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Whether property tax recoverable from tenant can be considered as arrears of rent for the purpose of seeking eviction or ejectment of such tenant.

December 8, 2017

Property tax recoverable arrear of rent or not

Supreme court settled the question whether property tax recoverable from the tenant under Section 67(3) of the New Delhi Municipal Council Act, 1994 as arrears of rent by the landlord/owner can be considered to be forming part of the rent for the purpose of seeking eviction or ejectment of such tenant who defaults in payment of such recoverable tax as rent and when the rent including recoverable tax in respect of the tenanted premises exceeds Rs.3500/- per month, thereby losing protection of the Delhi Rent Control Act, 1958.


Fact of the case is The appellant/plaintiff is the owner/landlord of the building known as Atma Ram Mansion (previously known as Scindia House), Connaught Circus, New Delhi-110001 by virtue of a registered sale-deed dated 31.5.1980 executed by previous owners in favour of the plaintiff. The respondent/defendant has been a tenant in respect of a portion of the aforesaid property. The rent of tenanted premises prior to termination of tenancy was Rs.1438/- per month exclusive of electricity and water charges. The defendant has been paying service tax of Rs.148/- on the said amount of Rs.1438/- and thus the last paid rent was Rs.1586/- per month.

Pursuant to the amendment of the New Delhi Municipal Council Byelaws, 2009, the house tax on the properties situated in the New Delhi Municipal Council area was assessable on the basis of Unit Area System. The tenanted premises in occupation of the defendant fell within the jurisdiction of NDMC. The house tax payable on the said property in accordance with the Unit Area System comes to Rs.9,64,710/- per annum, i.e. Rs.80,392.50 per month. According to the plaintiff, the defendant was liable to pay the said amount. The plaintiff issued a notice dated 6.7.2009 calling upon the defendant to pay the entire house tax or pay its monthly installment. However, the defendant neither replied to the same nor deposited/paid house tax to the plaintiff. The plaintiff issued a further notice dated 8.12.2009 calling upon the defendant to pay the house tax. The defendant did not come forward to make payment of the house tax.


In order to safeguard its property and to avoid any penal action, the plaintiff deposited the total house tax of Rs.2,94,23,237/- on the basis of self-assessment of the property tax with NDMC. After payment of the house tax, the plaintiff again sent a notice dated 7.4.2010 calling upon the defendant to pay the said amount of tax. The notice was returned with the report "left without address".

According to the plaintiff, the tax paid on the suit property was far more than the initial rent, the amount of property tax levied by NDMC and the initial rent became recoverable as arrears of rent and the suit property having fetched rent above Rs.3500/- per month has ceased the protection of the Rent Act. As such the plaintiff vide legal notice dated 16.6.2010, terminated the tenancy of the defendant without prejudice to its legal rights. The defendant sent a reply dated 23.7.2010 denying its liability to pay the rent. Therefore, plaintiff filed the aforesaid suit for a decree for possession of the tenanted premises, for damages/mesne profits of Rs.6,24,600/- per month w.e.f. 1.5.2011 till 31.5.2011 and for directing an enquiry under Order XX Rule 12 of the Code of Civil Procedure, 1908 (for short 'CPC') for assessment of future damages/mesne profits till the delivery of vacant possession of the tenanted premises.

The plaintiff filed an application under Order XII Rule 6 read with Section 151 of the CPC for passing a decree for possession of the tenanted premises for the reasons mentioned therein. The defendant opposed the application by filing objections.

The trial Court passed an order dated 12.8.2013 granting decree of possession of the tenanted premises in favour of the plaintiff. The High Court by the order dated 30.5.2016 has set aside the order of the trial Court and has remanded the matter to the trial Court. The appellant has called in question the legality and correctness of the said order in this appeal.

The court said that :
"The object of the Rent Act is to provide protection to tenants who under common law, including Transfer of Property Act could be evicted from the premises let out to them at any time by the landlord on the termination of their tenancy. It restricts the right of the landlord to evict the tenant at their will. It is a special law in relation to landlord and tenant issue. Therefore, the Rent Act has to prevail insofar as landlord and tenant issue is concerned."

The court observed that :
"we are of the view that though the Rent Act is an earlier Act when compared to the NDMC Act, it is a special enactment with regard to the matter in issue and has a non-obstante clause. The NDMC Act is not a special enactment insofar as landlord-tenant issue is concerned and it contains Section 411 which provides that other laws not to be disregarded. Section 67(3) of the NDMC Act merely gives a right to recover the tax in respect of the premises as rent. It does not override the Rent Act insofar as obviating the effect of Section 7(2) of the Rent Act."

The court accordingly dismissed the appeal.




Read the Judgment of Supreme Court dated 07.12.2017



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