Holding

A guest house is a commercial use, so the NDMC may charge electricity at commercial rates.

Summary

The landlord of a property in New Delhi let the first and barsati floors to a guest house. The New Delhi Municipal Council (NDMC) charged electricity and water rates at non‑domestic (commercial) rates, which the landlord contested, claiming the guest house was a residential use. The trial court and first appellate court upheld NDMC's right to charge commercial rates, but the Delhi High Court reversed, holding the guest house to be a domestic use. On appeal, the Supreme Court held that the terms "domestic" and "commercial" are to be given their ordinary meaning and that the relevant factor is the purpose for which the owner lets the premises, not the purpose of the occupants. Since a guest house is operated for profit and not for purely private residence, it constitutes a commercial purpose, allowing NDMC to levy commercial electricity rates. The appeal was allowed and the High Court judgment set aside.

Issues considered

Whether the use of premises for a guest house constitutes a "commercial" use for the purpose of electricity charges under Section 23 of the Electricity Act.
Whether the New Delhi Municipal Council is competent to levy electricity charges at non‑domestic rates for such premises.

Legislation cited

Electricity Acts. 23

Subjects

electricity chargesdomestic vs commercialguest houseSection 23non‑domestic ratesNDMCcommercial purpose

Judgment

NEW DELHI MUNICIPAL COUNCIL A
v.
SOHA'.'l LAL SACHDEV (DEAD) REPRESENTED BY MRS.
HARINDER SACHDEV w;o. LA TE SO HAN LAL SACHDEV

FEBRUARY 9, 2000
B
[S.B. MAJUMDAR AND D.P. MOHAPATRA, ff[

Electricity Act, 19 IO.· Section 23--Two floor of a residential house rented
for use as a Guest house-Electricity charges claimed 011 domestic
rates-Commercial rates charged--Suit filed for injunction restraining NDlvlC c
f ram charging commercial rates-Suit dismissed- First appeal also dis-
missed--Seco11d appeal allowed by High Court-On appeal, Held: letting out
ofpremises for rnnning a guest house amounted to commercial purpose-Pur-
pose for which the guest or occupant of guest house uses the electricity not
relevant-Nature of purpose of the user by the owner relevant for detem1ina-
tion. D

Word.I & Phrases:

'Commercial', 'domestic purpose'-Meaning of.

The respondent (after death represented by his wife) was residing E
/
on the ground floor of his house and let out the first floor and barsati to
a Guest House. On this the appellant started charging for w.iter and
electricity on 'non-domestic rates'. The respondent, therefore, filed a suit
for an injunction restraining the appellant from raising demand on the
basis of commercial user of the premises which was dismissed. First F
appeal before the Sr. Civil Judge was also dismissed. The second appeal
filed by the respondent was allowed by the High Court on the ground that
the user of the suit premises for running the 'guest house' without any
kitchen facility was a user for residential purpose. Hence the present
appeal. G
Allowing the appeal, this Court

HELD : 1.1. The terms 'domestic' and 'commercial' are not defined
in the Electricity Act or Rules. Therefore, the expressions are to be given
common parlance meaning and must be understood in their natural, H
731
v

732 SUPREMF. COURT RHORTS [2C<,'O] l S.C.R.
A ordinary and popular sense. In interpreting the phr.tses the context in
which they are used is also to be kept in mind. The word "commercial"
means traffic, trade or merchandist! in buying and selling of goods whereas
the phrase "domestic purpose" m1~ans use for personal residential pur·
poses. The significant thing to note is that what is the character of the
B purpose of user of the premises hy the owner or landlord and not the
character of the place of user. The classification made for the purpose of
charging electricity duty by the N.'.JMC sets out the categories 'domestic
user' as contra- distinguished from 'commercial' user or to put it different·
ly 'non-domestic user'. The intent and purpose of the classification is to
make a distinction between 'purely residential purpose' as against 'com·
C mercial purpose'. ln the case of a 'guest house', the building is used for
providing accommodation to 'guests' who may be travellers, passengers,
or such persons who may use the premises temporarily for the purpose of
their stay on payment of charges. The use for which the building is put by
the keeper of the guest house in the context cannot be said to be for purely
D residential purpose. It is the use of the premises by the owner (not
necessarily absolute owner) which is relevant for determination of the
question and not the purpose for which the guest or occupant of the guest
house uses electric energy. [735-C-H; 734-A·B]

Municipal Corporation of Greater Bombay v. Mafatlal Industries,
E [19961 s sec 21 relied on.

