Holding

The 2009 Bye‑laws are ultra vires the NDMC Act as they replace the statutory method of fixing rateable value based on annual rent, rendering them invalid.

Summary

The New Delhi Municipal Council (NDMC) enacted the 2009 Determination of Annual Rent Bye‑laws, introducing a Unit Area Method (UAM) for fixing rateable value, replacing the earlier method based on annual rent under Section 63 of the NDMC Act, 1994. A batch of writ petitions filed by property owners challenged the constitutional validity of these Bye‑laws, arguing that the UAM was foreign to the statutory scheme and violated Article 14. The Delhi High Court held the Bye‑laws ultra vires, a view affirmed by the Supreme Court, which reasoned that Section 63 expressly requires rateable value to be the annual rent a property might reasonably be expected to fetch, not a value derived from a formulaic UAM. Consequently, the Bye‑laws were declared invalid, but the Court exercised its powers under Article 142 to protect assessments already paid under the Bye‑laws, ordering that they not be reopened except for the petitioners. The appeals were disposed of, upholding the High Court’s decision and preserving the status‑quo for compliant assessees.

Issues considered

The validity of the 2009 NDMC Bye‑laws introducing the Unit Area Method for determining rateable value under Section 63 of the NDMC Act, 1994.
Whether the Bye‑laws are ultra vires the NDMC Act and exceed the powers conferred by Section 388(1)(A)(9).
Whether the Bye‑laws violate the constitutional guarantee of equality under Article 14.
Whether assessments made under the impugned Bye‑laws can be reopened after their invalidation.

Legislation cited

Constitution of Indias. Article 14, s. Article 142
Delhi Municipal Corporation Act, 1957
Delhi Rent Control Act, 1958
New Delhi Municipal Council Act, 1994s. 2(42), s. 388(1)(A)(9), s. 391(1), s. 416(2)(a), s. 60, s. 61, s. 62, s. 63, s. 65, s. 66, s. 67, s. 70, s. 81

Subjects

property taxrateable valueunit area methodultra viresmunicipal taxationArticle 14Article 142excessive delegationassessment listNDMC Act

Judgment

[2019] 2 S.C.R. 331 331

NEW DELHI MUNICIPAL COUNCIL ETC. ETC. A
v.
ASSOCIATION OF CONCERNED CITIZENS OF
NEW DELHI AND OTHERS ETC. ETC.
(Civil Appeal Nos.903-930 of 2019) B
JANUARY 22, 2019
[A. K. SIKRI AND ASHOK BHUSHAN, JJ.]
NDMC (Determination of Annual Rent) Bye-Laws, 2009 –
Writ petitions filed by respondents-assesses challenging the
C
constitutional validity of the 2009 Bye-laws – Impugned Bye-laws
lay down the procedure for determining the rateable value inter alia
on the basis of Unit Area Method (UAM) altering the earlier system
of determining the rateable value on the basis of the annual rent –
Bye-laws challenged by respondents inter alia on the ground that
the UAM of fixing the annual value was foreign to s.63 of the 1994 D
Act – NDMC contended that since s.63, 1994 Act does not prescribe
any particular method for arriving at annual rent therefore, this
gap was filled by the Bye-laws by prescribing the formula based on
UAM – High Court declared the Bye-laws as ultra vires the 1994 Act
– On appeal, held: Rateable value means value of any land or
E
building fixed in accordance with the provisions of 1994 Act and
the Bye-laws made thereunder for the purposes of assessment of
property taxes – S.63, 1994 Act stipulated that the rateable value
of any land or building assessable to property tax shall inter alia be
the annual rent at which such land and building might reasonably
be expected to let – s.63(1), 1994 Act is not silent on how to determine F
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’ – Yardstick is the ‘letting’ – It is the annual letting
value which can be the annual rent and not the value of the property
in question – Manner in which the rateable value is fixed under the
G
Bye-Laws is not in sink with the scheme of s.63(1) of the 1994 Act –
Bye-Laws are foreign to the methodology provided in s.63 of the
1994 Act and thus, ultra vires the provisions of 1994 Act – However,
in exercise of powers u/Art.142 of the Constitution, it is directed
that assessees who have paid the tax as per Bye-Laws, 2009, being
H
331
332 SUPREME COURT REPORTS [2019] 2 S.C.R.

