Supreme Court of India
LUCKNOW NAGAR NIGAM & OTHERSversusKOHLI BROTHERS COLOUR LAB. PVT. LTD. & OTHERS
- Citation
- 2024 INSC 135
- Decided
- 22 February 2024
- Disposal
- Appeal(s) allowed
- Bench
- B V NAGARATHNA
Holding
The Custodian for Enemy Property holds the property only as a trustee, not as an owner, so enemy property is not Union property and remains subject to municipal taxation.
Summary
The Supreme Court examined whether the statutory vesting of enemy property in the Custodian for Enemy Property under the Enemy Property Act, 1968 amounts to an expropriation that transfers ownership to the Union of India, thereby invoking Article 285's tax exemption. It held that the Custodian acts only as a trustee for management and preservation of enemy property and does not acquire ownership, so the property does not become Union property. Consequently, the property remains liable to municipal taxes under the Uttar Pradesh Municipal Corporation Act, 1959, and the Custodian may pay those taxes on behalf of the enemy. The Court set aside the High Court's order that exempted the lessee from tax and directed the municipal corporation to levy property, water, and sewerage taxes from the 2024‑25 fiscal year onward. The appeal was allowed, and the parties were ordered to bear their own costs.
Issues considered
- Whether statutory vesting of enemy property in the Custodian under the Enemy Property Act, 1968 constitutes expropriation and transfers ownership to the Union of India.
- Whether, if ownership is transferred, the property becomes Union property within the meaning of Article 285 and is exempt from state or municipal taxes.
- Whether, despite any Union ownership, clause (2) of Article 285 permits the municipal corporation to levy property or other local taxes on the lessee of the enemy property.
- Whether the High Court was correct in holding that the lessee was exempt from municipal taxes.
Legislation cited
- Constitution of Indias. Article 285, s. Article 289, s. Article 296, s. Article 300A
- Defence of India Act, 1971
- Enemy Property Act, 1968s. 10, s. 15, s. 17, s. 18, s. 22, s. 22A, s. 2(c), s. 3, s. 5, s. 5A, s. 5B, s. 6, s. 7, s. 8, s. 8A, s. 9
- Enemy Property Rules, 2015s. 15
- U.P. Municipal Corporation Adhiniyam, 1959s. 172, s. 173, s. 174, s. 175, s. 179
- Uttar Pradesh Municipalities Act, 1916s. 128, s. 129-A, s. 172, s. 173, s. 174, s. 175, s. 179, s. 181
Subjects
Statutory vestingEnemy propertyExpropriationOwnershipPossessionTransferCustodianExemptionTaxMunicipalTrusteeCentral legislationUnion propertyParliamentary legislationProperty taxLaw, Person, PropertyAuthority of lawFundamental rightConstitutional rightCitizenExpropriatory legislationCompensationVestVestingConnotationAbsolute titleJurisprudential aspect
Judgment
[2024] 2 S.C.R. 847 : 2024 INSC 135
Lucknow Nagar Nigam & Others
v.
Kohli Brothers Colour Lab. Pvt. Ltd. & Others
(Civil Appeal No. 2878 of 2024)
22 February 2024
[B.V. Nagarathna* and Ujjal Bhuyan, JJ.]
Issue for Consideration
1) Whether statutory vesting of property termed as enemy
property under the provisions of the Enemy Property Act,
1968 amounts to expropriation which leads to change of its
status inasmuch as its ownership is transferred to the Union
of India;
2) If there is a transfer of ownership by its statutory vesting
in the Custodian for Enemy Property, whether the Union
within the meaning of Article 285 of the Constitution would
be entitled to exemption from payment of property or other
local taxes to Municipal Corporation under provisions of
the UP Municipal Corporation Adhiniyam, 1959 (Act of
1959); and
3) Despite becoming the property of the Union, whether, clause
(2) of Article 285 enables the appellant to impose property or
other local taxes on the respondent, which is lessee of the
subject enemy property.
Headnotes
Enemy Property Act, 1968 – Whether statutory vesting
of enemy property including the subject property in the
Custodian for Enemy Property amounts to expropriation
and transfer of ownership so as to confer ownership of such
enemy property on the Custodian – Enemy Property Rules,
2015 – r.15.
Held: The Custodian for Enemy Property in India, in whom the
enemy properties vest including the subject property, does not
acquire ownership of the said properties – The enemy properties
vest in the Custodian as a trustee only for the management and
* Author
848 [2024] 2 S.C.R.
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administration of such properties – The Central Government may,
on a reference or complaint or on its own motion initiate a process
of divestment of enemy property vested in the Custodian to the
owner thereof or to such other person vide Rule 15 of the Rules
– Hence, the vesting of the enemy property in the Custodian is
only as a temporary measure and he acts as a trustee of the said
properties – In view of the position of a Custodian, who under
the Enemy Property Act, 1968, acts as the trustee for the enemy
property under the Act and not as the owner of the property, but
as a protector of the property vested in him, the Custodian can
never be an owner or having any right, title or interest in the enemy
property as owner.[Paras 16.1, 22.4]
Taxation – Of Enemy property – Constitution of India – Art.
285 – If ownership of enemy property is conferred on the
Custodian for Enemy Property, whether such property
becomes Union property within meaning of Art. 285 of
the Constitution and therefore, it is exempt from payment
of property or other local taxes to appellant-Municipal
Corporation under provisions of the Act of 1959 – Whether
despite such enemy property becoming property of the
Union, clause (2) of Article 285 of the Constitution enables
appellant to impose property or other local taxes on the
respondent which is lessee of the subject property – Enemy
Property Act, 1968 – UP Municipal Corporation Adhiniyam,
1959.
Held: Vesting of enemy property in the Custodian does not
transfer ownership of such property in the Custodian and by
that process in the Union or Central Government, but since the
Custodian is only a trustee of the enemy property, the same is
liable to tax in accordance with law, including to the appellant
– The Custodian is only authorised to pay the taxes on the
subject enemy property – The Custodian while doing so is not
acting on behalf of the Union Government being the owner of
the enemy property, rather, the Custodian who is appointed by
the Central Government under the provisions of the Act, which
is a Central legislation only discharges his duties and functions
under the provisions of the Parliamentary legislation i.e. the Act
under consideration – Such discharge of duties and functions,
including the payment of taxes vis-à-vis enemy property vested
in him would not also by the same logic imply that the Custodian
[2024] 2 S.C.R. 849
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
is acting as if the property vested in him has become the Union
property – Mere vesting of enemy property in the Custodian
does not transfer ownership of the same from the enemy to the
Union or to the Central Government; the ownership remains with
the enemy but the Custodian only protects and manages the
enemy property and in discharging his duties as the Custodian
or the protector of enemy property he acts in accordance with
the provision of the Act and on the instructions or guidance of
the Central Government – The reason as to why the Central
Government is empowered to issue guidelines or instructions to
the Custodian is because the Custodian is appointed under the
Act which is a Parliamentary legislation and the reason why the
Parliament has passed the said law is in order to have a uniformity
vis-à-vis all enemy properties throughout the length and breadth
of the country in that the same are protected, managed and dealt
with uniformly in accordance with the provisions of the Act – Union
of India cannot assume ownership of the enemy properties once
the said property is vested in the Custodian – This is because,
there is no transfer of ownership from the owner of the enemy
property to the Custodian and consequently, there is no ownership
rights transferred to the Union of India – Therefore, the enemy
properties which vest in the Custodian are not Union properties
– As the enemy properties are not Union properties, clause (1)
of Article 285 does not apply to enemy properties – Clause (2)
of Article 285 is an exception to clause (1) and would apply only
if the enemy properties are Union properties and not otherwise
– High Court was not right in holding that the respondent as
occupier of the subject enemy property, is not liable to pay any
property tax or other local taxes to the appellant – Consequently,
any demand for payment of taxes under the Act of 1959 made
and thereby paid by the respondent to the appellant-authority
shall not be refunded – However, if no demand notices have
been issued till date, the same shall not be issued but from the
current fiscal year onwards (2024-2025), the appellant shall be
entitled to levy and collect the property tax as well as water tax
and sewerage charges and any other local taxes in accordance
with law. [Paras 17.9, 22.4]
Constitution of India – Art.300A – Art. 300A states that no
person shall be deprived of his property save by authority
of law – Expressions “law”, “person”, “property” and “by
authority of law” – Meaning of – Whether having regard to
850 [2024] 2 S.C.R.
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Art. 300A, taking possession of the enemy property for the
purpose of administration of the same by the Custodian, is
an instance of transfer of ownership from the true owner to
the Custodian and thereby to the Union – Enemy Property
Act, 1968.
Held: The word “law” is with reference to an Act of Parliament or
of a State Legislature, a rule or a statutory order having the force
of law – Although, to hold property is not a fundamental right, yet
it is a constitutional right – The expression person in Article 300-A
covers not only a legal or juristic person but also a person who is
not a citizen of India – The expression property is also of a wide
scope and includes not only tangible or intangible property but also
all rights, title and interest in a property – Before a person can
be deprived of his right to property, the law must expressly and
explicitly state so – Thus, the expression by authority of law means
by or under a law made by the competent Legislature – Having
regard to the salutary principles of Art. 300-A, one cannot construe
the taking of possession of the enemy property for the purpose
of administration of the same by the Custodian, as an instance of
transfer of ownership from the true owner to the Custodian and
thereby to the Union – This position is totally unlike the position
under the provisions of the Land Acquisition Act, 1894 or the
subsequent legislation of 2013 which are expropriatory legislations
under which acquisition of land would inevitably result in transfer
of the ownership of the land from the owner to the State which is
the acquiring authority, but the same would be subject to payment
of a reasonable and fair compensation to the owner. [Paras 18
and 18.2]
Words and Phrases – Expression “vest” and “vesting” –
Meaning of.
Held: The expression ‘vest’ or ‘vesting’ has no precise definition
and it would depend upon the context in which the expression is
used under a particular enactment – The word ‘vesting’ is a word
of variable input and has more than one meaning which must be
discerned and the exact connotation must be found by looking
into the scheme of law and the context in which it is used – The
setting in which it is used would lend colour to it and divulge the
legislative intent – Vesting of property in a person or authority does
not always mean transfer of absolute title in the property. [Para 16]
[2024] 2 S.C.R. 851
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
Enemy Property Act, 1968 – Jurisprudential aspects of
ownership of property vis-à-vis the status of the Custodian
of Enemy Property for India under the Act – Jurisprudential
aspects of vesting or taking possession as per provisions of
the Act – Relationship between possession and ownership.
[Paras 14 to 14.16]
Constitution of India – Article 285 – Scope and ambit of the
two clauses of Art. 285 – Discussed. [Paras 21.1 to 21.10]
Case Law Cited
Union of India v. Raja Mohammad Amir Mohammad
Khan, [2005] Suppl. 4 SCR 390 : (2005) 8 SCC 696;
Delhi Administration v. Madan Lal Nangia, [2003]
Suppl. 4 SCR 360 : (2003) 10 SCC 321; Lieutenant
Governor of Delhi v. Matwal Chand (Dead) through LRs,
[2015] 10 SCR 346 : (2015) 15 SCC 576; Municipal
Commissioner of Dum Dum Municipality v. Indian
Tourism Development Corporation, [1995] Suppl. 2
SCR 433 : (1995) 5 SCC 251; Electronics Corporation
of India v. Secretary, Revenue Department, Govt. of
Andhra Pradesh, [1999] 2 SCR 1078 : (1999) 4 SCC
458; Union of India v. State of Uttar Pradesh, [2007]
11 SCR 792 : (2007) 11 SCC 324; Rajkot Municipal
Corporation v. Union of India, (2013) 14 SCC 599;
State of Uttar Pradesh v. Uttar Pradesh Rajya Khanij
Vikas Nigam Sangharsh Samiti, (2008) 12 SCC 675;
NDMC v. State of Punjab, [1996] Suppl. 10 SCR 472 :
(1997) 7 SCC 339; Fruit and Vegetable Merchants
Union, Subzi Mandi, Delhi v. Delhi Improvement Trust,
Regal Buildings, Cannaught Place, [1957] 1 SCR 1 :
AIR 1957 SC 344; Maharaj Singh v. State of Uttar
Pradesh, [1977] 1 SCR 1072 : (1977) 1 SCC 155; Dr.
M. Ismail Faruqui vs. Union of India, [1994] Suppl.
5 SCR 1 : (1994) 6 SCC 360; Indian Handicrafts
Emporium v. Union of India, [2003] Suppl. 3 SCR
43 : (2003) 7 SCC 589; Chandigarh Housing Board
v. Major-General Devinder Singh (Retd.), [2007] 3
SCR 1049 : (2007) 9 SCC 67; KT Plantation Pvt. Ltd.
v. State of Karnataka, [2011] 13 SCR 636 : (2011)
9 SCC 1; Union of India v. City Municipal Council,
Bellary, [1979] 1 SCR 573 : AIR 1978 SC 1803; Kohli
852 [2024] 2 S.C.R.
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Brothers v. Amir Mohammad Khan, (2012) 12 SCC
625 – referred to.
State of Andhra Pradesh v. V. Subba Rao, 2011
SCC OnLine AP 838; State of Gujarat v. The Board
of Trustees of Port of Kandla, (1979) 1 GLR 732;
Bibhutibhushan Datta v. Anadinath Datta, AIR 1934
Cal 87; The Governor-General of India in Council v.
The Corporation of Calcutta, AIR 1948 Cal 116; The
Corporation of Calcutta v. Governors of St. Thomas’
School, Calcutta, AIR 1949 FC 121 – referred to.
List of Acts
Enemy Property Act, 1968; Enemy Property Rules, 2015; Defence
of India Act, 1971; UP Municipal Corporation Adhiniyam, 1959;
Constitution of India.
List of Keywords
Statutory vesting; Enemy property; Expropriation; Ownership;
Possession; Transfer; Custodian; Exemption; Tax; Municipal;
Trustee; Central legislation; Union property; Parliamentary
legislation; Property tax; Law, Person, Property; Authority of law;
Fundamental right; Constitutional right; Citizen; Expropriatory
legislation; Compensation; Vest; Vesting; Connotation; Absolute
title; Jurisprudential aspect.
Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2878 of 2024
From the Judgment and Order dated 29.03.2017 of the High Court of
Judicature at Allahabad, Lucknow Bench in WPMB No. 2317 of 2012
Appearances for Parties
Kavin Gulati, Sr. Adv., Yash Pal Dhingra, Mukesh Verma, Pankaj
Kumar Singh, Dushyant Sharma, Advs. for the Appellants.
Balbir Singh, A.S.G., S. Gurukrishna Kumar, Rana Mukherjee, Sr.
Advs., Sunil Kumar Jain, Rajan Kumar Chourasia, Ms. Aakanksha
Kaul, Ms. Suhasini Sen, Ms. Gargi Khanna, Rupesh Kumar, Bhuvan
Kapoor, Arvind Kumar Sharma, Randhir Singh, Devesh Tuli, Dr.
Vijendra Singh, Deepak Goel, Ms. Apurva Singh, Sagar Mehlawat,
Kapil Prajapati, Advs. for the Respondents.
[2024] 2 S.C.R. 853
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
Judgment / Order of the Supreme Court
Judgment
Nagarathna, J.
Leave granted.
2. The present Civil Appeal has been filed by the Lucknow Nagar
Nigam (‘Municipal Corporation’) impugning the judgment of the
High Court of Allahabad that has allowed the Writ Petition filed by
respondent herein (‘the assessee’), thereby holding that the assessee
is exempt from payment of property tax under the provisions of the
UP Municipal Corporation Adhiniyam, 1959 (hereinafter referred to
as “Act of 1959”, for brevity sake).
Bird’s Eye View of the Controversy:
3. Whether statutory vesting of property termed as enemy property
under the provisions of the Enemy Property Act, 1968 (hereinafter
referred to as “the Act” for the sake of convenience) amounts to
expropriation which leads to the change of its status inasmuch as its
ownership is transferred to the Union of India, is a question that has
arisen in the present appeal. If there is a transfer of ownership by its
statutory vesting in the Custodian for Enemy Property, whether the
Union within the meaning of Article 285 of the Constitution of India
would be entitled to exemption from payment of property or other
local taxes to Municipal Corporation under the provision of the Act
of 1959 is another question that has arisen in the present appeal.
Further, despite becoming the property of the Union, whether, clause
(2) of Article 285 enables the appellant herein to impose property
or other local taxes on the respondent, which is the lessee of the
subject property is the third question which arises in this appeal.
Relevant Facts of the Case:
4. The subject property is an Enemy Property within the meaning of
the Act bearing House No.31/28/04(31/59) located on Mahatma
Gandhi Marg, Lucknow, owned by the Raja of Mahmudabad, who
migrated to Pakistan in the year 1947. A portion of the property is
currently occupied and utilized for profit-generating purposes by the
respondent-assessee, in this case.
4.1 Historically, prior to the fiscal year 1998-1999, the appellant-
Municipal Corporation imposed and collected taxes in
854 [2024] 2 S.C.R.
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accordance with Rule No.174 ‘ka’ of the Act of 1959 from the
assessee. However, in the fiscal year 1998-1999, it came to
the Municipal Corporation’s attention that the assessee was
operating a commercial establishment within the premises.
Consequently, the appellant-Municipal Corporation conducted
an assessment based on Capital Value and issued a notice to
the assessee regarding the assessed Annual Value.
4.2 It is pertinent to note that respondent No.2, Office of the
Custodian of Enemy Property for India (for short ‘the Custodian’),
under the Ministry of Commerce, Government of India, issued
a Certificate on 03.10.2002, stating that the subject property
bearing premises No.53-54, Lawrie Building Hazaratganj,
Lucknow, is Enemy Property vested with the Custodian. The
Certificate also explicitly stated that the Custodian was obligated
to pay house tax and other local taxes on behalf of this property.
4.3 The assessee, along with other tenants, inter-alia, contested
the assessment orders issued by the Municipal Corporation and
approached the High Court of Allahabad at Lucknow by filing
Writ Petition being Misc. Bench No. 3979 of 2003. However,
this legal action was ultimately uncontested by the tenants and
was subsequently dismissed vide order dated 30.03.2017.
4.4 Due to outstanding dues of Rs.1,621,987.00/- under the
head of House Tax concerning the Enemy Property No.31/58
Hazaratganj, the Municipal Corporation, vide letter dated
28.03.2005 notified the District Magistrate, Lucknow, of its
intention to proceed with attachment and sealing of the said
premises under Sections 506-509 of the Act of 1959.
