Holding

The sub‑lease did not operate as a conveyance of leasehold rights; it was a letting, so Section 120(1)(c) does not impose primary property‑tax liability on the sub‑lessee.

Summary

The Municipal Corporation of Delhi (MCD) sought to hold Shashnak Steel Industries liable for property tax under Section 120(1)(c) of the Delhi Municipal Corporation Act, 1957, alleging that a perpetual sub‑lease dated 20‑Feb‑1981 operated as a conveyance transferring leasehold rights to the sub‑lessee. The sub‑lease was between the President of India (lessor), Mohan Co‑operative Industrial Estate Ltd. (lessee) and Shashnak Steel (sub‑lessee) and contained numerous restrictions on transfer, assignment and use. The High Court held that these restrictions meant the sub‑lease was a letting, not a conveyance, and therefore s.120(1)(c) did not apply. The Supreme Court affirmed this view, stating that the sub‑lease did not confer ownership of leasehold rights and the primary tax liability remained with the superior lessor, not the sub‑lessee. Consequently, the appeal filed by MCD was dismissed.

Issues considered

The perpetual sub‑lease dated 20‑Feb‑1981 constitutes a conveyance of leasehold rights, making the sub‑lessee the owner for purposes of Section 120(1)(c) of the Delhi Municipal Corporation Act, 1957.
Whether the restrictions in the sub‑lease prevent it from being treated as a conveyance and instead render it a mere letting.

Legislation cited

Delhi Municipal Corporation Act, 1957s. 120(1)(a), s. 120(1)(b), s. 120(1)(c), s. 2(24), s. 2(37)

Subjects

property taxsub‑leaseconveyanceleasehold rightsDelhi Municipal Corporation Actprimary liabilityperpetual leasetax assessmentlandlord‑tenant law

Judgment

[2008] 16 S.C.R. 100

A MUNICIPAL CORPORATION OF DELHI
v.
SHASHNAK STEEL INDUSTRIES (P) LTD.
(Civil Appeal Nos. 6802-6806 of 2003)
NOVEMBER 17, 2008
B ;

[S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.]

Delhi Municipal Corporation Act, 1957: s.120(1)(c) -
Property tax - Perpetual sub-lease - Between the President
C of India, as lessor, Cooperative society as lessee and
respondent as sub-lessee - Liability of sub-lessee to pay
property tax under s.120(1)(c) on the ground that sub-lease
operated as conveyance - Held: The sub-lease did not
operate as conveyance, in view of number of restrictions put
D on sub-lessee which prevented sub-lessee from full
enjoyment of leasehold rights - Since it was case of letting
and not of conferring ownership rights on sub-lessee,
s.120(1 )(c) did not apply - Corporation was not right in
imposing primary liability to pay property tax on the sub-
E lessee under s.120(1)(c) of the Act.

A perpetual sub-lease dated 20.2.1981 was executed
between the President of India, as the lessor, Mohan
Cooperative Industrial Estate Ltd. as a lessee and
respondent as a sub-lessee of an industrial plot.
F According to the appellant-Corporation, the perpetual
sub-lease dated 20.2.1981 operated as a conveyance
having the effect of transferring the leasehold rights of
land in favour of respondent who on purchase became
the owner thereof and consequently exigible primarily to
G pay property tax under s.120(1)(c) of the Delhi Municipal
Corporation Act, 1957.

The High Court held that on account of various
restrictions put on the sub-lease, it cannot be said that
H 100
MUNICIPAL CORPORATION OF DELHI v. SHASHNAK 101
STEEL INDUSTRIES (P) LTD.

respondent-sub-lessee was the owner of the industrial A
plot. Hence the instant appeal.

It was contended for the appellant-Corporation that
under the deed dated 20.2.1981, lessor conferred
leasehold rights to the sub-lessee to which the lessee B
was a confirming party; that the sub-lessee was required
to pay premium amount in addition to rent and on
payment thereof the sub-lessee became the owner of the
lease-hold rights.

Dismissing the appeal, the Court c
HELD: 1. The nature of the tenancy created by any
document must be determined by· construing the
document as a whole. Whether it is tenancy for life or a
permanent tenancy must ultimately depend upon the 0
terms of the contract itself. [Para 9] (114-A-B]

Sivayogeswara Cotton Press, Devangere and Ors. v. M.
Panchaksharappa and Anr. AIR (1962) SC 413, relied on.