A satisfied with the assessments under the impugned Bye-laws, their
assessments shall not be reopened – However, this will not apply to
the respondents who were writ petitioners in the High Court – In
their cases, the direction given by the High Court in the impugned
judgment shall prevail – New Delhi Municipal Council Act, 1994 –
ss.2(42), 60-63, 65-67, 70, 81, 388(1)(A)(9),391(1) and 416(2)(a)
B
– Delhi Municipal Corporation Act, 1957 – NDMC House Tax
Bye-Laws, 1962 – Delhi Municipal Corporation (Property Taxes)
Bye-Laws, 2004 – Constitution of India – Arts.14 and 142.
New Delhi Municipal Council Act, 1994 – ss.2(42), 61-63,
65-67, 70, 72, 73 and 81 – Essence of – Discussed.
C
Words & Phrases – “annual rent” & “ annual value”–
Difference between– Discussed.
Disposing of the appeals, the Court
HELD: 1.1 Under Section 61 (1) of the NDMC Act, 1994
D 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
E 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
F (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.” Under Section
G 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.” [Para 21, 22] [355-G-H; 356-A-C]
1.2 The expression ‘rateable value’ is defined under Section
2 (42) of the NDMC Act to mean “the value of any land or building
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NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 333
CONCERNED CITIZENS OF NEW DELHI

fixed in accordance with the provisions of this Act and the Bye- A
laws made thereunder for the purpose of assessment to property
taxes.” [Para 23] [356-D]
1.3 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 B
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 C
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.” [Para 24] [356-E-F]
1.4 Section 63 of the NDMC Act sets out the method of D
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 E
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 F
Act’), the rateable value thereof “shall not exceed the annual
amount of the standard rent so fixed.”. 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 G
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

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334 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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. [Paras 25, 26] [356-G-H; 357-A-D]
1.5 Section 66 of the NDMC Act speaks of the incidence of
B 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. 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
C 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.
[Paras 27, 28] [357-D-F]
D 1.6 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
E 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
F 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
G 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

H
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 335
CONCERNED CITIZENS OF NEW DELHI

List and Section 73 for preparation of new Assessment List. Under A
Section 81 the Chairperson of the NDMC Act employs valuers
to give advice or assistance in respect of valuation of any land or
building. [Paras 29, 30] [357-F-H; 358-A-C]
1.7 Section 60, NDMC Act is the charging Section which
authorizes the NDMC to levy various types of taxes including B
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% C
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 D
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’. Various premises,
viz: lands and buildings, in respect of which property tax can be
levied are mentioned in Section 62. The manner of determination E
of rateable value is specified in Section 63 of the Act.
[Paras 67, 68] [376-E-H; 377-A-B]
1.8 As per Section 63(1), NDMC Act 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 F
such land or building might be reasonably be expected to let from
year to year….’ .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. Section 63 prescribes
that ‘annual rent’ would be rateable value. This annual rent, as G
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.
[Paras 69, 70] [377-G-H; 378-A]

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336 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 1.9 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. [Para 71] [378-D]
B 1.10 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. [Para 77] [380-C-D]
C 1.11 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
D 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
E than the rent it would be fetched otherwise. 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
F 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
G 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
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NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 337
CONCERNED CITIZENS OF NEW DELHI

