civil Application No. 6047/08 is tendered by the appellant/Municipal Corporation during the arguments for taking additional documents on record. Application is allowed. 3 Admitted facts are that the land bearing plot no.123, Phase II, MIDC, Marol, Andheri (East) was allotted on 99 years lease by MIDC to M/s. Spectrum Finishers by order dated 7.9.1974. The allottee M/s. Spectrum Finishers paid an amount of Rs.75,000/- as a premium towards the consideration for grant of lease and they were also required to pay nominal yearly rent of Rupee one to MIDC. The suit property falls in Ward KE-O9 within the limits of Municipal Corporation of Greater Bombay. M/s. Spectrum Finishers constructed a factory building on the said land and after that the said property was assessed at Rs. 7,085/- as rateable value of the property. With consent of the MIDC, M/s. Spectrum Finishers transferred the lease hold rights over the land with the structure thereon to the respondent, M/s. Arco Micaver Pvt. Ltd. for consideration of Rs.11,60,822/- on 25.11.1994. After this transfer, the respondent has become the lessee of the MIDC for the remaining period 3 of 99 years lease beginning with 1974. Respondent is also to pay nominal annual rent to MIDC. Respondent after purchase of lease hold rights on the land with the structure, moved a proposal to the Municipal Corporation for demolition of the old structure and for construction of new building. Application was sanctioned by the Municipal Corporation on 12.1.96. According to the respondent, after obtaining sanction of the Municipal Corporation, demolition of the existing structure was commenced in September, 1996. Immediately after the proposal was submitted for demolition of old building and for new construction, Special Notice Nos.158 and 158-A were served on the respondents by the appellant about the revision of rateable value to Rs.2,70,000/- p.a. Against that the respondent filed a complaint by letter dated 28.2.1996 and it was registered as complaint no. KECR 491 OF 1995/96. After hearing the parties, Investigating Officer of the Municipal Corporation by letter dated 28.11.1996 fixed the rateable value at Rs.2,70,000/- p.a. with effect from 1.4.95. That order was challenged by the appellant under Section 217 of the Mumbai Municipal Corporation Act, 1888 by filing Municipal Appeal No.141 of 1997 before the Court of Small Cause. According to the respondent, no valid reasons were disclosed in the order for increasing rateable value with effect from 1.4.1995. It is 4 contended that rateable value could not be revised treating the land as “land under construction” and therefore, the assessment is excessive and exorbitant and is liable to be set aside. 4 The present appellant / Municipal Corporation contested that appeal by filing written statement. Besides taking some technical objections to the tenability of the appeal, the Municipal Corporation contended that the owner, i.e., the present respondent had demolished the factory building and the land beneath the structure alongwith the surrounding land forms “buildable plot after removal of debris.” Owner had also started construction work since 1.4.1995 and, therefore, it was decided to revise the rateable value. It is contended that rateable value has been fixed by adopting fair and reasonable rate of Rs.2,500/- psm considering the locality wherein the property is situated. 5 While the present respondent had examined one witness, Rajendra Mahavir Ruia and produced certain documents, the Municipal Corporation mainly relied upon the documents in support of their revision. After hearing the parties, the learned Additional Chief Judge held that there cannot be any class of land as “Land Under Construction” for the purpose of assessment of rateable value and even if the land is under construction, it has to be treated as vacant land for the 5 purpose of assessment. The learned Additional Chief Judge set aside the order dated 28.11.1996 passed by the I.O. revising the rateable value and directed to restore the earlier rateable value with effect from 1.4.1995. That order is challenged in the present appeal by the Municipal Corporation. 6 There is no dispute that after taking the land on lease in 1974, M/s. Spectrum Finishers had constructed a factory building over the same and after construction, the rateable value was assessed with effect from 1.4.1978 . In paragraph 6 of the Civil Application submitted by the Municipal Corporation for production of additional documents. Municipal Corporation has verified that before the construction of the original factory building, plot of the land was assessed at Rs.6,750/- and the same was enhanced after construction of the building to Rs.7,085/- with effect from 1.4.1978. That assessment continued till it was further enhanced by the order dated 28.11.1996 passed by the I.O. In paragraph 5 of the said application, the Municipal Corporation also stated that after purchase of the lease hold rights, the present respondent submitted a proposal and obtained sanction for the construction of new building on the said plot after demolition of existing structure. The said proposal was sanctioned on 12.1.1996 and the demolition of the existing building 6 was started in September, 1996. Contents of the paragraph 5, fully corroborated the contention of the respondent that the demolition of the old building was undertaken from September, 1996. It means old structure was in existence till it was demolished in September, 1996. In paragraph 9 of the said application, Municipal Corporation again stated that while the original plot of land was assessed at Rs.6,750/- and it was enhanced to Rs.7,085/- due to construction of original factory, after the demolition of original building and the construction