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Delhi Rent Control Act will prevail over the NDMC Act: Supreme Court

The Supreme Court, in Atma Ram Properties v. Oriental Insurance Co. Ltd., while interpreting the interplay between the provisions of the New Delhi Municipal Council (NDMC) Act and the Delhi Rent Control Act, 1958 (Rent Act) held that the tax recoverable from the tenant under Section 67(3) of the NDMC Act as arrears of rent cannot be considered as forming part of the rent and that the same cannot be used for seeking eviction/ejection of the tenant who defaults in payment of such recoverable tax as rent.

The respondent was a tenant in respect of property of the appellant paying rent and service tax for the rented premises. Pursuant to the amendment of the New Delhi Municipal Council (Determination of Annual Rent) Bye Laws, 2009, the house tax on the properties situated in the NDMC area was assessable on the basis of Unit Area System and accordingly the house tax payable on the said property in accordance with the Unit Area System comes to Rs.9,64,710/- per annum, i.e. Rs.80,392.50 per month.

The appellant contended that the same is to be paid by the respondent. The appellant, in spite of serving legal notices to the respondent for the payment of the same, did not receive any reply and made payment of the house tax in order to avoid penal action. Another legal notice was sent calling forth the respondent to pay the said amount which was returned. According to the appellant, the tax paid on the suit property was far more than the initial rent, the amount of property tax levied by NDMC and the initial rent became recoverable as arrears of rent and the suit property having fetched rent above Rs.3500/- per month has ceased the protection of the Rent Act and vide legal notice dated 16.6.2010, terminated the tenancy of the respondent.

The respondent issued a reply stating that there is no liability. Therefore, appellant filed a suit for a decree for possession of the tenanted premises, for damages/mesne and for directing an enquiry under Order XX Rule 12 of the Code of Civil Procedure, 1908 for assessment of future damages/mesne profits till the delivery of vacant possession of the tenanted premises. The trial Court passed an order dated 12.8.2013 granting decree of possession of the tenanted premises in favour of the appellant and the High Court by the impugned order set aside the order of the trial Court and has remanded the matter to the trial Court.

Senior Counsel, Dushyant Dave appearing for the appellant argued that as a result of the enactment of the bye laws in 2009, the property tax payable increased and when the respondent failed to pay, the appellant had to pay the arrears of tax. It was contended that the rate of rent per month was Rs.1438/- and after adding the tax, it exceeded Rs.3500/- per month. Therefore, the tenant lost protection of the Rent Act. It was further argued that in Ganga Ram v. Mohd. Usman ILR (1978)1 Del 139, the full bench of the Delhi High Court had held that the landlord is entitled to recover, under Section 121(1) of the said Act, the enhanced amount of house tax from the tenant notwithstanding the contract of tenancy and the provisions of Section 7(2) and Section 4 of the Rent Act. Sub-sections (1) and (3) of Section 121 of the Corporation Act is in pari materia with sub-sections (1) and (3) of Section 67 of the NDMC Act. It was further submitted that the property tax has to be fictionally treated as rent under Section 67(1) of the NDMC Act because in the absence of the same; the landlord would be compelled to pay the whole amount of tax which is recoverable from him and would be left to an expensive and cumbersome remedy of filing a civil suit for recovery of such tax. It is submitted that the liability to pay excess property tax is solely that of tenant and the landlord has been provided with ‘rights and remedies’ for recovery of such amounts as rents.

Senior Counsel, Vikas Singh, Appearing for the respondent argued that the Rent Act is a special enactment, and has a non-obstante clause and the NDMC Act does not contain a non-obstante clause. He pointed out that Section 67(3) of NDMC Act permits the landlord to recover rent. However, for non-payment of the rent which includes tax component, the landlord cannot sue for eviction/ejectment of the tenant. It was argued that Section 67(3) of the NDMC Act merely gives a right to recover the rent and even if the latter enactment was to override the earlier enactment in so far as obviating the effect of Section 7(2) of the Rent Act, still the tax could not be added as a rent for the purpose of determining as to whether the tenant will lose the protection under the Rent Act.

The bench of Justice Jasti Chelamshwar and S. Adul Nazeer, observed that in Ganga Ram’s case, Court held that landlord is entitled to recover, under Section 121 of the Corporation Act, the enhanced amount of house tax from the tenant notwithstanding the contract of tenancy and the provisions of sub-section (2) of Section 7 and Section 4 of the Rent Act and did not consider the question relating to eviction of a tenant under the provisions of Rent Act. Referring to the decision of the court in Life Insurance Corporation of India v. D.J. Bahadur and Ors. (1981)1 SCC 315 and Sanwarmal Kejriwal v. Viswa Co-operative Housing Society Ltd. and Ors., (1990) 2 SCC 288 the court held that “earlier enactment will prevail over a latter enactment even if, there is a non-obstante clause in the latter enactment, if it were to be held that the earlier enactment is a special enactment on the particular subject being in issue”. The Court held that as far the issue of landlord and tenant is concerned, the Rent Act prevails over the NDMC Act.  The Court while dismissing the appeal held that,

“28. Therefore, we are of the view that though the Rent Act is an earlier Act when compared to the NDMC Act, it is a special enactment with regard to the matter in issue and has a non-obstante clause. The NDMC Act is not a special enactment insofar as landlord-tenant issue is concerned and it contains Section 411 which provides that other laws not to be disregarded. Section 67(3) of the NDMC Act merely gives a right to recover the tax in respect of the premises as rent. It does not override the Rent Act insofar as obviating the effect of Section 7(2) of the Rent Act. In our opinion, the tax recoverable from the tenant under Section 67(3) of the NDMC Act as arrears of rent by the appellant cannot be considered to be forming part of the rent for the purpose of seeking eviction/ejectment of the respondent who defaults in payment of such recoverable tax as rent.”

Read the Judgment below:


 

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