Stroud's Judicial Dictionary, Vth Edition, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 912 of
2000.
F
From fae Judgment and Order dated 18.12.96 of the Delhi High
Court in R.S.A. No. 27 of 1995.

R.K. Maheshwari for the Appellant.

G Rajesh Malhotra and Dalip Kumar Ylalhotra, for the Respondent.

The Judgmtnt of the Court was ddiwred by

MOHAPATRA, J. Delay condoned. Li;:;ave granted.

H The con: question that arises for determination in this case ts
N.D.M.C '· s.:. SACHDE'V :DEAD) REflU'-'toNIAIBD EY \1RS. H. SAC:HJJl!V [MOHAPATRA. J.[ 733

whether use of premises for the purpose of a guest house can be termed A
as 'domestic use' for the purpose of electricity charges by the New Delhi
Municipal Council (NDMC)?

The factual backdrop of the case, shorn of unnecessary details, may
be stated thus :
B
Sohan Lal Sachdev, deceased, represented by legal representative,
was the landlord of the premises bearing No. 49, Golf Links, New Delhi.
He occupied the ground floor the said premises. In the month of Septem-
ber, 1981, he let out the first floor and the Barsati floor to Sachdeva Guest
House for running a guest house. When this fact was intimated to the c
Corporation Authorities by the landlord, demands of electricity and water
charges were made according to 'non domestic rates' with effect from
1.10.1981. The landlord protested against the demand stating that the user
of the premises for running a guest house cannot be said to be a commer-
cial use of the premises and therefore the demand is unsustainable. There- D
after, the landlord filed a suit, Suit No. 230 of 1982, seeking a decrte of
injunction against the NDMC restraining it from raising demand on the
basis of commercial usi.:r of the premises on the ground as noted above.

The case of the NDMC was that use of the premises (first floor and
Barsati floor) for running the 'guest house' cannot be said to be 'domestic E
use'; it is a commercial ·user and therefore demand of electricity on that
basis is justified. The learned Trial Judge on the pleadings framed three
main issues :

(1) Whether the user of the premises for running a guest house F
can be termed as commercial user?

(2) Whether the defendant is competent to charge the electricity
consumption on non-domestic rates?

(3) Whether the plaintiff is entitlt:d for the relief of injunction? G

Relying on Section 23 of the Indian Electricity Act (the 'Act' for
short), the Trial Judge held that NDMC was competent to convert the
charges of electricity supply from one;: category to another i.e. from
'domestic' category to 'commercial' category. She, however, did not accept H
734 SCPREME COURT REPORTS (20CO) 1 S.C.R.
A the contention of NDMC that the user of the premises in running residen-
tial guest house can be termed as commercial user and answered issue
number one in favour of the plaintiff and against the defondant. The Trial
Judge further hdd that even if the running of a guest house at the suit
premises cannot be termed as 1;ommercial user, it cannot also be termed
B as 'domestic user' either. Therefore, the NDMC had the right to charge
rates at 'non domestic rates' for supply of electricity and water at the
premise being used for running the guest house. On the above finding the
suit was dismissed.

On appeal by the landlord the learned Senior Civil Judge, Delhi
C concurred with the finding of the trial court that NDMC was competent to
vary the electricity charges of the suit premises. The first Appellate Court
further held that NDMC has the right to charge non domestic rates for
supply of electricity and water in the suit premises as the same was being
used for running the guest house. The first Appellate Court dismissed the
D appeal.
The landlord filed second appeul in the High Court of Delhi chal-
lenging the Judgment and decree of the first appellate court confirming the
judgment of the trial court. The High Court reversed the concurrent
E decisions of the lower courts and decreed the suit. The: High Court took
the view that user of the suit premises for running the 'guest house' without
any kitchen facility is user for residential purpose: and, therefore, the
NDMC is not entitled to charge electricity and water charges on the basis
of commercial use. Being aggrieved by the decision of the High Court, the
NDMC has filed this appeal challenging the judgment.
F
On 23.3.1998, this Court ordered:

"Notice to issue in the light of the decision of this Court in the
case of Municipal Corporation of Greater Bombay v. Mafatlal In-
dustries & Ors. reported in (1996) 8 SCC 27. Notice shall state that
G the SLP shall be disposed of finally at the notice stage. Notice to
issue on the application for condonation of delay also".