2.1. The Deed dated 20.2.81 shows that there was a E
lease deed dated 20.3.80 between the lessor and the
lessee in the first instance under which the lessee Mohan
Co-operative Industrial Estate Ltd. was given the authority
to sub-lease on such premium and yearly rent as may be
fixed by the lessor (President of India) and the lessor F
demised the lease in perpetuity to the lessee-Mohan Co-
operative Industrial Estate Ltd. The sub-lessee applied for
the lease to the ~essee, the lessee agreed to sub-let and
the lessor (President of India through Delhi
Administration) agreed to confirm a perpetual sub-lease. G
Therefore, the lessor and not the lessee is the confirming
1 party to the sub-lease between the lessee-Mohan Co-
operative Industrial Estate Ltd. on one hand and the
respondent-sub-lessee on the other hand. The lessor is
the confirming party because under the Deed in question H
102 SUPREME COURT REPORTS (2008] 16 S.C.R.

A rent and premium was revisable periodically and the
t
determination of the revised/enhanced rent/premium was
left to the lessor though rent and premium was payable
by the sub-lessee to the lessee. [Para 11] [115-B-H; 116-
A] .
B 2.2. The purpo~e of the Deed in question is relevant.
What was demised was an industrial plot. Initially, the
lessee was given the authority to sub-lease the industrial
plot on such premium and yearly rent as may be fixed by
the lessor. The lessee was a society registered under
C Bombay Co-operative Societies Act, 1925; one of its
members was respondent-sub~lessee who had agreed
under the Deed in question to set up an industrial unit.
Under one of the terms, the sub-lessee was required to
pay premium and rent to be fixed by the lessor. However,
D both rent and premium was payable by the sub-lessee to
the lessee. The sub-lessee had agreed to put up at its
own expense a factory on the industrial plot within two
years from 20.2.81. Under the Deed, the lessor had to
estimate the capital value (including the enhancement) as
E and when the unit came up. It appears from the Deed that
lessor was entitled,to a share in the enhanced value. The
said Deed further stated that the lessor would have a right
to recover 50% of the unearned increase as and when
the lessor gives permission to the sub-lessee to transfer,
F assign or part with the possession of the plot to any other
member of the lessee society. All these terms indicated
that under the Deed, parties contemplated that on the unit
coming up on the leasehold land there would be an
accretion in the value. The provision for premium was
G only an additional source of revenue. There were number
of restrictions put on the sub-lessee which prevented the
sub-lessee from full enjoyment of the leasehold rights.
Under Clause 6(a) the sub-lessee was not entitled to sell,
transfer, assign or part with possession of the whole or
H any part of the industrial plot to a person who is not a
MUNICIPAL CORPORATION OF DELHI v. SHASHNAK 103
STEEL INDUSTRIES (P} LTD.

member of the lessee society. Under Clause 6(b) it was A
not allowed to transfer, assign or part with possession
to any other member of the lessee society, except with
the prior consent in writing of the lessor which in its
discretion is entitled to refuse such concept. Further,
under Clause 6(b), in the event of consent being given, it B
was open to the lessor to claim a portion of the unearned
increase in the value. Under Clause 16, on determination
of the sub-lease, the respondent-sub-lessee had to yield
up the industrial plot along with the buildings thereon
unto the lessee/lessor. The said restrictions indicated that c
the said Deed did not operate as a conveyance. [Para 13]
[116-P-H;
., 117-A-F]
2.3. During the period 1982 to 1987, the factory had
not come up. Therefore, there was no question of
enhanced value on account of accretion taking place D
during the said period. Therefore, keeping in mind the
restrictions placed on the sub-lessee, it was a case of
"letting" and not of conferring ownership rights on the
sub-lessee. Under the Deed, the respondent remained a
·sub-lessee. In fact, there was a provision for forfeiture/re- E
entry in the said lease. That right of forfeiture/re-entry
could be effected either by the lessor or by the lessee
which further shows that the sub-lessee was not in full
enjoyment of the leasehold rights in the property in
question. A bare perusal of the Deed would show that F
the condition imposed on the sub-lesse·e to pay tax was
only as a matter of indemnification and it would not
indicate ownership of the leasehold rights in favour of the
sub-lessee. [Paras 14 and 15] [117-G-H; 118-A]
3. The language of s.120(1) of the said 1957 Act G
suggests that the intention of the Legislature in fixing
primary liability of property tax upon the owner of the land
is to facilitate the collection of property tax. A bare reading
of s.120(1)(c), in the context of the Deed dated 20.2.81
shows that the said Deed did not operate as a H
104 SUPREME COURT REPORTS [2008] 16 S.C.R.