4.5 At this juncture, it is necessary to state that Raja Mohammed
Amir Mohammad Khan, the son of the Raja of Mahmudabad,
who remained in India as an Indian citizen, had been actively
seeking the release of enemy properties owned by his late
father. He contended that these properties should no longer be
vested with the Custodian after his father’s demise as they were
now vested in him, an Indian citizen. While the Government
had agreed to release 25% of these properties, it had not yet
acted upon this commitment. In response, Raja Mohammed
Amir Mohammad Khan approached the Bombay High Court
by way of filing WP No.1524 of 1997. The High Court ruled
[2024] 2 S.C.R. 855
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
in his favor, directing the Custodian to surrender possession
of the properties to him. Being aggrieved with this decision,
the Union of India approached this Court by way of filing SLP
(C) No.22452 of 2001, which was converted to Civil Appeal
No.2501 of 2002. This Court by its judgment dated 21.10.2005
reported in Union of India vs. Raja Mohammad Amir
Mohammad Khan, (2005) 8 SCC 696 (‘Amir Mohammad
Khan’), dismissed the appeal preferred by the Union of India
and directed the Union of India to get the buildings (residence
or offices) vacated from such officers and handover the
possession to Raja Mohammed Amir Mohammad Khan within
eight weeks. The Court further directed that the officers who
are in occupation of buildings for their residences or for their
offices shall immediately vacate and hand over the buildings
or the properties to the Custodian to enable him to hand over
the possession.
4.6 As a result of these orders, proceedings were initiated by
various tenants, including respondent No.1. This Court, in SLP
(Civil) No.14943 of 2006 vide order dated 08.09.2006, clarified
its earlier judgment dated 21.10.2005 passed in Civil Appeal
No.2501 of 2002. It was clarified by this Court that individuals
who were allotted properties by the Custodian or who came
into possession after 1965, i.e., following the declaration of
Raja Mahmudabad’s property as an enemy property and the
appointment of the Custodian, were required to vacate these
properties. However, persons claiming possession prior to the
Custodian’s appointment, based on valid tenancy agreements
established by Raja Mahmudabad or his General Power of
Attorney, were exempted from this directive. The enquiry
conducted in pursuance to the above orders of this Court
dated 08.09.2006 resulted in a report in favour of respondent
No.1 herein as well as other similarly situated tenants. Ergo,
they continued to remain in possession vide Amir Mohammad
Khan.
4.7 Following these events, on 28.05.2011, the appellant No.3,
issued a notice to the assessee, demanding payment of Rs.
7,57,239.00/-. The notice warned of proceedings for recovery
and attachment through the District Magistrate under Section
64 if the payment was not settled within three days.
856 [2024] 2 S.C.R.
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4.8 Aggrieved by the aforesaid action, the assessee approached
the High Court of Allahabad at Lucknow by filing Writ Petition
being Misc. Bench No.2317 of 2012 seeking the following reliefs:
"(a) issue a writ of prohibition or a writ, order or direction
in the nature of prohibition prohibiting the opposite
parties no.1 & 2 not to make any assessment or
raise bill for payment of House Tax or Water Tax/
or the property in the name and style of Lawrie
Building situated at 50, Hazratganj, Lucknow being
the property of Union of India and exempted from
State taxation;
(b) issue a writ of certiorari or a writ, order or direction in
the nature of certiorari quashing the impugned bills/
recovery notice in respect of payment of House Tax
for the year 2010-11, issued by the opposite party no.I,
contained in Annexure Number 1 to the writ petition;
(c) issue a writ of certiorari or a writ, order or direction
in the nature of certiorari quashing the impugned
bills/recovery notice dated 28.5.2011, issued by the
opposite party no.2, contained in Annexure Number
2 to the writ petition; and
(d) issue a writ of mandamus or a writ, order or direction
in the nature of mandamus commanding _the
respondent numbers 1 to 3 to refund the amount
of Rs.7,29,7461- and Rs.2 lacs deposited by the
petitioner along with interest at the rate of 18%
per annum and within such time as may kindly be
stipulated by this Hon’ble Court”
4.9 During the pendency of the said proceedings, appellants’ counsel
conceded that, as per the provisions of the Constitution of India,
the appellants could not levy taxes on property belonging to
the Government of India or Union properties. However, the
appellants reserved the right to demand applicable fees for
services rendered, such as water and sewerage charges.
4.10 By virtue of the impugned judgment and order dated 29.03.2017,
the High Court allowed the writ petition and quashed the recovery
notice dated 28.05.2011 on the ground that this case pertained
[2024] 2 S.C.R. 857
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
exclusively to taxes, namely House Tax and Water Tax, which
are not applicable to the respondent No.1 since the property in
question is an enemy property. The High Court further directed
respondent No.1 to make representations for the recovery of
any amounts previously paid to the appellants.
Hence, the appellants have preferred this civil appeal.
Respondent No.2 has filed his counter affidavit which we have
perused.
Submissions:
Submissions of the appellants:
5. Sri Kavin Gulati, learned senior counsel appearing on behalf of the
Municipal Corporation, at the outset, submitted that the High Court
erroneously held that the House Tax and Water Tax levied herein
are not leviable on the assessee respondent herein in respect of
property which is admittedly an enemy property and not property
of the Union or Central Government. Therefore, it was submitted:
a) that the property is merely in the custody of the Custodian as
specified under the Act. That the preamble of the Act provides
that this is “An Act to provide for the continued vesting of
Enemy Property”. That there is no declaration by the Union
Government through any legislation declaring the properties to
be the property of the Union Government. The only declaration
that is contained is to vest the property in the Custodian without
a further declaration that the property vests absolutely in the
Union Government free from all encumbrances. That whenever
the legislature desired that any property vests absolutely in the
Central Government, it would be specifically provided so as in
the case of Sections 16 and 17 of the Land Acquisition Act,
1984 as well as in the case of Section 269 of the Income Tax
Act, 1961. But the same is conspicuous by its absence under
the Act under consideration;
b) that a perusal of the scheme of the Act, more particularly, the
Preamble, Section 2(c) and its proviso, Sections 15(1), 17(1)(c),
and 18 read with Rule 5(1) and proviso 2, 5(2), 5(3) and 15(1)
cumulatively would establish that the Custodian has certain
obligations regarding Enemy Property. However, the Central
Government or the Custodian is not vested with ownership of
858 [2024] 2 S.C.R.
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the same. Section 2(c), which defines enemy property reads
that it “means any property for the time being belonging to or
held or managed on behalf of an enemy…”. That the expression
“for the time being” would show that the nature of vesting is not
permanent and that the vesting is only for the management of
the enemy property;
c) that for the Union Government to claim ownership of enemy
property, it must follow the tenets of Article 300-A of the
Constitution of India as well as other relevant provisions of the
Constitution, which allow the acquisition of private properties
only on payment of a fair compensation. This constitutional
right is available to all persons and not just to citizens of India.
Being aware of the aforesaid position that enemy properties
do not become properties of the Union of India, the legislature
has under Section 8(2)(vi) of the Act permitted the Custodian
for Enemy Property to deposit Municipal Taxes vis-à-vis enemy
property vested in him;
d) that even though the Union of India may have overarching
control over Enemy Properties, the status of the Union or
Central Government is not that of an owner. The Custodian is a
statutory authority in whom there is vesting of enemy property,
which is different from having ownership over the same. The
fact that the Custodian can sell properties to third parties is akin
to the powers available to a Receiver or a Liquidator who can
exercise similar powers of sale [vide Delhi Administration vs.
Madan Lal Nangia, (2003) 10 SCC 321 (“Madan Lal Nangia”)
Paras 14,15; Lieutenant Governor of Delhi vs. Matwal Chand
(Dead) through LRs, (2015) 15 SCC 576 (“Matwal Chand”),
Para 14; Municipal Commissioner of Dum Dum Municipality
vs. Indian Tourism Development Corporation, (1995) 5 SCC
251 (“Dum Dum Municipality”), Paras 14,18, 22 and 35 and
State of Andhra Pradesh vs. V.Subba Rao, 2011 SCC OnLine
AP 838 (“Subba Rao”), Paras 23-25];
e) that Article 285 (1) is not attracted to the present case as the bar
under Article 285 (1) is only applicable to the properties ‘of the
Union’. Even when the property is given on lease by the Union
to a private party, then under Section 179 of the Act of 1959,
tax is to be levied on the ‘occupier’. Reliance was placed on the
judgment of the Constitution Bench of this Court in Electronics
[2024] 2 S.C.R. 859
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
Corporation of India vs. Secretary, Revenue Department,
Govt. of Andhra Pradesh, (1999) 4 SCC 458 (“Electronics
Corporation”) wherein it was held that Article 285 will not be
applicable in cases when the land belonging to the Government
of India was leased out to a Government Company;
f) that this Court in Union of India vs. State of Uttar Pradesh,
(2007) 11 SCC 324 held that service charges are a fee and
cannot be said to be hit by Article 285 of the Constitution;
g) that pursuant to this Court’s orders dated 19.11.2009 in Rajkot
Municipal Corporation vs. Union of India, Civil Appeal
No.9458-63 of 2003 (“Rajkot Municipal Corporation”), the
Ministry of Urban Development, Government of India issued
clarification/instructions dated 17.12.2009 to all Secretaries
(Urban Development) of all State Governments. The relevant
portion of the said clarification/instructions dated 17.12.2009
is as follows:
“(1) The UOI & its Departments will pay service
charges for the services provided by appellant
Municipal Corporations. No Property Tax. will be paid
by UOI but service charges calculated @ 75%, 50%
or 33 1/3% of Property Tax levied on property owners
will be paid, depending upon utilisation of full or partial
or Nil Services. For this, purpose agreements will
be entered into by UOI represented by concerned
Departments with respective Municipal Corporation.”
h) that due to non-payment of taxes since the year 1998-1999, Jal
Sansthan Lucknow appellant No.3 herein, served final Notice
under the provisions of the Land Revenue Act of the State of
UP to respondent No.1 to pay the pending bills of Water Tax/
Sewer Tax/Water price of Rs. 7,57,239/- by 31.03.2011;
i) that it is settled law that the exemption from state taxation of
property of the Union Government is only against property
taxes and not against all taxes including the commercial taxes
and services by local administration/authorities. However, the
High Court in its final Judgment and Order dated 29.03.2017,
erroneously equated the commercial tenancy of a private
person in Enemy Property with the property of the Central
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Government and accordingly, has quashed the recovery notice
dated: 28.05.2011;
j) that the Enemy Property occupied by private persons for private
business interests is not synonymous with the interest of the
State and is starkly in contrast to the objectives and scheme
of the Constitution. Accordingly, it was contended that the
interest or property of a private person i.e. respondent No.1
is not exempted from property taxes under Article 285 of the
Constitution of India;
k) that the Custodian under the Act is empowered to realize from
occupants all taxes, fees and charges and pay to the local
authority. In the present case, it is admitted by the Custodian-
respondent No.2 that local taxes are payable to the local authority
in respect of the enemy property in question vide Certificate
dated 03.10.2002;
l) that although the Municipal Commissioner granted a concession
before the High Court, the said concession was due to a threat
of summoning him to file a personal affidavit. In this regard,
learned senior counsel argued that there can be no concession
or estoppel against the statute. The power to levy tax is plenary.
If the State is held to be bound by a concession made in one
case, it would result in serious consequences for the State as
such a concession is against public interest. That it was held
in State of Uttar Pradesh vs. Uttar Pradesh Rajya Khanij
Vikas Nigam Sangharsh Samiti, (2008) 12 SCC 675 that
statement, assurance, or even an undertaking of any officer
or counsel is irrelevant and that there can be no estoppel
against the statute.
With the aforesaid submission, learned senior counsel prayed that
the impugned order passed by the High Court may be set aside.
Submissions of the respondent No.1–assessee:
6. Per contra, learned senior counsel Sri Guru Krishna Kumar, appearing
for the assessee, supported the impugned judgment and submitted
that the High Court has proceeded to pass the impugned order on
a sound appreciation of the facts of the matter and the applicable
law and the same would not call for any interference by this Court.
It was further contended as under:
[2024] 2 S.C.R. 861
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
a) that the appellant-Municipal Corporation has approached the
court with unclean hands and has deliberately suppressed
critical facts. The Municipal Corporation’s reliance on the case
of Amir Mohammad Khan is misleading. In this regard, it was
submitted that the Municipal Corporation has conspicuously
omitted to disclose that the judgment in the aforementioned
case has been rendered nugatory due to the promulgation
of an Ordinance and the enactment of the Enemy Property
(Amendment and Validation) Act, 2017 (hereinafter referred to
as, “Amendment Act, 2017”). Further, as a result of the said
judgment and various tenants’ claims, respondent No.1 herein
approached this Court seeking a clarification. This Court by
order dated 08.09.2006, clarified that persons in possession
of properties based on duly authenticated tenancy agreements
before the appointment of the Custodian declaring the property
as enemy property would not be covered by the judgment in
Amir Mohammad Khan. Accordingly, the respondent No.1 has
continued to be in possession.
b) Reliance was placed on the Amendment Act, 2017 as per
which the enemy property vested in the Custodian will remain
vested in the Custodian regardless of change in circumstances
such as the death of the enemy; the extinction of the enemy
status; the winding up of business or a change in nationality
of the legal heir and successor. The Act further clarifies that
“enemy property vested in the Custodian” includes all rights,
titles, and interests in or benefits arising from such property.
It includes the right of expropriation of the enemy property, in
exercise of the police powers of the State. Also, the principles
of acquisition or requisition and payment of compensation will
not apply to such a legislation.
c) that the property in question unequivocally belongs to the Central
Government, specifically the Custodian; Enemy Property is thus
‘property of the Union.’ The assessee is merely a tenant of the
Custodian of the Enemy Property and therefore, no taxes can
be levied on this property.
d) that Article 285 of the Constitution provides exemption from
State taxation in respect of properties of the Union of India.
He buttressed his submission by stating that how the property
sought to be taxed is being used is irrelevant consideration
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as far as the interpretation of Article 285 of the Constitution of
India was concerned, vide NDMC vs. State of Punjab, (1997)
7 SCC 339 (“NDMC”). There is an absolute and emphatic ban
on state taxation on the property of the Union and the use of
such property is irrelevant.
e) that apart from Article 285, Section 172 of the Act of 1959
specifically provides that the Corporation may impose taxes
subject to the provisions of Article 285 of the Constitution.
Likewise, Section 177 of the said Act provides exceptions in
respect of the levy of tax amongst others to buildings and land
vesting in the Union of India. However, Section 8(2)(vi) of the
Act and/or Section 173 of the Act of 1959 cannot amount to
“law” authorizing levy of property tax on Union property in terms
of Article 285(1) of the Constitution.
f) that property vested in the Union was expressly excluded from
the scope of general tax on land and building. In this regard,
it was submitted that the impugned judgment was incorrect to
the extent that it allows Union property to be taxed on the basis
of an extended definition of ‘owner’, and is in conflict with the
judgment of this Court in NDMC and therefore, not good law.
The property in question is indisputably ‘property of the Union’
as per Article 285 of the Constitution.
g) that the declaration of a property as enemy property would be by
exercise of police power of the State. In other words, Article 300-A
only limits the powers of the State inasmuch as no person shall
be deprived of his property save by authority of law, implying that
there can be no deprivation without any sanction of law. Deprivation
by any other mode is not acquisition or taking possession under
Article 300-A. It was submitted that war between two or more
countries is a reason for which no compensation is payable for
acquisition of enemy property. The Act as amended has not been
(and cannot be) challenged by the Municipal Corporation and has
to be treated as valid and be given its full effect.
h) that the joint submission of Municipal Corporation and the Union
of India that Section 8(2)(vi) of the Act is a law relatable to Article
285 of the Constitution of India was neither raised before the
High Court nor in any pleading before this Court and is a clear
afterthought raised for the first time during oral replies;
[2024] 2 S.C.R. 863
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
i) in the alternative, this Court may balance the equities to make
the demand prospective considering the grave hardship that
the demand of entire past amount would cause to respondent
No.1 in case this Court holds against respondent No.1.
With the aforesaid submissions, it was prayed that the present
appeal be dismissed as being devoid of any merit and the
impugned order of the High Court be affirmed.
Submissions of the respondent No.2:
7. Learned counsel Sri Rupesh Kumar, appearing on behalf of the
Custodian of the subject Enemy Property, respondent No.2 herein,
submitted as under:
a) that the subject property belongs to a Pakistani National namely,
Raja of Mahmudabad and therefore, the property is vested in
the Custodian of Enemy Property for India under the Act as
amended by the Amendment Act, 2017 and is an undisputed
enemy property;
b) that the property belonging to the Union Government is exempted
from state taxation under article 285(1) of the Constitution of
India. However, there is no such exemption in respect of fee/
service charges or other charges and this position has been
conclusively decided by this Court in Union of India vs. State
of Uttar Pradesh, (2007) 11 SCC 324. Further, this stand has
been reiterated by this Court in Rajkot Municipal Corporation.
Consequently, the Ministry of Urban Development, Government
of India vide order No.11025/ 26/2003 UCD dated l7.l2.2009
issued a clarification/direction regarding the levy of taxes and
service charges in light of the judgments passed by this Court.
c) that the respondent No.2 Custodian vide his certificate dated
03.10.2002 has already clarified that it is under an obligation
to pay house tax and other local taxes as respondent No.1 is
running a private business for profit from the said premises
and therefore, not similar to a Central Government enterprise
and accordingly is liable for taxation by the local authorities;
d) that this Court in the case of NDMC has held that private parties
are not exempted from taxation. Therefore, the private person
in occupancy of enemy property for personal benefit is neither
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synonymous with Central Government nor can he agitate it
before the Court.
Learned ASG Sri Balbir Singh also made submissions in the matter
later on.
With the aforesaid submissions, it was prayed for this Court to pass
orders as this Court may think fit and proper.
Submissions of the respondent No.3 - State of Uttar Pradesh:
8. State of Uttar Pradesh, at the outset, adopted the contentions raised
by the appellant-Municipal Corporation and further submitted as under:
a) Admittedly, respondent No.1-assessee is a private entity and a
lessee of the Custodian of the enemy property in question and
the demand was raised by the appellant-Municipal Corporation
on the assessee and not on the Custodian or the Central
Government. A private entity, that is running its business, on a
property and continuing on lease under the Custodian as per
the provisions of the Act cannot claim the benefit of Article 285
of the Constitution of India;
b) that the Union of India has also taken a strident stand that
though the property is vested in the Custodian for the enemy
property in India, the running of the business by respondent
No.1 is not akin or synonymous with the running of the business
by the Central Government and that therefore tax is payable
by respondent No.1 to the appellant herein;
c) that vesting, as envisaged under the Act does not make such
properties as properties owned by the Central Government or
Union properties. In this connection, reference was made to the
observations of this Court in Amir Mohammad Khan, which
shall be discussed later in the judgment.
