Holding

Rule 5 is not ultra vires; it must be read down to apply only to properties not governed by rent‑control legislation, and the 1967‑68 assessment list is validly authenticated.

Summary

The Supreme Court examined challenges by Morvi and Junagadh Municipalities to the Gujarat Municipalities Rules governing consolidated property tax. Taxpayers had contested Rule 5, which allowed the actual rent received to be used as the annual letting value, alleging it was ultra vires Section 99(1)(i) read with Section 2(1) of the Gujarat Municipalities Act, 1963, and that assessment lists for 1967‑68, 1968‑69 and 1969‑70 were invalid for not following Sections 105‑112. The Court held that the "annual letting value" must be based on the standard or fair rent prescribed by rent‑control legislation, but Rule 5 could be read down to apply only to properties not covered by such legislation, thus it is not ultra vires. Consequently, the assessment list for 1967‑68, authenticated on 28 March 1968, was valid, and the High Court’s striking down of Rule 5 and the list was set aside. The appeals were allowed with no order as to costs.

Issues considered

Whether Rule 5 of the Gujarat Municipalities Rules, which permits the actual rent to determine the annual letting value, is ultra vires Section 99(1)(i) read with Section 2(1) of the Gujarat Municipalities Act, 1963.
Whether the assessment lists for the years 1967‑68, 1968‑69 and 1969‑70, prepared without complying with the procedure in Sections 105‑112 of the Act, are invalid.
How the term "annual letting value" should be interpreted in the context of rent‑restriction legislation.
Whether Section 112 imposes a statutory limitation period for authentication of the assessment list.

Legislation cited

Bombay Rents, Hotel and Lodging House Rates Control Act, 1947
Gujarat Municipalities Act, 1963s. 105, s. 106, s. 107, s. 108, s. 109, s. 110, s. 111, s. 112, s. 2(1), s. 2(17), s. 53, s. 99, s. 99(1), s. 99(1)(e), s. 99(1)(i)

Subjects

property taxannual letting valuerent control legislationGujarat Municipalities Actassessment listRule 5ultra viresauthenticationsection 112 limitation

Judgment

MORYi MUNICIPALITY A
v.
STATE OF GUJARAT AND ORS.

WITH
)--·
JUNAGADH NAGARPALIKA B
v.
STATE OF GUJARAT AND ORS.

MARCH 31, 1993

[J.S. VERMA, P.B. SAWANT AND N.M. KASLIWAL, JJ.] c
~

Municipalities : Gujarat Municipalities Act, 1963.

Sections 2( 1), 2( 17), 53, 99, 99(1), 99(1)(i), 99(J)(e), 105 to 112/Rules
2(7), 4, 5-\funicipalities-Property tin-Annual letting value of building or D
land or both-To be detemiined on the basis of annual standard/fair rent
under Rell/ Con/fol Act-Assessment-Procedure-Limitation-Municipality
to complete the authentication of tire assessment list before 31st
Ju/y~-W11ether directory in nature.

Gujarat Municipalities Rules: E
Rules 4 and 5-Validity of

Some tax-payers of the appellant-Municipality filed a writ petition
in the High Court challenging the validity of the rules made by it for the
levy of consolidated property tax on lands and buildings and also the F
assessment list prepared and authenticated by the Municipality for the
year 1967-68, 1968-69 and 1969-70. It was con_!ented before the High Court
that Rules 2(7), 4 and 5 of the Rules of the consolidated property tax on
the lands and buildings were ultra vires section 99(1) (i) and the proviso (e)
to it read with section 2(1) of the Act, and that the assessment lists for the
G
years 1967-68, 1968-69 and 1969-70 were invalid since they were prepared
-)'~
without following the procedure laid down in Sections 105 to 112 of the
Act.

The High Court upheld the validity of Rules 2 (7) and 4 and struck
do"n the validity or Rule 5. It also declared that the tax collected by the H.
803
804 SUPREME COURT REPORTS (1993] 2 S.C.R.

A Municipality for the assessment years 1968- 69 and 1969-70 in excess of
,
the amounts which may be determined in accordance with the principles
laid down was without the authority of law and struck down the assesse-
ment list for the year 1967-68 on the ground that it was not prepared in
compliance with the procedure laid down in Sections 105 to 112 of the Act.

B Being aggrieved by the High Court's decision the appellants
preferred the present appeals.