A conveyance and that the industrial plot was let out to
respondent. Sin~e there was letting in favour of the said
company, s.120(1)(c) of the said 1957 Act did not apply.
[Paras 16 and 17] (118-E-H; 119-A-B]

Case Law Reference :
B
AIR (1962) SC 413 relied on Para 8
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
6802-6806 of 2003.
c From the final Judgment and Order dated 17.9.2002 of the
High Court of Delhi at New Delhi in CWP Nos. 1336-1340 of
1990.
WITH
D C.A. Nos. 6800, 7143 & 7144 of 2003, 1011 & 1019 of 2005
& 6687 of 2008.
Nagendra Rai, Madhu Tewatia, Chander Shekhar Ashri,
Sanjiv Sen, Yunus Malik and Praveen Swarup for the Appellant.
E Sudhir Nandrajog:Saahila Lamba, Bharat Bhushan Jain
and V.B. Saharya (for Saharya & Co.), for the Respondent.
· The Judgment of the Court was delivered by
S.H. KAPADIA, J. 1. Leave granted in S.L.P. (C)
F No.18371 of 2006. t-
2. In this batch of civil appeals we are concerned with two
types of matters - one concerning perpetual sub-lease and the
other concerning lease.

G 3. The lead matter is Civil Appeal Nos.6802-6806 of 2003
- Municipal Corporation of Delhi vs. Mis. Shashnak Steel
lndustn"es Pvt. Ltd. which concerns Perpetual Sub-lease dated
20.2.81. Similarly the lead matter for the other set of civil
appeals is Civil Appeal No.1011 of 2005 - Municipal
H Corporation of Delhi v. Mis. Gaud Constructions Co.
MUNICIPAL CORPORATION OF DELHI v. SHASHNAK 105
STEEL INDUSTRIES (P) LTD. [S.H. KAPADIA, J.)

" CIVIL APPEAL NOS.6802-6806 OF 2003 A

4. A Perpetual Sub-lease dated 20.2.1981 stood
executed between the President of India (as the lessor), Mohan
Co-operative Industrial Estate Ltd. (as the lessee) and M/s.
Shashnak Steel Industries Pvt. Ltd. (as the sub-lessee) of an B
industrial plot.

. 5. We quote hereinbelow some of the relevant recitals and
the terms and conditions of the said Deed dated 20.2.1981:

"RECITALS c
This indenture made this Twentieth (20th) of February
One thousand nine hundred and Eighty one between the
President of India (hereinafter called "the lessor") of the
one part and the Mohan Co-operative Industrial Estate Ltd.
D
Society registered under the Bombay Co-operative
Societies Act, 1925, as in force in the Union Territory of
Delhi and having its registered office at S. Mohan Singh
Building, Connaught Lane, New Delhi hereinafter called
"the Lessee" of the second part and Mis. Shashank Steel
lndustdesPvt. Ltd. hereinafter called sub-lessee of the third E
part.·

(i) Whereas by a lease executed on the Twentieth (20th)
of February One thousand nine hundred and Eighty and
·-\ registered in office of the Registrar/Sub-Registrar, Delhi/ F
New Delhi (hereinafter called "the lease'; a copy of which
is annexed hereto and marked '.XJ the Lessor demised
unto the lessee in perpetuity the industrial plots as
mentioned therein.

(ii) And whereas under the lease the lessee has to sub- .G
lease, on such premium and yearly rent as may be fixed
by the lessor, one industrial plot to each of the members
of the lessee who may be approved by the Chief
Commissioner Delhi (hereinafter called "the Chief
Commissioner") for carrying on such manufacturing H
106 SUPREME COURT REPORTS [2008] 16 S.C.R.

A process or running such industry as may be approved by
the Chief Commissioner.

(iii) And whereas the Sub-lessee has applied to the
lessee for the grant of a perpetual sub-lease of an
industrial plot an~. on the faith of the statements and
B
representations made by the Sub-lessee, the Lessee has
agreed grant and the lessor has agreed to confirm a ~

perpetual sub-lease of an industrial plot.

(iv) And whereas on an application by the lessee the lessor
c has fixed the amount to be paid initial/y towards premium .
before the execution of these presents (and the lessor
shall fix subsequently additional or sum payable towards
premium as provided in the covenants hereinafter
contained) and the yearly of industrial plot hereby sub-
D leased.

(v) And whereas the Chief Commissioner has approved
the sub-lessee and the manufacturing process be carried
on or the industry to be run on the said industrial plot by
the sub-lessee. ·
E
Now this indenture witnesse that, in consideration of the
sub-lessee having paid to the lessee 16,093.60 Sixteen
thousand and ninety three and paise sixty only towards
premium before the execution of these present (the
F receipt whereofthe lessee hereby acknowledges) and of t
the rent hereinafter reserved and of the covenants on the
part of the Sub-lessee hereinafter contained, the lessee
doth hereby sub-lease and the lessor doth hereby
confirm unto the sub-Jessee . .........
G
Subject always to the exceptions reservations, covenants
and conditions contained in the lease and hereinafter
contained that is to say as follows:-

Covenants and the conditions contained in the Lease
H
MUNICIPAL CORPORATION OF DELHI v. SHASHNAK 107
STEEL INDUSTRIES (P) LTD. [S.H. KAPADIA, J.]