Delhi High Court in Raghunandan Saran Ashok Saran (HUF) vide A
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. [Paras 79, 81] [380-G-H; 381-A, F-H; 382-A-C]
B
1.12 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. After going through
the Bye-laws and the manner in which the rateable value is fixed, C
it is observed that it not in sink with the scheme of Section 63(1)
of the NDMC Act. 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 D
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. The arguments of the appellants is therefore rejected E
and it is not deemed necessary to deal therewith any further.
[Paras 82, 83] [382-C-G]
1.13 The Impugned Bye-laws are 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 F
the NDMC Act. 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 G
reasons best known to the appellants, without amending the
provisions of the Act it went ahead in bringing Impugned Bye-
laws, 2009. [Paras 84, 85] [382-H; 383-A-C]
2.1 In many ways, UAM is a better method in comparison
with the earlier method based on annual rent. For this reason, H
338 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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
B
Act. Since, the High Court which has quashed the Impugned Bye-
laws as ultra vires is agreed with, it becomes meaningless and
irrelevant to go into other issues or other arguments advanced.
However, once the appellants take steps for amending the Act
and want to reintroduce the Bye-laws of 2009, many aspects
C highlighted by the assessees in respect of Bye-laws would be
kept in mind. It is not being suggested that the contentions raised
by the respondents/assessees relating to validity of different Bye-
laws are well-founded, nor it is being suggested that they are ill-
conceived. Supreme Court has not expressed any views on the
merits of these contentions, either way as this Court has not gone
D
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.
[Para 86][383-C-G]
2.2 When the matter came up on 6 th March, 2018, a
E statement on behalf of NDMC that the revised guidelines have
been framed and put on website, to which objections have been
invited. It was 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
F 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 14th May, 2018 of the
Chairperson was handed over to the Court. As per this, various
G objections of the assessees were considered and decision taken
thereon. Many respondents/ assessees are still not satisfied with
the decision taken on various aspects and the arguments.
However, it is left to the NDMC to take a final call thereupon
having due regard to the legal position on these aspects.
H [Para 88] [384-F-H; 385-A]
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 339
CONCERNED CITIZENS OF NEW DELHI

2.3 The declaration of Impugned Bye-laws as ultra vires A
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
B
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 C
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, it is directed that those
assessees who have paid the tax as per Bye-Laws, 2009, their
assessments shall not be reopened. Another reason for taking
D
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.
[Para 89] [385-B-E] E
State Trading Corporation v. New Delhi Municipal
Council (2016) 12 SCC 603 ; The Corporation of
Calcutta v. Smt. Padma Debi and Others [1962] 3 SCR
49 ; The Guntur Municipal Council v. The Guntur Town
Rate Payers’ Association etc. (1970) 2 SCC 803 ; Dewan F
Daulat Rai Kapoor v. New Delhi Municipal Council and
Others (1980) 1 SCC 685 : [1980] 2 SCR 607 ; Indian
Automobiles Ltd. v. Calcutta Municipal Corporation and
Anr. (2002) 3 SCC 388 : [2002] 1 SCR 961 – relied
on.
G
State Trading Corporation of India Ltd. v. New Delhi
Municipal Council AIR 2003 Delhi 295 ; Ashok Singh
v. Asstt. Controller of Estate Duty (1992) 3 SCC 169 :
[1992] 3 SCR 190 ; Assistant Collector of Central
Excise v. National Tobacco Co. of India Ltd.(1972) 2
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340 SUPREME COURT REPORTS [2019] 2 S.C.R.

A SCC 560 : [1973] 1 SCR 822 ; Mafatlal Industries &
Ors. v. Union of India & Ors. (1997) 5 SCC 536 :
[1996] 10 Suppl. SCR 585 ; Raghunandan Saran Ashok
Saran (HUF) v. Union of India and Others 95(2002)
DLT 528 ; P. Ratnakar Rao and Others v. Sate of A.P.
and Others (1996) 5 SCC 359 : [1996] 2 Suppl.SCR
B
866 ; Pradeep Oil Corporation v. Municipal
Corporation of Delhi and Anr. (2011) 5 SCC 270 :
[2011] 4 SCR 764 ; Municipal Corporation of Delhi v.
Shashank Steel Industries (P) Ltd. 100 (2002) DLT 66
(FB) ; State of Kerala v. Haji Kutty AIR 1969 SC
C 378 : [1969] 1 SCR 645 ; NDMC v. State Trading
Corporation, 126 (2006) DLT 191 ; Government
Servant Cooperative House Building Society Limited
and Others v. Union of India and Others (1998) 6 SCC
381 : [1998] 3 SCR 996 – referred to.
D Case Law Reference
AIR 2003 Delhi 295 referred to Para 35
[1992] 3 SCR 190 referred to Para 41
[1973] 1 SCR 822 referred to Para 41
[1996] 10 Suppl. SCR 585 referred to Para 41
E
95 (2002) DLT 528 referred to Para 43
(2016) 12 SCC 603 relied on Para 44
[1996] 2 Suppl. SCR 866 referred to Para 47
[2011] 4 SCR 764 referred to Para 51
F 100 (2002) DLT 66 (FB) referred to Para 56
[1969] 1 SCR 645 referred to Para 58
126 (2006) DLT 191 referred to Para 59
[1962] 3 SCR 49 relied on Para 60
G (1970) 2 SCC 803 relied on Para 60
[1980] 2 SCR 607 relied on Para 60
[2002] 1 SCR 961 relied on Para 60
[1998] 3 SCR 996 referred to Para 80

