Holding

The Division Bench correctly upheld the order directing the appellant to pay the commercial surcharge as per the consent decree and Section 171(4) of the Calcutta Municipal Corporation Act, 1980.

Summary

Lagan Jute Machineries Co. Ltd. (appellant) was the lessee of premises owned by Candlewood Holdings Ltd. (respondent). After the lease expired, an eviction suit led to a consent decree in which the lessee undertook to pay the municipal commercial surcharge on consolidated rates as determined by the Calcutta Municipal Corporation. The lessee paid the surcharge from 1997 onward, but the lessor claimed arrears dating back to 1976. The Single Judge of the Calcutta High Court held that surcharge could not be levied before the Calcutta Municipal Corporation Act, 1980 came into force on 1 April 1984 and ordered payment of arrears only from that date to June 1997. The Division Bench upheld this order, rejecting the appellant’s arguments that no rate bill had been presented and that the liability arose only after the corporation’s assessment. The Supreme Court dismissed the appeals, confirming that the High Court correctly applied the consent decree and the Act, and that there was no merit in the appellant’s contentions.

Issues considered

The appellant’s liability to pay commercial surcharge for periods before the Calcutta Municipal Corporation Act, 1980 came into force.
Whether the absence of a formally presented rate bill to the occupier negates liability for surcharge.
Whether the consent decree and the provisions of Section 171(4) of the Calcutta Municipal Corporation Act, 1980 render the appellant liable for surcharge post‑1984.
The effect of the ‘without prejudice’ letter on the existence of a dispute.
The applicability of constructive res judicata in the execution proceedings.

Legislation cited

Calcutta Municipal Corporation Act, 1980s. 171(4)
Code of Civil Procedure, 1908s. 47

Subjects

evictionconsent decreecommercial surchargemunicipal taxCalcutta Municipal Corporation Actexecution proceedingsconstructive res judicataleaserate bill

Judgment

A LAGAN JUTE MACHINERIES COMPANY LIMITED
v.
CANDLEWOOD HOLDINGS LTD. AND ORS.
•.
SEPTEMBER 28, 2007
B
[DR. ARIJIT PASAYAT AND LOKESHWAR SINGH PANTA, JJ.)

Suit-Eviction suit-Consent decree between Judgment-debtor ..
agreeing to pay commercial surcharge on consolidated rates or a rate
C specified by Municipal Corporation-Judgment-debtor also making
payments accordingly-Claim of commercial surcharge for earlier
period by decree-holder-Execution application claiming eviction and
arrears of commercial surcharge-Plea ofjudgment debtor that
liability to pay the surcharge does not arise-Single Judge of High
D Court directing realization of the charge by selling the assets of the
Judgment-debtor-Division Bench ofHigh Court upholding the order
in view ofthe consent decree and conduct ofthe judgment-debtor-
On appeal, held: Order of High Court was correct as the same was
passed in view of relevant facts and law-Calcutta Municipal
E CorporationAct, 1980-s. 171(4).

After expiry oflease in respect of the property in question lessor
(predecessor-company of Respondent No.1 company) filed an eviction
suit against the lessee-appellant. Consent decree was passed in the suit
F decree. The same was also modified after change of succeeding owners
of the premises. Appellant-lessee, in the decree had given an
undertaking that itwould pay the commercial surcharge on consolidated
rate on the Corporation tax or at the rate as would be determined by
the Municipal Corporation. On demand ofcommercial surcharge by the
G lessor company lessee paid the same since 1997. Lessor then claimed
the arrears of Surcharge since July, 1976. Thereafter execution petition
was filed by the lessor (decree holder) for vacation ofthe premises and
for payment of arrears of surcharge. Single Jude held that the lessee
was not liable to pay the commercial surcharge from 1997 which he had
H 480
)
LAGAN JUTE MACHINERIES COMPANY LIMITED 481
v. CANDLEWOOD HOLDINGS LTD.

