Case: M.C.D Vs. Shashnak Steel Industries (P) Ltd

keep in mind the purpose of the Deed in question. What was demised was an industrial plot. Initially, the lessee - Mohan Co-operative Industrial Estate Ltd. was given the authority to sub-lease the industrial plot on such premium and yearly rent as may be fixed by the lessor. Mohan Co-operative Industrial Estate Ltd. was a society registered under Bombay Co-operative Societies Act, 1925; one of its members appears to be M/s. Shashnak Steel Industries Pvt. Ltd. who had agreed under the Deed in question to set up an industrial unit. Under one of the terms, the sub-lessee was required to pay premium and rent to be fixed by the lessor. However, both rent and premium was payable by the sub-lessee to the lessee. As stated, the sub-lessee had agreed to put up at its own expense a factory on the industrial plot within two years from dated 20.2.81. Under the Deed the lessor had to estimate the capital value (including the enhancement) as and when the unit came up. It appears from the Deed that lessor was entitled to a share in the enhanced value. The said Deed further stated that the lessor shall have a right to recover 50% of the unearned increase as and when the lessor gives permission to the sub-lessee to transfer, assign or part with the possession of the plot to any other member of the lessee society. All these terms indicate that under the Deed parties contemplated that on the unit coming up on the leasehold land there would be an accretion in the value. In our view, the provision for premium was only an additional source of revenue. Therefore, we do not find any merit in the contention advanced on behalf of the Corporation that on payment of premium the sub-lessee became the owner of the leasehold rights. Further as rightly held by the High Court there are numbers of restrictions put on the sub-lessee which prevented the sub-lessee from full enjoyment of the leasehold rights. Under Clause 6(a) the sub-lessee was not entitled to sell, transfer, assign or part with possession of the whole or any part of the industrial plot to a person who is not a member of the lessee society - Mohan Co-operative Industrial Estate Ltd. Under Clause 6(b) it was not allowed to transfer, assign or part with possession to any other member of the lessee society, except with the prior consent in writing of the lessor which in its discretion is entitled to refuse such concept. Further, under Clause 6(b), in the event of consent being given, it was open to the lessor to claim a portion of the unearned increase in the value. Under Clause 16, on determination of the sub-lease, M/s. Shashnak Steel Industries Pvt. Ltd. herein had to yield up the industrial plot along with the buildings thereon unto the lessee/lessor. The said restrictions indicate that the said Deed did not operate as a conveyance.14. In this case, we are concerned with the question of primary liability on the vacant land during the period 1982 to 1987. During that period the factory had not come up. Therefore, there was no question of enhanced value on account of accretion taking place during the said period. Therefore, keeping in mind the restriction(s) placed on the sub-lessee we are of the opinion that this is a case of "letting". It is not the case of conferring ownership rights on the sub-lessee. Under the Deed, M/s. Shashnak Steel Industries Pvt. Ltd. remains a sub-lessee. In fact, there is forfeiture/re-entry provided for in the said lease. That right of forfeiture/re-entry can be effected either by the lessor or by the lessee which further shows that the sub-lessee is not in full enjoyment of the leasehold rights in the property in question.15. For the aforestated reasons on interpretation of the perpetual sub-lease dated 20.2.81, we are of the view that the said Deed cannot be construed as a conveyance of leasehold rights in favour of M/s. Shashnak Steel Industries Pvt. Ltd. We are of the view that this case is that of letting. Therefore, we do not find any infirmity in the impugned judgment. We also agree with the view taken by the Delhi High Court that a bare perusal of the Deed would show that the condition imposed on the sub-lessee to pay tax is only as a matter of indemnification and it would not indicate ownership of the leasehold rights in favour of the sub-lessee.16. Coming to the interpretation of the provisions of Section 120(1) of the said 1957 Act, at the outset we may state that the language of the said section suggests that the intention of the Legislature in fixing primary liability of property tax upon the owner of the land is to facilitate the collection of property tax. It is not unreasonable for the Legislature to impose the primary liability upon the lessor and to give him the right of recoupment. In this case, we are concerned only with the question as to whether the Corporation was right in imposing primary liability to pay property tax on the sub-lessee under Section 120(1)(c) of the said 1957 Act. Whether the liability was on Mohan Co-operative Industrial Estate Ltd., is not required to be gone into by us because that is not the case of the Corporation and also because the lease between the President of India and Mohan Co-operative Industrial Estate Ltd. dated 20.3.80 was not produced before us. We also do not know the basis on which premium was payable by the lessee to the lessor. 17. On a bare reading of Section 120(1)(c), in the context of the Deed dated 20.2.81, we find that the said Deed did not operate as a conveyance and that the industrial plot was let out to M/s. Shashnak Steel Industries Pvt. Ltd. Since there was letting in favour of the said company, Section 120(1)(c) of the said 1957 Act did not apply. 18. For the aforestated reasons, we