In light of the aforesaid submissions, it was urged that the view
taken by the Hon’ble High Court in the impugned judgment and
order needs to be set aside.
Points for consideration:
9. Having heard learned senior counsel and learned counsel for
the respective parties, the following points would arise for our
consideration:
[2024] 2 S.C.R. 865
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
1. Whether statutory vesting of enemy property including the
subject property in the Custodian amounts to expropriation and
transfer of ownership so as to confer ownership of such enemy
property on the Custodian?
2. Consequently, if the ownership of such enemy property is
conferred on the Custodian for Enemy Property, whether such
property becomes Union property within the meaning of Article
285 of the Constitution and therefore, it is exempt from payment
of property or other local taxes to the appellant-Municipal
Corporation under the provisions of the Act of 1959?
3. Whether despite such enemy property becoming property of
the Union, clause (2) of Article 285 of the Constitution enables
appellant herein to impose property or other local taxes on the
respondent which is lessee of the subject property?
4. Whether the High Court was right in holding in favour of the
respondent?
5. What order?
Since these questions are inter-related, they shall be considered
together.
Preface:
9.1 Before we proceed further, we would like to preface the
discussion with a historical perspective.
9.2 Jean-Jacques Rousseau in his treatise the Social Contract said
that “War is constituted by a relation between things, and not
between persons… War then is a relation, not between man
and man, but between State and State…” The general aim of
the administration of enemy property is to eliminate enemy
influence from the national economy. The mischief that such state
instruments seek to cure is the provision of aid and comfort to
the enemy, for instance, through the making available of funds
for war financing. Enemy property can be disposed of by various
means including custodianship, liquidation, expropriation,
confiscation or nationalization. The means of custodianship
imply a fiduciary administration. The whole raison d’etre of
a statutory regime that seeks to administer enemy property
through a custodianship is to preserve and protect the properties
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until the war is over. After all, the law of settlement of enemy
property is governed not only by considerations of diplomatic
strategy but also by fundamental principles of fair governance.
9.3 In 1962, in the wake of the Chinese aggression, the Custodian
of Enemy Property for India was called upon to take charge
of the Chinese assets in India with the object of vesting the
movable and immovable properties of the Chinese subjects
left in India under the Defence of India Rules, 1962 specifying
the enemy nationals and the properties held by them. Similarly,
in the wake of the Indo-Pak war of 1965 and 1971, there was
migration of people from India to Pakistan. Under the Defence
of India Rules framed under the Defence of India Act, 1962, the
Government of India took over the properties and companies
of such persons who had taken Pakistani nationality.
9.4 At this juncture, we may notice the expression ‘on behalf of an
enemy’ occurring in the definition of enemy property in Rule 133-I
of Defence of India (Amendment) Rules, 1962, and Subrule 4
of Rule 138 of Defence of India Rules, 1971 implying that the
enemy property is only held and managed by the Custodian for
a specific purpose. We ought to appreciate that the Statement
of Objects and Reasons of the Enemy Property Act, 1968 intend
to continue the vesting and maintenance of the properties by
the Custodian of Enemy Property until the Government of
India arrives at a settlement with the Governments of enemy
countries. The intent of the Parliament is further illuminated by
the Tashkent Declaration by India and Pakistan dated January
10, 1966, which included a clause stating that the two countries
would discuss the return of the properties and assets taken
over by either side in connection with the conflict.
Legal framework:
Provisions of the Act:
10. The Parliament has enacted the said Act to provide for the continued
vesting of enemy property vested in the Custodian of Enemy Property
for India under the Defence of India Rules, 1962 and the Defence
of India Rules, 1971 and for matters connected therewith.
10.1 Part IV of the Defence of India Rules, 1962 deals inter alia
with restriction of movements and activities of persons. While
[2024] 2 S.C.R. 867
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
Part XIV-A deals with control of trading with enemy, Part XIV-B
deals with control of enemy firms. Section 133-A defines the
expression ‘enemy’ inter alia to mean any individual resident in
enemy territory. In Part XIV-B, the definition of enemy subject
and enemy firm have been given and also the definition of
enemy property. Under the said Rules, the Controllers, Deputy
Controllers or Inspectors appointed by the Central Government
had to carry out the supervision of firms suspected to be enemy
firms and do all other ancillary and incidental acts as delineated
under the said Rules.
10.2 Similarly, under the Defence of India Act, 1971, Part IV deals
with restriction of movement and activities of person. Part XVI
deals with control of trading with enemy and the definition of
enemy is in Rule 130 of the said Rules and similarly, Controllers
or Deputy Controller were appointed for controlling the trading
with enemy. Part XVII deals with control of enemy firms to carry
out the business of enemy firms, etc. Rule 151 of the 1971
Rules clearly states with a view to preserving enemy property,
the Central Government may appoint a Custodian of Enemy
Property for India and one or more Deputy Custodians and
Assistant Custodians of Enemy Property for such local areas
as may be prescribed.
The Act under consideration is essentially to provide for the
continued vesting of enemy property vested in the Custodian
of Enemy Property for India under the Defence of India Rules,
1962, and the Defence of India Rules, 1971 and for matters
connected therewith.
10.3 At this stage, we can refer to the relevant provisions of the
Act. The expression “Custodian”, “enemy” or “enemy subject”
or “enemy firm” and “enemy property” are defined as under:
“2. Definitions.- In this Act, unless the context
otherwise requires,-
(a) “Custodian” means the Custodian of Enemy
Property for India appointed or deemed to have
been appointed under section 3 and includes a
Deputy Custodian and an Assistant Custodian of
Enemy Property appointed or deemed to have
been appointed under that section;
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(b) “enemy” or “enemy subject” or “enemy firm”
means a person or country who or which was an
enemy, an enemy subject including his legal heir
and successor whether or not a citizen of India
or the citizen of a country which is not an enemy
or the enemy, enemy subject or his legal heir
and successor who has changed his nationality
or an enemy firm, including its succeeding firm
whether or not partners or members of such
succeeding firm are citizen of India or the citizen
of a country which is not an enemy or such firm
which has changed its nationality, as the case
may be, under the Defence of India Act, 1962,
and the Defence of India Rules, 1962 or the
Defence of India Act, 1971 (42 of 1971) and the
Defence of India Rules, 1971, does not include
a citizen of India other than those citizens of
India, being the legal heir and successor of the
“enemy” or “enemy subject” or “enemy firm”;
(c) “enemy property” means any property for the
time being belonging to or held or managed
on behalf of an enemy, an enemy subject or
an enemy firm:
Provided that where an individual enemy subject dies
in the territories to which this Act extends, or dies in
the territories to which the Act extends or dies in any
territory outside India, any property which immediately
before his death, belonged to or was held by him or
was managed on his behalf, may, notwithstanding his
death, continue to be regarded as enemy property
for the purposes of this Act;”
10.4 Section 3 of the Act deals with appointment of Custodian of
Enemy Property for India and Deputy Custodian, while Section
4 deals with appointment of Inspectors of Enemy Property.
Section 5 states that property vested in the Custodian of
Enemy Property for India under the Defence of India Rules,
1962 to continue to vest in the Custodian. The said provisions
read as under:
[2024] 2 S.C.R. 869
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
“3. Appointment of Custodian of Enemy Property
for India and Deputy Custodian, etc.—The Central
Government may, by notification in the Official
Gazette, appoint a Custodian of Enemy Property
for India and one or more Deputy Custodians and
Assistant Custodians of Enemy Property for such
local areas as may be specified in the notification:
Provided that the Custodian of Enemy Property
for India and any Deputy Custodian or Assistant
Custodian of Enemy Property appointed under the
Defence of India Rules, 1962 or the Defence of India
Rules, 1971, as the case may be, shall be deemed
to have been appointed under this section.
4. Appointment of Inspectors of Enemy Property.—
The Central Government may, either generally or for
any particular area, by notification in the Official
Gazette, appoint one or more Inspectors of Enemy
Property for securing compliance with the provisions
of this Act and may, by general or special order,
provide for the distribution and allocation of the
work to be performed by them for securing such
compliance:
Provided that every Inspector of Enemy Firms
appointed under the Defence of India Rules, 1962 or
the Defence of India Rules, 1971, as the case may
be, shall be deemed to be an Inspector of Enemy
Property appointed under this section.
5. Property vested in the Custodian of Enemy
Property for India under the Defence of India
Rules, 1962 to continue to vest in Custodian.—(1)
Notwithstanding the expiration of the Defence of India
Act, 1962 (51 of 1962), and the Defence of India
Rules, 1962, all enemy property vested before such
expiration in the Custodian of Enemy Property for
India appointed under the said Rules and continuing
to vest in him immediately before the commencement
of this Act, shall, as from such commencement, vest
in the Custodian.
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(2) Notwithstanding the expiration of the Defence of
India Act, 1971 (42 of 1971) and the Defence of India
Rules, 1971, all enemy property vested before such
expiration in the Custodian of Enemy Property for
India appointed under the said Rules and continuing
to vest in him immediately before the commencement
of the Enemy Property (Amendment) Act, 1977 (40
of 1977) shall, as from such commencement, vest
in the Custodian.
(3) The enemy property vested in the Custodian shall,
notwithstanding that the enemy or the enemy subject
or the enemy firm has ceased to be an enemy due to
death, extinction, winding up of business or change
of nationality or that the legal heir and successor is
a citizen of India or the citizen of a country which is
not an enemy, continue to remain, save as otherwise
provided in this Act, vested in the Custodian.
Explanation. – For the purposes of this sub-section,
“enemy property vested in the Custodian” shall include
and shall always be deemed to have been included
all rights, titles, and interest in, or any benefit arising
out of, such property vested in him under this Act.”
10.5 Section 5A and Section 5B were inserted with retrospective
effect from 07.01.2016 and 10.07.1968 by Act 3 of 2017. They
read as under:
“5A. Issue of certificate by Custodian. —The
Custodian may, after making such inquiry as he
deems necessary, by order, declare that the property
of the enemy or the enemy subject or the enemy firm
described in the order, vests in him under this Act and
issue a certificate to this effect and such certificate
shall be the evidence of the facts stated therein.
5B. Law of succession or any custom or usage
not to apply to enemy property.—Nothing contained
in any law for the time being in force relating to
succession or any custom or usage governing
succession of property shall apply in relation to
[2024] 2 S.C.R. 871
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
the enemy property under this Act and no person
(including his legal heir and successor) shall have
any right and shall be deemed not to have any right
(including all rights, titles and interests or any benefit
arising out of such property) in relation to such enemy
property.
Explanation.—For the purposes of this section, the
expressions “custom” and “usage” signify any rule
which, having been continuously and uniformly
observed for a long time, has obtained the force of
law in the matters of succession of property.”
10.6 Section 6 has been substituted by Section 6 of Act 3 of 2017
with retrospective effect from 10.07.1968. Prior to its substitution,
it read as under:
“6. Prohibition to transfer any property vested in
Custodian by an enemy, enemy subject or enemy
firm.—(1) No enemy or enemy subject or enemy firm
shall have any right and shall never be deemed to
have any right to transfer any property vested in the
Custodian under this Act, whether before or after the
commencement of this Act and any transfer of such
property shall be void and shall always be deemed
to have been void.
(2) Where any property vested in the Custodian
under this Act had been transferred, before the
commencement of the Enemy Property (Amendment
and Validation) Act, 2017, by an enemy or enemy
subject or enemy firm and such transfer has
been declared, by an order, made by the Central
Government, to be void, and the property had
been vested or deemed to have been vested in the
Custodian by virtue of the said order made under
section 6, as it stood before its substitution by section
6 of the Enemy Property (Amendment and Validation)
Act, 2017 such property shall, notwithstanding
anything contained in any judgment, decree or order
of any court, tribunal or other authority, continue
to vest or be deemed to have been vested in the
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Custodian and no person (including an enemy or
enemy subject or enemy firm) shall have any right
or deemed to have any right (including all rights,
titles and interests or any benefit arising out of such
property) over the said property vested or deemed
to have been vested in the Custodian.”
10.7 Section 7 deals with payment to Custodian of money otherwise
payable to an enemy, enemy subject or enemy firm, the same
reads as under:
“7. Payment to Custodian of money otherwise
payable to an enemy, enemy subject or enemy
firm. - (1) Any sum payable by way of dividend,
interest, share profits or otherwise to or for the benefit
of an enemy or an enemy subject or an enemy
firm shall, unless otherwise ordered by the Central
Government, be paid by the person by whom such
sum would have been payable but for the prohibition
under the Defence of India Rules, 1962 or the Defence
of India Rules, 1971, as the case may be, to the
Custodian or such person as may be authorised by
him in this behalf and shall be held by the Custodian
or such person subject to the provisions of this Act.
(2) In cases in which money would, but for the
prohibition under the Defence of India Rules, 1962 or
the Defence of India Rules, 1971, as the case may be,
be payable in a foreign currency to or for the benefit
of an enemy or an enemy subject or an enemy firm
(other than cases in which money is payable under
a contract in which provision is made for a specified
rate of exchange), the payment shall be made to the
Custodian in rupee currency at the middle official rate
of exchange fixed by the Reserve Bank of India on
the date on which the payment became due to that
enemy, enemy subject or enemy firm.
(3) The Custodian shall, subject to the provisions of
section 8, deal with any money paid to him under
the Defence of India Rules, 1962 or the Defence of
India Rules, 1971 as the case may be or under this
[2024] 2 S.C.R. 873
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
Act and any property vested in him under this Act in
such manner as the Central Government may direct.”
10.8 The powers of Custodian in respect of enemy property vested
in him as amended are delineated in Section 8 which reads
as under:
“8. Power of Custodian in respect of enemy
property vested in him.— (1) With respect to the
property vested in the Custodian under this Act, the
Custodian may take or authorise the taking of such
measures as he considers necessary or expedient
for preserving such property till it is disposed of in
accordance with the provisions of this Act.
(2) Without prejudice to the generality of the foregoing
provision, the Custodian or such person as may be
specifically authorised by him in this behalf, may, for
the said purpose,—
(i) carry on the business of the enemy;
(ia) fix and collect the rent, standard rent, lease rent,
licence fee or usage charges, as the case may
be, in respect of enemy property;
(ii) take action for recovering any money due to
the enemy;
(iii) make any contract and execute any document
in the name and on behalf of the enemy;
(iv) institute, defend or continue any suit or other
legal proceeding, refer any dispute to arbitration
and compromise any debts, claims or liabilities;
(iva) secure vacant possession of the enemy property
by evicting the unauthorised or illegal occupant
or trespasser and remove unauthorised or illegal
constructions, if any.
(v) raise on the security of the property such loans
as may be necessary;
(vi) incur out of the property any expenditure including
the payment of any taxes, duties, cesses and
rates to Government or to any local authority and
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of any wages, salaries, pensions, provident fund
contributions to, or in respect of, any employee of
the enemy and the repayment of any debts due
by the enemy to persons other than enemies;
(vii) transfer by way of sale, mortgage or lease or
otherwise dispose of any of the properties;
(viii) invest any moneys held by him on behalf of
enemies for the purchase of Treasury Bills or
such other Government securities as may be
approved by the Central Government for the
purpose;
(ix) make payments to the enemy and his
dependents;
(x) make payments on behalf of the enemy to
persons other than those who are enemies, of
dues outstanding on the 25th October, 1962 or
on the 3rd December, 1971; and
(xi) make such other payments out of the funds of
the enemy as may be directed by the Central
Government.”
10.9 Section 8A deals with sale of property by Custodian which has
been inserted with retrospective effect from 07.01.2016 while
Section 10A deals with power to issue certificate of sale. The
same are extracted as under:
“8A. Sale of property by Custodian.—(1)
Notwithstanding anything contained in any judgment,
decree or order of any court, tribunal or other
authority or any law for the time being in force, the
Custodian may, within such time as may be specified
by the Central Government in this behalf, dispose of
whether by sale or otherwise, as the case may be,
with prior approval of the Central Government, by
general or special order, enemy properties vested in
him immediately before the date of commencement
of the Enemy Property (Amendment and Validation)
Act, 2017 in accordance with the provisions of this
Act, as amended by the Enemy Property (Amendment
and Validation) Act, 2017.
[2024] 2 S.C.R. 875
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
(2) The Custodian may, for the purpose of disposal
of enemy property under sub-section (1), make
requisition of the services of any police officer to
assist him and it shall be the duty of such officer to
comply with such requisition.
(3) The Custodian shall, on disposal of enemy
property under sub-section (1) immediately deposit
the sale proceeds into the Consolidated Fund of
India and intimate details thereof to the Central
Government.
(4) The Custodian shall send a report to the Central
Government at such intervals, as it may specify, for
the enemy properties disposed of under sub-section
(1), containing such details, (including the price for
which such property has been sold and the particulars
of the buyer to whom the properties have been sold
or disposed of and the details of the proceeds of sale
or disposal deposited into the Consolidated Fund of
India) as it may specify.
(5) The Central Government may, by general
or special order, issue such directions to the
Custodian on the matters relating to disposal of
enemy property under sub-section (1) and such
directions shall be binding upon the Custodian and
the buyer of the enemy properties referred to in
that sub-section and other persons connected to
such sale or disposal.
(6) The Central Government may, by general or
special order, make such guidelines for disposal of
enemy property under sub-section (1).
(7) Notwithstanding anything contained in this
section, the Central Government may direct that
disposal of enemy property under sub-section (1)
shall be made by any other authority or Ministry or
Department instead of Custodian and in that case
all the provisions of this section shall apply to such
authority or Ministry or Department in respect of
disposal of enemy property under sub-section (1).
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(8) Notwithstanding anything contained in sub-
sections (1) to (7), the Central Government may deal
with or utilise the enemy property in such manner as
it may deem fit.
xxx
10A. Power to issue certificate of sale.—(1) Where
the Custodian proposes to sell any enemy immovable
property vested in him, to any person, he may on
receipt of the sale proceeds of such property, issue a
certificate of sale in favour of such person and such
certificate of sale shall, notwithstanding the fact that
the original title deeds of the property have not been
handed over to the transferee, be valid and conclusive
proof of ownership of such property by such person.
