Supreme Court of India

KRISHNA MOHAN PVT. LTD.versusMUNICIPAL CORPORATION OF DELHI AND ORS.

Citation: 2003 INSC 340
Decided: 28 July 2003
Disposal: Appeal(s) allowed
Bench: RUMA PAL

Holding

Section 116(3) is declared invalid as it delegates unguided legislative power, and the cost of plant and machinery cannot be included in the rateable value unless a valid notification under that provision is issued.

Summary

Krishna Mohan Pvt Ltd owned a cinema complex on which it installed plant, machinery, lifts and air‑conditioners. The Municipal Corporation of Delhi assessed property tax by adding the cost of these items to the building's rateable value. The company appealed, arguing that such costs are movable and should be excluded, and that Section 116(3) of the Delhi Municipal Corporation Act, 1957, which allows the Commissioner to deem plant and machinery part of the land or building, vested unguided discretion and was unconstitutional. The Supreme Court held that Section 116(3) is invalid for excessive delegation of legislative power and that, absent a valid notification under that provision, the cost of plant and machinery cannot be included in the rateable value. The Court set aside the High Court’s judgments and the assessment orders, remitting the matter to the assessing authority for fresh assessment.

Issues considered

Whether the cost of plant and machinery installed in or upon a building is includible for the purpose of determining the rateable value of the building.
Whether Section 116(3) of the Delhi Municipal Corporation Act, 1957, vests arbitrary and uncanalised discretion in the Commissioner, rendering it unconstitutional for excessive delegation of legislative powers.

Legislation cited

Delhi Municipal Corporation Act, 1957s. 116(3), s. 169, s. 171, s. 2(24), s. 2(3), s. 2(38), s. 2(47)
Transfer of Property Acts. 3

Subjects

property taxrateable valueplant and machineryDelhi Municipal Corporation Actexcessive delegationconstitutional validitymunicipal assessmentnotificationliftsair‑conditioners

Judgment

.
I

A KRISHNA MOHAN PVT. LTD.
v.
MUNICIPAL CORPORATION OF DELHI AND ORS.

JULY 28, 2003

B (RUMA PAL AND B.N. SRIKRISHNA, JJ.]

Delhi Municipal Corporation Act, 1957; Sections 2(3), 2(24), 2(38),
2(47), 116(3), 169 and 171 and Bye-Laws thereunder: Property tax-Levy
of-Rateable value-Inclusion of cost of the Plant/machinery affixed therein--
C Vesting of arbitrary and uncanalised discretion with the authority under
Section 116(3) of the Act-Constitutionality of-Held: Jn the absence of any
provision of law for an appeal against inclusion of any plant/machinery
within land/building by the authority for determination of rateable value,
such discretion vested with the authority under Section 116(3) invalid-Cost
D of such machinery not liable to be included for determination of rateable
value-Assessing authority directed to assess rateable value afresh-Directions
issued-Interpretation of Statutes-Transfer of Property Act-Section 3.

Words and Phrases:

E 'Rateable value '-Meaning and scope of in the context of Delhi
Municipal Corporation Act.

In these appeals, the assessees challenged the correctness of the
judgment of the Full Bench of the Delhi High Court upholding the levy of
property tax by the respondent-Corporation. The common questions oflaw
F which arose for consideration of the Court in these appeals were:

I. Whether the cost of the plant and machinery installed in or upon
a building is includible for the purpose of arriving at the rateable
value of the building; and
2. Whether Section 116(3) of the Delhi Municipal Corporation
G
Act, 1957 vests arbitrary and uncanalised discretion in the
Commissioner and is, therefore, invalid for excessive delegation
of legislative powers.

It was contended for the appellant-assessees that the Corporation had
H 848
KRISHNA MOHAN PVT. LTD. v. M.C.D. 849
no power to levy property tax by including the cost of machinery installed in A
or upon a building within the rateable value of the property, since it was
expressly excluded under the Act; and that the reasons enunciated by this
Court in New Manek Chowk Case striking down Rule 7(2) under the Bombay
Provincial Municipal Corporation Act due to excessive delgation of power of
legislature, were equally applicable to sub-section (3) of Section 116 of the· B
DMCAct

On behalf of the respondents, it was submitted that the Municipal
Legislation must be interpreted progressively; that the rateable value of a
building/premises must be taken to be the letting return inclusive of all plant/
machinery affixed therein since it is for the enjoyment of the tenant; that C
since guidelines for exercise of delegated power are discernible in the Statute,
it could not be held unconstitutional.

Allowing the appeals, the Court

HELD: I.I. The distinction drawn between the Delhi Municipal D
Corporation Act and Bombay Provincial Municipal Corporation Act is hardly
valid. While in the case of the DMC Act, the Commissioner is required to
obtain the approval of the Standing Committee before notifying any plant or
machinery under sub-section (3) of Section 116, under the BPMC Act, the
Commissioner has to do it with the approval of the Corporation, which means
almost the same thing. If the delegated power was treated as wholly unguided E
and uncanalised under BPMC Act, it should be so under the DMC Act also.
However, it cannot be said that Section 116(3) is beyond the legislative
competence of the Legislature for the reason that the DMC Act is not the
result of exercise of the legislative powers relatable to List II of the Vllth
Schedule of the Constitution by the State Government, but is enacted by F
Parliament in exercise of its powers referable to List I of Vllth Schedule of
the Constitution. [865-G-H; 866-A-BI

New Manek Chowk Spg. And Wvg. Mills Cb. Ltd. etc. v. Municipal
Corporation of the City ofAhmedabad and Ors., AIR (1967) SC 801, referred
to. G
1.2. The Full Bench of the High Court fell into error in not keeping in
mind the respective functional roles of the definitions of"land", "building"
and "premises" and conceptually allowing them to overlap. In any event,
Section 116 itself indicates, in terms, how the rateable value of land and
building assessable to the property taxes is tu be determined. [868-B-CI H
850 SUPREME COURT REPORTS [2003) SUPP. I S.C.R.

A Hindustan lever ltd. v. Municipal Corporation ofGreater Bombay and
Ors., 1199513 SCC 716, relied on.

Poona Municipal Corporation v. Shankar Ramakrishna Jabade, (1957)
LX Bombay Law Reporter 25, approved.

B Municipal Corporation of Delhi v. Pragati Builders and Ors., (1991)
45 D.L.T. 264, overruled.

1.3. Legislative practice, which was noticed by this Court in New Manek
Chowk* case, showed that both in England and in India municipal legislation
had uniformly tended to exclude the cost of plant and machinery for the
C purpose of computation of rateable value of land or building subject to
exc.!ptions made by statute under sub-section (3) of Section 116 of DMC Act,
Section 154(2) of the BMC Act, Rule 7(2) made under the BPMC Act, and
similar statutory provisions. The Full Bench of the High Court laid great
emphasis on the word 'premises' used in the Act and the enlarged meaning
D given to the term under the 1994 bye-laws. Even assuming the contention
which appealed to the High Court to be correct, the definition of the term
"premises" in Section 2(38) and express words used in sub-section (3) of
Section 116 of the Act must be reconciled. Appellant's contention that,
whatever be the amplitude of the expression 'premises' or the expression
'fittings' used in clause (b) of Section 2(38) of the Act, it cannot include plant
E or machinery, which have been expressly excluded under Section 116 (3) of
the Act, except to the extent it is notified, appears justified, on principle and
precedent, and deserves acceptance. (868-F-H; 869-A-CI

*New Manek Chowk Spg. And Wvg. Mills Co. ltd. etc. v. Municipal
Corporation of the City of Ahmedabad and Ors., AIR (1967) SC 801, relied
F ,_
on.