I. The lessor ... A

(1) The Sub-lessee shall pay to the lessee within such
time such additional sum or sums towards premium in
respect of the industrial plot as may be decided upon and
fixed by the lessor on account of the compensation
B
awarded by the Land Acquisition Collector being
; . enhanced on reference or in appeal or both as mentioned
in Sub-clause (1) and (5)(a) of Clause II of the Lease and
the decision of the lessor in this behalf shall be final and
binding on the Sub-lessee and lessee.
c

(2) The Sub-lessee shall pay unto the lessee the yearly
rent hereby reserved on the days and in the manner herein
before appointed.
D
(3) ...

(4) The sub-lessee shall at all times duly perform and
observe all the covenants and conditions which. are
contained in the lease on the part of the lessee or sub- E
lessee there under to be performed and observed insofar
as the same may be applicable to, affect and relate to the
industrial plot sub-leased to him.

(5) The sub-lessee shall within a period of two years from
the twentieth day of February one thousand nine hundred F
eighty one and the time so specified shall be of the
essence of the contract after obtaining sanction to the
buil~i.ng. plan, with necessary designs, plans and
spe~rfrcatrons from the proper municipal or other authority
at hts ow~ expense erect upon the industrial plot and G
~omplete rn a substantial and workmanlike manner an
rndustrral. building for carrying on be approved
manufacturrng process or industry within the requisite and
proper walls, sewers and drains and other conveniences
H
108 SUPREME COURT REPORTS [2008] 16 S.C.R.

A in accordance with the sanctioned building plan and to the
satisfaction of such municipal or other authority.

(6)(a) The sub-lessee shall not sell, transfer, assign or
otherwise part with the possession of the whole or any of
the industrial plot in any form or manner, benami or
8 otherwise to a person who is not a member of the lessee.
•
(b) The Sub-lessee shall not transfer assign or otherwise
part with the possession of the whole or any part of the
industrial plot to any other member of the lessee except
c with the previous consent in writing of the lessor which it
shall be entitled to refuse in his absolute discretion.

Provided that, in the event of the consent being given, the
lessor may impose such terms and conditions as thinks
fit and the lessor shall be entitled to claim and recover a
D
· portion of the unearned increase in the value (i.e. the
difference between the premium paid and the market
value) of the industrial plot at the time of sale transfer
assignment, or parting with the possession, the amount to
be recovered being fifty percent of the unearned increase
E. and the vision of the lessor in respect of the market value
shall be final and binding.

Provided further that the lessor shall have the pre-emptive
right to purchase the property after deducting ·
F
Provided that the Lt. Governor reserves the right to resume
any plot or part thereof on payment of reasonable.
compensation which may be required for the development
of the area like laying of sewerage, _Trunk Services,
Electric and Telephone Wires and Water Supply lines etc.,
G or such other purposes, which may be deemed of public
and general utility.
Lessor shall be entitled to. claim the recover one fifty
percent of the unearned increase in the value of the
H industrial plot as aforesaid and the amount of the lessor's
MUNICIPAL CORPORATION OF DELHI v. SHASHNAK 109
STEEL INDUSTRIES (P) LTD. [S.H. KAPADIA, J.]

share of the said unearned increase shall be a first charge, A
having priority over the said mortgage or charge. The
decision of the lessor in respect of the market value of the
said industrial plot shall be final and binding on all parties
concerned
B
Provided further that the lessor shall. have the pre-emptive
right to purchase the mortgaged or charged property after
deducting fifty percent of the unearned increase as
aforesaid.

(7) The lessor's right to the recovery of fifty percent of the c
unearned increase and the pre-emptive right to purchase
the property as mentioned hereinafter shall apply equally
to an involuntary sale or transfer whether it be by or through
an executing or insolvency court.
D
(8) .........

(9) .........
'

(10) The sub-lessee shall from time to time and at all time
pay and discharge all rates, taxes, charges and E
assessment of every description which are now or may at
any time hereafter during the continuance of the sub-lease
be assessed, charged or imposed upon the industrial plot
hereby sub-leased or on any building to be erected
hereupon or on the landlord or tenant in respect thereof. F
(11) .........

(12) .........

(13) ......... G
)
(14) The sub-lessee shall not without the written consent
of the lessor use or permit to be used the industrial plot
or any building thereon for residence or for carrying on any
trade or business whatsoever or use the same or permit
H
110 SUPREME COURT REPORTS [2008] 16 S.C.R.

A the same to be used for any purpose other than that of
carrying on the manufacturing process or running the
industry of Item as per Master Plan or such other
manufacturing process or industry as may be approved
from time to time by the Chief Commissioner or to or suffer
B to be done therein any Act or thing whatsoever which in
1
the opinion of the lessor may be a nuisance, annoyance
or disturbance to .the Lessor, Lessee and other Sub-
lessees and persons in the neighborhood.