Allowing the appeals, this Court,

C HELD: 1. It is not the value of occupation of the property to the tenant,
but the rental income from it to the owner which ·is to be taken into
consideration while estimating the reasonable return that a landlord can .
expect from his property. While estimating or calculating the annual rent
which might reasonably be expected from such property, the provisions of
such legislation have to be taken into consideration. Different rent restric-
D tion legislations have described the maximum rent recoverable under them
differently such as standard rent, fair rent etc. Hence the annual letting value
of the building or land or both to which the rent restriction legislation is
applicable cannot exceed the annual standard or fair rent. It is the annual
standard/fair rent which alone, therefore, can form the basis of the assess-
ment of the property tax by the local authority. [809 E-G)
E
1.2. Since there is no 11on-obsto11te clause in the Gujarat Munici-
palities Act, 1963, this Court refrains from going into the question of
no11-obsto11te clause in the provisions of the Act levying property tax.
[810-C]
F 1.3. If the expression 'annual letting value' in rule 4 is read as the
annual letting value as determined by the outer limit prescribed by the
standard or fair rent under the rent restriction legislation applicable to
the premises, which in the present cast is the Bombay Rents, Hotel and
Lodging House Rates Control Act, 1947, the validity of the said rule
G cannot be assailed. [811-B)

1.4. Rule 5 mandates the actual rent received to be taken into
consideration for fixation of the annual letting value, even if it is in excess
of the standard rent fixed under the rent restriction legislation, which is
contrary to the interpretation placed by this Court on the expression
H "annual letting value". The correct mode of getting over the difficulty is to
,...
MORYi MUNICIPALITY v. STATE OF GUJARAT 805
.-J_
amend Rule 5 itself suitably to take care of such properties instead of A
keeping It on the rule book as it is. There is nothing to prevent the
Municipality from introducing a new rule in place of the said rule.
(8128-E)

y- 1.5. Even without Rule S and on the basis of Rule 4 as it is, the
annual letting value can be calculated on the basis of the standard rent B
where the rent restriction legislation is applicable. Where it is not ap-
plicable, nothing prevents the Municipality from assessing the properties
on the basis of the actual rent received under the same Rule 4 itself.
(811-FJ
,l·'
' 1.6. Rule S is to be ·read as being applicable only to the properties c
which are not governed by the provisions of the Rent Control AcL As far
~·
as the properties which are amenable to the provisions of the Rent Con-
trol Act are concerned, their annual letting value will be calculated only
on the basis of the standard rent determined or determinable under Ille
said Act. Where the standard rent is determined by the Civil Court, of 0
course under the rent restriction legislation, the annual letting value will
be determined on the basis of such standard rent. The rule, however, goes
further and says that in other cases, viz., (1) where the standard rent is
not determined and (2) even if ii is determined, where actual rent charged
~ is in excess of the standard rent, it is the actual rent, which will be taken
E
as the basis for calculating the annual letting value. The latter two situa-
lions do not make distinction between the properties lo which the rent
restriction legislation is applicable and the properties to which it is not
- applicable. In other words, under the rule, even where the rent restriction
legislation is in force, it is the actual rent which will be taken as the basis
for calculating the annual letting value if the standard rent is not deter- F
A, mined by the Court. (817-0, 818 E-F)

1.7. Rule 5, to the extent it enables the authorities to lake the actual
rent as the basis for calculating the annual letting value, will apply to the
properties to .which the rent restriction legislation which in the present
case is the Bomhay Rent, Hotel and Lodging Housing Rates Control Act,
G
y 1947, does not apply. (819-BJ

171e Corporatio11 of Ca/curia v. Smt. Padma Debi a11d Others, [1962)
'• 3 SCR 49; Corporatio11 of Calcutta v. Life Insura11ce Corporatio11 of I11dia,
(1971] 1 SCR 248, Gu11htr Mu11icipal Cou11cil v. Gwrhlr Tow11 Rate Payers H
806 SUPREME COURT REPORTS [1993] 2 S.C.R.

A Association, [1971] 2 SCR 423 and Dewan Dau/at Rai Kapoor and Others
•.-
!-
v. New Delhi Municipal Commiltee & Others, [1980] 1 SCC 685, relied on.