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NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 341
CONCERNED CITIZENS OF NEW DELHI

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 903- A
930 of 2019.
From the Judgment and Order dated 10.08.2017 of the High Court
of Delhi at New Delhi in W.P. (C) Nos. 3348 of 2010, 12689 of 2009,
1985, 2315, 3074, 4047, 8679 of 2010, 363, 7296, 7491 of 2011, 728, 729,
1153, 1154, 1487, 1492, 1822, 2088, 2091, 2102, 3453, 1759 of 2012, 645, B
1996, 1997, 1998, 2001 of 2016 and 1581 of 2017
WITH
Civil Appeal No. 964 of 2019.
Prag P. Tripathi, Amit Sibbal, B. B. Gupta, Aman Ahluwalia, Guru C
Krishna Kumar, Ms. Vibha Dutta Makhija, Sr. Advs., Sanjay Jain,
Yoginder Handoo, Ms. Rhea Verma, Nishant Kumar, Arjun Mitra,
Mahesh Agarwal, Rishi Agrawala, Ramaswamy Srinivasan, Ankur Saigal,
Ms. Devika Mohan, Navjot Singh, E. C. Agrawala, Amitabh Chaturvedi,
Trideep Pais, G. V. Chandrashekar, N. K. Verma, Ms. Anjana
Chandrashekar, Abhimanyu Mahajan, Ms. Anubha Goel, Jayant Kumar D
Mehta, Ms. Ruby Singh Ahuja, Ms. Aakanksha Munjhal, Shravan Sahny,
Davesh Bhata, Saurabh Kumar, Apoorv Gupta, Udai Khanna (for
M/s Karanjawala & Co.), Saurabh Mishra, Sachit Jolly, Ayush Dhawan,
Ms. B. Vijayalakshmi Menon, Abhay Kumar, B. B. Jain, Himanshu Pal,
Abhay Jain, Saurabh Mishra, Abhay Kumar, Ms. Aditi Gupta, S. K. Jain, E
S. S. Ray, Ms. Rakhi Ray, Sanjeev Anand, Abhinav Shrivastava, Himadri
M. Mukherjee, Mr. Amitesh Gaurav (for Mr. Ajay Sharma), Sangram
Patnaik, Swamsiddha Patnaik, Madhav Chaturvedi, Naresh Kumar,
Sanjay Kapur, Ms. Megha Karnwal, Ms. Mansi Kapur, Ms. Disha Vaish,
Waheb Hussaini, Ms. Asita, Kabir Dixit, Advs. for the appearing parties.
F
The Judgment of the Court was delivered by
A. K. SIKRI, J.1. Leave granted.
Introductory Remarks:
2. These appeals are filed by New Delhi Municipal Council
(NDMC) against the judgment dated August 10, 2017 rendered by High G
Court of Delhi in a batch of writ petitions which were filed by the
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
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342 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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
B
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
C 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.
D
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.
E 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
F 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
G 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.
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4. When the matter was argued before us, initially the parties A
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
B
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 C
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 D
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 E
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 F
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. G
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 H
344 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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).
B 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
C 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
D 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
E 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
F 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
G 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
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of powers conferred under Section 416(2)(a) of the NDMC Act adopted A
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
B
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, C
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 D
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 E
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) F
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, G
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 H
346 SUPREME COURT REPORTS [2019] 2 S.C.R.