1.4. The legislation must be interpreted by reading the words in the
statute. Section 116(3) takes care of the progressive concepts by vesting the
Commissioner with the power to issue the requisite notification to include
G newer machinery within the ambit of 'land' or 'building'. The High Court
also seems to have lost sight of the fact that the Explanation II of 1994 bye-
laws was struck down by the High Court earlier and its invalidity was upheld
by this Court. Thus, Explanation II to Section 3(l)(c) of 1994 bye-laws is no
longer alive and has been set aside by this Court. Hence, cost of plant and
machinery situate in or upon any land or building cannot be included in the
H computation of the rateable value of land and building unless a valid
j-
KRISHNA MOHAN PVT. LTD. v. M.C.D. 851
notification contemplated by sub-section (3) of Section 116 of the Act has been A
issued. (870-B-CI

1.5. Lifts and air-conditions are neither fittings, nor fixtures, but are
'plant' and 'machinery'. The concept of rateable value, as generally understood,
does not admit the inclusion of the cost of such plant or machinery in the
computation of the rateable value of the building. The legislature has, B
therefore, made a specific provision that if their cost has to be included, a
previous notification has to be issued. This was purportedly done by issuance
of the notification by the concerned authority and, ifat all valid, it would become
operative from the issuing date and not from any date earlier. (869-D-El

1.6. The contention of the respondent that the statute indicates the C
guidelines, namely, that the Commissioner's power to notify under Section
116(3) is only in respect of things which are of the same nature as would fall
within the ambit of expression "land'', as defined under Section 2(24), appears
to be a classic case of post hoc ergo propter hoc. Obviously, the power given
to the Commissioner is intended to be exercised only in a case where the D
plant or machinery does not fall within the ambit of the expression 'land' or
'building' as defined in the Act. It is only in such cases that the question of
exercise of the discretion on the part of the Commissioner arises. Hence, the
so called guideline is wholly chimerical. (871-B-CI

1.7. The reasoning on which this Court in New Manek Chowk case E
struck down delegated legislative power of the Commissioner under Rule 7(2)
of the BPMC Act, is equally true for Section 116(3) of the DMC Act. Apart
from there being no guidelines in the statute, the exercise of discretion by
the Commissioner is not subject to any appeal to a higher authority. The
respondent pointed out two circumstances, namely, that the discretion can be F
exercised only with the approval of the Standing Committee and, secondly,
that the rateable value is subject to an appeal under the statute. Both these
facets are present in the impugned statute. But both these facets were also
extant, considered and held inconsequential in New Manek Chowk* case.
There also the discretion of the Commissioner was exercisable with the
approval of the Corporation and the rateable value was subject to an appeal. In G
any event, although there may be an appeal provided against the determination
of the rateable value, there is no provision in the statute for an appeal against
inclusion of any plant or machinery within "land" or "building" for
determination of the rateable value. (871-E-G(

H
852 SUPREME COURT REPORTS [2003) SUPP. I S.C.R.

.A *New Manek Chowk Spg. and Wvg. Mills Co. Ltd. etc. v. Municipal
Corporation of the City of Ahmedabad and Ors., AIR (1967) SC 801, relied
on.

1.8. The observations made in the judgment of this Court in Patel
Gordhandas Hargovindas* case and the legislative practice highlighted
B therein become very relevant in the context of interpretation of the provisions
of the statute impugned. Applying the test laid down in J Jayalalitha and
Kishan Prakash Sharma cases, no legislative guidelines are found in the
instant case upon which the Commissioner's power under Section 116(3)
could be exercised. The vice discovered by this Court in Rule 7(2) of the
C BPMC Act, 1949 in New Manek Chowk case equally invalidates Section
116(3) of the D.M.C. Act. Hence, Section 116(3) is declared invalid as it
delegates unguided and uncanalised legislative powers to the Commissioner
to declare any plant or machinery as part of land or building for the purpose
of determination of the rateable value thereof. The impugned assessment
orders are set aside and remitted to the assessing authority under the DMC
D Act for passing orders afresh in accordance with law and the observations
made in the judgment. (873-A-C; 870-DI

New Manek Chowk Spg. and Wvg. Mills Co. Ltd. etc. v. Municipal
Corporation of the City of Ahmedabad and Ors., AIR (1967) SC 801; Patel
Gordhandas Hargovindas v. Municipal Commissioner, Ahmedabad, (1964) 2
E SCR 608; J. Jayalalitha v. Union of India and Anr., AIR (1999) SC 1912 and
Kishan Prakash Sharma and Ors. v. Union of India and Ors., (2001] 5 SCC
212, relied on.

Municipal Corporation of Delhi v. Pragati Builders and Ors., (19911
F 45 D.L.T. 264, overruled.

CIVIL APPELLATE JURISDICTION: Civil Appeal No .. 3312 of2000.

From the Judgment and Order dated 19.2.99 of Delhi High Court in
C.W.P. No. 1420of1995.

G WITH

C.A. Nos. 3313-3333, 3334, 3335/2000 and 8570-8573 of2002.

M.L. Verma, 8.8. Jain, Virendra Rawat and Sudhir Nandrajog for the
Appellant.
H
KRISHNA MOHAN PVT. LTD. v. M.C.D. [SRIKRISHNA. J.] 853
Ms. Indira Sawhney and Ms. Karnika Sawhney for the Appellant in C.A. A
No. 333512000.

Ashwani Kumar, Ms. Bindu Tamta and Mrs. Arnita Gutpa for the
Respondents.

The Judgment of the Court was delivered by B
SRI KRISHNA, J. These appeals, though arising under different factual
backgrounds, raise a common question of law and challenge the correctness
of a judgment of the Full Bench of the Delhi High Court. The questions
involved in all these appeals are :-
c
"Whether the cost of the plant and machinery installed in or upon a
building is includible for the purpose of arriving at the rateable value of the
building? and

Whether Section 116 (3) of the Delhi Municipal Corporation Act, 1957
(hereinafter referred to as "the DMC Act") vests arbitrary and uncanalised D
discretion in Commissioner and is, therefore, invalid for excessive delegation
of legislative powers?"