(2) Notwithstanding anything contained in any law for
the time being in force, the certificate of sale, referred
to in sub-section (1), issued by the Custodian shall be
a valid instrument for the registration of the property in
favour of the transferee and the registration in respect
of enemy property for which such certificate of sale had
been issued by the Custodian, shall not be refused on
the ground of lack of original title deeds in respect of
such property or for any such other reason.”
10.10 Section 9 states that all enemy property vested in the Custodian
under this Act shall be exempt from attachment, seizure or
sale in execution of a decree of a civil court or orders of any
other authority. The same is extracted as under:
“9. Exemption from attachment, etc. - All enemy
property vested in the Custodian under this Act
shall be exempt from attachment, seizure or sale in
execution of decree of a civil court or orders of any
other authority.”
10.11 Section 12 speaks of protection for complying with orders of
Custodian and the same reads as under:
“12. Protection for complying with orders of
Custodian.- Where any order with respect to any
money or property is addressed to any person by the
[2024] 2 S.C.R. 877
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
Custodian and accompanied by a certificate of the
Custodian that the money or property is money or
property vested in him under this Act, the certificate
shall be evidence of the facts stated therein and if that
person complies with the orders of the Custodian, he
shall not be liable to any suit or other legal proceeding
by reason only of such compliance.”
10.12 Section 13 deals with validity of action taken in pursuance of
orders of Custodian while Section 14 deals with proceeding
against companies whose assets vest in custodian, which
read as under:
“13. Validity of action taken in pursuance of orders
of Custodian.—Where under this Act,—
(a) any money is paid to the Custodian; or
(b) any property is vested in the Custodian or an
order is given to any person by the Custodian
in relation to any property which appears to the
Custodian to be enemy property vested in him
under this Act,
neither the payment, vesting nor order of the
Custodian nor any proceedings in consequence
thereof shall be invalidated or affected by reason
only that at a material time,—
(i) some person who was or might have been
interested in the money or property, and who
was an enemy or an enemy firm, has died or
had ceased to be an enemy or an enemy firm; or
(ii) some person who was so interested and who was
believed by the Custodian to be an enemy or an
enemy firm, was not an enemy or an enemy firm.”
14. Proceedings against companies whose assets
vest in Custodian - Where the enemy property
vested in the Custodian under this Act consists of
assets of a company, no proceeding, civil or criminal,
shall be instituted under the Companies Act, 1956
(1 of 1956), against the company, or any director,
manager or other officer thereof except with the
consent in writing of the Custodian.”
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10.13 Section 17 pertains to levy of fees and the same reads as
under:
“17. Levy of fees.— (1) There shall be levied by the
Custodian fees equal to five per centum of—
(a) the amount of moneys paid to him;
(b) the proceeds of the sale or transfer of any
property which has been vested in him under
this Act; and
(c) the value of the residual property, if any, at the
time of its transfer to the original owner or other
person specified by the Central Government
under section 18:
Provided that in the case of an enemy whose property
is allowed by the Custodian to be managed by some
person specially authorised in that behalf, there shall
be levied a fee of five per centum of the gross income
of the enemy or such less fee as may be specifically
fixed by the Central Government after taking into
consideration the cost of direct management incurred
by that Government, the cost of superior supervision
and any risks that may be incurred by that Government
in respect of the management:
Provided further that the Central Government may,
for reasons to be recorded in writing, reduce or remit
the fees leviable under this sub-section in any special
case or class of cases.
Explanation.—In this sub-section “gross income of the
enemy” means income derived out of the properties
of the enemy vested in the Custodian under this Act.
(2) The value of any property for the purpose of
assessing the fees shall be the price which, in the
opinion of the Central Government or of an authority
empowered in this behalf by the Central Government,
such property would fetch if sold in the open market.
(3) The fees in respect of property may be levied out
of any proceeds of the sale or transfer thereof or out
of any income accrued therefrom or out of any other
[2024] 2 S.C.R. 879
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
property belonging to the same enemy and vested
in the Custodian under this Act.
(4) The fees levied under this section shall be credited
to the Central Government.”
10.14 Section 18 deals with transfer of property vested as enemy
property in certain cases and the said provision reads as under:
“18. Transfer of property vested as enemy property
in certain cases.—The Central Government may, on
receipt of a representation from a person, aggrieved
by an order vesting a property as enemy property
in the Custodian within a period of thirty days from
the date of receipt of such order or from the date of
its publication in the Official Gazette, whichever is
earlier and after giving a reasonable opportunity of
being heard, if it is of the opinion that any enemy
property vested in the Custodian under this Act and
remaining with him was not an enemy property, it
may by general or special order, direct the Custodian
that such property vested as enemy property in the
Custodian may be transferred to the person from
whom such property was acquired and vested in
the Custodian.”
10.15 Section 18A, Section 18B and Section 18C though related
to Section 18, however, are not relevant for the purposes of
this case. Section 22 gives overriding effect to this Act and
the same reads as under:
“22. Effect of laws inconsistent with the Act.—The
provisions of this Act shall have effect notwithstanding
anything inconsistent therewith contained in any other
law for the time being in force, (including any law
of succession or any custom or usage in relation to
succession of property).”
Section 22A is a validation clause which reads as
under:
“22A. Validation.—Notwithstanding anything
contained in any judgment, decree or order of any
court, tribunal or other authority,—
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(a) the provisions of this Act, as amended by the
Enemy Property (Amendment and Validation)
Act, 2017, shall have and shall always be
deemed to have effect for all purposes as if
the provisions of this Act, as amended by the
said Act, had been in force at all material times;
(b) any enemy property divested from the Custodian
to any person under the provisions of this Act, as
it stood immediately before the commencement
of the Enemy Property (Amendment and
Validation) Act, 2017, shall stand transferred
to and vest or continue to vest, free from all
encumbrances, in the Custodian in the same
manner as it was vested in the Custodian before
such divesting of enemy property under the
provisions of this Act, as if the provisions of this
Act, as amended by the aforesaid Act, were in
force at all material times;
(c) no suit or other proceedings shall, without
prejudice to the generality of the foregoing
provisions, be maintained or continued in any
court or tribunal or authority for the enforcement
of any decree or order or direction given by such
court or tribunal or authority directing divestment
of enemy property from the Custodian vested
in him under section 5 of this Act, as it stood
before the commencement of the Enemy
Property (Amendment and Validation) Act, 2017,
and such enemy property shall continue to vest
in the Custodian under section 5 of this Act,
as amended by the aforesaid Act, as the said
section, as amended by the aforesaid Act was
in force at all material times;
(d) any transfer of any enemy property, vested in the
Custodian, by virtue of any order of attachment,
seizure or sale in execution of decree of a civil
court or orders of any tribunal or other authority
in respect of enemy property vested in the
Custodian which is contrary to the provisions
of this Act, as amended by the Enemy Property
[2024] 2 S.C.R. 881
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
(Amendment and Validation) Act, 2017, shall be
deemed to be null and void and notwithstanding
such transfer, continue to vest in the Custodian
under this Act.”
10.16 Section 24 states that certain orders made under the Defence
of India Rules, 1962, to continue in force and the same is
extracted as under:
“24. Certain orders made under the Defence of
India Rules, 1962, to continue in force. - (1) Every
order which was made under the Defence of India
Rules, 1962, by the Central Government or by the
Custodian of Enemy Property for India appointed
under those Rules, relating to enemy property and
which was in force immediately before the expiration
thereof shall, in so far as such order is not inconsistent
with the provisions of this Act, be deemed to continue
in force and to have been made under this Act.
(2) Every order which was made under the Defence
of India Rules, 1971 by the Central Government or by
the Custodian of Enemy Property for India appointed
under those rules relating to enemy property and
which was in force immediately before the expiration
thereof shall, in so far as such order is not inconsistent
with the provisions of this Act, be deemed to continue
in force and to have been made under this Act.”
The Enemy Property Rules, 2015:
10.17 The Enemy Property Rules, 2015 deal with procedure for
identification of immovable property, procedure for declaration
and vesting of the enemy property. While Rule 5 deals with
procedure for preservation, management and control of
immovable property, Rule 6 deals with procedure for taking
possession of moveable property; on the other hand, Rule 7
deals with procedure for taking possession of certain moveable
property. Rule 15 deals with procedure for divestment of enemy
property vested in Custodian which reads as under:
“15. Procedure for divestment of enemy property
vested in Custodian.- (1) The Central Government
may, on a reference or complaint or on its own motion,
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initiate process for divestment of an enemy property
vested in the Custodian, to the owner thereof or to
such other person.
(2) An officer of the rank of Joint Secretary or above
in the Government of India shall be the Chairperson
of the proceedings for divestment of the enemy
property under this rule.
(3) The Chairperson shall give thirty days’ notice
to all concerned including the Custodian, requiring
them to submit a reply, produce all documentary
evidence and appear in person or through authorised
representative:
Provided that if any party fails to appear on the date
fixed for hearing, then a second and final notice shall
be served through registered post and if he again
fails to appear after the second notice, then the
proceedings shall be heard ex parte:
Provided further that the Chairperson shall record
the reasons for such ex parte proceedings.
(4) The notices shall be served on all concerned
parties before each hearing.
(5) The presenting officer who has been engaged
for presentation of the case on behalf of the Central
Government, shall examine such witnesses and
documentary evidences in respect of the property
as he thinks fit.
(6) On completion of the proceedings, the details
including depositions shall be furnished to the parties.
(7) The Chairperson, after examining the evidence
and calling for further reports and inquiry as may
be necessary, shall pass such orders thereon as it
thinks fit, and a copy of the said orders shall be sent
to the parties.”
11. Articles 285, 289, 296 and 300-A of the Constitution of India are
relevant while interpreting the Act and read as under:
“285. Exemption of property of the Union from State
taxation.—(1) The property of the Union shall, save
[2024] 2 S.C.R. 883
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
in so far as Parliament may by law otherwise provide,
be exempt from all taxes imposed by a State or by any
authority within a State.
(2) Nothing in clause (1) shall, until Parliament by
law otherwise provides, prevent any authority within
a State from levying any tax on any property of the
Union to which such property was immediately before
the commencement of this Constitution liable or treated
as liable, so long as that tax continues to be levied in
that State.
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289. Exemption of property and income of a State
from Union taxation.— (1) The property and income of
a State shall be exempt from Union taxation.
(2) Nothing in clause (1) shall prevent the Union from
imposing, or authorising the imposition of any tax to such
extent, if any, as Parliament may by law provide in respect
of a trade or business of any kind carried on by, or on
behalf of, the Government of a State, or any operations
connected therewith, or any property used or occupied for
the purposes of such trade or business, or any income
accruing or arising in connection therewith.
(3) Nothing in clause (2) shall apply to any trade or
business, or to be incidental to the ordinary functions of
Government.”
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296. Property accruing by escheat or lapse or as bona
vacantia. - Subject as hereinafter provided, any property
in the territory of India which, if this Constitution had not
come into operation, would have accrued to His Majesty
or, as the case may be, to the Ruler of an Indian State by
escheat or lapse, or as bona vacantia for want of a rightful
owner, shall, if it is property situate in a State, vest in such
State, and shall, in any other case, vest in the Union:
Provided that any property which at the date when it would
have so accrued to His Majesty or to the Ruler of an Indian
State was in the possession or under the control of the
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Government of India or the Government of a State shall,
according as the purposes for which it was then used or
held were purposes of the Union or of a State, vest in the
Union or in that State.
Explanation: In this article, the expressions “Ruler” and
“Indian State” have the same meanings as in Article 363.
xxx
300-A. Persons not to be deprived of property save
by authority of law.- No person shall be deprived of his
property save by authority of law.”
12. The Uttar Pradesh Municipalities Act, 1916 (hereinafter referred
to as “Act of 1916”) consolidates and amends the law relating to
Municipalities in the erstwhile United Provinces and presently State
of Uttar Pradesh. The city of Lucknow was a municipality and later
was constituted as Nagar Nigam or Corporation under the Act of
1959 and till then the Act of 1916 was applicable. Hence, the relevant
provisions of the Act of 1916 are extracted as under:
“128. Taxes which may be imposed.- (1) Subject to any
general rules or special order of the State Government in
this behalf, the taxes which a Municipality may impose in
the whole or part of a municipality are,-
(i) a tax on the annual value of building or lands or
of both;
(ii) a tax on trades and callings carried on within the
municipal limits and deriving special advantages
from, or imposing special burdens on municipal
services;
(iii) a tax on trades, callings and vocations including
all employments remunerated by salary or fees;
(iii-a) a theatre tax which means a tax on amusements
or entertainments;
(iv) a tax on vehicles and other conveyances plying
for hire or kept within the municipality or on boats
moored therein;
(v) a tax on dogs kept within the municipality;
[2024] 2 S.C.R. 885
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
(vi) a tax on animals used for riding, driving, draught or
burden, when kept within the municipality;
(vii) [***]
(viii) [***]
(ix) a tax on inhabitants assessed according to their
circumstances and property;
(x) a water tax on the annual value of buildings or
lands or of both;
(x-a) a drainage tax on the annual value of buildings
leviable on such buildings as are situated within a
distance, to be fixed by rule in this behalf for each
municipality from the nearest sewer line;
(xi) a scavenging tax;
(xii) a conservancy tax for the collection, removal and
disposal of excrementious and polluted matter from
privies, urinals, cesspools;
(xiii) [***]
(xiii-A) [***]
(xiii-B) a tax on deeds of transfer of immovable property
situated within the limits of the municipality;
(xiv) [***]
(2) Provided that taxes under clauses (iii) and (ix) of sub-
section (1) shall not be levied at the same time [***] nor
shall the taxes under clauses (x-a) and (xii) of sub-section
(1) be levied at the same time;
Provided further that no tax under clause (xiii-B) of sub-
section (1) shall be levied on deeds of transfer of immovable
property situated within such area of the municipality as
forms part of the local area of any Improvement Trust
created under Section 3 of the U.P. Town Improvement
Act, 1919 (UP Act No. VIII of 1919):
Provided also that no tax under clause (iv) of sub-section
(1) shall be levied in respect of any motor vehicle.
(3) Nothing in this section shall authorize the imposition
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of any tax which the State Legislature has no power to
impose in the State under the Constitution:
Provided that a Municipality which immediately before the
commencement of the Constitution was lawfully levying
any such tax under this section as then in force, may
continue to levy that tax until provision to the contrary is
made by Parliament.
(i) A tax on the annual value of buildings or lands or both;
(ii) A water tax on the annual value of buildings or lands
or both;
(iii) A drainage tax on the annual value of buildings
leviable on such buildings as are situated within a
distance, to be fixed by rules in this behalf for each
municipality from the nearest sewer lines;
(iv) A conservancy tax for the collection, removal and
disposal of excrementious and polluted matter from
privies, urinals, cesspools;
(2) xxx
(3) The municipal taxes shall be assessed and levied in
accordance with the provisions of this Act and the rules
and bye-laws framed thereunder.
(4) Nothing in this section shall authorize the imposition
of any tax which the State Legislature has no power to
impose in the State under the Constitution:
Provided that a Municipality which immediately before the
commencement of the Constitution was lawfully levying
any such tax under this section as then in force, may
continue to levy that tax until provisions to the contrary is
made by the Parliament.
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129-A. Levy of tax on annual value of buildings or
lands or both.- The Tax on annual value of buildings or
lands or both shall be levied in respect of all buildings and
lands situated in the municipal limit except,-
xxx
[2024] 2 S.C.R. 887
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
(e) building and land vested in the Union of India, except
where provisions of clause (2) of Article 285 of the
Constitution of India, apply;”
12.1 Section 140 of the said Act defines annual value.
13. The relevant provisions of the Act of 1959 are extracted as under as
they are applicable to Lucknow Nagar Nigam (Municipal Corporation)
– the appellant herein:
“172. Taxes to be imposed under this Act. – (1) For
the purposes of this Act and subject to the provisions
thereof and of Article 285 of the Constitution of India the
Corporation shall impose the following taxes, namely-
(a) property taxes;
xxx
(3) The Corporation taxes shall be assessed and levied
in accordance with the provisions of this Act and the rules
and bye-laws framed thereunder.
(4) Nothing in this section shall authorize the imposition
of any tax which the State Legislature has no power to
impose in the State under the Constitution of India:
Provided that where any tax was being lawfully levied
in the area included in the City immediately before the
commencement of the Constitution of India such tax
may continue to be levied and applied for the purposes
of this Act until provision to the contrary is made by
Parliament.
173. Property taxes leviable. – (1) For the purposes of
sub-section (1) of Section172 property taxes shall comprise
the following taxes which shall, subject to the exceptions,
limitations and conditions hereinafter provided, be levied
on buildings and lands in the City -
(a) a general tax which may be levied, if the Corporation
so determines, on a graduated scale;
(b) a water tax;
(c) drainage tax leviable in areas provided with sewer
system by the Corporation;
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(d) a conservancy tax in areas in which the Corporation
undertakes, the collection; removal and disposal of
excrementitious and polluted matter from privies,
urinals and cesspools.
(2) Save as otherwise expressly provided in this Act or
rules made thereunder, these taxes shall be levied on
the annual value of buildings or land as the case may be:
Provided that the aggregate of the property taxes shall in
no case be less than 15 per cent nor more than 25 per
cent of the annual value of the building of land or both
assessed to such taxes.
174. Definition of “Annual Value” – “Annual value”
means –
(a) in the case of railway stations, colleges, schools,
hostels, factories, commercial buildings, and other
non-residential buildings, a proportion not below 5
per cent, to be fixed by rule made in this behalf of
the sum obtained by adding the estimated present
cost of erecting the building, less depreciation at a
rate to be fixed by rules, to the estimated value of
the land appurtenant thereto; and
(b) in the case of a building or land not falling within the
provisions of clause (a), the gross annual rent for which
such building exclusive of furniture or machinery therein,
or such land is actually let, or where the building or land
is not let or in the opinion of the assessing authority
is let for a sum less than its fair letting value, might
reasonably be expected to be let from year to year.
Provided that where the annual value of any building would,
by reason of exceptional circumstances, in the opinion of
the Corporation, be excessive if calculated in the aforesaid
manner, the Corporation may fix the annual value at any
less amount which appears to it equitable.
Provided further that where the Corporation so resolves,
the annual value in the case of owner occupied buildings
and land shall for the purposes of assessment of property
taxes be deemed to be 25 per cent less than the annual
value otherwise determined under this Section.