Municipal Corporation, Indore v. Smt. Ratnaprablta and Others,
[1976] 4 SCC 622, referred to. [809-D]

B 2. Section 112 in the context in which it appears is both directory
and enabling in nature insofar as it requires the Municipality to authen·
ticate the list before 31st July of tbe omcial year. That the provisions are
oo more than directory is clear from the fact that they provide that if the
Municipality fails lo do its duty, the State Government may complete the -'
C work by appointing person(s) to do it. This is as it should be since the
various provisions of the Act show that the revenue and the expenditure
'L
of the Municipality, among others, is controlled and regulated by the State
Government. Further the Section requires that the Municipality should
complete the authentication or the assessment list before a· particular-<4.ate
which, in the present case happens to be, 31st July of the year. It was
D necessary to incorporate in the section the said provision to give enough
time to the State Government to step in and authenticate the list before
the end or the omcial year. The official year is the same for the
Municipality as well as the State Government and for the purposes or
budgeting, the provision that the assessment list should be authenticated
E by the particular date was necessary to be incorporated. In any case
neither the Municipality is prevented from authenticating it beyond 31st
July nor is the person or persons appointed by the State Government
prevented from doing so beyond 31st March or the o'mcial year. [816 E·GI

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1374 of
-
F 1974

From the Judgment and Order dated 13/14-2-1974 of the Gujarat
High Court in Special Civil Application No. 220 of 1970. I
WITH
G
Civil Appeal No. 1776 of 1980

From the Judgment· and Order dated 21.4.1980/2.5.1980 of the
Gujarat High Court in Special Civil Application No. 942 of 1976.

H B.K. Mehta and H.S. Parihar for the Appellant.
" I
'-,.
i

~- MORVI MUNICIPALITY v. STATE OF GUJARAT [SAWANT, J.] 807

1 Dave, Ms. Meenakshi Arora, Anip Sachthey for the Respondents.

The Judgment of the Court was delivered by
A

SAWANT, J. Civil Appeal No. 1374/1974
t-·
Some tax-payers of the appellant-Morvi Municipality (the B
'Municipality') bad filed a writ petition in the High Court challenging the
validity of the rules made by it for the levy of consolidated property tax on
- lands and buildings and also the assessment lists prepared and authenti-
cated by the Municipality for the years 1967-68, 1968-69 and 1969-70. There
is no dispute that the concerned rules have been made by the Municipality
under Section 271 (1) read with Section 99 (1) of the Gujarat Munici-
c
palities Act, ~963 (the 'Act'). The relevant contentions of the writ
petitioners who are the respondents before us, before the High Court were
as follows:

l. Rules 2 (7), 4 and 5 of the Rules of the consolidated D
property tax on the lands and buildings were ultra vires
Section 99 ( l) (i) and proviso (e) to it read with Section
2 (1) of the Act.

2. The assessment lists for the years 1967-68, 1968-69 and
1969-70 were invalid since they were prepared without
E
following the procedure laid down in Sections 105 to 112

- of the Act.

The High Court upheld the validity of Rules 2 (7) and 4. No appeal
is preferred against that part of the High Court's decision. We are, there- F
-~ fore, concerned in this appeal only with the validity of Rule 5 which has
·been struck down by the High Court. The High Court has also declared
that the tax collected by the Municipality for the assessment years 1968-69
and 1969-70 in excess of the amounts which may be determined in accord-
ance with the principles laid down by it in the judgment under appeal, was
without the authority of law. So far as the assessment lists for the said two G
y years are concerned, we are concerned in this appeal only with the validity
of the excess amount. However, as far as the assessment list for the year
1%7-68 is concerned, it has been struck down in its entirety by the High
Court alsv on the ground that it was not prepared in compliance with the
procedure laid clown in Sections 105 to 112 of the Act. Hence, we have to H
I
,)

808 SUPREME COURT REPORTS (1993] 2 S.C.R. .~

A consider the validity of the entire assessment for the said year.
Rules 4 and 5 have obviously been made by the Municipality to give
effect to Section 99 (1) (i) which provides for imposition of taxes on
buildings or lands situate within its limits: That section reads as follows:

B "99. Taxes which may be imposed. - (1) Subject to any
general or special orders which the State Government may
make in this behalf and to the provisions of sections 101

c
and 102, a municipality may impose for the purposes of
this Act any of the following taxes, namely :-

(i) a tax on building or lands situate within the municipal
-
borough to be based on the annual letting value or the
capital value or a percentage of capital value of the build-
ings or lands or both;"

D Further, Clause (e) of the second proviso to sub-section (1) of
Section 99 reads as follows:

"(e) the municipality in lieu of imposing separately any
two or more of the taxes described in clauses (i), (vii), (ix)
and (x) except a special water-rate may impose a con-
E solidated tax assessed as a tax on buildings or lands or
both situated within the municipal borough."