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In this case great emphasis is placed by the Corporation on the fact that the sub-lessee was required to pay a sum of Rs.16093.60 as premium in addition to rent which according to the Corporation indicated purchase of leasehold rights. According to the Corporation on purchase of leasehold rights the sub-lessee became the owner thereof. We find no merit in this contention. If one looks at the Deed in question we find that the lessor has retained its right to determine periodically the rent payable and the premium chargeable. One has to keep in mind the purpose of the Deed in question. What was demised was an industrial plot. Initially, the lessee - Mohan Co-operative Industrial Estate Ltd. was given the authority to sub-lease the industrial plot on such premium and yearly rent as may be fixed by the lessor. Mohan Co-operative Industrial Estate Ltd. was a society registered under Bombay Co-operative Societies Act, 1925; one of its members appears to be M/s. Shashnak Steel Industries Pvt. Ltd. who had agreed under the Deed in question to set up an industrial unit. Under one of the terms, the sub-lessee was required to pay premium and rent to be fixed by the lessor. However, both rent and premium was payable by the sub-lessee to the lessee. As stated, the sub-lessee had agreed to put up at its own expense a factory on the industrial plot within two years from dated 20.2.81. Under the Deed the lessor had to estimate the capital value (including the enhancement) as and when the unit came up. It appears from the Deed that lessor was entitled to a share in the enhanced value. The said Deed further stated that the lessor shall have a right to recover 50% of the unearned increase as and when the lessor gives permission to the sub-lessee to transfer, assign or part with the possession of the plot to any other member of the lessee society. All these terms indicate that under the Deed parties contemplated that on the unit coming up on the leasehold land there would be an accretion in the value. In our view, the provision for premium was only an additional source of revenue. Therefore, we do not find any merit in the contention advanced on behalf of the Corporation that on payment of premium the sub-lessee became the owner of the leasehold rights. Further as rightly held by the High Court there are numbers of restrictions put on the sub-lessee which prevented the sub-lessee from full enjoyment of the leasehold rights. Under Clause 6(a) the sub-lessee was not entitled to sell, transfer, assign or part with possession of the whole or any part of the industrial plot to a person who is not a member of the lessee society - Mohan Co-operative Industrial Estate Ltd. Under Clause 6(b) it was not allowed to transfer, assign or part with possession to any other member of the lessee society, except with the prior consent in writing of the lessor which in its discretion is entitled to refuse such concept. Further, under Clause 6(b), in the event of consent being given, it was open to the lessor to claim a portion of the unearned increase in the value. Under Clause 16, on determination of the sub-lease, M/s. Shashnak Steel Industries Pvt. Ltd. herein had to yield up the industrial plot along with the buildings thereon unto the lessee/lessor. The said restrictions indicate that the said Deed did not operate as a conveyance.14. In this case, we are concerned with the question of primary liability on the vacant land during the period 1982 to 1987. During that period the factory had not come up. Therefore, there was no question of enhanced value on account of accretion taking place during the said period. Therefore, keeping in mind the restriction(s) placed on the sub-lessee we are of the opinion that this is a case of "letting". It is not the case of conferring ownership rights on the sub-lessee. Under the Deed, M/s. Shashnak Steel Industries Pvt. Ltd. remains a sub-lessee. In fact, there is forfeiture/re-entry provided for in the said lease. That right of forfeiture/re-entry can be effected either by the lessor or by the lessee which further shows that the sub-lessee is not in full enjoyment of the leasehold rights in the property in question.15. For the aforestated reasons on interpretation of the perpetual sub-lease dated 20.2.81, we are of the view that the said Deed cannot be construed as a conveyance of leasehold rights in favour of M/s. Shashnak Steel Industries Pvt. Ltd. We are of the view that this case is that of letting. Therefore, we do not find any infirmity in the impugned judgment. We also agree with the view taken by the Delhi High Court that a bare perusal of the Deed would show that the condition imposed on the sub-lessee to pay tax is only as a matter of indemnification and it would not indicate ownership of the leasehold rights in favour of the sub-lessee.