[2024] 2 S.C.R. 889
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
175. Restrictions on imposition of water tax.-The
imposition of a tax under clause (b) of sub-section (1) of
Section 173 shall be subject to the restriction that the tax
shall not be imposed –
(i) on any land exclusively for agricultural purposes,
unless the water is supplied by the Corporation for
such purposes; or
(ii) on a plot of land or building the annual value whereof
does not exceed rupees three hundred and sixty and
to which no water is supplied by the Corporation; or
(iii) on any plot or building, no part of which is within
the radius prescribed for the City, from the nearest
stand-pipe or other waterworks whereat water is made
available to the public by the Corporation.
Explanation. - For the purposes of this section –
(a) ‘building’ shall include the compound, if any, thereof,
and, where there are several buildings in a common
compound, all such buildings, and the common
compound;
(b) ‘a plot of land’ means any piece of land held by a single
occupier, or held in common by several co-occupiers,
whereof no one portion is entirely separated from
any other portion by the land of another occupier or
of other occupiers or by public property.
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177. General tax on what premises to be levied. – The
general tax shall be levied in respect of all buildings and
lands in the City except -
xxx
(f) buildings and lands vesting in the Union of India
except where provisions of clause (2) of Article 285 of the
Constitution of India apply;
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179. Primary responsibility for certain property taxes
on annual value. – (1) Except where otherwise prescribed,
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every tax (other than a drainage tax or a conservancy
tax) on the annual value of buildings or lands shall be
leviable primarily from the actual occupier of the property
upon which the tax is assessed, if he is the owner of the
buildings or lands or holds them on a building or other
lease from the Central or the State Government or from
the Corporation, or on a building lease from any person.
(2) In any other case the tax shall be primarily leviable
as follows, namely, -
(a) if the property is let from the lessor;
(b) if the property is sublet from the superior lessor;
(c) if the property is unlet from the person in whom
the right to let the same vests.
(d) if the property is let in pursuance of an order
under the Uttar Pradesh Urban Buildings
(Regulations of Letting, Rent and Eviction) Act,
1972, from the tenant.
(3) On failure to recover any sum due on account of such
tax from the person primarily liable, the Mukhya Nagar
Adhikari may recover from the occupier of any part of the
buildings or lands in respect of which it is due that portion
thereof which bears to the whole amount due the same
ratio as the rent annually payable by such occupier bears
to the aggregate amount of rent payable in respect of the
whole of the said building or lands, or to the aggregate
amount of the letting value thereof in the authenticated
assessment list.
(4) An occupier who makes any payment for which he is
not primarily liable under the foregoing provisions shall,
in the absence of any contract to the contrary, be entitled
to be reimbursed by the person primarily liable.
180. Liability for payment of other such taxes. – (1) A
drainage tax, or a conservancy tax on the annual value of
buildings or lands shall be levied from the actual occupier
of the property upon which the taxes are assessed:
Provided that, where such property is let to more occupiers
than one, the Mukhya Nagar Adhikari may at his option
[2024] 2 S.C.R. 891
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
levy the tax from the lessor instead of from the actual
occupiers.
(2) A lessor from whom a tax is levied under the proviso
to sub-section (1) may, in the absence of a contract to
the contrary, recover the tax from any or all of the actual
occupiers.
181. Property taxes to be a first charge on premises on
which they are assessed. – (1) Property taxes due under
this Act in respect of any building or land shall, subject to
the prior payment of the land revenue, if any, due to the
State Government thereupon, be a first charge, in the case
of any building or land held immediately from the State,
upon the interest in such building or land of the person
liable for such taxes and upon the movable property, if any,
found within or upon such building or land and belonging
to such person; and, in the case of any other building or
land, upon the said building or land and belonging to the
person liable for such taxes.
Explanation. - The term «property taxes» in this section
shall be deemed to include any charges payable for water
supplied to any premises and the costs of recovery of
property taxes as specified in the rules.
(2) In any decree in a suit for the enforcement of the
charge created by subsection (1), the Court may order the
payment to the Corporation of interest on the sum found to
be due at such rate as the Court deems reasonable from
the date of the institution of the suit until realization, and
such interest and the cost of enforcing the said charge,
including the costs of the suit and the cost of bringing the
premises or movable property in question to sale under
the decree, shall, subject as aforesaid, be a first charge on
such premises and movable property along with the amount
found to be due, and the Court may direct payment thereof
to be made to the Corporation out of the sale proceeds.”
Legal status of the Custodian under the Act:
14. At this stage, it would be useful to dilate on the jurisprudential aspect
of ownership of property and examine the nuances thereof vis-à-vis
the status of the Custodian of Enemy Property for India under the Act.
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14.1 According to Salmond on Jurisprudence, the expression
‘ownership’ in a generic sense, extends to all classes of
rights, whether proprietary or personal, in rem or in personam,
in re propria or in re aliena. Every man is the owner of the
rights which he owns. Ownership in its generic sense as a
relation in which a person stands to any right vested in him,
is opposed to two other possible relations between a person
and a right. In the first place, it is opposed to possession. A
man has possessory right without owning it or secondly, he
may own a right without possessing it. Thirdly, the ownership
and possession may be united as they usually are, in the
context of de jure and the de facto relation being co-existent
or coincident.
14.2 In the first of the above, possession is a de facto relationship
while the second is de jure ownership or relationship. In the
second sense, the ownership of a right is opposed to the
encumbrance of it. The owner of the right is he, in whom
the right itself is vested, while the encumbrancer of it is he,
in whom, is vested, not the right itself, but some adverse,
dominant and limiting right in respect of it. In law, there are
no separate names for every distinct kind of encumbrancer.
However, an encumbrance is opposite to ownership; every
encumbrancer is nevertheless himself the owner of the
encumbrance, that is to say, he, in whom, an encumbrance
stands in a definite relation, not merely to it, but also to the
right encumbered by it.
How is ownership acquired? :
14.3 Ownership is an important right vis-à-vis any property
and more so immovable property. What are the modes of
acquisition of ownership? Under the provisions of the Transfer
of Property Act, 1882, acquisition of ownership in relation
to immovable property is by a transfer or conveyance. The
expression “transfer” is defined with reference to the word
convey which is an assurance inter vivos under the provisions
of the said Act. Thus, the transferor must have an interest
in the property before he can convey it. A person who has
no interest in the property, cannot convey any interest in the
property, in other words, he cannot sever himself from it and
yet convey it. Further, there are various modes of transfer of
[2024] 2 S.C.R. 893
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
immovable property known to law. Section 54 of the Transfer
of Property Act defines a sale to be a transfer of ownership
in exchange for a price paid or promised or part-paid and
part-promised. The definition of sale itself indicates that in
order to constitute a sale, there must be transfer of ownership
from one person to another, i.e., all rights and interests in
the property which is possessed by a person are transferred
by him with his free consent to another person for a price
called consideration. The conveyance has to be regarded
in accordance with law. Then only the transaction of sale is
complete and title in the property passes from the seller to
the buyer. The transferor cannot retain any part of his interest
or right in that property or else it would not be a sale. On
the other hand, any transfer by operation of law, or by or in
execution of a decree or order of a court within the meaning
of Section 2(d) of the Transfer of Property Act are outside the
scope of Section 54, and need not be registered. Thus, where
the property is sold at a court auction, a certificate of sale
issued by the court is enough as the purchaser’s document of
title. But in order to constitute a sale, the parties must intend
to transfer the ownership of the property for a price to be
paid in present time or in future. Sub-section (2) of Section
55 states that the seller shall be deemed to contract with the
buyer that interest which the seller professes to transfer to
the buyer which subsists and he has power to transfer the
same. Proviso thereto further states that, where the sale
is made by a person in a fiduciary character, he shall be
deemed to contract with the buyer that the seller has done
no act whereby the property is encumbered or whereby he
is hindered from transferring it.
14.4 Similarly, gift is the transfer of certain existing movable or
immovable property made voluntarily and without consideration,
by one person, called the donor, to another, called the donee,
and accepted by or on behalf of the donee. Such acceptance
must be made during the lifetime of the donor and while he
is still capable of giving. If the donee dies before acceptance,
the gift is void. The donor is the person who gives. Any person
who is sui juris can make a gift of his property. Therefore, it
is only a person who is the owner of the property, can gift
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his property and according to the provisions of the Transfer
of Property Act.
14.5 In the same vein, an exchange is when an exchange of
immovable property takes place when two persons mutually
transfer the ownership of one thing for the ownership of another,
neither thing or both things being money only. A transfer of
property in completion of an exchange can be made only in
a manner provided for the transfer of such property by sale.
In the case of an exchange also, the person must have the
ownership in the property before the same can be exchanged
for any immovable property.
14.6 Similarly, transfer of ownership of movable property is by sale,
gift or exchange and in the case of a sale, the provisions of
the Sale of Goods Act, 1930 would apply.
14.7 Transfer of ownership other than transfer inter vivos is by
succession or inheritance under a testament or a will/codicil
in which case, the provisions of the Indian Succession Act,
1925 would have to be adhered to.
14.8 In the context of acquisition of land under the power of eminent
domain such as under the provisions of Land Acquisition Act,
1894 or the Right to Fair Compensation and Transparency
in Land Acquisition, Rehabilitation and Resettlement Act,
2013, there is divesting of ownership of the owner of the
property only when land “vests absolutely in the Government
free from all encumbrances” such as under Section 16 of
the Land Acquisition Act, 1894. This Court in Fruit and
Vegetable Merchants Union, Subzi Mandi, Delhi vs. Delhi
Improvement Trust, Regal Buildings, Cannaught Place, AIR
1957 SC 344 has held that the property acquired becomes
the property of the Government without any conditions or
limitations either as to title or possession when it vests
free from all encumbrances in the Government. The word
encumbrances means a burden or charge upon property or a
claim or lien upon an estate or on the land. Encumber means
burden of legal liability on property, and therefore, when there
is encumbrance on a land, it constitutes a burden on the title
which diminishes the value of the land. But where the land
acquired by the State is free from all encumbrances, it vests
[2024] 2 S.C.R. 895
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
absolutely and free from all encumbrances. In such a case, it
would be an incidence of transfer of ownership from the owner
of the land to the Government as there would be divesting of
land from its true owner.
14.9 Amongst the distinct kinds of ownerships, a trust ownership
and beneficial ownership is relevant to the case. A trust is a
very important and curious instance of duplicate ownership.
According to Salmond, the trust property is that which is
owned by two persons at the same time, the relation between
the two owners being such that one of them is under an
obligation to use his ownership for the benefit of the other.
The former is called the ‘trustee’ and his ownership is the
‘trust ownership’; the latter is called the ‘beneficiary’ and his
is beneficial ownership.
14.10 The trustee’s ownership of any property is a matter of form
rather than a substance and nominal rather than real. A trustee
is not effectively an owner at all but in essence a mere agent,
upon whom the law has conferred the power and imposed
the duty of administering the property of another person. The
trustee is a person to whom the property, substantially that
of someone else is technically attributed by the law on the
footing that the rights and powers that it vests under him are
to be used by him on behalf of the real owner. As between the
trustee and beneficiary, the law recognises that the property
belongs to the latter and not to the former. But as between the
trustee and the third persons, the fiction prevails, inasmuch
as the trustee is clothed with the rights of his beneficiary and
personate or represent him in dealings with the world at large.
This principle is actuated under various provisions of the Act
including Section 8 thereof vis-à-vis an enemy who is the
owner of a property and the Custodian in whom the property
vests under the provisions of the Act. This position becomes
clear on a reading of the Rules under the Defence of India
Rules, 1962 and 1971 as discussed above.
14.11 Thus, the trusteeship is to protect the rights and interests of
persons, who, for any reason are unable effectively to protect
them for themselves. The law vests those rights and interests
for safe custody in a trustee, who is capable of guarding them
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and dealing with them and who is placed under an obligation
to use it for the benefit of him to whom they in truth belong.
One of the classes of persons on whose behalf the protection
of the trusteeship is called is in respect of the property of those
persons who are absent in the country, such as a person who
has migrated to a country which is described as an enemy
country by the Government of India as defined under the
provisions of the Act under consideration.
14.12 Thus, under the Act, the Custodian acts as a trustee. A trust is
more than an obligation to use the property for the benefit of
another; it is an obligation to use it for the benefit of another in
whom it is already concurrently vested. Since the beneficiary
is himself the owner of the enemy property, in the instant case,
the Custodian who is the trustee appointed under the Act is
therefore a statutory authority constituted for the administration
of the enemy property, who is only a nominal owner of the
property so administered by him vis-à-vis third parties. As
already noted, the nominal ownership in the trustee is only
for the purpose of using the rights and powers vesting with
the trustee i.e., Custodian under the Act to be used by him
or on behalf of the real owner of the property is absent, since
he has left the country for an enemy country.
14.13 The trustee or Custodian under the Act may, in pursuance
of the powers vested in him under the Act which actually
creates a trust by operation of law, can lease or mortgage the
property without the concurrence of the beneficiary under the
provisions of the Act just as the beneficiary could have dealt in
the same way with his ownership of the property independently
of the trustee as there is no bar in law to do so other than the
provisions of the Act. Thus, a relationship of trusteeship exists
between the trustee and all persons beneficially interested in
the property, either as owners or encumbrancers.
Possession:
14.14 There is another jurisprudential angle to the matter. Under the
Act the Custodian takes possession of the enemy property,
in as much as, the enemy property vests with the Custodian
under the provisions of the Act. What does this entail?
[2024] 2 S.C.R. 897
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
14.15 While discussing on the jurisprudential aspects of vesting or
taking possession in the instant case as per the provisions
of the Act, it is necessary to reiterate and bear in mind the
following aspects:
(i) That there are three possible situations: first, the
possession usually exists both in law and in fact; secondly,
the possession may exist in fact but not in law; thirdly,
the possession may exist in law but not in fact. This is
also called ‘constructive possession’. In the case of the
Custodian for Enemy Property, possession exists in law
under the provisions of the Act but may be in fact in the
hands of a third party such as a tenant or a mortgagee
of the owner of such property who is declared an enemy
under the Act.
(ii) Further, whatever may be owned may be possessed but
whatever may be possessed may not be owned. This
statement is however subject to important qualifications.
For example, there can be possession of an interested
person without ownership of any kind. Conversely, there
are many rights, which can be owned in relation to a
property but which are not capable of being possessed.
There are those which may be termed ‘transitory’. For
example, a creditor does not possess the debt that is
due to him as it is a transitory right, which in its very
nature cannot survive in exercise, but a man may possess
an easement over the land because it has exercise in
continued existence or consistent with each other.
(iii) Moving further, while discussing the concept of
possession, it is necessary to understand two elements:
first is animus possidendi. The intent necessary to
constitute possession is the intent to appropriate to
oneself the exclusive use of the thing possessed. It is
an exclusive claim to a material object for the purpose of
using the thing oneself by excluding interference of other
persons. The claim of the possessor must be exclusive,
which however need not be absolute. But animus
possidendi need not amount to a claim or intent to use
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the thing as owner. The tenant or a pledgee may have
possession no less real than that of the owner himself,
just as a Custodian under the provisions of the Act in
the instant case. Thus, the animus possidendi need not
be a claim on one’s own behalf. A trustee or Custodian
under the Act may have possession of enemy property,
though he claims an exclusive right of the thing on behalf
of another than himself. This is vis-à-vis third parties. He
definitely does not have a right of ownership over the
enemy property possessed by him as the ownership of
the said property continues in the enemy.
(iv) The second concept is that to constitute possession,
the animus domini is not in itself sufficient but must
be embodied in a corpus. There are two aspects with
regard to corpus of possession: first is the relationship
of the possessor to other persons and the second, is
the relation of the possessor to the thing possessed.
The necessary relation between the possessor and the
thing possessed is such as to admit of his making such
use of it as accords with the nature of the thing and of
his claim to it. There must be a correlation between him
and the thing possessed, which is not inconsistent with
the nature of the claim he makes to it.
(v) Thus, possession is acquired whenever the two elements
of corpus and animus come into co-existence and it is
lost as soon as either of them disappears.
(vi) The modes of acquisition of possession are two in
number, namely, taking and delivery. Taking is the
acquisition of possession without the consent of the
previous possessor such as in the case of the Custodian
vis-à-vis enemy property. Delivery, on the other hand is
the acquisition of possession with the consent and co-
operation of the previous possessor.
Relation between Possession and Ownership:
14.16 According to Rudolf von Ihering, a jurist “Possession is the
objective realisation of ownership”. It is in fact what ownership
is in right. Ownership is the guarantee of the law, while the
[2024] 2 S.C.R. 899
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
possession is the guarantee of the fact. Normally, ownership
and possession co-exist but not always. This aspect of the
case is crucial for answering the contentions raised by the
respective parties.
Analysis:
Let us apply the aforesaid jurisprudential principles to the provisions
of the Act under consideration.
15. Section 2 (c) of the Act defines enemy property to mean any property
for the time being belonging to or held or managed on behalf of an
enemy, an enemy subject or an enemy firm: That even when an
enemy subject dies in the territories to which the Act extends, or
dies in any territory outside India, any property which immediately
before his death, belonged to or was held by him or was managed
on his behalf, may, notwithstanding his death, continue to be
regarded as enemy property for the purposes of the Act. The Act
when enacted extended to the whole of India except the State of
Jammu and Kashmir and it applies also to all citizens of India outside
India and to branches and agencies outside India of companies or
bodies corporate registered or incorporated in India. On a combined
reading of the above, it is clear that the Act applies to any property
belonging to or held or managed on behalf of an enemy, an enemy
subject or an enemy firm, even if, the enemy or enemy subject or
enemy firm is outside India and to branches and agencies outside
India of companies or bodies corporate registered or incorporated in
India. That as per Explanation (1), the definition of enemy property
in clause (c) of Section 2, it is clarified that “enemy property” shall,
notwithstanding that the enemy or the enemy subject or the enemy
firm has ceased to be an enemy due to death, extinction, winding
up of business or change of nationality or that the legal heir and
successor is a citizen of India or the citizen of a country which is
not an enemy, continue and always be deemed to be continued as
an enemy property. Explanation (2) states that for the purposes of
this clause, the expression enemy property shall mean and include
and shall be deemed to have always meant and included all rights,
titles and interest in, or any benefit arising out of, enemy property in
the context of such property for the time being belonging to or held
or managed on behalf of an enemy, an enemy subject or an enemy
firm. The Explanation to sub-section (3) of Section 5 of the Act also
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states that for the purposes of this sub-section, “enemy property
vested in the Custodian” shall include and shall always be deemed
to have been included all rights, titles, and interest in, or any benefit
arising out of, such property vested in him under the Act.