Since the Municipality has chosen to impose the tax on the basis of
the "annual letting value" of the buildings and lands and not on the basis
of the capital value or percentage of capital value, we have to ascertain in
F the present case the precise connotation of th.e expression "annual letting
value". Section 2 (1) of the Act defines the expression 'annual letting value"
as follows:

"(l) 'annual letting value' means the annual rent for which
any building or land, exclusive of furniture of machinery
G contained or situate therein or thereon might reasonably
be expected to let from year to year, and shall include all
payments made or agreed to be made by a tenant to the
owner of the building or land on account of occupation,
truces under any law for the time being in force, insuracne
H or other charges incidental to his tenancy;"
MORVI MUNICIPALITY v. STATE OF GUJARAT [SAWANT, J.] 8()<)

The crucial expressions in the above definition are "might reasonably A
be expected to let" and "all payments made or agreed to be made by a
tenant to the owner on account of occupation." Shri Mehta, the learned
counsel for the Municipality contended that the said expressions unmis-
tai1ably indicate the actual rent received by the landlord from his tenant.
According to him, the reasonable rent means the rent which a willing B
tenant will pay to the willing owner and the agreement between the parties
woud indicate the same and no more and no less. He further argued that

- the standard rent under the rent restriction legislation was only one of the
factors relevant for the estimation of the reasonable expectation of the rent
from the property and was not the sole basis of such rent and hence the
assessment can be made on the basis of the actual rent received. C

2. It is not necessary for us to go into a detailed discussion of the
pros and cons of the question since the question is no longer res integra.
The decisions of this court rendered in 771e Corporation of Calcutta v. Smt.
Padma Debi a11d others, [1962) 3 SCR 49, Corporation of Calcutta v. Lij''e D
I11sura11ce Corporatio11 of J11dia, [1971) 1 SCR 248, Gwitur Municipal Coun-
cil v. Guntur Town Rate Payers Association, (1971] 2 SCR 423 and Dewan
Dau/at Rai Kapoor and Others v. New Delhi Mknicipal Committee and
Others, [1980] 1 SCC 685 have consistently held that it is not the value of
1. occupation of the property to the tenant, but the rental income from it to
the owner which is to be taken into consideration while estimating the E
reasonable return that a landlord can ex;iect from his property. It has also
been held there that wherever the rent is restricted on account of the
- operation of the rent restriction legislation, the outer limit of the
reasonable rent that can be expected from the property stands defined by
such restriction. Hence, while estimating or calculating the annual rent F
which might reasonably be expected from such property, the prnvisions of
such legislation have to be- taken into consideration. Different rent restric-
tion legislations have described the maximum rent recoverable under them
differently such as standard rent, fair rent etc. Hence the annual letting
value of the building or land or both to which the rent restriction legislation G
is applicable cannot exceed the annual standard or fair rent. It is the annual
standard/fair rent which alone, therefore, can form the basis of the assess-
ment of the property tax by the local authority. It is true that although a
four-judge Bench of this Court as early as in Padma Debi's case [Supra],
had taken this view which has been reiterated in the other decisions cited
above, a three-Judge Bench of this Court in a decision in Mu11icipal H
810 SUPREME COURT REPORTS [1993] 2 S.C.R. ~

A Corporation, Indore v. Smt. Ratnaprabha and Others, [1976] 4 SCC 622 has
held that the actual annual rent received by the owner of the property
notwithstanding the application of the rent restriction legislation can pro-
vide a basis for assessment of the property tax. However, this view taken ·
in the above case has been explained in Dewan Dau/at Rai Kapoor's case '1
[Supra], which is the latest decision of this Court on the point. It has been
B pointed out there that the said view in the case of the Municipal Corpora-
tion, Indore [supra] turned on the presence of the non obstante clause -

C
"notwithstanding anything contained in any other law" in the provisions of
the Act levying the property tax there. Since in the present Act, namely,
the Gujarat Municipalities Act, 1%3, there is no such non obstante clause,
the view taken there would not apply to the present case. Shri Mehta,
-
learned counsel appearing for the Municipality did not press his further 1'
contentions that the presence or the absence of such non obstante clause
would not make any difference to the proposition laid down there that the
annual letting value should always be based upon the actual annual rent
D received and not on the standard or fair rent under the rent restriction
legislation. We, therefore, refrain from going into the said question in the
present case and leave the point open for consideration, if necessary, in
future cases. For our purpose, it is sufficient to proceed on the footing that
the annual letting value has to be determined, as held in the aforesaid three
decisions of this Court, keeping in mind the outer limit down in the rent _i.
E restriction legislation.