Civil Appeals Nos. 3313-333312000 & 3335/2000

The appellant company owned land in Delhi on which it constructed a E
cinema complex known as Delite Cinema Complex. The construction was
completed in or about the year 1954. The company had installed certain plant
and machinery, furniture and fixtures in the said construction of cinema
house. By an order made on 30th May, 1988 the first respondent Munkipal
Corporation of Delhi revised the rateable value of the appellant's property to F
Rs. 2, 16,970 w.e.f. 1.4. 1968, Rs. 2, 18,150 w.e.f. 1.4.1970 and Rs. 2,20,510 w.e.f.
1.7.1970. For the purpose of arriving at the rateable value the assessing
authority added the cost incurred by the appellant towards installation of
plant and machinery, furniture and fixtures to the cost of the building. The
appellant challenged the assessment order by a statutory appeal under Section
169 of the DMC Act contending that the costs incurred towards plant and G
machinery, furniture and fixtures could not be added to the cost of the
building for the purpose of rateable value as they are moveable items and not
part and parcel of the building. It was also contended that there was no
specific notification issued by the Commissioner of the Municipal Corporation
for including the value of moveable items, plant and machinery for arriving H
854 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.

A at a rateable value. The appeals filed by the appellant were allowed by the
appellate court by a judgment dated 1.6.1991. The appellate court upheld the
contention of the appellant and directed the Municipal Corporation to work
out rateable value by deleting the cost of plant and machinery, furniture and
fixtures from the cost of the building. Aggrieved by the aforesaid judgment
the respondent Municipal Corporation challenged the judgment by a batch
B of writ petitions before the High Court of Delhi. The writ petitions together
with other writ petitions challenging similar orders was disposed of by a
common judgment dated 19.02.1999. The High Court relying upon its own
judgment in Municipal Corporation of Delhi v. Pragati Builders and Ors.,
45 (1991) D.L.T. 264 and the judgment of this Court in Hindustan Lever Ltd ,
C v. Municipal Corporation ofGreater Bombay and Ors., (1995] 3 SCC716 took
the view that the matter had to be remitted back to the accessing authority
to determine the rateable value in accordance with law as pronounced in the
aforesaid judgments. Although, it was specifically contended by the appellant
before the High Court that a notification under Section 16 (3) of the DMC Act
declaring that the lift shall be deemed to form part of land and building, was
D published in the Newspaper on 23.10.1989 and 24.10.1989 and therefore, could
have only prospective effect, the High Court did not decide the said issue.
After setting aside the Judgment of the appellate authority, the issues were
remitted back to the assessing authority with a direction to determine the
rateable value in accordance with law leaving open all contentions to be
E urged before the assessing authority. This judgment is challenged by these
appeals.

Civil Appeal No. 3312 & 3334 of 2060

In these two appeals the facts are almost same as in the previous group
except that here an additional contention as to the constitutional validity of
Section 116(3) of the D.M.C. Act was raised before the High Court while
challenging the order of the Joint Assessor and Collector fixing the rateable
value for different years. The writ petitions were disposed of by the High
Court by two separate judgment dated 19.2.1999. The High Court negatived
the challenge to the validity of Section 116(3) of the D.M.C. Act by holding
that is only an enabling provision and that the judgment of this Court in New
Manek Chowk Spg. and Wvg. Mills Co. Ltd. etc. v. Municipal Corporation
of the City of Ahmedabad and Ors., AIR (1967) SC 801 was distinguishable.
The High Court also relied on its own judgment in Municipal Corporation
of Delhi v. Pragati Builders and Ors., (supra) and the judgment of this Court
in Hindustan Lever Ltd. v. Municipal Corporation of Greater Bombay and
KRISHNA MOHAN PVT LTD. v. M.C.D. [SRIKRISHNA, J.] 855
Ors., (supra), set aside the judgment of the appellate authority and remitted A
the assessment to the assessing authority for making afresh assessment
orders. The appellants are in appeal before this Court.

Civil Appeals Nos. 8570-73 of 2002

The appellants in these cases are owners of certain premises in which B
either lifts or air-conditioners or both have been installed. The Commissioner
of Municipal Corporation of Delhi exercising his powers under Section 116(3)
of th.e Act issued a notification dated 23.10.1989/24.10.1989 to the following
effect :-

"Municipal Corporation of Delhi c
Public Notice :

Lift containing or situated in or upon any building form an integral
part of such building for its more beneficial enjoyment and is not plant
or machinery contained or situated in or upon any land or building. D
However, to put this matter beyond any point of doubt, with the
approval of Standing Committee, it is hereby notified under sub-
section (3) of Section 116 of the Delhi Municipal Corporation Act,
1957 that lift shall be deemed to form part of land and building for the
purpose of determining the ·rateable value of such land and building
under sub-section (I) of Section 116 of the Delhi Municipal Corporation E
Act, 1957."

Although the notification applied to the lifts installed in the building,
admittedly, no notification was issued in respect of air-conditioners. This
group of writ petitions was filed by the assessees contending that Section
116(3) of the DMC Act confers unguided, uncontrolled and arbitrary powers F
in the Commissioner without laying down any guidelines whatsoever and was
consequently invalid. When the assessees were faced with the judgment of
the Division Bench in Pragati Builders (surpa), the assessees urged that
Pragati Builders be reconsidered as it was in conflict with the judgments of
this Court in New Manek Chowk, (surpa) and the judgment of this Court in G
Hindustan lever ltd (supra). The writ petitions were therefore placed before
a Full Bench to consider the correctness of the Pragati Builders (supra). The
Full Bench of the High Court by the judgment impugned before us took the
view that Pragati Builders (supra) has laid down the law correctly and the
writ petitions were dismissed. Aggrieved thereby the appellants challenge the
judgment of the, Full Bench. H
856 SUPREME COURT REPORTS (2003) SUPP. I S.C.R.

A TheDMCAct
The DMC Act, 1957 was enacted to consolidate and amend the laws
relating to the Municipal Government of Delhi. By virtue of section 516 of the
Act the enactments specified in Schedule XIII to the Act ceased to have
effect within Delhi. The DMC Act sets up a Municipal Corporation under
B chapter II, defines the function of the Corporation under Chapter III and those
of the Municipal Authorities under Chapter IV. Chapter VIII deals with taxation.
Section l J3 of the Act, inter-alia, provides for levy of a tax known as
property tax. Section 114 indicates that the property taxes to be levied on
lands and buildings in Delhi shall consist of a general tax which is to be levied
C at a prescribed percentage of rateable value of lands and buildings with in
the urban area. There are certain other details and powers of exemption which
are not material for our purpose. Section 115 provides that general tax shall
be levied in respect of all lands and buildings in Delhi. There are certain
exceptions made in this section which are again not relevant for us. Section
116 is the crucial section which has generated considerable debate at the bar
D and bears reproduction.

"116. Determination of rateable value of lands and buildings assessable
to property taxes - (I) the rateable value of any land or building
assessable to property taxes shall be the annual rent at which such
land or building might reasonably by expected to let from year to year
E less -
(a) a sum equal to ten percent of the said annual rent which shall
be in lieu of all allowances for costs of repairs and insurance, and
other - expenses, if any, necessary to maintain the land or building
in a state to command that rent, and
F
(b) the water tax or the scavenging tax or both, ifthe rent is inclusive
of either or both of the said taxes :-
Provided that ifthe rent is inclusive of charges for water supplied
by measurement, then, for the purpose of this section the rent shall
be treated as inclusive of water tax on rateable value and the deduction
G
of the water tax shall be made as provided therein :

Provided further that in respect of any land or building the standard
i'ent of which has been fixed under the Delhi and Ajmer Rent Control
Act, 1952 (38 of 1952), the rateable value thereof shall not exceed tpe
annual amount of the standard rent so fixed.
H
KRISHNA MOHAN PVT. LTD. v. M.C.D. [SRIKRISHNA, J.] 857

Explanation - The expression "water tax" and "scavenging tax" shall A
mean such taxes of that nature as may be levied by an appropriate
authority.