15.1 Therefore, the moot question is, what is the nature and extent
of rights, titles, and interest in or any benefit arising out of,
such property which is vested in the Custodian? Does it mean
vesting of the ownership of the rights, titles, and interest in,
or any benefit arising out of such enemy property owned by
the enemy which becomes vested in the Custodian in the
sense that the Custodian becomes the owner of the property;
thereby there is a divesting of the ownership or a transfer of
ownership of such property from the ownership of the enemy
to the Custodian.
15.2 We do not think that such an interpretation can be given for
the simple reason that clause (c) of Section 2 clearly states
that enemy property means any property for the time being
belonging to or held or managed on behalf of an enemy, an
enemy subject or an enemy firm being vested in the Custodian.
Therefore, the provision of the Act recognises the ownership
of the enemy vis-à-vis the enemy property and the enemy
property belonging to or held or managed on behalf of an
enemy, an enemy subject or an enemy firm being vested in
the Custodian. What exactly is vested in the Custodian? The
Explanations i.e. Explanation (2) of clause (c) of Section 2 as
well as Explanation (2) to sub-section (3) of Section 5 of the
Act, being identical state that all rights, titles, and interest in,
or any benefit arising out of such enemy property vest in the
Custodian. This means that only the rights etc. vis-à-vis enemy
property vest in the Custodian. By that, the Custodian does
not acquire ownership rights in the property. It continues to
vest with the enemy. This is because ownership of immovable
property can be transferred from one person to another i.e.
transfer inter vivos can only transferred in accordance with
the provisions of the Transfer of Property Act.
15.3 On a conspectus reading of the aforesaid provisions, what
emerges is that under Section 3 of the Act, the Custodian
of Enemy Property for India is appointed by the Central
[2024] 2 S.C.R. 901
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
Government by issuance of a notification in the official gazette
so also Deputy Custodians and Assistant Custodians of Enemy
Property could be appointed for certain local areas as may be
specified in the notification. Since the Act is in continuation of
the Defence of India Rules, 1962 as well as Defence of India
Rules, 1971, as the case may be, the Custodian of Enemy
Property for India appointed under the aforesaid Rules shall be
deemed to have been appointed under Section 3 of the Act.
The expressions “enemy” or “enemy subject” or “enemy firm”
are defined in clause (b) of Section 2; The use of the words
“for the time being”, “belonging to” and “held” or “managed
on behalf of an enemy, an enemy subject or an enemy firm”
in clause (b) of Section 2 of the Act are significant. The said
provision clearly recognizes ownership of the enemy property
by the enemy or property held by an enemy or managed on
behalf of an enemy, an enemy subject or an enemy firm.
The proviso states that where an individual subject dies in
the territories to which the Act extends, any property which
immediately before his death belonged to or was held by him
or managed on his behalf, may, notwithstanding his death,
continue to be recorded as enemy property for the purposes
of this Act. This proviso clearly recognizes that the death of an
enemy would not result in the enemy property ceasing to be so.
Explanation (1) to Section 2(c) also states that enemy property
shall continue to remain as enemy property even on the death
of the enemy or extinction, winding up of business or change
of nationality to continue to remain an enemy property. This is
even if the legal heir and successor is a citizen of India or a
citizen of a country which is not an enemy country. Explanation
(2) thereof states that enemy property shall mean and include
and shall be deemed to have always meant and included all
rights, titles and interests in, or any benefit arising out of such
property. This Explanation gives meaning to the scope of the
expressions belonging to, held or managed on behalf of an
enemy, an enemy subject or enemy firm.
15.4 If a certificate is issued by the Custodian that the enemy
property has vested in him under the Act, the same shall be
evidence of the facts stated therein vide Section 5-A of the
Act. Section 5-B of the Act begins with a non obstante clause
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which states that nothing contained in any law for the time
being in force relating to succession or any custom or usage
governing succession of property shall apply in relation to the
enemy property under this Act and no person (including his
legal heir and successor) shall have any right and shall be
deemed not to have any right (including all rights, titles, and
interests or any benefit arising out of such property) in relation
to such enemy property. This provision regarding extinction of
rights, titles or interests or any benefit arising out of the enemy
property is deemed to have been lost is by operation of law
and by a legal fiction only in so far as a heir or successor
is concerned. If any property is vested in the Custodian as
enemy property, then no enemy or enemy subject or enemy
firm shall have any right to transfer any such property and
any such transfer shall always be deemed to have been void.
Therefore, by a deeming fiction and by operation of law the
right, title and interest in any property vested in the Custodian
under the Act shall be extinguished vis-à-vis any enemy or
enemy subject or enemy firm once such property is vested in
the Custodian only with regard to succession to such enemy
property or transfer of such property by an enemy, enemy
subject or enemy firm. This would imply that the enemy, enemy
subject as well as enemy firm would continue to remain the
owner of such property and would continue to vest with the
Custodian on the death of the enemy.
15.5 The pertinent question which arises is, whether, vesting of any
enemy property in the Custodian under the provisions of the
Act which belonged or was held or managed on behalf of an
enemy, an enemy subject or an enemy firm would result in
“transfer of title” in the said enemy property to the Custodian
and therefore to the Central Government or to the Union. In
order to discern an answer to this question, it is necessary to
read further the provisions of the Act from Section 7 onwards.
15.6 Section 7 states that any sum otherwise payable to an enemy,
enemy subject or an enemy firm in the form of dividend,
interests share profits or otherwise to or for the benefit of an
enemy or an enemy subject or an enemy firm, unless otherwise
ordered by the Central Government, be paid by the person by
[2024] 2 S.C.R. 903
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
whom such sum would have been payable to the Custodian
or such other person as may be authorised by him in this
behalf and shall be held by the Custodian or such person
subject to the provisions of the Act. This provision indicates
that the Custodian only holds in trust the sums payable by
any person to an enemy subject or an enemy firm. This is
because the Custodian of Enemy Property acts as a trustee
of the enemy property vested in him as well as a trustee of
all monetary dues payable to an enemy, enemy subject or
enemy firm. The Custodian shall, subject to the provisions of
Section 8, deal with any money paid to him under the Act or
under the Defence of India Rules, 1962 or 1971 as the case
may be. Further, any property vested in the Custodian under
the Act shall be dealt with by him as the Central Government
may direct.
15.7 What are the powers of the Custodian in respect of property
vested in him? This is dealt with in Section 8 of the Act. The
Custodian may take or authorise the taking of such measures
as he considers necessary or expedient for preserving
such property till it is disposed of in accordance with the
provisions of the Act. Sub-section (2) of Section 8 speaks
of eleven exigencies which a Custodian or such person as
may be specifically authorised by him may take. The same
are extracted above. A reading of the above clearly indicates
that the Custodian or his authorised person can carry on the
business of the enemy; fix and collect the rent etc. in respect
of enemy property; take action for recovering any money due
to the enemy; make any contract and execute any document
in the name and on behalf of the enemy; institute or defend
any legal proceeding; secure vacant possession of the enemy
property; raise on the security of the property such loans as
may be necessary; incur out of the property any expenditure
including payment of any taxes, duties, cesses and rates to
Government, or to any local authority, pay wages, salaries,
pensions, etc. to or in respect of any employee of the enemy
and repayment of any debts due by the enemy to persons
other than enemies; transfer or otherwise dispose of any of the
enemy properties; invest any moneys held by him on behalf
of the enemies for the purpose of Government securities
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etc.; make payments to the enemy at his dependants; make
payments on behalf of the enemy to persons other that those
enemies, of dues outstanding; make such other payments out
of the funds of the enemy as may be directed by the Central
Government.
15.8 What emerges from the above is that the activities that the
Custodian or his authorised person carries out vis-à-vis the
enemy such as the business of the enemy or in respect of
managing the enemy property would also clearly indicate that
the Custodian of the Enemy Property holds the said property
in trust or as a trustee and not as an owner of the enemy
property or by exercising rights of ownership over the enemy
property. Carrying on the business of the enemy and dealing
with the property of the enemy vested in the Custodian is
in order to protect the business belonging to an enemy or
enemy subject or enemy firm, who has left the country. The
Custodian of Enemy Property for India who acts on behalf of
the Enemy holds in trust the enemy property vested in him
under the provisions of the Act. He does so as a trustee and
therefore, the principles and legal doctrines applicable to a
trustee are applicable to the Custodian accordingly.
15.9 It is trite that a trustee or Custodian in the instant case can
never be the owner of the property. The vesting of property
in a trustee or the Custodian which, in the instant case, is
enemy property as defined under the Act is for the purpose
of managing the said property and protecting it, so that
the property does not fall into the hands of trespassers,
unauthorised persons or render it as being ownerless and
therefore, a free for all, so to say owing to the absence of the
owner. The object and purpose of the Act is to ensure that
the enemy property, which vests in the Custodian, is held in
trust and is looked after, protected and managed as per the
provisions of the Act. The statement of objects and reasons
of the Act makes this position clear.
Jurisprudential aspect of vesting:
16. A discussion on the aforesaid provisions under the Act would indicate
that the Custodian takes charge of the enemy property which vests
in him by operation of law. Then the following questions would arise:
[2024] 2 S.C.R. 905
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
(i) Does vesting of enemy property in the Custodian imply that the
Custodian assumes ownership rights vis-à-vis enemy property
vested in him?
(ii) Secondly, whether the vesting of enemy property in the
Custodian would imply that it becomes the property of the Union?
These are the two crucial questions which are required to be answered
in this case in order to decide the matter in all its perspectives.
16.1 The expression ‘vest’ or ‘vesting’ has no precise definition and
it would depend upon the context in which the expression is
used under a particular enactment. This Court has held that
the expression ‘vest’ is of fluid or flexible content and can, if
the context so dictates, bear the limited sense of “being in
possession and enjoyment”. (See: Maharaj Singh vs. State
of Uttar Pradesh, (1977) 1 SCC 155) (Para 18)]. In Dr. M.
Ismail Faruqui vs. Union of India, (1994) 6 SCC 360 : AIR
1995 SC 605, it was observed that the word ‘vest’ has to be
understood in the different contexts in which the word occurs.
In the context of acquisition of certain area under the Ayodhya
Act, 1993, it was observed that the vesting of the disputed area
in Central Government is limited, as a statutory receiver, with
the duty of its management and administration. According to
Section 7 of the said Act, till it is handed over in terms of the
adjudication made in the suit, the word ‘vest’ takes varying
colours from the context and the situation in which the word
is used in the statute.
Under the Land Acquisition Act, 1894, vesting in the State,
is from the date of taking possession under Sections 16 or
17(2) which is free from all encumbrances. But under the
Land Reforms Act like abolition of estates and taking over
thereof, the vesting takes effect from the date of publication
of the notification in the official gazette until the occupant of
the land is granted the occupancy rights. This is however
not the position when enemy property vests in the Custodian
under the provisions of the Act. The vesting of enemy property
in the Custodian is not free from encumbrances. Therefore,
the expression ‘vest’ has no fixed connotation. It is a word of
variable input and therefore has to be understood in different
contexts and under different circumstances. Therefore, the
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context and situation in which the word is used in the statute
is significant in order to interpret the said expression. Under
certain statutes, the word ‘vesting’ would mean placing into
possession and not conferring ownership of the person who
comes into possession of property. Therefore, the word ‘vesting’
is a word of variable input and has more than one meaning
which must be discerned and the exact connotation must be
found by looking into the scheme of law and the context in
which it is used. The setting in which it is used would lend
colour to it and divulge the legislative intent.
In State of Gujarat vs. The Board of Trustees of Port of
Kandla, (1979) 1 GLR 732, (“Trustees of Port of Kandla”),
it was observed that the vesting of property in the Board of
trustees is for the limited purpose of administration, control
and management only without the Central Government having
divested itself of ownership. Thus, vesting of property in a
person or authority does not always mean transfer of absolute
title in the property.
In Bibhutibhushan Datta vs. Anadinath Datta, AIR 1934
Cal 87, (“Bibhutibhusan Datta”), it was observed that mere
transference of management or control of a property, when
transfer of proprietary rights is not intended, the requirements of
vesting is not satisfied in terms of Section 10 of the Limitation Act.
Under the Act under consideration, the vesting of the enemy
property in the Custodian is not free from encumbrances but
vesting is in accordance with the status of the property as
held by the enemy, enemy subject or enemy firm prior to its
vesting. Therefore, only when enemy property vests in the
Custodian free from all encumbrances it will be a transfer of
ownership from the owner of such property to the Custodian.
This is because under the Act, Custodian holds or manages
the property for and on behalf of the enemy, enemy subject
or enemy firm only temporarily and there is no transfer of
ownership to the Custodian or the Union of India. Hence, there
is no necessity of payment of compensation to the owners of
such properties.
Under Section 5A of the Act under consideration, when property
vests in the Custodian under the provision of the Act, he may
[2024] 2 S.C.R. 907
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
issue a certificate to that effect and such certificate shall be
evidence of the facts stated therein. Further, under Section 7
(1) of the Act, any sum payable by way of dividend, interest,
share profits or otherwise to or for the benefit of an enemy or
an enemy subject or an enemy firm shall, unless otherwise
ordered by the Central Government, be paid by the person by
whom such sum would have been payable to the Custodian
or such person as may be authorised by him in that behalf
and shall be held by the Custodian or such person subject to
the provisions of the Act. Under Section 7 (3) of the Act, the
Custodian shall, subject to Section 8 of the Act, can deal with
any money paid to him or any property vested in him under
the Act in such manner as the Central Government may direct.
Section 8-A of the Act begins with a non-obstante clause and it
states that notwithstanding anything contained in any judgment,
decree or order of any court, tribunal or other authority or
any law for the time being in force, the Custodian may, within
such time as may be specified by the Central Government in
this behalf, dispose of whether by sale or otherwise, as the
case may be, with prior approval of the Central Government,
by general or special order, enemy properties vested in
him immediately before the date of commencement of the
Amendment Act, 2017 in accordance with the provisions of
this Act, as amended by the Amendment Act, 2017. The sale
proceeds have to be deposited into the Consolidated Fund of
India and the details thereof have to be intimated to the Central
Government. The directions issued by the Central Government,
by way of general or special order, vis-à-vis disposal of enemy
property is binding upon the Custodian and the buyer of the
enemy properties and the other persons connected to such
sale or disposal. Further, instead of the Custodian disposing
of enemy property, any Ministry or Department of the Central
Government may do so as authorised and the provision of
Section 8A applies to such authority or Ministry or Department.
The Central Government can also deal with or utilise enemy
property in such manner as it may deem fit.
The scheme of Section 8A of the Act is only to regulate the
disposal of the enemy property by the Custodian bearing in
mind the guidelines and/or directions issued by the Central
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Government and to deposit the sale proceeds into the
Consolidated Fund of India. The Custodian would nevertheless
be acting as a trustee of the enemy property but under the
directions of the Central Government as the Custodian is
appointed under the Central Government and he, with the
prior approval of the Central Government may dispose of the
enemy property for valid reasons. It could be for the reasons
that there is no succession to the enemy property or the said
property is in a dilapidated condition or, if for any reason,
there is litigation or legal or other complications arising which
would make it difficult for the Custodian as the trustee of such
property to manage the same. In such circumstance, there
could be alienation of the said property. On such alienation, the
sale proceeds would have to be deposited in the Consolidated
Fund of India, as the Custodian, being an officer appointed
under the provisions of the Act by the Central Government,
would be discharging his duties under the Act. But the power
of sale of an enemy property as envisaged under Section 8A
of the Act, in our view, would also not imply that the Custodian
would be acting as the owner of the property but only as a
Custodian of such property. This view is further supported
by Section 9 of the Act, which states that all enemy property
vested in the Custodian under the Act shall be exempt from
attachment, seizure or sale in execution of a decree of a
civil court or orders of any other authority. Therefore, it is the
duty of the Custodian as the trustee of the enemy property
to ensure that the said property is saved from attachment,
seizure or sale in execution of a decree of a civil court or
orders of any other authority.
Section 10 of the Act also categorically states that where
the Custodian proposes to sell any security issued by a
company and belonging to an enemy, the company may,
with the consent of the Custodian, purchase the securities,
notwithstanding anything to the contrary in any law or in any
regulations of the company and any securities so purchased
may be re-issued by the company as and when it thinks fit
so to do. Where the Custodian executes and transfers any
securities, he has to register them (securities) in the name
of the transferee, notwithstanding that the regulations of the
[2024] 2 S.C.R. 909
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
company do not permit such registration in the absence of
the certificate, script or other evidence of title relating to the
securities transferred. The expression securities includes
shares, stocks, bonds, debentures and debenture stock but
does not include bills of exchange.
On sale of any immovable property vested in him to any
person and on receipt of the sale proceeds of such property,
the Custodian has to issue a certificate of sale in favour of
the transferee and even in the absence of handing over the
original title deeds of the property, the sale shall be valid and
conclusive proof of transfer of ownership of such property to
such person, who has the certificate registered in his name.
Such transfer is obviously from the owner of the enemy property
who is represented by the Custodian who only executes the
sale and transfers the ownership of such property from the
ownership of the enemy, enemy subject or enemy firm to the
buyer of such property. The Custodian does not sell the enemy
property as the owner of such property as no ownership rights
are vested in him.
Section 15 of the Act states that the Custodian may call from
persons who, in his opinion, have any interest in, or control
over, any enemy property vested in him under this Act, such
returns as may be prescribed. In such an event, every person
from whom a return is called for shall be bound to submit
such return within the prescribed period. All such returns shall
be recorded in such registers as may be prescribed, which
shall be open to inspection subject to reasonable restrictions
as may be imposed by the Custodian, if in the opinion of the
Custodian, the person seeking inspection is interested in any
particular enemy property as a creditor or otherwise.
Such being the position of a Custodian, who under the Act,
acts as the trustee for the enemy property under the Act and
not as the owner of the property, but as a protector of the
property vested in him, the Custodian can never be an owner
or having any right, title or interest in the enemy property
as owner. While Section 5-B states that any law related to
succession or any custom or usage governing succession of
property shall not apply in relation to enemy property under
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the Act as no person including a legal heir and successor of
an enemy or enemy subject or enemy firm shall be deemed
to have any right, title or interest or any benefit arising out
of such property in relation to enemy property, this provision
does not at the same time confer any right, title and interest
or any benefit arising out of enemy property in the Custodian
for Enemy Property. A Custodian is thus only a trustee of the
enemy property. In the absence of any transfer of ownership
or any benefit arising from enemy property being conferred on
the Custodian, he acts merely as a trustee of the said property
and not as the owner of enemy property. The Explanation to
Section 5(3) states that for the purpose of that sub-section
only ‘enemy property vested in the Custodian’ shall always be
deemed to have included all rights, titles and interests in or
any benefit arising out of such property vested in him under
the Act. This is by a deeming provision and by a fiction only
for the limited purpose of extinction of rights of succession
on the death of the enemy or extinction or winding up of the
business of enemy property or change of nationality of the
legal heir or successor.