(15) .........
c
(16) The sub-lessee shall on the determination of this
Sub-lease peaceably yield up the said industrial plot and
the buildings thereon unto the lessee or the lessor, as
may be entitled.
D
Ill. If the sum or sums payable towards the premium or
the yearly rent hereby reserved or any part thereof shall
any time be in arrear and unpaid for one calendar month
next after any of the days whereon the same shall have
become due whet~er the same shall have been demanded
E
or not, or if it is discovered that this sub-lease has been
obtained by suppression of any fact of by any mis-
statement, misreP,resentation or fraud if there shall have
been in the opinion of the lessee or the lessor and the
decision of the lessor shall final any breach by the sub-
F lessee or by any person claiming through or under him of
any of the covenants or conditions contained herein and
in the lease and on his part to be observed or performed,
then land in any such case, it shall be lawful for lessor or
the lessee with the prior consent in writing of the lessor
G notwithstanding the waiver of any previous cause or right (
of re-entry upon the industrial plot and sub-leased and the
buildings thereon, to re-enter upon and take possession
of industrial plot and buildings and fixtures thereon, and
thereupon this sub-lease and everything herein contained
H shall cease determine in respect of the industrial plot so
MUNICIPAL CORPORATION OF DELHI v. SHASHNAK 111
STEEL INDUSTRIES (P) LTD. [S.H. KAPADIA, J.]

re-entered upon, and the sub-lessee shall not be entitled A
to any compensation whatsoever nor to the return of any
premium paid by him.

•,
IV. No. forfeiture or re-entry shall be effected until the lessor B
or the lessee has served on the sub-lessee a notice in
writing.

(a) specifying the particular breach complained of and

(b) if the breach if capable of remedy, requiring the sub-
c
lessee to remedy the breach.

and the sub-lessee fails within such reasonable time as
may be mentioned in the notice to remedy the breach if it
is capable of remedy; and in the event of forfeiture or re- D
entry the lessor in his discretion or the lessee, with the prior
consent in writing of the lessor may relieve against
forfeiture on such terms and conditions as the lessor thinks
proper."
E
(emphasis supplied by us)

6. In this civil appeal the main contention of the Corporation
-j is that the perpetual sub-lease dated 20.2.81 operated as a
conveyance having the effect of transferring leasehold rights,
which constituted "land" as defined in Section 2(24) of the Delhi F
Municipal Corporation Act, 1957, in favour of M/s. Shashnak
Steel Industries Pvt. Ltd., who on purchase became the "owner''
thereof as defined under Section 2(37) of the said 1957 Act
and consequently as the said "owner'' became exigible primarily
)
to pay property tax under Section 120(1)(c) of the said 1957 G
Act. In short, according to the Corporation, Mis. Shashnak Steel
Industries Pvt. Ltd. was the owner of the leasehold rights under
the said-Oeed who was primarily liable to pay property tax under
Section 120(1)(c) of the said 1957 Act. This argument has
been rejected by the High Court which has interpreted the H
112 SUPREME COURT REPORTS [2008] 16 S.C.R.

A perpetual sub-lease dated 20.2.81 in entirety and has come to
the conclusion that on account of various restrictions put on the
sub-lessee it cannot be said that M/s. Shashnak Steel Industries
Pvt. Ltd. (sub-lessee) was the owner of the industrial plot and
. that the perpetual sub-lease did not operate as a conveyance.
B The impugned judgment of the High Court was given in Civil
Writ Petition No.1336'of 1990 dated 17.9.2002, hence this civil '
appeal is filed by the Corporation.

7. For the sake of convenience, we also quote the relevant
provisions of the Delhi Municipal Corporation Act, 1957 which
c read as follow:

"CHAPTER I

PRELIMINARY
D Section 2. Definitions.- In this Act, unless the context
otherwise requires, -

(24). "land" includes benefits to arise out of land, things
attached to the earth or permanently fastened to anything
E attached to the earth and rights created by law over any
street;

(37). "owner" includes a person who for the time being is
receiving or is entitled to receive, the rent of any land or I-·
building whether on his own account or on account of
F
himself and others or as an agent, trustee, guardian or
receiver for any other person or who should so receive the
rent or be entitled to receive ii if the land or building or part
thereof were let to a tenant and also includes- •
G (a) the custodian of evacuee property in respect of
...
evacuee property vested in him under the Administration
of Evacuee property Act, 1950 (31 of 1950);

(b) the estate officer to the Government of India, the
H Secretary of the Delhi Development Authority, constituted
-MUNICIPAL CORPORATION OF DELHI v. SHASHNAK 113
-, STEEL INDUSTRIES (P) LTD. [S.H. KAPADIA, J.]

under the Delhi Development Act, 1957 (61 of 1957), the A
General Manager of a railway and the head of a
Government department, in respect.of prtiperties under
their respective control;

CHAPTER VIII
B
TAXATION

Levy of taxes

Section 120. Incidence of property taxes.-
c
(1) The property taxes shall be primarily leviable as
follows:-

(a) if the land or building is let, upon the lessor;
D
(b) if the land or building is sub-let, upon the superior
lessor;

(c) ifthe land or building is unlet, upon the person in whom
the right to let the same vests:
E
Provided that the property taxes in respect of land or
building, being property of the Union, possession of which
has been delivered in pursuance of Section 20 of the
Displaced Persons (Compensation and Rehabilitation)
Act, 1954 (44of1954), shall be primarily leviable upon the F
transferee."