(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 of erection shall be fixed at five percent of the estimated B
capital value of such land.

(3) All plant and machinery contained or situate in or upon any land
or building and belonging to any of the classes specified from time
to time by public notice by the Commissioner with the approval of the
Standing Committee, shall be deemed to form part of such land or C
building for the purpose of determining the rateable value thereof
under sub-section (I) but save as aforesaid no account shall be taken
of the value of any plant or machinery contained or situated in or
upon any such land or building.
There are detailed provisions in the DMC Act with regard to the manner D
of incidence of the property tax, the persons on whom the incidence falls
under different circumstances, manner of recovery of the tax from occupiers,
manner of making, publishing and amending assessments lists and so on.
Any objections to the rateable value of property as entered in the assessment
list shall be made in writing to the Commissioner before the date fixed in the E
notice. After disposing of the objection, the revision of the rateable value is
indicated as an amendment in the assessment list.

Section 169 confers a right of appeals against the assessment of any
tax under the Act to the District Judge of Delhi. Section 171 provides for
finality of appellate orders. The order of the appellate court confirming, F
setting aside or modifying an order in respect of rateable value or assessment
or liability to assessment or taxation is declared to be final.

The expression "building" is defined in sections 2(3) as under :

"2(3) "building" means a house, out-house, stable, latrine, urinal,
shed, hut, wall (other than a boundary wall) or any other structure, G
whether of masonry, bricks, wood, mud, metal or other material but
does not include any portable shelter."
"Land has been defined in section 2(24) as follows :-
"2(24) "Land" includes benefits to arise out of land, things attached H
858 SUPREME COURT REPORTS (2003] SUPP. I S.C.R.

A to the earth of pemianently fastened to anything attached to the earth
and rights created by law over any street."

"Rateable value" is defined in section 2(47) as fol!ows :

"2(47) "Rateable value" means a regulation made by the Corporation
B under this Act, by notification in the Official Gazette."

The 1994 Bye-Laws

Section 481 empowers the Corporation, subject to the provisions of the
Act, to make bye-laws to provide for all or any of the matters dealt with in
C the section. Paragraph A deals with bye-laws relating to taxation. After
enumerating a number of topics on which bye-laws could be made, in 'entries
I to 8, entry 9 gives power to the Corporation as under :-

"Entry 9 : Any other matter relating to the levy, assessment, collection,
refund or remission of taxes, under this Act."
D Jn exercise of its power to make bye-laws, the Delhi Municipal Corporation
has made a set of bye-laws styled as "DMC determination of Rateable Value
Bye-Laws 1994", which were brought into force w.e.f. 24.10.1994. These bye-
laws are purportedly made in exercise of the powers under section 2(47) read
with Section 116, 481and483 of the DMC Act, after previous publication and
E in accordance with the procedure prescribed thereunder.

Bye-law No. 2(e), defines "premises" as having the same meaning as
under Section 2(38) of the DMC Act. Bye-law 2(f) defines "rent", particularly
clause (ii) thereof. Our attention was also drawn to bye-law no. 3 which, "for
the purposes of sub-section (!) of section 116 of the DMC Act", indicates
F the manner of determination of the annual rent. Of particular interest to us are
clauses 3(1 )( c) (ii) and 3(1 )(d) (e) explanation (ii) which read as under :-

"3 Determination of rateable value of lands and buildings :-

(I) For the purposes of sub-section (I) of section 116 of the Act, the
G annual rent shall be determined as under :-
(a) m xxx =
(b) )00( xxx )00(

(a) in case premises are used and occupied or are lying vacant for
H use and occupation by the owner himself -
KRISHNA MOHAN PVT. LTD. v. M.C.D. (SRIKRISHNA, J.] 859
(i) xxx xxx A
(ii) Where the building or part thereof, is used or to be used as
a banquet hall, cinema hall, club, guest house, hotel, nursing
home or as house for marriage and such other functions, the
annual rent shall be the amount calculated at ten per cent of
the market price of land in the year of assessment and the B
cost of construction of the building, cost of fixtures and
fittings and cost of addition, alteratic'1.s ;:id improvements,
or the prevalent rent, whichever is higher;

Explanation II - For the purposes of this bye-law, the annual rent of
the premises includes the annual rent of the land and building thereon, C
and such other fixtures and fittings as are considered necessary for
the use and enjoyment of the land and building purpose for which
they are intended to be used and shall include lifts, elevators, storage
tanks, pipe-lines, railway lines, runways, underground cables, air-
conditioning plant in centrally air-conditioned buildings, swimming D
pools, chairs and screen in cinema halls, theatres and auditoria, cost
of insulations and racks in cold storage buildings, but, save as
aforesaid, no account shall be taken of the value of any fixtures and
fittings contained or situated in or upon any land or building."

We may mention here that these bye-laws were challenged as ultra- E
vires the delegated powers of legislation of the Corporation. By a judgment
in Delhi Urban House Owner's Welfare (lssociation and Anr. v. Union of
India and Ors., 60 ( 1995) DLT 644 a Division Bench of the Delhi High Court
held that the explanation to bye-law 3(1)(a), bye-law 3(\)(c)(ii) and bye-law
3(1)(e) were bad and they were struck-down. The Delhi Municipal Corporation
carried an appeal to this Court an'1 by a judgment in MCD v. Delhi Urban F
House Owner's Welfare Association, (1997] 8 SCC 335 this Court reversed the
judgment of the Division Bench of the Delhi High Court except to the extent
the challenge was given up by the Corporation. Consequently, the judgment
of the High Court declaring the provisions of bye-law 3(I)(c)(ii) and 3(\)(e)
of the rateable value bye-laws as invalid remains unaltered.
G
Rateable Value

The Concept of a "rate" has to be kept in focus in order to understand
the meaning of the expression "rateable value", as generally understood in
law, subjects to changes made in any local enactments.
H
860 SUPREME COURT REPORTS (2003] SUPP. I S.C.R.

A In Patel Gordhandas Hargovindas v. Municipal Commissioner,
Ahmedabad, (1964] 2 SCR 608 this Court examined the history and practice
of rates in England and under Indian legislation and noticed that the word
"rate" was used as meaning a tax for local purposes imposed by local
authorities. The basis of the tax was annual value of the land or building on
or in connection with which it was imposed, arrived at in one of the three
B ways indicated in the judgment. Legislatures being creatures of habit, the use
of the word "rate or equitable value" in municipal Jaws definitely suggests
that it was that particular kind of tax which in legislative history and practice
was known as a "rate" which the municipality could impose and not any other
kind of tax. After referring to a number of English authorities, it was emphasized
C that "rate" could be levied only for beneficial occupation-and the rateable
value had to be arrived at by one of the three modes namely :-

(a) actual rent fetched by land or building where it is actually let,
(b) where it is not Jet, rent based on hypothetical tenancy, particularly
in the case of buildings, and
D
(c) where either of these two modes is not available, by valuation
based on capital value form which annual value has to be found
by applying a suitable percentage which may not be same for
lands and buildings.