Thus, if no ownership rights are conferred on the Custodian and
he is appointed vis-à-vis any enemy property as a Custodian, in
law, he cannot be construed to be the owner of such property.
This position is also discerned from the manner in which the
Custodian acts vis-à-vis the enemy property as a protector of
such property and not as its owner. If the Custodian himself
cannot be construed to be the owner of the enemy property,
then much less the Central Government or Union can be
considered to be the owner of such property. In our view,
the Union or the Central Government cannot usurp rights of
ownership and exercise all such rights of ownership vis-à-vis
enemy property. In the absence of any provision conferring
such ownership on the Custodian, the Central Government,
which appoints the Custodian of Enemy Property in India by
issuance of a notification in the Official Gazette to carry on
his functions under the provisions of the Act, cannot assume
ownership rights over such property. The same is having regard
to the fact that the Act is a piece of parliamentary legislation
and therefore, the State Legislatures or Governments have
[2024] 2 S.C.R. 911
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
no competence to take steps under the Act and therefore,
the Central Government appoints the Custodian of Enemy
Property in India.
17. However, it was contended by Sri Balbir Singh, learned ASG appearing
along with Sri Rupesh Kumar, learned counsel for the Custodian that
by the appointment of the Custodian by the Central Government, the
powers of the Custodian in respect of enemy property vested in him
and such other actions that he may take vis-à-vis enemy property,
would clearly indicate that the Custodian acts at the behest of the
Central Government and therefore, the enemy property becomes
Union property even though the same is vested in the Custodian
who, in any case, is appointed by the Central Government. In order
to buttress this submission, our attention was drawn to Section 8-A
which begins with a non-obstante clause and which states that
the Custodian may, with the approval of the Central Government,
dispose of enemy property by sale or otherwise, as the case may
be, the enemy property vested in him immediately before the date
of commencement of the Amendment Act, 2017, in accordance with
the provisions of the Act as amended by the Amendment Act, 2017.
Further, the Custodian, on disposal of enemy property, has to deposit
the sale proceeds into the Consolidated Fund of India immediately
and intimate details thereof to the Central Government. Also, the
Custodian has to submit a report of the enemy properties disposed
of enclosing details of sale etc. The Central Government may also
issue directions and guidelines to the Custodian in matters related
to disposal of enemy property which are binding on the Custodian
and the buyer. Moreover, the Central Government may deal with or
utilise the enemy property in a manner as it may deem fit. On sale of
any enemy property vested in the Custodian to any person he may,
on receipt of the sale proceeds of such property, issue a certificate
of sale notwithstanding the fact that the original title deeds of the
property have not been handed over to that transferee. That once
such certificate of sale is issued, the same shall be valid as conclusive
proof of ownership of property by such person. Further, the certificate
issued by the Custodian shall be a valid instrument for registration of
the property in favour of the transferee as the registration in respect
of enemy property for which such certificate has been issued by the
Custodian, shall not be refused on the ground of lack of original title
deeds in respect of such property or for any other matter.
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17.1 In our view, although the Custodian for the Enemy Property is
empowered to alienate enemy property under the provisions of
the Act, he does so as a trustee of the said property and not
as the owner thereof or as the Central Government being the
owner. As already stated, the ownership continues to remain
with the enemy but the management and the custody of the
property only remain with the Custodian and in the absence
of the enemy, the Custodian is empowered to sell or alienate
such property and can issue a sale certificate as is expedient
to do so. This is in the interest of or benefit of the enemy
property. Thus, the transfer of such enemy property by sale or
otherwise is for and on behalf of the enemy who is not available
in the country and in order to ensure that such property is not
dissipated owing to the owner of the property being absent in
the country. Thus in order to protect the enemy property, the
Custodian is empowered to even sell the enemy property and
deposit the sale proceeds with the Central Government. The
sale or transfer of ownership of the enemy property in favour
of the transferee is, in fact, on behalf of the enemy who is the
owner of the property through the legal and statutory authority
of the Custodian which empowers him to alienate the property
for good and sound reasons and in the interest of the enemy
property irrespective of whether there is any claim made by
the enemy or his heirs or descendants. It is for this reason
that the original title deeds may remain with the enemy or his
family vis-à-vis the enemy property and in lieu of handing over
of the title deeds of the property to the vendee or purchaser
of the enemy property, a certificate of sale is issued in favour
of such person by the Custodian and such certificate of sale
is a valid instrument for seeking registration of the property in
favour of the transferee. When the registration of the sale is
made in favour of the transferee by the Custodian, the latter
is acting as a trustee and not as the owner of the enemy
property. Therefore, it cannot be accepted that the Custodian
is acting as the owner of the property and by that logic the
enemy property would become the property of the Union.
17.2 Further, since the Custodian is the trustee of the enemy
property, if any monies are due to the enemy or if any order
has been made with regard to enemy property vested in the
[2024] 2 S.C.R. 913
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
Custodian which are paid or complied with by any person,
as the case may be, and a certificate is issued in that regard
by the Custodian, such a person, to whom the certificate is
issued, shall not be liable to any suit or other legal proceeding,
by reason only of such compliance. This aspect also indicates
that payment made to the Custodian is payment to the enemy,
enemy subject or enemy firm who accepts the same for and
on behalf of the enemy and the payer is thus absolved of all
his liabilities and obligations to the enemy.
17.3 In Amir Mohammad Khan, it was observed by this Court
that vesting of enemy property in the Custodian is limited
to temporary possession, management and control of the
property till it becomes incapable of being used by the enemy
subject for carrying on business and trading therein. This does
not divest the enemy subject of his right, title and interest in
the property. The aforesaid two aspects are totally distinct.
However, in the said case this Court observed that on the
death of the enemy subject the said property would cease to
be enemy property if the same is succeeded to by his heir
who is a citizen of India. Hence the Custodian could not be
permitted to continue with the possession thereof and would
be duty bound to release the property to the true owner. In
our view, it is only in respect of succession to the enemy
property on death of the enemy which has been abrogated
by the Parliament by insertion of Explanations (1) and (2)
to clause (b) of Section 2 which defines enemy or enemy
subject or enemy firm which are with effect from 21.03.2018.
Therefore, the jurisprudential position of the Custodian for
Enemy Property vis-à-vis the enemy continues to remain as
that of a trustee although the enemy property may vest in such
Custodian for the protection, preservation and management
thereof. Thus, such vesting of property in the Custodian does
not result in the transfer of ownership from the owner of the
property who is an enemy or enemy subject or enemy firm
within the meaning of clause (b) of Section 2 of the Act to
the Custodian. When the Custodian appointed by the Central
Government in whom enemy property vests is only a trustee
and does not adorn the status of an owner of such enemy
property, consequently, the Central Government or the Union
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even within the meaning of Article 285 of the Constitution
cannot usurp the ownership of such property.
17.4 That when enemy property is not the property of the Union
within the meaning of Article 285 of the Constitution, there is
no exemption from taxes imposed on by a State or by any
authority within a State. When the aforesaid position of law
was discussed during the course of submission and specifically
put to Sri Balbir Singh, learned ASG by the Bench, the
response was that the enemy property being the property of
the Union is exempt from all taxes imposed by a State or by
any authority within a State, save insofar as Parliament may
by law otherwise provide. That in the instant case, Section
8(2)(vi) authorises the Custodian to make payments out of
the enemy property any taxes, dues, cesses or rates to the
State Government or to any local authority and therefore, the
Parliament has by the said provision authorised the payment
of taxes to the State Government or the local authority such
as the appellant herein and hence, there is no exemption
from payment of taxes in respect of enemy property which is
by that reason Union property. In other words, the contention
was premised on the fact that once the enemy property vests
in the Custodian, it automatically becomes the property of
the Union and having regard to the saving clause in Articles
285(1) of the Constitution, and bearing in mind Section 8(2)
(vi) of the Act, there is no exemption from the payment of
property tax in the instant case.
17.5 Thus, while both the appellant-Municipal Corporation or Nagar
Nigam and the Union of India are at ad idem on the legal
position that the property tax is liable to be paid to the appellant
in the instant case but it is for different reasons or basis.
17.6 In this context, Mr. Kavin Gulati, learned senior counsel for
the appellant emphasised that the subject property in question
is not Union property but it is enemy property vested with
the Custodian under the Act and continues to be so and is
therefore, subject to payment of taxes, etc. to the appellant-
Corporation and Section 8(2)(vi) is only an enabling provision.
The Custodian collects the taxes on behalf of the enemy and
pays it to the appellant and not as owner of the enemy property.
[2024] 2 S.C.R. 915
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
17.7 Per contra, Shri Guru Krishna Kumar, learned senior counsel
appearing for the respondent-lessee contended that the subject
property being enemy property vested with the Custodian under
the Act is the property of the Union or Central Government
and therefore, is exempt from any taxation under clause (1)
of Article 285 of the Constitution.
17.8 Interestingly, while both learned ASG Sri Balbir Singh,
appearing for the Union of India and Sri Gurukrishna Kumar,
learned senior counsel appearing for the respondent-lessee
have contended that the subject property is Union property,
between them there is also a difference in their stand in
the matter. While learned ASG contended that there is no
exemption from payment of municipal taxes, on the other hand,
learned senior counsel Sri Gurukrishna Kumar appearing for
the respondent-lessee contended that the subject property
being Union property is totally exempt from any kind of taxes
to be paid to any Government or local authority.
17.9 But in view of our above analysis, we hold that the vesting of
enemy property in the Custodian does not transfer ownership
of such property in the Custodian and by that process in
the Union or Central Government, but since the Custodian
is only a trustee of the enemy property, the same is liable
to tax in accordance with law, including to the appellant
herein. The Custodian is only authorised to pay the taxes
on the subject enemy property by virtue of sub-section (2)
of Section 8 of the Act. The Custodian while doing so is not
acting on behalf of the Union Government being the owner of
the enemy property, rather, the Custodian who is appointed
by the Central Government under the provisions of the Act,
which is a Central legislation only discharges his duties and
functions under the provisions of the Parliamentary legislation
i.e. the Act under consideration. Such discharge of duties and
functions, including the payment of taxes vis-à-vis enemy
property vested in him would not also by the same logic imply
that the Custodian is acting as if the property vested in him
has become the Union property. We emphasise again that
mere vesting of enemy property in the Custodian does not
transfer ownership of the same from the enemy to the Union
or to the Central Government; the ownership remains with
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the enemy but the Custodian only protects and manages the
enemy property and in discharging his duties as the Custodian
or the protector of enemy property he acts in accordance with
the provision of the Act and on the instructions or guidance
of the Central Government. The reason as to why the Central
Government is empowered to issue guidelines or instructions
to the Custodian is because the Custodian is appointed under
the Act which is a Parliamentary legislation and the reason
why the Parliament has passed the said law is in order to
have a uniformity vis-à-vis all enemy properties throughout
the length and breadth of the country in that the same are
protected, managed and dealt with uniformly in accordance
with the provisions of the Act.
18. We say so because Article 300-A of the Constitution states that
no person shall be deprived of his property save by authority of
law. The word “law” is with reference to an Act of Parliament or of
a State Legislature, a rule or a statutory order having the force of
law. Although, to hold property is not a fundamental right, yet it is a
constitutional right. The expression person in Article 300-A covers
not only a legal or juristic person but also a person who is not a
citizen of India. The expression property is also of a wide scope and
includes not only tangible or intangible property but also all rights,
title and interest in a property. Deprivation of property may take
place in various ways, but where there is only control of property
short of deprivation would not entail payment of compensation vide
Indian Handicrafts Emporium vs. Union of India, (2003) 7 SCC
589, (Paras 109 and 111) and Chandigarh Housing Board vs.
Major-General Devinder Singh (Retd.), (2007) 9 SCC 67, (Para
11). However, deprivation of property is to be distinguished from
restriction of the rights following from ownership, which falls short
of dispossession of the owner from those rights. Deprivation also
takes within its nomenclature acquisition in accordance with law and
not without any sanction of law. Before a person can be deprived of
his right to property, the law must expressly and explicitly state so.
Thus, the expression by authority of law means by or under a law
made by the competent Legislature.
18.1 In KT Plantation Pvt. Ltd. vs. State of Karnataka,
(2011) 9 SCC 1, it was observed that though the right to
claim compensation or the obligation of the State to pay
[2024] 2 S.C.R. 917
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
compensation to a person who is deprived of his property is
not expressly included in Article 300-A of the Constitution, it
is in-built in the Article. Within the scope of Article 300-A the
doctrine of eminent domain could also be read inasmuch as
the said doctrine states that the acquisition of property must
be in the public interest and there must be payment of just and
fair compensation therefor. When acquisition of property takes
place either under the Land Acquisition Act, 1984 or the Right
to Fair Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act, 2013, it is always for a
public purpose and on payment of compensation to the owner
of the said property. The State then possesses the power
to take control of the property of the owner thereof for the
benefit of the public and when the State so acts it is obliged
to compensate the owner upon making just compensation as
the owner of the property would lose all his rights vis-à-vis
the acquired land.
18.2 However, this position has to be distinguished vis-à-vis the
Custodian for Enemy Property under the Act, as he takes
possession of the enemy property only for the purpose of
managing the same as per the provisions of the Act and
does not become the owner of the property inasmuch as the
ownership of the property from the enemy or enemy subject
or enemy firm does not get transferred to the Custodian. On
the other hand, if it is to be recognised that ownership of the
property gets transferred from the enemy to the Custodian
who takes possession of the property and administers it or
manages it and thereby the ownership would then be that
of the Union, in that event, it would be a deprivation of the
property of the true owner who may be an enemy or an
enemy subject or enemy firm but such deprivation of property
cannot be without payment of compensation. Having regard to
the salutary principles of Article 300-A of the Act, we cannot
construe the taking possession of the enemy property for
the purpose of administration of the same by the Custodian,
as an instance of transfer of ownership from the true owner
to the Custodian and thereby to the Union. This position is
totally unlike the position under the provisions of the Land
Acquisition Act, 1894 or the subsequent legislation of 2013
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which are expropriatory legislations under which acquisition
of land would inevitably result in transfer of the ownership of
the land from the owner to the State which is the acquiring
authority, but the same would be subject to payment of a
reasonable and fair compensation to the owner.
18.3 Further even under Article 296 of the Constitution, the manner
in which ownership of certain types of property gets vested
directly with the Union is stated when such property vests
with the Union by virtue of the application of the doctrine of
escheat or doctrine of bona vacantia. But under the provisions
of the Act, the Custodian is appointed only to protect the
property and to manage it as a trustee and not as an owner
by vesting in the Custodian free from all encumbrances. By
that, the Union cannot assume rights of ownership over such
property through the Custodian.
19. Therefore, we see no substance in the arguments of learned ASG
appearing for the Union of India as well as that of Sri Guru Krishna
Kumar appearing for the respondent-lessee to the effect that enemy
property vested with the Custodian becomes property of the Union.
20. There is another angle to the case which revolves around Article
285 of the Constitution. Clause (1) of Article 285 of the Constitution
corresponds to the first paragraph of Section 154 and clause (2)
corresponds to the proviso to Section 154 of the Government of
India Act, 1935. For a more comprehensive understanding of the
subject, it would also be useful to read Articles 286, 287, 288, 289
and Article 296 also.
Article 289:
21. Clause (1) of Article 289 exempts from Union taxation any income of
a State, whether it is derived from governmental or non-governmental
activities. However, an exception is provided in clause (2) thereof in
that the income derived by a State from trade or business would be
taxable, provided a law is made by Parliament in that behalf. Clause
(3) is an exception to the exception prescribed in clause (2) which
states that the income derived from a particular trade or business
may still be immune from Union taxation if Parliament declares that
the said trade or business is incidental to the ordinary functions of
Government. This Article broadly corresponds to Section 155 of the
Government of India Act, 1935 but has certain other conditions thereto.
[2024] 2 S.C.R. 919
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
Articles 285 and 289 provide for the immunity of the property of
the Union and the State from mutual taxation on the basis of the
Federal principle.
NDMC is a decision of nine-Judge Bench which dealt with a question
whether the properties owned and occupied by various States within
the National Capital Territory of Delhi are entitled to be exempted from
the levy of taxes under the provision of Delhi Municipal Corporation
Act, 1957 and New Delhi Municipal Council Act, 1994 by virtue of
the provisions of Article 289(1) of the Constitution. The pertinent
question was, whether, by virtue of Article 289(1), the States are
entitled to exemption from the levy of taxes imposed by laws made
by Parliament under Article 246(4) upon their properties situated
within Union Territories. The Delhi High Court had taken the view
that the properties of the States situated in the Union Territory of
Delhi are exempt from property taxes levied under the municipal
enactments in force in the Union Territory of Delhi. The said view
was challenged in the appeals preferred by the New Delhi Municipal
Council and the Delhi Municipal Corporation which are functioning
under the respective parliamentary enactments.
While considering Article 285 as well as the Article 289 of the
Constitution which deal with exemption of property of the Union from
State taxation and exemption of property and income of State from
Union taxation, respectively, by a 5:4 majority judgment speaking
through B.P. Jeevan Reddy, J., it was observed that in a federation
there are two coalescing units, namely, the Federal Government
or the Centre and the States or the Provinces. Articles 285 and
289 deal with the concept of doctrine of immunity from taxation.
While the immunity created in favour of the Union is absolute, the
immunity created in favour of the States is a qualified one. Article
285 provides a complete and absolute ban on all taxes that could be
imposed by a State on Union property. There is no way in which a
State Legislature can levy a tax upon the property of the Union but
Article 289 is distinct. Although, the property and income of a State
is exempt from Union taxation, the same is qualified inasmuch as
the aforesaid ban imposed by clause (1) of Article 289 would not
prevent the Union from imposition or from imposing or authorising
the imposition of, any tax to such extent, if any, as Parliament may
by law provide in respect of - (a) a trade or business of any kind
carried on by, or on behalf of, the Government of a State, or (b) any
920 [2024] 2 S.C.R.
Digital Supreme Court Reports
operations connected such trade or business or (c) or any property
used or occupied for the purposes of such trade or business, or
(d) any income accruing or arising in connection with such trade or
business.