8. At the outset it may be stated that in this civil appeal
we are concerned with the assessment years 1982 to 1987
when admittedly the land in question was vacant land. We may
also state at the outset that in this civil appeal we are concerned G
with interpretation of sub-lease dated 29.2.81 which has been
annexed to the civil appeal paper book.
9. The forms in which tenancies are created in India are
not uniform and they do not conform to the precedents known H
114 SUPREME COURT REPORTS [2008] 16 S. C.R.
,·.
A to conveyancing; sometimes the words used are not precise
and it is not easy to understand from the said words the
intention of the parties in executing the documents. The nature
of the tenancy created by any document must be determined
by construing the document as a whole. If the tenancy is for a
B building purpose, as is the case herein, then prima facie it is
intended for the life time of the lessee or it may in certain cases
be even a permanent lease. Prima facie such a lease is not
intended to be tenancy at will. But whether it is tenancy for life
or a permanent tenancy must ultimately depend upon the terms
C of the contract itself. [See: Sivayogeswara Cotton Press,
Devangere and others v. M. Panchaksharappa and another
-AIR 1962 SC 413].

10. Although .it is the case of the Corporation that the
perpetual sub-lease operated as a conveyance for which
D reliance was placed on the terms and conditions mentioned in
the Deed, what we are concerned in this civil appeal is: whether
on the terms and conditions mentioned in the said Deed, could
primary liability to pay property taxes be placed on the
assessee under Section 120(1)(c) of the said 1957 Act to pay
E property taxes. It is well settled that "intendment" has no role
to play in a taxing statute. Section 120(1) falls in Chapter VIII
of the said 1957 Act which deals with taxation.

11. Before dealing with the provisions of the Chapter VIII
F of the said 1957 'Act we are required to analyse the Deed
dated 20.2.81. The Deed is described as perpetual sub-lease.
The President of India under the Deed is the lessor, Mohan Co-
operative Industrial Estate Ltd. is described as lessee and M/
s. Shashnak Steel Industries Pvt. Ltd. is described as a sub-
G lessee. We have quoted the recitals extensively hereinabove.
On reading the first recital, we enquired from Ms. Madhu
Tewatia, learned counsel appearing on behalf of the
Corporation, as to the existence of the lease dated 20.3.80
which is referred to in the first recital as "annexed mark X". This
query was raised because ii was argued on behalf of the
H
MUNICIPAL CORPORATION OF DELHI v. SHASHNAK 115
STEEL INDUSTRIES (P) LTD. [S.H. KAPADIA, J.]

Corporation that the Deed dated 20.2.81, which is the Deed A
in question, was between the President of India and M/s.
Shashnak Steel Industries Pvt. Ltd. in which the lessee, namely,
Mohan Co-operative Industrial Estate Ltd. was the confirming
party. Since this was the argument put in the forefront by the
learned counsel for the Corporation we enquired of the lease B
dated 20.3.80. It was not produced. Be that as it may, on
reading the said Deed dated 20.2.81 we find that there was a .
lease deed dated 20.3.80 between the lessor and the lessee
in the first instance under which the lessee Mohan Co-operative
Industrial Estate Ltd. was given the authority to sub-lease on c
such premium and yearly rent as may be fixed by the lessor
(President of India). This position emerges from the .second
recital in the Deed. It also appears from the first recital that the
lessor had demised the lease in perpetuity to the lessee -
Mohan Co-operative Industrial Estate Ltd. on 20.3.80. Similarly, D
from the third recital ii becomes clear that the sub-lessee (M/
s. Shashnak Steel Industries Pvt. Ltd.) had applied to the lessee
- Mohan Co-operative Industrial Estate Ltd. for grant of
perpetual sub-lease of an industrial plot to which the lessee had
agreed. The most important aspect in the third recital is that
the sub-lessee had applied for the lease to the lessee, the E
lessee agreed to sub-let and the lessor (President of India
through Delhi Administration) had agreed to confirm a perpetual
sub-lease. This position is also stated in the operative part of
the said Deed before setting out the terms and conditions.
Therefore, the lessor and not the lessee is the .confirming party F
to the sub-lease between the lessee - Mohan Co-operative
Industrial Estate Ltd. on one hand and Mis. Shashnak Steel
Industries Pvt. Ltd. on the other hand. Therefore, there is no
merit in the contention advanced on behalf of the Corporation
that under the Deed lessor conferred leasehold rights to the G
sub-lessee to which the lessee was a confirming party. On the
contrary, the said Deed indicates the lease was between the
lessee and the sub-lessee to which the lessor was the
confirming party. There is one more aspect to be kept in mind.
The lessor is the confirming party because under the Deed in H
116 SUPREME COURT REPORTS [2008] 16 S.C.R.