Rule 4 of the Municipality is as under:.

"4. The tax on open lands and buildings shall be levied in
accordance with the following rate.
-
F
1. The buildings which are used for residential purpose
shall be levied on the annual letting value by the percent-
age as follows:-

x x x x x x
G
2. The buildings which are use:! for non-residential pur-
pose shall be levied on the annual letting value by the.
percentage as follows:-

H xxxxxx"
\
I
MORVI MUNICIPALITY v: STATE OF GUJARAT[SAWANT, J.) 811
~ i
It merely prescribes that the tax that may be levied on buildings used A
both for residential and non-residential purposes will be on the basis of the
annual letting value by the percentages prescribed therein. Hence if the
expression "annual letting value" in the said rule is read as the annual letting
· - value as dete-rmined by the out limit prescribed by the standard or fair rent
_,,- under the rent restriction legislation applicable to the premises, which in B
~ · the present case is the Bombay Rents, Hotel and Lodging House Rates
Control Act, 1947, the validity of the said rule cannot be assailed. The High
Court has, therefore, rightly upheld it.

3. However, Ifole 5 with the validity of which we are concerned here,
reads as follows: C
'5 (a). The rental actually realised_ in each case of the
buildings, shops and lands which are let, shall be con-
sidered to be the annual letting value, but if the assessment
officer has reasons to believe that the rent shown in the
rent note o~ in account, does not represent the correct D
letting value, then the case of such properties he (officer)
shall assess- the reasonable annual letting wlue according
to his own decision. ./

(b) In the case ofbuildi~gs which are sublet, the rent paid E
by the oceupier shall be taken as annual letting value.

(c) In the case of the buildings used by the owner himself,
the annual letting value, shall be fixed with the rent
denved from the properties (buildings) which are let near-
, by. - F
The assessment officer will not assess the annual let-
- ting value more than 6V4% of the 'capital value in the case
of the properties noted in sub-rule C.(

It will be apparent that the rule seeks to lay down the mode of G
working out the annual letting value of the property. According to the rule,
il'is to be worked out by taking the actual rental realised as the basis.
However, where the assessment officer has reason to believe that the re.nt ~ "'
sho'Ml in the re-nt note or in the accounts c;loes not represent the correct
letting value, the rule permits the officer to assess the reasonable annual H
812 SUPREME COURT REPORTS [1993] 2 S.C.R. ~·

A letting value according to his own decision. In clause (c) the rule states that
so far as the buildings used by the owner himself are concerned, the annual
letting value· should be fixed with reference to the rent derived from the
properties which are let nearby.

It is clear that to the extent the rule mandates the actual rent received
...,
B to be taken into consideration for fixation of the annual letting value, even
if it is in excess of the standard rent fixed under the rent restriction
legislation, it is contrary to the interpretation placed by this Court on the
~~
expression 'annual letting value'. It is for this reason that the High Court
has struck down the whole of the said rule. Shri Mehta does not dispute
c the premise that where the rent restriction legislation is applicable, Rule 5
will have to be read down to mean that the annual letting value is to be
fixed only on the basis of the annual standard rent. However, he contends . y-'
that it is not necessary to strike down the said rule for there may be
properties which are not governed by the rent restriction legislation and
their annual letting value can be determined unrestricted by the provisions
D of the rent restriction legislation. His grievance is that since the High Court
has struck down the rule, instead of reading it down to bring it in conform-
ity with the judicial decisions, the Municipality is hampered in assessing
the properties to which the rent restriction legislation does not apply. Shri

E
Mehta may be right there, if there are such properties within the limits of
the Muncipality. The correct mode of getting over the difficulty is to amend
>--'
Rule 5 itself suitably to take care of such properties instead of keeping it
on the rule book as it is. There is nothing to prevent the Municipality from
introducing a new rule in place of the said rule. -
Even without Rule 5 and on the basis of Rule 4 as it is, the annual
F
letting value can be calculated on the basis of the standard re.nt where the
rent restriction legislation is applicable, Where it is not applicable, nothing
prevents the Municipality from assessing the properties on the basis of the
actual rent received, under the same Rule 4 itself.