already paid and such surcharge could not be levied prior to A
commencement of Section 171(4) of Calcutta Municipal Corporation
Act, 1980 i.e. 1.4.1984. It directed payment of arrear occurring from
1.4.1984 till June, 1997. The Special Leave Petition against the order
was withdrawn. Thereafter second execution petition was filed, during
pendency thereof, application u/s 47 CPC was filed questioning the date B
of imposition of surcharge as well as contending that payment of
surcharge actually arose only after determination of annual valuation
.. r and fixation of rates by Municipal Authorities. Single Judge of High
Court disposed ofthe execution application of Receiver for realization
of commercial surcharge and consolidated rates of taxes. In appeal to c
Division Bench of High Court, it was contended that as per law
prevalent, rate bill has not been presented to the occupier; and that it
was not liable to pay as the Act envisaged one consolidated rate bill
payable by the owner which was recoverable from the occupier. Division
Bench of High Court in view of the consent decree and the fact that the D
appellant had all along been making payment, declined contentions of
appellant, and upheld the order of Single Judge. Hence the present
appeals.
Dismissing the appeals, the Court
E
HELD: The High Court has referred to all the relevant factors
and has kept in view the correct position in law. Division Bench did not
__....... accept the stand ofthe appellant that under law prevalent at the relevant
time, the rate bill should have been presented to the occupier for
payment and since there was no such presentation, the question of non- F
payment does not arise. It also did not accept the stand that after the
Corporation Act came into operation, there was one consolidated rate
bill and amount was not determined and the primary obligation "Owner
to pay and thereafter recover from appellant", and as such the appellant
is not liable. It was noted that it all along made payment in terms of the G
terms of the settlement before the High Court on the basis ofwhich the
consent decree was passed. There was no dispute with regard to the
amount raised at any point oftime. In the earlier round also, the Division
Bench noted this stand which was indicated in the memorandum of
H

r
482 SUPREME COURT REPORTS [2007] 10 S.C.R.

A appeal and SLP before this Court was withdrawn. In the earlier SLP
the stand was that the dispute related to post-1984 and also there is no
dispute after 1997. It is also to be noted that there was no point raised
relating to interest before the High Court. Admittedly, the assessment
proceedings have been completed and bills have been raised by the
B Municipal Corporation. That being so, there is no merit in these appeals.
(Paras 4, 5, 10, 11 and 13] [488-B, C; 484-C, D; 487-E, F]

Kamlabai and Ors. v. Mangilal Dulichand Mantri, (1987] 4 SCC 585, -(
relied on.
C CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 5670-
5671 of 2000.
From the Judgment and Order dated 05.05.2000 of the High Court
of Judicature at Calcutta in APOT No. 333 of2000. (G.A. No. 1592 of

D ~~~~o~: ~1.~~~~~~~,0~~~~~ ~s8 ~~.1~;~)0~1d9 ~J.OT N~. 309
Amar Dave, Mahesh Agarwal, Rishi Agrawala, E.C. Agrawala,
Gaurav Goel and Neha Aggarwal for the Appellant.
E Tapash Ray, Srenik Singhvi, Anil Agrawal, Mohd. Faisal, K.V.
Vijayakumar and L.C. Agrawala for the Respondents.
The Judgment of the Court was delivered by
DR ARIJIT PASAYAT, J. 1. Challenge in these appeals is to the
. F order passed by a Division Bench of the Calcutta High Court in an appeal
which was directed against the order of the learned Single Judge dated
23.3.2000. By the said order, ·the learned Single Judge in that application
for execution appointed Receiver for realiz.ation of commercial charges
and consolidated rates and taxes in terms of prayer (e) of column 10 of
G the tabular statement. The order was passed on 9.2.2000 wherein it was
recorded in terms of earlier order dated 18.5.1999 that the judgment
debtor did not pay any instalment and in that view the decree dated
13 .10.1982 had become executable. The second order dated 9 .2.2000
was not challenged in any proceedings. The application was made by the
H tabular.statement before the learned Single Judge for execution of the
/
LAGAN JUTE MACHINERIES COMPANY LIMITED 483
v.CANDLEWOOD HOLDINGS LTD. [PASAYAT, J.]
decree dated 13.10.1982. The said decree was passed by consent of A
the parties and parties filed their tenns of settlement in the Court on the
basis of which the said consent decree was made. The decree was
subsequently modified by consent of parties by order dated 26.4.1990
and subsequently the.decree was transferred by the then decree-holder
· in favour of the applicant-respondent for execution proceedings. The B
execution proceedings were related to recovery of the immovable property
and money on account of rates, taxes and commercial surcharge levied
by the Municipal Corporation of Calcutta (in short 'Corporation') under
the Municipal Corporation Act, 1980 (in short the 'Corporation Act')
which operated prospectively from 4.1.1984. An order was made in tenns C
of prayer (b) of the tabular statement on the earlier occasion and also in
tenns of prayer (f) as recorded in the order dated 2.9.2000. By another
order dated 30.3.2000 application was rejected.
2. Stand of the appellant was that the learned Single Judge was
incorrect in passing the order directing execution by way of appointment I)
of Receiver since the commercial surcharge is not payable according to
Corporation Act and the consolidated rates an4 taxes are detennined by
the Corporation. Stand before the High Court was that since no rate had
been produced and it was not so as determined by the Corporation, there E
is no question of paying any amount by way of surcharge. It was urged
that the Corporation Act envisages one consolidated rate bill payable by
the owner which is recoverable by the owner from the occupier. It was
urged that the earlier order dated 10.3 .1999 as well as the order of the
Division Bench did not consider this aspect. Therefore, it was submitted F
that the application should not have been disposed of under Section 47
of Code of Civil Procedure, 1908 (in short 'CPC').
3. Stand of the respondents, on the other hand, was that there was
no dispute with regard to amount payable and the appellant had in fact
paid the amount. The question was considered by the earlier Division G
Bench by an order dated 18.5.1999. The order was challenged before
this Court by SLP which was not accepted. Reference was also made to
a letter dated 10.12.1999, which clearly indicated the liability for
commercial surcharge. The Division Bench considered the respective
stand. It was noted that the claim can be divided into two parts. One H
\.