A question rent and premium was revisable periodically and the
determination of the revised/enhanced rent/premium was left
to the lessor though rent and premium was payable by the sub-
lessee to the lessee.

12. The said Deed indicates thatthe sub-lessee obtained
8
the sub-lease in order to put up an industrial unit on the industrial
plot.

13. In this case great emphasis is placed by the
Corporation on the fact that the sub-lessee was required to pay
C a sum of Rs.16093.60 as premium in addition to rent which
according to the Corporation indicated purchase of leasehold
rights. According to the Corporation on purchase of leasehold
rights the sub-lessee became the owner thereof. We find no
merit in this contention. If one looks at the Deed in question we
D find that the lessor has retained its right to determine
periodically the rent payable and the premium chargeable. One
has to keep in mind the purpose of the Deed in question. What
was demised was an industrial plot. Initially, the lessee - Mohan
Co-operative Industrial Estate Ltd. was given the authority to
E sub-lease the industrial plot on such premium and yearly rent
as may be fixed by the lessor. Mohan Co-operative Industrial
Estate Ltd. was a society registered under Bomb.ay Co-
operative Societies Act, 1925; one of its members appears to.
be M/s. Shashnak Steel Industries Pvt. Ltd. who had agreed
F under the Deed in question to set up an industrial unit. Under
one of the terms, the sub-lessee was required to pay premium
and rent to be fixed -by the lessor. However, both rent and
premium was payable by the sub-lessee to the lessee. As
stated, the sub-lessee had agreed to put up at its own expense
a factory on the industrial plot within two years from dated
G 20.2.81. Under the Deed the lessor had to estimate the capital
value (including the enhancement) as and when the unit came
up. It appears from the Deed that lessor was entitled to a share
in the enhanced value. The said Deed further stated that the
lessor shall have a right to recover 50% of the unearned
H
MUNICIPAL CORPORATION OF DELHI v. SHASHNAK 117
STEEL INDUSTRIES (P) LTD. [S.H KAPADIA, J.]
--.
-'"¥
increase as and when the lessor gives permission to the sub- A
lessee to transfer, assign or part with the possession of the plot
to any other member of the lessee society. All these terms
indicate that under the Deed parties contemplated that on the
unit coming up on the leasehold land there would be an
accretion in the value. In our view, the provision for premium B
was only an additional source of revenue. Therefore, we do not
find any merit in the contention advanced on behalf of the
Corporation that on payment of premium the sub-lessee
became the owner of the leasehold rights. Further as rightly held
by the High Court there are numbers of restrictions put on the c
sub-lessee which prevented the sub-lessee from full enjoyment
of the leasehold rights. Under Clause 6(a} the sub-lessee was
not entitled to sell, transfer, assign or part with possession of
the whole or any part of the industrial plot to a person who is
not a member of th~ lessee society - Mohan Co-operative D
Industrial Estate Ltd. Under Clause 6(b) it was not allowed to
transfer, assign or part with possession to any other member
of the lessee society, except with the prior consent in writing of
the lessor which in its discretion is entitled to refuse such
concept. Further, under Clause 6(b), in the event of consent
E
being given, it was open to the lessor lei claim a portion of the
unearned increase in the value. Under Clause 16, on
determination of the sub-lease, M/s. Shashnak Steel Industries
Pvt. Ltd. herein had to yield up the industrial plot along with the
buildings thereon unto the lessee/lessor. The said restrictions
indicate that the said Deed did not operate as a conveyance. F

14. In this case, we are concerned with the question of
primary liability on the vacant land during the period 1982 to
1987. During that period the factory had not come up.
Therefore, there was no question of enhanced value on account G
of accretion taking place during the said period. Therefore,

• keeping in mind the restriction(s} placed on the sub-lessee we
are of the opinion that this is a case of "letting". It is not the
case of conferring ownership rights on the sub-lessee. Under
the Deed, Mis. Shashnak Steel Industries Pvt. Ltd. remains a H
•
118 SUPREME COURT REPORTS [2008] 16 S.C.R.