G However, pending the framing of the new rule, Rule 5 as it can be
interpreted as being applicable only to such properties which are not )'
governed by the rent restriction legislation. Hence the decision of the High
Court will have to be modified to the extent the High Court has struck
down the said rule instead of allowing it to remain on the rule book
H confining its operations only to those properties which are not governed by
""

~ MORVI MUNICIPALITY v. STATE OF GUJARAT (SAWANT, J.] 813

the Rent Control Act. A
4. Coming now to the assessment list for 1967-68 which is struck
down in its entirety by the High Court, we are afraid that the High Court
has misinterpreted the provisions of Sections 105 to 112 of the Act which
r relate to the assessment of taxes on properties. Section 105 provides for
preparation of an assessment list containing the particulars mentioned B
therein such as the address and description of the property, the name(s)
of the owner, the valuation based on the annual letting value, of the amount
of tax assessed thereon etc. Section 106 indicates the person(s) primarily
liable for tax and the procedure to be followed when the name of such
person cannot be ascertained. Section 107 provides for the publication of c
notice when the assessment has been completed and the right of the owner
---1.· or occupier of the property included in the list or any agent of suc_h person,
to inspect the list, and to make extracts therefrom.

Section 108 then provides for a public notice of a date before which D
the objections to the valuation or assessment in the assessment list, shall
be made and of the hearing of objections. Sub-section (3) of Section 108
provides for the hearing of objections by the Executive Committee of the
Municipality constituted under Section 53 of the Act. Upon hearing of the
~ objections and disposing them of, the Executive Committee is required to
cause the result thereof to be noted in the book kept for the purpose. The E
Executive Committee is also empowered to amend the assessment list, if
neces~ary, in accordance with the result of the hearing. However, before
- any amendment is made in the assessment list, the reasons thereof are
required to be recorded in the book concerned. This sub-section also
provides that the powers and duties of the Executive Committee under it, F
"-- may be transfered to any other committee appointed by the Municipality
or with the permission of the Development Commission to any officer or
pensioner of the Government. Sob-section (4) of the said section provides
that as and when in respect of any property, the objections made under
the section have been disposed of and the amendment required by sub-sec-
tion (3) have been made in the assessment list, the said list, so tar as such G
y- properties are concerned, shall be authenticated by the signature of the ·
Chairman and at least one other member of the Executive Committee. If
the Executive Committee's powers and functions under sub-section (3)
have been transferred to any other committee or to an officer or pensioner
of the Government, the authentication is to be made by the signatures of H
814 SUPREME COURT REPORTS (1993) 2 S.C.R.

A c 0: !cs..~ than 2 members of such Committee or of the officer or pensioner
as the case may be. The person or the persons so authenticating the list
have to certify that no valid objection has been made to the valuation and
assessment of the property contained in the list except in the cases in which
amendments have been made therein. Sub-section (5) of the said Section
then provides that the lists so authenticated shall be deposited in the
B
Municipal Office and shall be open for inspection to all owners and
occupiers of the property entered in the list or to their agents. Sub-section
(6) states that subject to such alterations made therein under the provisions
of Section 109 and to the result of any appeal or revision under that
Section, the entries in the assessment list so authenticated and deposited
c shall be accepted as conclusive evidence (i) for the purposes of the
Municipal taxes and of the valuation of the annual letting value and [iij for
the purposes of the tax for which such assessment list has been prepared
and the amount of the tax leviable on such properties in any official year
in which the list is in force.
D Section 109 gives power to the Executive Committee to amend the
assessment list if any entry in respect of any property has been either
omitted from or erroneously made therein through fraud, accident or
mistake. It also gives power to the Executive Committee to amend the list
if any building has been constructed, altered or reconstructed either in
E whole or part, after the preparation of the assessment list. Section 110
provides that where any building or any portion of such building which is
liable to payment of tax is demolished or removed otherwise than by an
order of the Executive Committee, the person primarily liable for the said
tax has to give notice to the Chief Officer of the Municipality. -
F
Section 111 states that it shall not be necessary to prepare a new
assessment list every year subject to the condition that the assessment list
shall be completely revised every four years. The Chief Officer is given
power to adopt the valuation and assessment contained in the list for any
year such alteration as may be deemed necessary for the year immediately
G following. However, the provisions of Sections 107, 108 and 109 are ap·
plicable to the said list as if a new assessment list has been completed at
the commencement of the official year.