of new building, assessment was revised to Rs.2,70,000/- as plot of land. In paragraph 7 of the said appellant Municipal Corporation also specifically stated that the new building was under construction and by letter dated 5.1.2000 the Executive Engineer, MIDC, Division No.1 issued building completion certificate. Thus, it is clear that building completion certificate was issued on 5.1.2000 and from that date, building was fit to be occupied and used. It is explained in the said application that when the original factory was constructed against the available F.S.I. of 1, actual .21 F.S.I. was consumed. However, after the demolition of original factory and construction of new factory, which consists of ground plus three floors, almost complete F.S.I. has been used and on the plot area of 1,000 sq.mtrs. actual built up area is 999.02 sq.mtrs. If all these statements are 7 taken into consideration, it appears that while revising assessment to Rs.2,70,000/-, construction of 999.02 sq.mtrs. has been taken into consideration. 7 It appears that before the trial Court, the stand of the Municipal Corporation was that once the old construction is demolished and the land becomes vacant and the new construction is proposed, the land is treated as “buildable land” or “land under construction” and accordingly, it’s assessment has to be made. However, the learned senior counsel for the Corporation before this Court tried to contend that assessment was not made on the basis of “land under construction” but only as “open land.” Attempt was made to place reliance on the Tabulated Ward Report for the fortnight ended on 31st October, 1995 about this report. However, in that report also it is shown as land under construction, total area of the “land under construction” is shown 1,000 sq.mtrs. Value of the land is assessed at Rs.2,500/- psm. Thus, the total cost of the land under construction is shown Rs.25 lakh, 12% of which is shown Rs.3 lakh and after deduction of 10%, rateable value is assessed at Rs.2,70,000/- with effect from 1.4.95. Report shows that construction has been started since 1.4.95 and the land after demolition of the factory and the structure forms “buildable plot after removal of debris.” Contents of 8 the tabulated ward report and the stand taken by the Corporation in Paragraphs 5,6,7 and 9 of the Civil Application No.6047/08 clearly shows that the rateable value was not fixed treating the land as “vacant land” after demolition. In fact, there was no vacant land as on 1.4.95 because the permission for new construction was obtained in January, 1996 and admittedly, demolition of the old structure commenced in September, 1996. If the demolition is commenced in September, 1996 by no stretch of imagination, it could be treated as vacant land or buildable plot after removal of debris as on 1.4.1995 since when the rateable value was revised. 8 In The Municipal Corporation of Greater Bombay v. M/s. Polychem Ltd. AIR 1974 SUPREME COURT 1779, it was clearly held that for the purpose of assessment of rateable value under Section 154, land can be of two types, i.e., “vacant land” or the land on which construction has been completed or constructed to such an extent that atleast a partial completion notice can be given so that the completed portion can be occupied. Their Lordships observed as follows in paragraph 21: “21. The above mentioned authorities of this Court, which were cited before us, enable us to hold that the mode of assessment in every case must be directed towards finding out the annual letting value of land 9 which is the basis of rating of land, and, by definition, “land” includes land which is either being built upon or has been built upon. Nevertheless, a reference to the provisions of the Act shows that , after a building has been completed, the letting value of the building, which becomes part of land, will be the primary or determining factor in fixing the annual rent for which the land which has been built upon “might reasonable by expected to be let from year to year”. All that Section 154 seems to contemplate, by mentioning “land or building”, is that land which is vacant or which has not been built upon may be treated, for purposes of valuation, on a different footing from land which has actually been built upon. But, relevant provisions of the Act do not mention and seem to take no account, for purposes of rating, of any building which is only in the course of being constructed although Section 3(r) of the Act makes it clear that land which is being built upon is also “land”. Hence, so long as a building is not completed or constructed to such an extent that atleast a partial completion notice can be given so that the completed portion can be occupied and let, the land can, for purposes of rating, be equated with or treated as vacant land. It is only when the building which is being put up is in such a state that it is actually and legally capable of occupation that the letting value of the building can enter into the computation for rating “Rebus sic stantibus”. Although, the definition of land, which is rateable, covers three kinds of “land”, yet, for the purposes of rating Section 154 recognizes only two categories. Therefore, all “land” must fall in one of these two categories for purposes of rating and not outside.” In Naman Developers Private Ltd. v. Municipal Corporation of Greater Mumbai and others 2002(6) Bombay C.R. (561), the Division 10 Bench of this Court had an opportunity to deal with the same question. In the light of Supreme Court authority in the Polychem Ltd., it was observed that “All that can be said is that so long as building being constructed on some land is not in a state fit for occupation, it’s rateable value should not be more or less than