E This Court also examined the legislative history and practice in India by
referring to be a number of municipal legislations and concluded that the
"rateable value" contemplated in the municipal legislations was based on the
same concept.

Contentions
F
The first contention of the appellants before us is that the Corporation
has no power to levy property tax by including within the rateable value
anything other than what is expressly pem1itted by the Act and must, in doing
so, exclude what is expressly excluded by the Act.

G In Haji Dawood v. Municipal Commissioner, City of Bombay, AIR
( 1922) Born. 386 the question had arisen before the Bombay High Court as
to whether, in the case of a building fitted with electric fittings and fans, bath
tubs and lavatories, deduction could be allowed for the reasonable cost of
bath tubs and lavatories and electric lights and fans for working out the
H rateable value. The High Court was of the opinion that the baths and lavatories
KRISHNA MOHAN PVT. LTD. v. M.C.D. [SRIKRISHNA, J.] 86 !
were undoubtedly annexed to be freehold, as also electric fittings, except A
perhaps such fittings as are attached with plugs in the wall. It was also held
that without these conveniences the premises would be not let unless perhaps
a tenant were found to take the premises on a long lease on favourable terms
on the understanding that he should put up such fitting himself. With regard
to the electric fittings and fans it was urged that they should be treated as
"machinery" under section 154(2) of the Bombay Municipal Corporation Act, B
1888 (hereinafter referred to as "the BMC Act") and their cost was liable to
be excluded for rateable value of the building. This contention was summarily
rejected by the High Court by observing :-

"But we have not been referred to any.authority under which it is said C
that electric fittings in a residence come within the term "machinery".
It seems to me that when electric fittings are installed by a landlord
they become part of the premises and so are necessary for the user
of the premises by the tenant."

On this reasoning, the reference was answered against the owner of the D
building by holding that no deductions could be allowed for the aforesaid
items while computing the rateable value.

In Poona Municipal Corporation v. Shankar Ramakrishna Jabade,
(1957) LX Bombay Law Reporter 25, the questions arose once again before
the Bombay High Court. This time it was the case of a cinema theatre which E
was fitted with articles of furniture, mostly chairs, intended to be used by the
audience. Considering the case under the provisions of the Bombay Provincial
Municipal Corporations Act, 1949, (for short "the BPMC Act") the Bombay
High Court considered the definitions of"rateable value", "land" and "building"
urder the Act. The contention urged was that furniture in the theatre falls
either within the definition of "building" or within the definition of "land". F
Particularly, it was urged that if anything w1:1s attached to the earth and
something was fastened to that thing, then that thing clearly become "land''
looking to the language used. "Land" was defined in section 2(30) of the Act
as including which is being built upon or is built upon or covered with water,
benefits to arise out of land, things attached to the earth or permanently G
fastened to anything attached to the earth and rights created by legislative
enactment over any street.

Rejecting the contention as untenable the High Court held that if such
a contention were to be accepted, then the expression "building" would
H
862 SUPREME COURT REPORTS (2003] SUPP. I S.C.R.

A become completely superfluous. In the Act the legislature had drawn a
distinction between "land" and "building" and defined the two expressions
separately, which went to show that different connotations were intended to
be given to these expressions. The Court also explained the purpose of these
two definitions by saying "when you are dealing with a structure, you must
turn to the definition of "building" in order to find out whether that structure
B or anything in that structure falls within the definition of building. When there
is no building or no structure, then undoubtedly you turn to the definition
of "land" and even when you have a building and land, the Legislature has
distinguished between a structure standing on the land and the land under
structure." It was held that these definitions are material for various purposes
C and the taxing authority cannot turn to the definition of "land", if it falls to
bring the case within the definition of "building", when it is dealing with a
structure, and what is contained in that structure. The High Court laid down
two tests, namely, ( 1) the nature and extent or degree of annexation to the
property and (2) the object, intention or purpose of the annexation. Since the
facts were not clear, the case was remanded back to the lower appellate court
D for deciding the factual matrix.

In Pragati Builders (supra) it was held as under :-

"21. We can cull from the above discussion the following points
which are to be kept in mind while determining the rateable value of
E a building :
(a) Has the machinery installed in a building become part of the said
building on account of some degree of annexation?
(b) Is the said machinery so annexed to the building for its better
F enjoyment and enhancement of its utility?
(c) Whether any hypothetical tenant would be ready to occupy the
said building with all its available facilities and amenities?
(d) What reasonable return a tenant would be called upon to pay on
the total investment of the owner for raising such a building
G along-with all its annexures and fixtures so as not to exceed its
standard rent?
22. It can be safely concluded from above that in case a machinery
is so annexed to the building that it has become a part thereof, and
it is therefore its better enjoyment, in that eventually it is to be taken
H
KRISHNA MOHAN PVT. LTD. v. M.C.D. [SRIKRISHNA, J.] 863

into account for the determination of its rateable value. We are thus A
of the view, from the conspectus ... of the above authorities that a lift
is very much a part of the building and thus is to be taken into
account for fixing the rateable value."

The appellants urged before the Full Bench of the High Court that
Pragati Builders (supra) has not bestowed sufficient and requisite attention B
to the judgment of this Court in New Manek Chowk (supra) and Hindustan
Lever Ltd. (supra). The Full Bench dismissed the contention by taking the
view that, because the legislative provisions considered in the said two
judgments were different, the ratio of those two cases has no application.
Counsel for appellants have contended that this reasoning of the Full Bench C
is incorrect. They urged that the Legislative provisions considered by this
Court in the aforesaid judgments were in effect pari materia and there is no
reason why the law laid down by this Court in the said two judgments should
not apply.

New Manek Chowk (supra) arose under the provisions of the BPMC D
Act. The Corporation was entitled under Section 249 to levy a property tax
which was defined as "tax on the buildings and lands" in the said Act.
Section 254 thereof defines "rateable value" as the value of any building or
land fixed under the provisions of the Act for the purposes of assessment
of the property taxes. Ui:ider Section 453 of the Act the rules in the schedule
as amended from time to time shall be deemed to be part of the Act. The E
relevant taxation rules were prescribed in Chapter VIII of the Rules. Under
Rule 7(2) all plant and machinery contained or situated in or upon any
building or land and belonging to any of the classes specified from time to
time by public notice by the Commissioner, with the approva~ of the Corporation,
shall be deemed to form part of such building or land for the purpose of fixing p
the rateable value thereof under sub-rule (!). But save as aforesaid, no
account shall be taken of the value of any plant or machinery contained or
situated in or upon any such building or land.

In our judgment, the language of sub-section (3) of section 116 ofDMC
Act is pari-materia with rule 7(2) under the BPMC Act, 1949. The contention G
was that sub-rule (2) of Rule 7 was beyond the legislative competence of the
State as the State could not levy a property tax on plant and machinery in
the guise of levying taxes on lands and buildings. It was also urged that the
power given to the Commissioner to notify and machinery or class of machinery
upon which it would be treated as part of the building was uncanalised,
H
864 SUPREME COURT REPORTS (2003) SUPP. I S.C.R.