The 'official year' has been defined in Section 2 (17) of the Act to
H mean the year commencing on the first dav of AnriL
•
MORVI MUNICIPALITY v. STATE OF GUJARA1[SAWANT, J.] 815
-j.
Section 112, then gives power to the State Government to appoint a A
person to authenticate the assessment list in case of default by the
Municipality in authenticating it. It states that where in any year, a new
, assessment list is prepared or a list is revised or the v.Uuation and assess-
ment contained in the list for the year immediately preceding is adopted

r with or without alterations, such new, revised or adopted assessment list
shall be authenticated in the manner provided by Section 108 at any time
B
~
not later than 31st of July of the official year to which the list relates. If
the list is not. so authenticated, then the State Government shall appoint

- such person or persons as it thinks fit, to prepare, revise or adopt and
authenticate the assessment list. Such person or persons have to authenti-
cate such list at any time before the last day of the official year, i.e., 31stc
March of the year to which the list relates. The section also states that
Sections 105 to 108 and Section in shall, so far as may be necessary, apply
~.
to the preparation, revision or adoption of the list as the case may be by
the person or persons appointed by the State Government.
D
5. Section 99, among others, of the Act to which we have already
made a reference earlier, empowers the Municipality to impose various
taxes, fees and cesses as a source of revenue for discharging its duties and
functions. The tax on buildings or lands or both, is only one of such taxes.
This tax can be recovered separately or as the consolidated tax along with
..( general water rate and lighting tax as provided in Clause (e) of the second E
proviso to sub-section (1) of Section 99. The provisions contained in
Sections 105 to 112 above only relate to the preparation of an assessment
list of properties which are liable to such tax. They are procedural in nature
and the charging section for the tax is Section 99 of the Act. Section 99
itself does not provide for any limitation of time on the imposition of tax. F
The High Court has, however, read limitation of time in Section 112 on the
J.... authentication of the assessment list. According to the High Court, the
period of limitation for the Municipality to authenticate the list is upto 31st
July of the official year to which the list relates, and in default by the
Municipality. the period of limitation for the person appointed by the State
GO\·ernment is upto the 31st March of the said official year. What is G
further, according to the High Court, the Municipality cannot authenticate
'( the asse;sment list beyond 31st July of the official year and it is the J>erson
(s) appointed by the State Government alone who can do so and that too
upto 31st March of that official year. It is difficult to accept this reasoning.
According to us, the High Court has erred in reading in the provisions of H
816 SUPREME COURT REPORTS (1993] 2 S.C.R.

A Section 112 an intention by the legislature to lay down a period of limitation
either for the Municipality or for the person or persons appointed by the
State Government. It is obvious that Section 112 in the context in which it
appears is both directory and enabling in nature insofar as it requires the
Municipality to authenticate the list before 31st July of the official year.
B That the provisions are no more than directory is clear from the fact that
they provide that if the Muncipality fails to do its duty, the State Govern-
ment may complete the work by appointing a person(s) to do it. This is as
it should be since the various provisions of the Act show that the revenue
and the expenditure of the Municipality, among others, is controlled and
regulated by the State Government. Further the Section requires that the
-
C Municipality should complete the authentication of the assessment list
before a particular date which, in the present case happens to particular
date which, in the present case happens to be, 31st July of the year. It was
• necessary to incorporate in the section the said provision to give enough
time to the State Government to step in and authenticate the list before
D the end of the official year. The official year is the same for the
Municipality as well as the State Government and for the purposes of
· budgeting, the provision that the assessment list should be authenticated
by the particular dates was necessary to be incorporated. However, even
Section 112 which is procedural in nature, does not state that the list which
E is authenticated by the Municipality after 31st July of the official year and
by the person appointed by the Government after 31st March of the same
official year would be invalid. On the contrary, when the Municipality fails
to authenticate the assessment list till 31st July of the official year, the
section empowers the State Government to appoint a person or persons to
authenticate the same. It was also necessary to prescribe some time limit
-
F for the authentication by the person so appointed and hence the section j
provides that person(s) so appointed shall authenticate it by 31st March of
the official year. In any case, neither the Municipality is prevented from
authenticating it beyond 31st July nor is the person(s) appointed by State
Government prevented from doing so beyond 31st March of the official
G year. In the present case, there was an additional factor which was relevant
to be taken into consideration. The Municipality had levied the property
tax for'the first time in the official year 1%7-68 and the State Government
felt that it should be given time to authenticate the same before 31st March,
1968. That is the reason why the State Government did not appoint a
H person to authenticate the list after 31st July 1967, even though the Mun-
j.. MORYi MUNICIPALITY "· STATE Of GUJARAT [SAWANT, J.] 817

cipality had failed to do so. Instead, the State Government had extended A
the time for the Municipality to do so, till 31st March, 1968. The step taken
by the government was in conformity with the interpretation of the
provisions of Section 112 which, as stated earlier, are only directroy and
enabling in nature. The High Court has, therefore, erred in holding that
the Municipality could not authenticate the assessment list after July, 1967
and it is only the State Government which could do it. This the High Court
B
did, as stated earlier, by reading 31st July, 1967 as the period of limitation