484 SUPREME COURT REPORTS [2007] 10 S.C.R.

A part of the claim is from 1976 upto 4.1.1984, when the Corporation Act
came into force and the second portion of the claim is subsequent to
coming into operation of the said Act.
4. So far as the first portion is concerned, there was no argument
B on behalf of the appellant. It was not explained as to what would be its
stand for non-payment of the dues prior to the operation of the Act. It
was, however, submitted by the appellant that under .law prevalent at the
relevant time, the rate bill should have been presented to the occupier for J

payment and since there was no such presentation, the question of non-
e payment does not arise. The High Court did not accept this stand with
reference to the consent decree. The High Court also did not accept this
stand that after the Corporation Act came into operation, there was one
consolidated rate bill and amount was not determined and the primary
obligation "Owner to pay and thereafter recover from appellant", and as
D ~uch the appellant is not liable. It was noted that it all along mad~ payment
m terms of clause 7 of the terms of the settlement before the High Court
on the basis of which the consent decree was passed. There was no
dispute with regard to the amount raised at any point of time.
5. The Division Bench also did not find any relevance of the fact
E that letter dated 10.12.1999 was issued under the heading "without
prejudice". The High Court was of the view that it is clear from the letter
that there was no dispute with regard to the amount and the expression
"without prejudice" referred to any other contention that could have been
raised by the appellant. Since the appellant was paying the amount without
F any dispute, the stands raised were not acceptable. In the earlier round
also, the Division Bench noted this stand which was indicated in the
memorandum of appeal and SLP before this Court was withdrawn. The
appeal was accordingly dismissed.
6. In support of the appeals, it has been contended as follows:
G
(I) Commercial surcharge only becomes payable after the same
is determined by the Corporation. Since that has not been done
and there is no assessment and no demand by the Corporation,
the question of any liability does not arise.
H
LAGAN JUTE MACHINERIES COMPANY LIMITED 485
v.CANDLEWOOD HOLDINGS LTD. [PASAYAT, J.]
(2) Commercial surcharge payable under the Act since 4.1.1984 A
and the same is not payable.
7. In the consent decree, clause (vii) is of considerable relevance in
the present dispute. The same reads as follows:
"The defendant further undertakes and agrees to punctually and B
regularly pay commercial surcharge on consolidated rates @ 50%
of the amount of corporation tax or at such rate as Municipal
Corporation of Calcutta may determine as and when the same is
determined and becomes payable and the defendant shall keep the
plaintiff or person claiming through the plaintiff fully discharged and C
indemnified."
8. Reference also needs to be made to letter dated 10.12.1999. The
said reads as follows:
"Mis Candlewood Holdings Limited, D
24, Park Street,
CALCUTTA 700 016.
Dear Sir,
Sub: Payment of Rent for the month of October, 1999 without E
prejudice.
Enclosed please find the four Manager's Cheque No. 056083,
_..I.,
056084, 056085, 056086 dated 09.12.99 payable at UCO Bank,
Free School Street Branch for Rs.1,53,182/- on account of Rent
Payable for October, 1999. The irnount in the Cheque is arrived F
as below.
Rent Rs.1,26,943.00

Corporation Tax Rs. 46,270.84
....;' G'
Commercial Surcharge @ 50% of
Corpn. Tax. Rs. 23,135.44
Rs.1,96,349 .00
Less: I. Tax 20% on Rs.1,26,943.50
H
486 SUPREME COURT REPORTS [2007] 10 S.C.R..