A arbitrary and invalid on account of excessive delegation of power. With regard
to the first contentions, this Court held that Courts can look into legislative
practice (see in this connection Ra/la Ram v. The Province of East Punjab
- (1948) FCR 207. The Court then referred to a large number of municipal Acts
passed by different Legislatures after 1935 to show that plant and machinery
were excluded from the purview of such taxes. The different municipal
B legislations noticed were :-

Punjab Municipal Act, 1911, s.3(1);

The Madras Act IV of 1884, s.65(2);

C Madras District Municipalities Act, 1920 s. 82(2) proviso (b );

The Patna Municipal Corporation Act, 1951, s.130(3)

The Bombay District Municipalities Act, 1911, s.3(11);

D The Bombay Municipal Borough~ Act, s.3(1);

The Bombay Municipal Corporations Act, 1888, s.154(2);

The Calcutta Municipal Act, 1899, s.151 proviso; and

E The Central Provinces and Berar Municipalities Act, 1922 s.73 proviso.

This Court also noticed the English Rating and Valuation Act, 1925 in
which Section 2( I) gives the power to levy a consolidated rate and sub-
section (3) thereof states that the rate shall be at a uniform amount per Pound
on the rateable value of each hereditament of the area. Section 24(1) of that
F Act provides that plant and machinery in or on the hereditament as belongs
to any of the classes specified in the Third Schedule to the Act shall be
deemed to be a part of hereditament.

This Court's attention was also drawn to a number of sections of BMC
Act which went to show that "land" in those sections was clearly not meant
G to include the plant and machinery situate thereupon. Though it was contended
for the Corporation that the distinction had been practically eliminated in
England, this contention was rejected by this Court observing "It will therefore
be noticed that the rateability of the plant and machinery depended on judicial
decisions as to the meaning of the word "land". There is no reason why we
H should accept those decisions as to what was comprehended by the term
KRISHNA MOHAN PVT. LTD. v. M.C.D. [SRIKRISHNA, J.] 865
"land" when we find in our statutes plant and machinery being excluded A
there- from."

It was held that Rule 7(2) framed under the BPMC Act, 1949 was beyond
the legislative competence of the State. The Court also accepted the second
contention that the rules suffers from another defect that is does not lay
down any principle on which machinery is to be specified by public notice B
by the Commissioner to be deemed to fonn part of the building for the
purpose of fixing the rateable value. It was pointed out that the specifications
of the classes was done time to time by the Commissioner with the approval
of the Corporation irrespective of the question as to where they are to be
found. It, therefore, depended on the arbitrary will of the Commissioner as to C
what machinery he would specify and what he would not. Moreover, he was
the only person who could examine this question. There was no right of
appeal from any specification made under sub-rule (3) of rule 7 except that
the Commissioner was to act under the directions of the Standing Committee.
For all these reasons it was held that sub-rule (3) of rule 7 was invalid on
account of excessive delegation of power by legislature. D
The Full Bench of the Delhi High Court has brushed aside the judgment
in New Manek Chowk (surpa) by the following observation :-

"23. However, in the instant case the Commissioner is not the only
person who can detennine, as to whether any plant and machinery E
contained or situated in or upon any land or building and belonging
to any of the classes specified from time to time by public notice shall
be deemed to form part of the land or bui Iding but therefore he was
required to obtain the approval of the Standing Committee. Thus, it
cannot be said that wholly unguided and uncanalized power was F
conferred upon a statutory authority."

In our considered view, the distinction drawn is hardly valid. While in
the case of the DMC Act, the Commissioner is required to obtain the approval
of the Standing Committee before notifying any plant or machinery under
sub-section (3) of section 116, under the BPMC Act, the Commissioner has G
to do it with the approval of the Corporation, which means almost the same
thing. If the delegated power was treated as wholly unguided and uncanalized
under BPMC Act, we fail to see why it should not be so under the DMC Act
also. We are, however, not inclined to accept the contention of learned
counsel for the appellant that section 116(3) is beyond the legislative
H
866 SUPREME COURT REPORTS (2003] SUPP. I S.C.R.

A competence of the Legislature for the reason that the DMC Act is not result
of exercise of the legislative powers relatable to List II of the Vllth Schedule
of the Constitution by the State Government, but is enacted by Parliament in
exercise of its powers referrable to List I, of Seventh Schedule of the
Constitution.

B Turning to Hindustan Lever (supra) it appears to us that the reasons
given by the Full Bench of the High Court for holding that this judgment does
not apply, are also not valid. Hindustan Lever (supra) was a case under BMC
Act, 1888. The dispute was with regard to the rateable value of a building
which was centrally air conditioned. The AC Plant was so designed as to
C have the whole of the building centrally air-conditioned. For this purpose a
provision was made for concrete cooling towers on the terrace and steel pipes
had been laid tio ensure the circulation of the cooling water from the tower
to ground floor and then back to the tower. The Corporation was of the view,
and the High Court held, that the cost of air conditioning machinery and the
cost of false ceiling had to be included as cost of construction for arriving
D at the rateable value. This court made a categorical finding that there was no
manner of doubt that the air-conditioning machinery had been installed for
the purpose of better enjoyment of the building itself, increasing its utility.

Section 154(1) and (2) of the BMC Act, 1888 read as under :-

E "154(1) in order to fix rateable value of any building or land assessable
to a property-tax there shall be deducted from the amount of the
annual rent for which land or building might reasonably be expected
to let from year to year a sum equal to ten percent of the said annual
rent and the said deduction shall be in lieu of all allowances for repairs
or on any other account whatsoever.
F
(2) The value of any machinery contained or situated in or upon any
building or land shall not be included in the rateable value of such
building or land."

The appellant there contended that the value of the air-conditioning
G machinery including the cost of false ceiling had to be excluded from the cost
of the building computation of rateable value in accordance with sub-section
(2) of Section 154 of the BMC Act. It was contended specifically by the
Corporation that as machinery had been embedded in the building it became
an integral part of the building and that its cost should not be excluded under
H sub-section CZ) of Section 154. A large number of authorities as well as the
KRISHNA MOHAN PVT.LTD. v. M.C.D. [SRIKRISHNA, J.] 867
provisions of Section 3 of the Transfer of Property Act were relied upon by A
the Corporation. This Court, after noticing Poona Municipal Corporation
(supra), (vide para 9) observed :-

"When the legislature sought to exclude the value of machinery of the
type mentioned in sub-section (2) from forming a part of rateable
value, some meaning has to be ascribed to the provision, otherwise B
the intention of the legislature would get frustrated. We therefore,
state that the fact that a machinery gets embedded to a building or
becomes an integral part or it has no relevance while deciding the
question of applicability of the exemption provision."