¥-
A sub-lessee. In fact, there is forfeiture/re-entry provided for in the
said lease. That right of forfeiture/re-entry can be effected either
by the lessor or by the lessee which further shows that the sub-
lessee is not in full enjoyment of the leasehold rights in the
property in question.
B
15. For the aforestated reasons on interpretation of the
perpetual sub-lease dated 20. 2. 81, we are of the view that the r
said Deed cannot be construed as a conveyance of leasehold
rights in favour of Mis. Shashnak Steel Industries Pvt. Ltd. We
are of the view that this case is that of letting. Therefore, we
c do not find any infirmity in the impugned judgment. We also
agree with the view taken by the Delhi High Court that a bare
perusal of the Deed would show that the condition imposed on
the sub-lessee to pay tax is only as a matter of indemnification
and it would not indicate ownership of the leasehold rights in
D favour of the sub-lessee.

16. Coming to the interpretation of the provisions of
Section 120( 1) of the said 1957 Act, at the outset we may state
· that the language of the said section suggests that the intention
E of the Legislature in fixing primary liability of property tax upon
the owner of the land is to facilitate the collection of property
tax. It is not unreasonable for the Legislature to impose the
primary liability upon the lessor and to give him the right of
recoupment. In this case, we are concerned only with the
F question as to whether the Corporation was right in imposing
primary liability to pay property tax on the sub-lessee under
Section 120(1)(c) of the said 1957 Act. Whether the liability
was on Mohan Co-operative Industrial Estate Ltd., is not
required to be gone into by us because that is not the case of
the Corporation and also because the lease between the
G
President of India and Mohan Co-operative Industrial Estate
Ltd. dated 20.3.80 was not produced before us. We also do
not know the basis. on which premium was payable by the
lessee to the lessor.
'
H 17. On a bare reading of Section 120(1)(c), in the context
-
MUNICIPAL CORPORATION OF DELHI v. SHASHNAK 119
l!lll
"''"'i_., STEEL INDUSTRIES (P) LTD. [S.H. KAPADIA, J.]
_,,
of the Deed dated 20.2.81, we find that the said Deed did not A
~ operate as a conveyance and that the industrial plot was let out
to Mis. Shashnak Steel Industries Pvt. Ltd. Since there was
letting in favour of the said company, Section 120(1)(c) of the
said 1957 Act did not apply.
B
18. For the aforestated reasons, we see no infirmity in the
l
impugned judgment of the Delhi High Court. Accordingly, the
civil appeal filed by the Corporation is dismissed with no order
as to costs.

Facts in Civil Appeal No.101112005 and other Civil Appeals c
19. The lead matter in this set of civil appeals is Civil
Appeal No.1011 of 2005 - Municipal Corporation of Delhi v.
Mis. Gauri Constructions Co. On 7.5.1999 there was a
Perpetual Lease executed by the President of India through D
Delhi Administration as lessor in favour of Mis. Gauri
Constructions Co. (respondent herein). Unlike Mohan Co-
operative Industrial Estate Ltd., the lessee in the earlier case,
the respondent herein had no right to sell, transfer, assign or
part with the possession of the commercial plot except with the
E
consent in writing from the lessor who was entitled to refuse
such consent in its absolute discretion. In the case of Mis.
Shashnak Steel Industries Pvt. Ltd. (supra) ii was a case of
grant of Perpetual Sub-lease. In that case there were two
.., leases. In the first instance, there was a lease dated 20.3.80
F
from the lessor to Mohan Co-operative Industrial Estate Ltd.
(lessee), a society registered under Bombay Co-operative
Societies Act, 1925, under which the lessee -was entitled to
sub-lease whereas in the present case of Mis. Gauri
Constructions Co., no such right was given to the lessee to sub-
lease. In the circumstances, for the reasons given hereinabove, G
) the case of Mis. Gauri Constructions Co. would not attract
Section 120(1)(c) of the said 1957 Act. In this civil appeal also
we are concerned only with the period when the land was
vacant.
H
120

-
SUPREME COURT REPORTS [2008] 16 S.C.R.

A 20. Before concluding, we may state that there is a
difference between "liability" and "exemption from liability". In
this case Union of India is exempt from payment of property
tax, we are not concerned with that aspect. We are only
concerned with whether the assessee(s) was primarily liable
B to pay property tax under Section 120(1)(c) of the said 1957
Act. For that purpose, we were required to examine the Deed
dated 7.5.99 to find out whether the case is that of letting or
conferment of ownership of leasehold rights. On reading and
analyzing the said Deed, we are of the view that it did not
c operate as conveyance of leasehold rights. Consequently,
Section 120(1)(c) of the ·said 1957 Act is not attracted.

21. For the aforestated reasons we find no infirmity in the
impugned judgments of the Delhi High Court and accordingly
all the civil appeals filed by the Corporation stand dismissed
D with no order as to costs.

D.G. Appeal dismissed.

(