that of the land which is vacant”. It was further observed that “Therefore, we think that land upon which a building was under construction could and should be rated in the same way as the vacant land”. After referring to the observations of the Supreme Court in Polychem Limited and the observations of the Division Bench in Naman Developers Private Ltd., this Court in Shree Saurashtra Patel Samaj & Another vs. Brihanmumbai Municipal Corporation & Others 2003(6) Bombay C.R. 618 observed as follows in paragraph 12: 12. It is also sought to be contended that mere reference to a plot of land as “the land under construction” or “the building land” for the purpose of identification of such plot would not amount to consideration of land as “the land under construction” for the purpose of revision of the rateable value nor in such circumstances it would be in any manner in violation of the decision of the Apex Court. Undoubtedly, mere reference to a parcel of land as “ the land under construction” used for the purpose of identification of that parcel of land or location of the area in respect of which higher rate is applied as compared to the remaining 11 part of the property of the assessee, may not be in violation of the provisions of law or the order in Polychem case. Though reference to the said expression merely for the purpose of identification of parcel of land may not be in violation of the law and the decision of the Apex Court in Polychem case, yet use of such expression to decide the nature of land in respect of which higher rate is applied, would certainly be in contravention of the law laid down by the Apex Court. In other words, the expressions “ the land under construction” or “the building land” or “the buildable land” are used to identify the location of parcel of land subjected to revision of rateable value then it would be perfectly permissible. However, use of any such expression to identify the nature or condition of any such parcel of land would mean that the rateable value has been revised on the basis of the nature of land as described which would be in contravention of the decision of the Apex Court. Merely the land being under construction cannot be the basis for revision of rateable value. It is only after the completion of the construction work and on the same being made suitable for occupation, that the change in that regard in the land that can be considered and the land can be classified as the land with building. This, however, does not mean that the land which has been developed and the one which is not developed, both should have some rateable value and that is what has been the law explained by the Division Bench in Naman Developers.” 9 Taking into consideration the legal position settled as above , it must be held that Municipal Corporation could not fix the rateable value of the property in question treating the same as “land 12 under construction” or the “buildable land”. The land could have been assessed only as “vacant land” as and when it would have become vacant. In the present case as pointed out earlier, Municipal Corporation revised the assessment with effect from 1.4.95 without any justification because the old structure of the building was in existence on the land for which the rateable value was fixed at Rs.7,085/- since 1.4.1978. Record also reveals that before the construction, rateable value of the open land was Rs.6,750/- and it was enhanced to Rs.7,085/- from 1.4.1978 after construction of the building on the said plot. There was no change in the circumstances till September, 1996 when the demolition was undertaken except that property has changed the hands when M/s. Arco Micaver Private Ltd. had purchased the lease hold rights on the suit property from M/s. Spectrum Finishers. 10 Section 154 of the Bombay Municipal Corporation Act provides as to how rateable value has to be determined. Under Section 155, the Municipal Commissioner may call for information or returns from the owner or the occupier about the details of the property including dimensions of such building or land in portion thereof and the rent, if any, obtained for such building or land. Section 156 requires Municipal Commissioner to maintain assessment book in which certain 13 information has to be entered in every official year. Section 160 provides that when the entries in Class (a), (b), (c) , and (d) of Section 156 have been completed a public notice shall be given; Section 162 provides that whenever such public notice is given, complaint about the assessment of rateable value may be filed within 15 days from the date of publication of the notice. Under Section 162(2), a special notice has to be given where rateable value of any premises liable to payment of property rates has been increased. Under Section 167 assessment book may be amended by the Commissioner during the official year upon the representation of any person concerned or upon any other information at any time during the official year to which assessment book relates. If any changes in the circumstances take place, amendment can be made under Section 167 after giving special notice under Section 162. Therefore, the power of the Municipal Corporation to revise the rateable value due to change in the circumstances and to amend assessment book can not be disputed but for this purpose, it is necessary that there has to be some changes in the circumstances. In the present case, there was no such change with effect from 1.4.95 since then the rateable value was revised. In view of these circumstances, I find that the Small Cause Court was justified in allowing the Municipal Appeal No.141 of 1997. Therefore, I 14 find no substance in the present appeal. 11 In the result, the appeal stands dismissed. (J.H. BHATIA,J.)