Case: Municipal Corporation of Greater Bombay Vs. M/s. New Standard Engineering Company Limited

2. The facts given rise to these appeals briefly are as follows : The respondents - M/s. New Standard Engineering Co. Ltd. is an industrial concern. It has constructed a building for providing housing accommodation for its labourers under a scheme known as the "Government Subsidised Scheme for Industrial Workers". Under the Scheme, the respondent has obtained certain amount by way of subsidy together with a loan advanced by the government. The subsidy and loan were advanced under an agreement dated November 12, 1959 entered into between the government and the respondent. The agreement inter alia, provides that the government being satisfied that the proposed construction would be helpful in implementing the governments scheme for giving an impetus to industrial housing with a view to relieving the acute shortage of houses intended for industrial workers, has agreed to grant a subsidy not exceeding a sum of Rs. 75, 400 and a loan not exceeding a sum of Rs. 1, 50, 000. Clause 5 of the agreement requires the respondent to observe and perform all the terms, conditions and stipulations as in force at the date of Government of India Subsidised Housing Scheme for Industrial Workers including the Subsidised Housing Allotment Rules contained therein. Clause 8 of the agreement reads asThe rent which the loanee shall charge to the allottee for the occupation of one tenement shall not exceed Rs. 26.50 per month, such monthly rent being inclusive of municipal rates and taxes."For the purpose of payment of property tax the Corporation fixed the rateable value of the building by a Special Notice No. 528 of 1959-60 dated March 17, 1960 issued under sub-section (2) of Section 162 of the Act at Rs. 33, 155 and by a Special Notice No. G-558 of 1962-63 dated March 18, 1963 at Rs. 33, 495. Apparently the annual letting value was fixed at an amount higher than the actual rent charged for each of the tenements. It was indeed determined under sub-section (1) of Section 154 of the Act. ItRateable value how to be determined. - (1) In order to fix the rateable value of any building or land assessable to a property tax, there shall be deducted from the amount of the annual rent for which such land or building might reasonably be expected to let from year to year a sum equal to ten per centum of the said annual rent and the said deduction shall be in lieu of all allowances for repairs or on any other account whatever."The respondent questioned the assessment before the Investigation Officer of the Corporation. The case of the appellant has been that the building was erected under the recognised Subsidised Housing Scheme for industrial workers, and under the Scheme, they are restrained from recovering the rent exceeding Rs. 26.50 from each occupant. The rateable value of the building should, therefore, be limited to the actual rentals recovered and not on any other basis. In other words, the plea put forward on behalf of the respondent is that the rateable value of the building should be fixed under sub-section (3) of Section 154 of the Act, and not under sub-section (1) thereof. The Investigating Officer of the Corporation rejected the contentions. The appeal preferred by the respondent before the Chief Judge of the Small Causes Court, Bombay also became unsuccessful. Thereafter, the matter was taken up before the Bombay High Court which has allowed the respondents claim. The High Court has directed the Corporation to re-assess the rateable value of the building taking into account only the actual rentals recoverable from each of the tenants that is at Rs. 26.50 per month which would be the standard rent for each of theThe Bombay Municipal Corporation by obtaining special leave has appealed to this Court challenging the correctness of the decision of the High Court

Court's reasoning:
14. In the instant case, the Corporation has numerous obligatory functions to perform, namely drains and drainage works, scavenging and removal and disposal of refuse and rubbish, construction and maintenance of public streets, bridges, culverts, of works and means for providing water supply, electricity, maintenance of fire brigade, measures for preventing and checking the spread of dangerous diseases etc. (see Section 61 of the Act). All these measures require funds. The property tax appears to be the major source of corporation revenue. Consultation as envisaged under the Explanation is therefore definitely a matter of importance and consequence to the Corporation. Its right to recover normal rates of property tax would be deprived of if the government prepares a scheme for subsidised housing without its consultation. Section 154 provides for fixing the rateable value of the building for the purpose of levying property tax. Sub-section (1) provides a general principle for fixing the rateable value. Sub-section (3) is an exception to that principle and it is required to be followed in certain specified categories. The Corporation is bound to follow the exception provided under sub-section (3) if the building has been erected as part of a recognised scheme of subsidised housing for industrial workers. In such a case, the rateable value shall not exceed Rs. 32.50 for each such tenement inclusive of all service and other charges. That would affect the financial interests of the Corporation. Even according to the High Court the consultation referred to in the Explanation is a safeguard added in favour of the Corporation because the Corporation is likely to suffer to some extent its revenue in a given case. But nevertheless it was held that the consultation is directory and not to be regarded as mandatory. The High Court seems to have erred in this regard. The right to be consulted in opposition to a claim or proposal which will adversely affect its financial interests is to be regarded asThere must be opportunity for the Corporation to express its views on the recognised scheme and the terms thereof. The opinion expressed by the Corporation may not be binding on the government to take decision. The government may take its own decision but consultation with the Corporation must be there on the essential points and the core of the subject involved. The consultation must enable the Corporation to consider the pros and cons of the question as to the concessional rate of property tax. (See : (i) Fletcherv. Minister of Town Planning and Country Planning ( 1947 (2) ALLER 496ii) R. Pushpam v. State of Madras 1953 AIR(Mad) 392 : 1953 (1) MLJ 88 ).). If there is no such consultation the Corporation cannot be compelled to fix the rateable value of the building under sub-sectionFinally, we should refer briefly to one other reasoning adopted by the High Court. The High Court has stated that since the building plans were approved by the Corporation and the construction work was almost complete before the respondent approached the government for subsidy, it will have to be presumed that the government had taken judicial note of the rates likely to be charged by the Corporation or the loss, if any, it was likely to suffer. This assumption is wholly unjustified. No such inference could be possible from the Corporation licence for building construction. Such licence has nothing to do with the property tax to be levied. Our attention has not been drawn to any other material on which the government could have taken note of the rates likely to be charged by the Corporation or the loss that it might suffer in recovering the property tax on the basis of rentals of each tenement at Rs. 26.50. We are, therefore, not impressed with the conclusion reached by the High Court