Again (para 11) it was observed :- c
"According to us, this dischotomy may not be applied to Section in
154(2), as it could not have been intended by the legislature that, say,
only unembedded air-conditioners used for cooling a building would
get the exemption, but not if the apparatus gets embedded and central
air-conditioning is provided in the building. In any case, as we are D
concerned with a taxing provision, an interpretation beneficial to the
assessees, in case two interpretations be reasonably possible, has to
be given. This is a well-settled position in law."

Finally, this Court held that the High Court erred in law in not excluding E
the cost incurred on the air-conditioners and false ceiling and directed exclusion
of the same for the purpose of working out the rateable value.

This judgment too has been given short shrift by the Full Bench of the
Delhi High Court. The High Court side stepped Hindustan Lever Limited
(supra) by observing : F
"The said decision, therefore, again has no application in the instant
case having regard to the fact the interpretation of the expression
"land" building etc. of the DMC Act and BMC Act were different."

We regret we are unable to subscribe to the view of the Full Bench of G
the High Court. As to the construction of Section 116(3), the reasoning given
by Chief Justice Chhagla in Poona Municipal Corporation (supra) and the
reasoning in Hindustan Lever (supra) appeals to us. The Full Bench has laid
great emphasis on the definition of 'land' under section 2(24) of the Act while
approving the reasoning given in Pragati Builders (supra). As pointed out
by the Bombay High Court, in Poona Municipal Corporation (supra), if such H
868 SUPREME COURT REPORTS [20G3] SUPP. I S.C.R.

A a wide meaning were to be given to "land'' defined in Section 2(24) of the Act,
Section 2(3) defining "building" would be wholly rendered otiose. We agree
with the reasoning of Chhagla, C.J., as to the respective functions of the two
definitions, and the observations made in this regard, which we have quoted
earlier.

B In our judgment, the Full Bench of the High Court fell into error in not
keeping in mind the respective functional roles of the definitions of "land",
"building" and "premises" and conceptually allowing them to overlap.

In any event, it cannot be forgotten that Section 116 itself indicates, in
terms, how the rateable value of land and building assessable to the property
C taYes is to be determined. Sub-section (3) of Section 116 lays down the
general rule that no account shall be taken of the value of any plant or
machinery in or upon any land or building subject only to the one exception
namely that if such plant or machinery has been notified by a public notice
by the Commissioner, with the previous approval of the Standing Committee,
D then it shall be deemed to form a part of such land or building for the purpose
of determination of the rateable value. The words used in sub-Section (3) of
Section 116 of the DMC Act are "land" or "building". Hence, the principle
of interpretation evolved in Poona Municipal Corporation (supra) was very
much relevant and applicable. In any event, the definition of "premises" was
wholly irrelevant for interpretation of sub-Section (3) of Section 116.
E
The legislative history unmistakably points towards out to this manner
of interpretation. Legislation, like history, has the habit of repeating itself.
Legislative practice, which was noticed by this Court in New Manek Chowk
(supra), showed that both in England and in India municipal legislation had
F uniformly tended to exclude the cost of plant and machinery for the purpose
of computation of rateable value of land or building subject tio exceptions
made by statute, examples being sub-sections (3) of Section 116 of DMC Act,
Section 154 (2) of the BMC Act, Rule 7 (2) made under the BPMC Act, 1949
and similar statutory provisions. The Full Bench laid great emphasis on the
word "premises" used in the Act and the enlarged meaning given to the term
G under the 1994 bye-laws. In the first place, "rateable value" is defined in
Section 2(47) as the value of any "land" or "building" fixed in accordance with
the provisions of the Act and the bye-laws made there under for the purposes
of assessment to property tax. Section 2 (4 7) does not even make a reference
to "premises". It is true that the expression "premises" is defined in Section
H 2 (38) as inclusive of any fittings affixed to a building for the more beneficial
KRISHNA MOHAN PVT.LTD. v. M.C.D. [SRIKRISHNA, J.) 869
enjoyment thereof. Even assuming the contention which appealed to the High A
Court to be correct, we must reconcile the definition of the term "premises"
in Section 2 (38) with the express words used in sub-section (3) of Section
116 of the Act. Learned counsel for the appellant is, therefore, right in his
contention that whatever be the amplitude of the e~pression "premises" or the
expression "fittings" used in clause (b) of Section 2 (38) of the Act, it cannot
include plant or machinery which have been expressly excluded under Section B
116 (3), except to the extent it is notified. This contention appears justified,
on principle and precedent, and deserves acceptance.

We are unable to accept the view of the High Court that the notification
dated 23.10.1989 was issued by the DMC ex-majori cautela, nor are we in C
agreement with its view that lifts and air-conditioners are not plant or
machinery, but fittings and fixtures. We also cannot accept the view that a
lift being permanently embedded in the "land" duly forms parts of"building"
for computation of rateable value of the building. Jn our view, lifts and air-
conditioners are neither fittings, nor fixtures, but are 'plant' and 'machinery'.
The concept of rateable value, as generally understood, does not admit the D
inclusion of the cost of such plant or machinery in the computation of the
rateable value of the building. The legislature has, therefore, made a specific
provision that if their cost has to be included, a previous notification has to
be issued under sub-section (3) of Section 116. This was purportedly done
by the notification dated 23.10.1989 and, if at all valid, it would become E
operative from the said date and not from any date earlier.

The High Court also seems to have lost sight of the fact that the
Explanation II of 1994 bye-laws was struck down by the High Court and its
invalidity was upheld by this Court.

The learned counsel for the respondent advanced before us the same
F
arguments which appealed to the Full Bench. He contends that whatever
might have been the situation in 1888, Municipal Legislation must be
progressively interpreted. With the concept of 'plant' and 'machinery'
undergoing changes, as a result of series of rapidly advancing technology,
the rateable value of a 'building' or 'premises' to the owner must be taken G
to be letting return inclusive of all plant or machinery contained therein, since
ultimately such plant or machinery is intended for the beneficial enjoyment
of the tenant. Learned counsel also contended that the common law principle,
and the principle under Section 3 of the Transfer of Property Act, as to what
is 'land' has been applied under the DMC Act which is highlighted by H
870 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.

A Explanation II to section 3 (I) (c) of 1994 bye-laws. The contentions do not
appeal to us. First, we must interpret the legislation by reading the words in
the statute. Secondly, Section 116 (3) takes care of the progressive concepts
by vesting the Commissioner with the power to issue the requisite notification
to include newer machinery ~ithin the ambit of'land' or 'building'. Lastly, the
B said explanation is no longer alive and has been set aside by this court.
In the result, we accept the contention of the learned counsel for
appellants and hold cost of plant and machinery situate in or upon any land
or building cannot be i!lcluded in the computation of the rateable value of
land and building unless a valid notification contemplated by sub-section (3)
C of section 116 has been issued.
The next question that arises for our consideration is whether, following
the reasons given by this Court in New Manek Chowk (supra), it can be held
that sub-section (3) of Section 116 is invalid for excessive delegation of
legislative powers as it vests arbitrary and unguided discretion in the
D Commissioner to declare any machinery situated in or upon a land or building
to be deemed to form part of the land and building for the purpose of
determining the rateable value thereof. According to learned counsel for the
appellant, the reasons given by this Court in New Manek Chowk, (supra) for
striking down Rule 7(2) framed under the BPMC Act, 1949 as invalid on
account of excessive delegation of power of legislature equally apply to sub-
E section (3) of Section 116.
For the respondents, however, it is contended that as long as guidelines
for exercise of delegated power are discernible in the statute, it cannot be held
to be unconstitutional, however skeletal the parent legislation may be. Our
F attention was drawn to the judgments of this Court in J. Javalalitha v. Union
of India and Anr., AIR (1999) SC 1912 and Kishan Prakash Sharma and Ors.
V. Union of India and Ors., (2001] 5 sec 212.