- for the Municipality to authenticate the list for the official year 1967-68.
There is no dispute that the Municipality authenticated the list by 28th
March, 1968. The finding of the High court that the assessment list for the
year 1967-68 is void and illegal is, therefore, clearly wrong. c
6.ln the result, we set aside the finding of the High Court that Rule
5 is ultra vires the Act and hold that the same is to be read as being
applicable only to the properties which are not governed by the provisions
of the Rent Control Act. As far as the properties which are amenable to
the provisions of the Rent Control Act are concerned, their annual letting D
value will be calculated only on the basis of the standard rent determined
or determinable under the said Act. We, further, set aside the decision of
the High Court striking down the assessment list for 1967-68 and hold that
the said assessment list is validly authenticated and the taxes can be
recovered on the basis of the same. The appeal is allowed accordingly with E
no order as to costs.

CWIL APPEAL NO. 177611980

7. In the present case, Rule 5 of the rules made by the appellatit-
Junagadh Municipality ('the Municipality'] under Section 271 (1) and Sec- F
A tion 99 (1) (i) of the Act has been struck down by the High Court to the
extent it provides for calculating the annual letting value on the basis of
actual rent, as being ultra vires Section 99 (1) (i) read with Section 2(1) of
the Act. The relevant portion of the said Rule 5 reads as follows:

"In the case of buildings or lands which are let, the rent G
which is the actual rent, or in the case where the standard
rent is determined by the Civil Court, the same shall in
such case be considered to be the annual letting value,
unless the executive committee or the special committee
on the Chief Officer or his delegate entrusted with the H
818 SUPREME COURT REPORTS (1993] 2 S.C.R.

A work of valuation has reasons to believe that the rent
shown in the rent note or account does not represent the
correct letting value or is collusive or is not determined
by the Court on merits as the case may be in which case
reasons for such belief shall be stated in the decision
provided that in case rent actually charged is in excess of
B the rent as determined by the Court at any time the rent
actually charged shall be considered to be the annual

-
letting value."

8. It is not necessary to repeat what we have discussed on the subject
C in the accompanying appeal, viz., C.A. No. 1374 of 1974. Suffice it to say
that in the present case, the rule itself has provided that where the standard
rent is determined by the Civil Court, of course under the rent restriction
legislation, the annual letting value will be determined on the basis of such
standard rent. The rule, however, goes further and says that in other cases,
D viz., (1) where the standard rent is not determined and (2) even if it is
determined, where actual rent charged is in excess of the standard rent, it
is the actual rent, which will be taken as the basis for calculating the annual
letting value. The latter two situations do not make distinction between the
properties to which the rent restriction legislation is applicable and the
E properties to which it is not applicable. In other words, under the rule,
even where the rent restriction legislation is in force, it is the actual rent
which will be taken as the basis for calculating the annual letting value if

F
the standard rent is not determined by the Court. The High Court has,
therefore, rightly struck down the rule to the extent that it applies to
properties to which the rent restriction legislation is applicable. In view of
·-
what we have stated in the accompanying appeal, we see no reason to take
a different view.

However, Shri Mehta appearing for the Municipality is right in
contending that it is n0t necessary to declare the rule ultra vires Section
G 99(1) read with Section 2 because it also provides for assessing the annual
letting value of property on the basis of the actual rent. That part of the
rule which enables the authorities to take the actual rent as the basis for
calculating the annual letting value can be read down to apply only to those
properties to which the rent restriction legislation does not apply. We agree
H with him there, if there are such properties "ithin the limits of the
MORVI MUNICIPALITY v. STATE OF GUJARAT [SAWANT, J.] 819

Municipality. A
9. We, therefore, allow the appeal, set aside the decision of the High
Court striking down the part of the rule which enables the authorities to
adopt actual rent as the basis for calculating the annual letting value of the
properties. Instead, we declare that Rule 5, to the extent it enables the
authorities to take the actual rent as the basis for calculatwg the annual B
letting value, will apply only to the properties to which the rent restriction

-
legislation which in the present case is the Bombay Rents, Hotel and
Lodging House Rates Control Act, 1947, does not apply.

The appeal is allowed accordingly with no order as to costs.
c
V.M. Appeal allowed.