A =Rs. 25,389.00
2. Surcharge 10% on I.Tax.
=Rs. 2,539.00
========== Rs. 27,928.00
B Rs.1,68,421.78
Less: Arrear I.Tax an~ surcharge:
Actual I.Tax and surcharge
since April, 1999 to Sept. 99 '1:
=Rs.1,67,568.00
c
Less: Deducted during earlier
Said months =Rs.1,52,328.00
Rs. 15,240.00
Net amount:
D Rs.1,53,181.78

With best regards,
Yours faithfully,
For THE LAGAN JUTE MACHINERY CO. LTD.
E Sd/- B.B. CHAKRABORTY
SUPERVISOR (Cashier)
Encl: As above."
9. At this juncture, it would be appropriate to take note of what
was stated in Kamlabai and Ors. v. Mangilal Dulichand Mantri, [1987]
F 4 SCC 585, it was noted as follows:
28. The next question which is of some importance is about raising
of the objections at the earlier stage. Admittedly when the award
was filed in the court, notice was served and no objection was
raised. If the tenant intended to raise the objection that this decree
G
on the basis of the award could not be passed as it was in
contravention of Clause 13 of the Rent Act and therefore was
absolutely without jurisdiction, such an objection could have been
raised there and then. The tenant admittedly did not raise this
objection which was open to him. In this view of the matter, the
H
/
f
LAGAN JUTE MACHINERIES COMPANY LIMITED 487
v. CANDLEWOOD HOLDINGS LTD. [PASAYAT, J.]
contention on behalf of the appellant about the constructive res A
judicata also is of some significance. This question of constructive
res judicata in execution proceedings came before this Court in
Mohanlal Goenka v. Benoy Krishna Mukherjee. In this decision
following the earlier decision of the Privy Council, this Court ruled
that the principles of constructive res judicata will be applicable B
even in execution proceedings.

•· 29. It is also clear that when the decree was passed on the basis
of award and notice was issued to the judgment-debtor respondent
no such objection was raised. It is also clear that the decree was C
· put in execution on more than one occasions and this obj~ction
was for the first time raised only in 1983. In this view of the matter
also the contention of the learned counsel for the appellant that by
not raising this objection earlier the judgment-debtor has lost his
right to raise this objection and he is estopped, deserves to be
.. _> accepted, although in the light of what we have discussed earlier, D
it is not necessary to go into this question, having come to the
conclusion on the first question against the respondent."
10. It is to be noted that in the earlier SLP the stand was that there.
wa5 no liability prior to 1984. In other words the dispute related to post- E
1984 and also there is no dispute after 1997. It is also to be noted that
there was no point raised relating to interest before the High Court.
11. Admittedly, Municipal Corporation was not a party before the
High Court and was subsequently impleaded. It is stated before this Court F
that so far as the appellant is concerned, the Corporation has completed
the assessment proceedings and bills amounting to Rs.1,02,23,706.88,
have been raised.
12. It is pointed out that in terms of the order dated 24.7.2000 of
the Deputy Municipal Commissioner (Revenue HQ) the said premises G
.were surveyed and assessed. The assessment was made from April 1974
to March 2001, when it was found that a total amount of tax payable, in
respect of the said premises, as assessed is Rs.26,47,07,167/- out of
which approximately Rs.7.70 crores, which includes Rs.1,10,50,624.51
H
\
-1-
\
'·~
488 SUPREME COURT REPORTS [2007] 10 S.C.R.

A p. in Suspense Ale., have been realized. However, more than Rs.18. 7 .,,_
Crores of tax is due from the premises. The details of year wise valuation
and tax liability contained in a Summary Report on Annual Valuation with
Tax Liabilities of premises No.24, Park Street, Kolkata. A copy of the
report has been filed.
B
13. The High Court has referred to all the relevant factors and has
kept in view the correct position in law. That being so, there is no merit
in these appeals which are accordingly dismissed.
K.K.T. Appeals dismissed.