Learned counsel for respondents contends that reading the provision
of the D.M.C. Act, particularly the definition of the expression 'land', 'building',
G 'premises', 'rateable', it is clear that the exclusion contemplated by sub-
section (3) of Section 116 of the Act can only be of such item which could
not normally be included in the concept of land or building. Hence, the
Commissioner's power to notify plant or Machinery under Section 116(3) must
be read .is extending only to such things of the same nature as would fall
within the definition of "land" as defined in Section 2(24) of the Act. He,
H therefore, contends that there is thus sufficient guideline indicated in the
KRISHNA MOHAN PVT.LTD. v. M.C.D. [SRIKRISHNA, J.) 871

statute itself and, therefore, the constitutionality of the statute must be A
upheld. Despite anxiously scanning the provisions of the statute, we hardly
find any such guidelines therein. The contention of the learned counsel for
the respondent that the statute indicates the guidelines, namely, that the
Commissioner's power to notify under Section 116(3) is only in respect of
things which are of the same nature as would fall within the ambit of expression B
"land", as defined under Section 2(24), appears to be a classic case of post
hoc ergo propter hoc obviously, the power given to the Commissioner under
sub-Section (3) of Section 116 is intended to be exercised only in a case where
the plant or machinery does not fall within the ambit of the expression 'land'
or 'building' as defined in the Act. It is only in such cases that the questions
of exercise of the discretion on the part of the Commissioner arises. Thus, the C
so called guideline is wholly chimerical.

It is urged by the appellants that there is hardly any distinction between
the situation envisaged by this Court in New Manek Chowk (supra) and the
one before us. The vice discovered by this Court in Rule 7(2) framed under
the BPMC Act, 1949 equally affects Section 116(3) of the D.M.C. Act. D
The second reasoning on which this Court in New Manek Chowk
(supra) struck down a similar delegated legislative power of the Commissioner
under Rule 7 (2) of the BPMC Act, 1949 is equally true. Apart from there being
no guidelines in the statute, the exercise of discretion by the Commissioner
is not subject to any appeal to a higher authority. Learned counsel for the E
respondent points out two circumstances, namely, that the discretion can be
exercised only with the approval of the Standing Committee and Secondly,
that the rateable is subject to an appeal under the statute. True, both these
facets are present in the impugned statute. Unfortunately for the responJents
both these facets were also extant, considered and held inconsequential in F
New Manek Chowk (supra). There also the discretion of the Commissioner
was exercisable with the approval of the Corporation and the rateable value
was subject to an appeal. In any event, as this Court pointed out, although
there may be an appeal provided against the determination of the rateable
value, there is no provision in the statute for an appeal against inclusion of
any plant or machinery within "land" or "building" for determination of the G
rateable value.

In the very judgment cited by the learned counsel for respondent,
Kishan Prakash Sharma and Ors. (supra). It is observed in paragraph 18 as
follows:-
H
872 SUPREME COURT REPORTS (2003) SUPP. I S.C.R.

A "So far as the delegated legislation is concerned, the case-law will
throw light as to the manner in which the same has to be understood
and in each given case we have to understand the scope of the
provisions and no uniform rule could be laid down. The legislatures
in India have been held to possess wide power of legislation subject,
however, to certain limitations such as the legislature cannot delegate
B essential legislative functions which consist in the determination or
choosing of the legislative policy and of formally enacting that policy
into a binding rule of conduct. The legislature cannot delegate
uncanalised and uncontrolled power. The legislature must set the
limits of the power delegated by declaring the policy of the law and
c by laying down standards for guidance of those on whom the power
to execute the law is conferred. Thus the delegation is valid only
when the legislative policy and guidelines to implement it are adequately
laid down and the delegate is only empowered to carry out the policy
within the guidelines laid down by the legislature. The legislature may,
after laying down legislative policy, confer discretion on an
D administrative agency as to the execution of the policy and leave it
to the agency to work out the details within the framework of the
policy. When the Constitution entrust~ the duty of law making to
Parliament and the legislatures of States, it impliedly prohibits them to
throw away that responsibility on the shoulders of some other authority.
E An area of compromise is struck that Parliament cannot work in detail
the various requirements of giving effect to the enactment and,
therefore that area will be left to be filled in by the delegatee. Thus
the questions is whether any particular legislation suffer from excessive
delegation and in ascertaining the same, the scheme the provisions of
the statute including its preamble and the facts and circumstances in
F the background of which the statute is enacted the history of the
legislation, the complexity of the problems which a modern state has
to face, will have to be taken note of and if, on a liberal construction
given to a statute a legislative policy and guidelines for its execution
are brought out, the statute, even if skeletal, will be upheld to be valid
but this rule of liberal construction should not be carried by the court
G
to the extent of always trying to discover a donnant or latent legislative
policy to sustain an arbitrary power conferred on the executive.

The observations made in the judgment of this Court in Patel
Gordhandas Hargovindas (supra) and the legislative practice highlighted
H therein become very relevant in the context of interpretation of the provisions
KRISHNA MOHAN PVT. LTD. v M.C.D. [SRIKRISHNA, .I.] 873
of the statute impugned before us. Applying the test laid down in the A
judgments J. Jaynalitha (supra) and Kishan Prakash Sharma and Ors.,
(supra) we are unable to find any legislative guidelines upon which the
Commissioner's power under Section 116 (3) could be exercised. Since the
High Court had not adverted to these aspects of the matter, we allowed this
contention to be elaborated by the learned counsel before us. We are satisfied
that the vice discovered by this Court in rule 7(2) of the BPMC Act, 1949 in B
New Manek Chowk (supra), equally invalidates Section 116(3) of the DMC
Act.

In the result, we allow the appeals and hold as L<nder :-

(1) Sections 116(3) is declared invalid as it delegates unguided and C
uncanalised legislative powers to the Commissioner to declare
any plant or machinery as part of land or building for the purpose
of determination of the rateable value thereof;
(2) The cost of plant or machinery, lifts and air conditioners fixed on
the land or building of the appellant in question shall not be D
liable to be included for the determination of the rateable value
of the land or building;
(3) The decisions in Pragati Builders (supra) and that of the Full
Bench of the High Court under appeal do not lay down the law
correctly. Corisequently, they are hereby over ruled; E
(4) The appeals are accordingly allowed and impugned judgments of
the High Court are set aside. The impugned assessment orders
are set aside and remitted to the assessing authority under the
DMC Act for passing orders afresh in accordance with law and
the observations made in the judgment. F
In the circumstances of the case, there shall be no order as to costs.

S.K.S. Appeals allowed.

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