A suggested to introduce UAM selectively for self-occupied residential
properties in the Bye-laws. Thereafter, on 10th 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
B
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
C (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
D 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
E 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
F 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.
G
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
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properties to continue under the reasonable rent method of A
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
B
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 C
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 D
(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 E
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.” F
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 G
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.”
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A 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
B
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:
C “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:-
D “(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
E 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%
F 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
G (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
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(3) The use factor for the land shall be as under:- A
Use Factor
Residential, Public Purpose, School, College
Hostel, Hospital 1
Public Utility Government Offices, Embassies 2
B
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. C

(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 D
Constructed upto 1970-79 0.7
Constructed upto 1980-89 0.8
Constructed upto 1990-99 0.9
Constructed upto 2000-09 1.0
4. Annual Rent of other land and buildings- E

(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.
F
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
G
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.

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350 SUPREME COURT REPORTS [2019] 2 S.C.R.

A (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
B
Others 6
Occupancy of land and covered space of building Factor
Self-Occupied or Vacant 1
Others 3
C

Provided that the location factor covered space in basement used
for storage, parking and utilities will be taken 0.5.
Explanations:-
D
(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
E 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
F 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
G Constructed upto 1960-69 0.6
Constructed upto 1970-79 0.7
Constructed upto 1980-89 0.8
Constructed upto 1990-99 0.9
Constructed upto 2000-09 1.0
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NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 351
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(8) Where the land and the covered space of the building is let A
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.” B
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:- C
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 D
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 E
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 F
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 G
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.
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352 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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
B 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:
C
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.

D 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;
E
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-sec-
F tion (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
G 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-
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NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 353
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1. The rateable value of any lands or buildings assessable to any A
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
B
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.
C
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 D
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 E
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 F
the Union shall be exempt from the property tax specified in sec-
tion 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
G
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
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A 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
B
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
C 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:-

D (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
E
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
F
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.
G 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
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payment of property tax or any installment thereof payable during A
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 B
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 C
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 D
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 E
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 F
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. G
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
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A 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
B
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.”
C 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
D 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
E 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
F 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
G 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
H
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 357
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

expenses necessary to maintain the land or building in a state to command A
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.”.
B
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 C
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 D
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 E
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 property tax as specified in Section 66. It is clarified that this
would be the occupier of such land or building. F
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 G
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
H
358 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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
B
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
C 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
D 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
E 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
F 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
G 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.”
H
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 359
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

32. Further in the opinion of the High Court though under Section A
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
B
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 C
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
D
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 E
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 F
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 G
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
H
360 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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
B
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,
C 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
D (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)
E 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
F 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
G 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
H of a land or building is liable to a higher rate of tax then such
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 361
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

portion will be deemed to be a separate property for the purpose A
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 B
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.
C
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 D
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.”
E
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 F
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’. G
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
H
362 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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,
B
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
C 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
D 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
E 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.
36. Mr. Jain also submitted that UAM introduced by the MCD
has been upheld by this Court.
F
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.
G
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
1
H 104(2003) DLT 808 = AIR 2003 Delhi 295
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 363
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

done by the impugned judgment dated 10th August, 2017 of the Delhi A
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 B
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 C
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. D
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
E
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 F
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 Duty2
(ii) Assistant Collector of Central Excise vs. National Tobacco G
Co. of India Ltd.3
(iii) Mafatlal Industries & Ors. vs. Union of India & Ors.4
2
(1992) 3 SCC 169
3
(1972) 2 SCC 560
4
(1997) 5 SCC 536 H
364 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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:
B (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.,
(ii) Bye-law 4 provides that the annual rent of lands and buildings
C 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.
D
(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
E 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
F 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
G 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
H
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 365
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

dealing with Standard Rent in Raghunandan Saran Ashok Saran A
(HUF) vs. Union of India and Others5 , 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 Council6. In that view of the
matter, there was no occasion for the High Court to strike down the B
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. C
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 D
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 E
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 F
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
G
Others 7:
“4. The contention raised before the High Court and repeated
before us by Shri Rajeev Dhavan, the learned Senior Counsel for
5
95(2002)DLT 528
6
(2016) 12 SCC 603
7
(1996) 5 SCC 359 H
366 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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,
B
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
C 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
D
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
E 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,
F
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
G 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
H
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 367
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

determine the rateable value. Section 63(2) on a fair reading thereof A
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 B
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 C
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 D
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 E
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 F
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 G
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). H
368 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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
B
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
C 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
D 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-
E 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
F 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
G 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
H
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 369
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