The main thrust of the submissions of learned counsel for the appel-
lant NDMC is that user of the suit premi~es for running the guest house
H with arrangement for boarding of guests on payment cannot be said to be
S.D.Jvf,C. >. S.L. SAC:HDEV (DEAD) REPRESENTAT!ill BY MRS.Ii SAC:HDEV\MOHAPATRA. J.J 735

private domestic user of the premises. It is the further contention of the A
learned counsel that such user of the premises can be appropriately
classified as 'commercial' user. The High Court, according to the learned
counsel, committed an error in holding that the user of the suit premises
is 'domestic'.
B
The h:arned counsel appearing for the respondent landlord on the

- other hand supporh:d the judgment of the High Court reiterating the
reasons stated therein.

On the case of the parties and the rival contentions raised on their
behalf, the question formulated earlier arises for consideration. C

The two terms 'domestic' and 'commercial' are not defined in the
Act or the Rules. Therefore, the expressions are to be given common
parlance meaning and must be understood in their natural, ordinary and
popular sense. In interpreting the phrases tht: context in which they are D
used is also to be kept in mind. In Stroud's Judicial Dictionary (Fifth
Edition) the term 'commercial' is defined as "traffic, trade or merchandise
in buying and selling of goods". In the said dictionary the phrase 'dom<.:stic
purpose' is stated to mean use for personal residential purposes. In essence
the question is, what is the character of the purpose of user of the premises
E
by the owner or landlord and not the character of the place of user. For
example, running a boarding-house is a business, but persons in a board-
ing-house may use water for 'domestic' purposes. As noted earlier the
classification made for the purpose of charging electricity duty by the
NDMC sets out the categories 'domestic' user as contra-distinguished from
'commercial' user or to put it differently 'non domestic user'. The intent F
and purpose of the classification, as we see it, is to make a distinction
between purely 'private residential purpose' as against 'commercial
purpose'. In the case of a 'guest house', the building is used for providing
accommodation to 'guests' who may be travellers, passengers, or such
persons who may use the premises temporarily for the purpose of their stay G
on payment of the charges. The use for which the building is put by the
keeper of the guest house, in the context cannot be said to be for purely
residential purpose. Then the question is, can the use of the premises be
said to be for 'commercial purpose'? Keeping in mind the context in which
the phrases are used and tht: purpose for which the classification is made, H
736 SUPREME COURT REPORTS [2000) 1 S.C.R.
A it is our considered view that the question must be answered in the
affirmative. It is the use of the premises by the owner (not necessarily
absolute owner) which is relevant for determination of the qm:stion and
not the purpose for which the guest or occupant of the guest house uses
electric energy. In the broad classification as is made in the rules, different
B types of user which can reasonably be grouped together for the purpose of
understanding the two phrases 'domestic' and 'commercial' is to be made.
To a certain degree there might be overlapping, but that has to be accepted
in the context of things. The High Court was not right in setting aside the
order of the learned senior Civil Judge merely on the ground that the use
of electricity for running the 'guest house' does not come under the
C category of 'commercial use'. The High Court has not discussed any reason
for holding that user in such a case comes under the category of 'domestic'
use.

In the case of Municipal Corporation of Greater Bombay v. Mafatlal
D Industries and Other, [1996] 8 Supreme Court Cases, 27, this Court inter-
pn:ted the expression "exclusively used as a private residential premises'
(In Bombay Electricity Duty Act, 1958). To connote that the premises in
question must be exclusively use<!. as a residential premises which in other
words would mean where the premises which is used by any person
E privately for his own residence for a sufficient continued period and not a
premises where a person can come and spend a day or a night and then
go back. This Court further held that guest houses arc maintained by
company or commercial undertakings as a part of its commercial venture.
The test of profit making as well as the test of the work 'private' in
F contradiction to 'public' have no relevance for interpreting the expression
"exclusively used as a private residential premises". This court concluded
that in the case of a guest house category 'R' which applies to premist:s
used as a prh1ate n:sidential premises is not applicable and category 'C'
would apply as a residuary category to premises which docs not come
within the categories R, S, RC (LV) and SL. Though the fact situation in
G the case and the question which was considered by this Court therein are
not the same as in t.'ie case on hand, the discussions in the judgmt:nl throw
light on the controversy raised in this case.

On the discussions made and the reasons stated in the foregoing
H paragraphs, we are clearly of the view thut the judgment of the High Court
N.D.M.f'. >. S.L SACHDllV (DllAD) REPRESENTAIBD BY MRS. H. SACHDEV !MUHAPATRA. J.] 737

is unsustainable. Accordingly, the appeal is allowed. The impugned judg- A
ment of tht: High Court of Ddhi is set aside. The New Delhi Municipal
Council is c.:ntitled to charge for use of electricity in Sachdeva Guest House
at the rate applicable to 'commercial' use. No costs.

R.C.K. Appeal allowed.
B