Survey of India (ASI) under the Ancient Monuments and Archaeological A
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. B
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 C
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 D
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 E
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. F
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 G
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
8
100 (2002) DLT 66 (FB)
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370 SUPREME COURT REPORTS [2019] 2 S.C.R.

A sq. mtrs.) one in B.K. Dutt Colony and the other on Golf Links, where
both are 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
B 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
C 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
D 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:
E
(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
F
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;
G (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.”

9
AIR 1969 SC 378
H
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 371
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

This Section clearly contemplates the classification of unlet land A
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 B
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 C
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, D
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 E
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 F
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 G
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
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372 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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
B 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.
C (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.
D
(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.
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
F (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
G 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
H
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 373
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

calculate the annual rent, it is incongruous that the actual rent be taken A
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 B
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 C
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 D
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 E
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 F
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. G
(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
10
126(2006) DLT 191
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374 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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.
B 60. Adverting to the issue of ultra vires which has appealed to the
High Court thereby quashing the impugned Bye-laws, the 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
C 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
D 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;
E (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

F (iv) Indian Automobiles Ltd. vs. Calcutta Municipal
Corporation and Anr.14
(v) State Trading Corporation case
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
G might reasonably be expected to let. In support of this contention, the
respondents referred to some of the Bye-laws and the position thereunder
11
(1962) 3 SCR 49
12
(1970) 2 SCC 8703
13
(1980) 1 SCC 685
14
H (2002) 3 SCC 388
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 375
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

which according to the respondents makes it clear that UAM introduced A
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 B
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 C
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 D
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 E
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 F
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.
G
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
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376 SUPREME COURT REPORTS [2019] 2 S.C.R.

A ’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
B
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
C – 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
D 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,
E 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
F 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
G 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

H
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 377
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

in accordance with the provisions of this Act and Bye-laws made A
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 B
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:
C
“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 D
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 E
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 F
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
G
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

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378 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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
B
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
C 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,
D 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
E 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
F 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,
G
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).
H 15
(1962) 3 SCR 49
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 379
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

73. In the case of The Guntur Municipal Council case, this A
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 B
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 C
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 D
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 E
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 F
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 G
‘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:

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380 SUPREME COURT REPORTS [2019] 2 S.C.R.

A “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
B
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
C 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
D 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
E 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
F 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
G 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
H
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 381
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

where the property is let out actually at a rent which is lesser than the A
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
B
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 C
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 D
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 E
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.”
F
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. G
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

16
(1998) 6 SCC 381
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382 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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
B
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.
C 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
D 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
E 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
F 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-
G 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-
H laws that provide UAM which is based on value of the property that on
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 383
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

rental which the property is likely to fetch and are, there, foreign to the A
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 B
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. C

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 D
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 E
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 F
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 G
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 H
384 SUPREME COURT REPORTS [2019] 2 S.C.R.

A 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.
B
“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
C 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
D 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.
E 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 6th March, 2018, Mr. Sanjay
F 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
G 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 14th 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
H reflected in the tabulated form. Many respondents/ assessees are still
NEW DELHI MUNICIPAL COUNCIL v. ASSOCIATION OF 385
CONCERNED CITIZENS OF NEW DELHI [A.K. SIKRI, J.]

not satisfied with the decision taken on various aspects and the arguments. A
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 B
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 C
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 D
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 E
in the impugned judgment shall prevail.
90. The appeals stand disposed of in the aforesaid terms.

Divya Pandey Appeals disposed of. F

G

H