Article 289 clause (3) empowers Parliament to declare, by law,
which trade or business or any class of trades or businesses is
incidental to the ordinary functions of the Government, whereupon
the trades/businesses so specified go out of the purview of clause
(2) of Article 289. It was held that levy of taxes on property by the
Punjab Municipal Act, 1911 (as extended to Part ‘C’ State (Law)
Act, 1950), the Delhi Municipal Corporation Act, 1957 and the New
Delhi Municipal Council Act, 1994 (both parliamentary enactments)
constitute “Union taxation” within the meaning of Article 289(1). That
by virtue of the exemption provided by clause (1), taxes are not
leviable on State properties but clauses (1) and (2) of Article 289
go together, form part of one scheme and have to be read together.
Therefore, Municipal Laws of Delhi are inapplicable to the properties
of State Government to the extent such properties are governed and
saved by clause (1) of Article 289 and that insofar as the properties
used or occupied for the purpose of a trade or business carried on
by the State Government, the ban in clause (1) does not avail to
them and the taxes thereon must be held to be valid and effective.
It was observed that the levy of the property taxes under the three
enactments, namely, the Delhi Municipal Corporation Act, 1957; the
New Delhi Municipal Council Act, 1994 and the Punjab Municipal Act,
1911 are valid to the extent the provisions related to land and building
owned by State Government and used or occupied for the purposes
of any trade or business carried on by the State Government. In other
words, the levy is invalid and inapplicable only to the extent of those
lands or buildings which are not used or occupied for the purposes
of any trade or business carried on by the State Government. That
it is for the authority under the said enactment to determine with
notice to the affected State Government, which land or building is
used or occupied for the purpose of any trade or business carried
out or on behalf of that State Government. It was further observed
that the said judgment was to operate prospectively commencing on
01.04.1996 onwards by invoking the Article 142 of the Constitution.
Another aspect which was argued in the said case was that the
exemption provided by clause (1) of Article 289 would not apply to
[2024] 2 S.C.R. 921
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
compensatory taxes like water tax, drainage tax and so on. However,
it was contended that even in respect of a composite taxes, known
as property tax, insofar as the taxes on the services are concerned,
the ban under clause (1) of Article 289 would not apply. However,
the Court did not express any opinion on this aspect of the matter.
Article 285:
21.1 Article 285 speaks about the doctrine of immunity restricting
the taxing powers of the governments in a federation. The
doctrine is based on the principle that there ought to be inter-
governmental tax immunities between the Centre and the
States. In a Constitution such as ours which has a federal
character, where both the Union and State Governments have
the powers to levy taxes even on governmental property,
the immunity is intended for the smooth working of the
Governments and for saving time and efforts in cross taxation.
Clause (1) of Article 285 deals with immunity of the property of
the Union from State taxation. Article 285 embodies a narrower
aspect of the doctrine of “Immunity of Instrumentalities” as
propounded in the United States inasmuch as it exempts only
property and not the functions or instrumentalities of the Union.
21.2 Article 285(1) states that the property of the Union shall be
exempted from all taxes imposed by the State or by any
authority within a State unless so provided for by the Parliament
by law. Clause (2) of Article 285 states that nothing in clause
(1) shall prevent any authority within a State from levying any
tax on any property of the Union to which such property was
immediately before the commencement of the Constitution
liable or treated as liable, so long as that tax continues to
be levied in that State. Clause (2) of Article 285 is a clause
which is transitional in nature and is in the nature of a saving
clause intended to save all taxes levied on the property of the
Union prior to the commencement of the Constitution so long
as the taxes continues to be levied in that State. However,
this saving clause is subject to any law that the Parliament
may provide otherwise.
21.3 While applying clause (1) of Article 285, two considerations
must be taken into account: firstly, whether the tax is claimed
in respect of property, and secondly, whether such property
922 [2024] 2 S.C.R.
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is vested in the Union Government. The expression property
must be given its widest meaning to include both tangible
and intangible property as well as moveable and immovable
property. The immunity conferred under clause (1) of the Article
285 is only in respect of a tax on property. The rationale for
providing Articles 285 and 289 of the Constitution is based on
the principle that one sovereign cannot tax another sovereign.
Thus, under Article 285, all property of the Union is exempted
from State taxes, while Article 289 exempts all incomes and
property of a State from Union taxation; no distinction is made
between the Union property used for commercial purposes or
used for governmental functions. Thus, irrespective of use of
the Union property is put to, there is an exemption.
21.4 The expression ‘vest’ is not found in Article 285, though, it
occurred in Section 154 of the Government of India Act, 1935.
However, this does not really make a difference, so long as the
owner of the property is the Union. For instance, property which
is requisitioned by the Union does not affect the ownership of
the requisitioned property. But, if the Union Government erects
buildings on requisitioned lands, the buildings become property
of the Union within the meaning of Article 285 although, the
Union is not the owner of the land upon which the building
stands vide The Governor-General of India in Council vs.
The Corporation of Calcutta, AIR 1948 Cal 116 affirmed by
The Corporation of Calcutta vs. Governors of St. Thomas’
School, Calcutta, AIR 1949 FC 121.
21.5 The immunity from taxation on property of the Union therefore
depends upon the factum of the ownership of the property. If
a property accrues to the Union by escheat, lapse or bona
vacantia under Article 296 of the Constitution, such property
would be immune from State taxation. Thus, where the Union
Government is not the owner of the property but is a lessee
from a private owner, a tax on such owner is not exempted
under Article 285 of the Constitution. Similarly, where the Union
Government is using the property for governmental purposes or
has control over its use, does not give it immunity from State
taxation. Conversely, where the Government is the lessor, a tax
on the interest of the private lessee is not a tax on the property
of the Union. Since the immunity is confined to property vested
[2024] 2 S.C.R. 923
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
in the Union, the same cannot be claimed by entities other than
the Union. In order to ascertain this aspect i.e., whether the
statutory corporation or other entities do not come within the
scope and the ambit of Article 285, the doctrine of “piercing the
veil” may be pressed into service. Thus, Article 285 would not
apply when the property to be taxed is not of Union of India but
of a distinct and separate legal entity. Thus, the State cannot
levy road tax on the vehicles owned by the Central Government
or the Railway, which is a Ministry of the Union Government.
21.6 In Union of India vs. City Municipal Council, Bellary, AIR
1978 SC 1803 (“City Municipal Council”), it was observed
that the property of the Union is exempt from all taxes imposed
by the State or by any authority within the State under Article
285(1), unless the claim can be supported and sustained within
the parameters of Article 285 (2). The expression “save in so
far as Parliament may by law otherwise provide” in clause
(1) of Article 285 is to enable the Parliament to control Union
property. Thus, the Parliament may by law permit a State or
any authority or instrumentality within a State to impose tax on
Union property. But if no such law is made by the Parliament
the immunity would continue. Similarly, clause (2) of Article 285
which is in the nature of an exception to clause (1) thereof,
has given an overriding power to Parliament to take away any
existing taxation of a State or a local authority of Union property
prior to the commencement of the Constitution and which has
continued to be levied in the State even after the enforcement
thereof. In City Municipal Council, question arose whether the
Railway (Local Authorities Taxation) Act, 1941 which created
a liability on the Railways to taxation by local authorities was
contrary to Article 285 (1) of the Constitution. It was held that
the aforesaid Act being enacted prior to the enforcement of
the Constitution was not a law which came within the scope
of the expression “save in so far as Parliament may by law
otherwise provide” in clause (1) of Article 285. Hence, it was
observed that the said law could not be enforced after the
enforcement of the Constitution, and the Railway property
was immune from State taxation.
21.7 As already noted, clause (2) of Article 285 is in the nature
of an exception or a proviso to clause (1) of the said Article.
924 [2024] 2 S.C.R.
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However, it empowers Parliament to restrict the exception. In
other words, any local taxes on Union property which were
saved by virtue of clause (2) of Article 285 shall cease to
be valid as soon as the Parliament by law provides to that
effect. This implies that clause (2) of Article 285 which saves
the existing power of the State and the local lawful bodies to
tax Union property would continue and the status quo would
be maintained till Parliament would legislate otherwise. In
clause (2) of Article 285, the expression “liable or treated as
liable” is of significance. The conditions necessary to bring
a property within clause (2) of Article 285 in order to make it
liable to taxation are as under:
"(a) Physical existence of the property immediately before
the commencement of the Constitution;
(b) Liability of the property to the tax on that date;
(c) Physical existence of the property now, i.e., at the time
when the tax is sought to be levied;
(d) Liability of the property to tax now;
(e) The tax in question must be the ‘same tax’ as that
which was levied or leviable at the commencement of
the Constitution;
(f) The local authority seeking to levy the tax must be in
the same State to which the pre-Constitution authority
belonged.”
[Source: Shorter Constitution of India by D.D. Basu, 16th Edition]
21.8 The aforesaid conditions would mean that the nature, type
and the property on which the tax is being levied prior to the
commencement of the Constitution must be the same, as also
the local authority of the same State to which it belongs before
the commencement of the Constitution. If the conditions of
clause (2) of Article 285 are not satisfied, the pre-Constitution
tax cannot be continued to be levied by a State by virtue of
Article 372(1) as the latter Article states that the continuance
of the existing law would be ‘subject to the other provisions
of the Constitution’. Hence, any law which is inconsistent with
Article 285 cannot be continued by virtue of Article 372(1) of
the Constitution.
[2024] 2 S.C.R. 925
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
21.9 The expression “immediately before the commencement of
this Constitution” under clause (2) of Article 285 would mean
that the property is liable or treated as liable to tax until the
Union Parliament legislates to the contrary. One of the ways
of interpreting this is that the property must have been liable
to taxation even under the Government of India Act, 1935 in
as much as if any property was not liable to be taxed under
the said Act, in other words, if there was an immunity during
the enforcement of the said Act then it would not have been
taxed from the date of enforcement of the Constitution. It is
also necessary to understand the meaning of expression
“that tax” in clause (2) of Article 285 which would have a
relation to its nature and character and not its quantum or
rates. So long as the taxes remains the same, the State
or local authority can always increase or reduce its rate, in
accordance with law. The variation of the quantum or rate
would not affect its power to continue to levy the tax so long
as it remains “that tax,” in its nature and character. Thus, if
the tax remains the same, it is only the Parliament which can
prevent the continuance of levy of that tax by the State or
local authority or by any law. This Court in City Municipal
Council held that it does not matter whether the liability is
imposed by one statute or other as long as liability is of a
particular kind of tax.
21.10 Section 172 of the Act of 1959 categorically states that subject
to Article 285 of the Constitution, the corporation shall impose,
inter alia, property taxes assessed and levied in accordance
with the provisions of the Act of 1959 and the rules and bye-
laws framed thereunder. Sub-section (4) of Section 172 of
the Act of 1959 states that nothing in the said sub-section
shall authorize the imposition of any tax which the State
Legislature has no power to impose in the State under the
Constitution of India provided that where any tax was being
lawfully levied in the area included in the city immediately
before the commencement of the Constitution of India, such
tax may continue to be levied and applied for the purposes
of the Act of 1959 until provision to the contrary is made by
Parliament. Section 172, in fact, summarises Article 285 of the
Constitution in the context of levy of property taxes imposed
926 [2024] 2 S.C.R.
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under the said Act by the Corporation. Section 173 deals
with property tax leviable which is again subject to Section
172(1) of the Act of 1959. It includes a general tax, a water
tax, drainage tax and conservancy tax. The said taxes shall
be levied on the annual value of the building and land, as
the case may be. However, the aggregate of the property
taxes shall in no cases be less than 15 per cent nor more
than 25 per cent of the annual value of the building or land or
both assessed to such taxes. The definition of annual value
is given under Section 174 of the Act of 1959. Restrictions
on imposition of water tax are delineated under Section 175
while the primary responsibility for certain property taxes
on annual value is stated in Section 179. It states that the
property tax shall be leviable primarily from the actual occupier
of the property upon which the tax is assessed, if he is the
owner of the buildings or lands or holds them on a building
or other lease from the Central or the State Government
or from the Corporation, or on a building leased from any
person. In any other case, tax shall be leviable as per sub-
section (2) of Section 179 of the Act of 1959. The drainage
taxes are assessed. Therefore, the levy of property taxes
or other taxes on land and building is subject to Article 285
of the Constitution.
21.11 We have already discussed the scope and ambit of the two
clauses of Article 285 of the Constitution. Applying the same
to the present case and having regard to the reasoning given
by us in the earlier part of this judgment, we have held that
enemy property is not the property of the Union although
it may vest with the Custodian for Enemy Property in India
who is a person appointed by the Central Government. If the
enemy property is not the Union property in terms of clause
(1) of Article 285 of the Constitution then such property
cannot be exempt from the taxes imposed by the State or
by any authority within the State unless otherwise provided
by the Parliament.
21.12 For the sake of completeness of the discussion assuming
for a moment that the vesting of the enemy property with
the Custodian becomes the property of the Union, then
clause (2) of Article 285 would apply in the instant case.
[2024] 2 S.C.R. 927
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
This is because an authority within the State is not prevented
from levying any tax on any property of the Union to which
such property was immediately before the commencement
of the Constitution was liable or treated as liable so long
as that tax continued to be levied in that State. Applying
the same to the facts of the present case, it is noted that
the property in question which is located in Lucknow within
the State of Uttar Pradesh and in respect of which the Act
of 1959 applies was earlier governed by the Act of 1916.
On a perusal of the relevant provisions of the Act of 1916,
it becomes clear that the property tax was leviable on the
subject property. Act of 1916 is a pre-Constitution enactment
and therefore immediately before the commencement of the
Constitution, the subject property was liable to property tax
under the Act of 1916 and therefore until the Parliament by
law provides otherwise, the appellant corporation can continue
to levy municipal taxes including the property tax on the
subject property as it was liable to pay such tax prior to the
commencement of the Constitution under the provisions of
1916 Act. For ease of reference, the relevant provisions of the
1916 Act are also extracted above. Therefore, even as per
the provisions of clause (2) of Article 285 even if the subject
property is assumed to be Union property under clause (2)
of Article 285, the appellant-Corporation is entitled to levy the
property tax and the municipal tax on the said property even
though, it vests with the Custodian under the provisions of
the Act. That is why under Section 8 of the Act, Custodian
is duty bound to pay the taxes, duties, cesses and rates to
the municipal authority.
We wish to also make another observation. Since the year
1968, there have been lakhs of Indians who have settled
overseas without giving up their Indian citizenship. They have
acquired several movable and immovable properties in India.
If, in an unforeseen eventuality, any of the countries in which
such Indians are settled, is declared to be an enemy country
then all such Indians who are settled abroad would possibly
become enemy subjects, enemy firms and enemy companies
within the definition of the Act. In such an event, the Custodian
will have to take possession of such properties. Vesting of
928 [2024] 2 S.C.R.
Digital Supreme Court Reports
such enemy properties in the Custodian is thus only for the
purpose of administration and management of such properties.
In view of our discussion made above, there would be no
transfer of ownership and such properties vest in the Custodian
for their protection and management only. By such vesting,
the Union cannot usurp ownership of such properties. In the
same vein, when many persons who are resident in India left
their properties and settled in enemy countries, the Custodian
has taken possession of such properties which is only for the
purpose of protection and maintenance and to be handed
over as and when a conducive environment between the
countries arises.
We also observe that it was never the intention under the
Defence of India Rules, 1962 and 1971 or under the provisions
of the Act that enemy subjects would lose all their right, title
and interest in the properties once the said properties vest in
the Custodian and thereby become Union properties. In this
regard, we also would like to emphasise that the expression
“vest in the Union” is clearly mentioned in Article 296 of the
Constitution. The said provision deals with properties which
for want of a rightful owner or as bona vacantia would vest
in a State if the property is in a State or vest in the Union
in any other case. The Constitution has therefore clearly
differentiated between vesting of properties in the Union or a
State which is totally distinct from vesting of enemy properties
in the Custodian for Enemy Property.
It is reiterated that the Custodian who is appointed under the
provisions of the Act by the Central Government discharges
his duties and carries out his functions under the provisions of
the Act in terms of the directions of the Central Government.
This is because the Act is a piece of Parliamentary legislation
and in order to achieve a uniform policy vis-à-vis management
and administration of enemy properties throughout the length
and breadth of the country. It, therefore, cannot be held that
the properties vest with the Union within the meaning of Article
285 of the Constitution. In our view, the said Article has no
application to enemy properties.
[2024] 2 S.C.R. 929
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
22. In Amir Mohammad Khan case, the father of the respondent therein
was a Raja, who had migrated to Pakistan in 1957 and became
a citizen of that country. However, the respondent therein and his
mother (since deceased) continued to reside in India as Indian
citizen. Under the provisions of the Enemy Property (Custody and
Registration) Order, 1965, the property of the respondent’s father in
India vested in the Custodian of Enemy Property. After the enactment
of the Act under consideration, by virtue of Section 24 thereof, the
property continued to be vested in the Custodian. In 1973, the Raja
died in London. The respondent then sought the Government of India
and the Custodian to release that property as the same stood vested
in him as an Indian citizen. In 1981, the Government of India agreed
to release 25% of the property to the legal heirs and successors
of the late Raja in India and the Custodian of the Enemy Property
asked the respondent for legal evidence regarding such heirs and
successors. In 1986, at the instance of the respondent, the civil
court declared that the respondent was the sole heir and successor
of his father and thereby entitled to 25% or whatever percentage it
might be of the suit property. The said judgment became final. Since,
the properties were not handed over to the respondent, he filed a
writ petition before the Bombay High Court which was allowed by
directing that the possession of the properties should be handed
over to the respondent. The Union of India filed an appeal before
this Court by way of a Special Leave. Dismissing the appeal, this
Court held that the Act was enacted for the purpose of continued
vesting of enemy property in the Custodian of Enemy Property for
India under the Defence of India Rules, 1962 and the Defence of
India Rules, 1971.
22.1 This Court observed that the respondent therein was the sole
heir and successor of the late Raja and properties belonging to
the late Raja was succeeded to by the respondent by way of
succession and the properties in question could no longer be
enemy property within the meaning of Section 2(c) of the Act.
Therefore, the Custodian could not be permitted to continue
in possession of such properties. During the pendency of the
Writ Petition before it, the High Court directed the appellant
therein to place on record a copy of the note put up for release
of the property of the respondent’s father and the decision
taken thereon by the Cabinet.
930 [2024] 2 S.C.R.
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22.2 The Union of India was directed by this Court to get the
buildings (residence or offices) of the subject property vacated
from such officers and hand over the possession to the
respondent therein within eight weeks. While holding so, this
Court observed that on a conjoint reading of Sections 6, 8 and
18 of the Act, the enemy subject is not divested of his right,
title and interest of the property which vest in the Custodian is
limited to the extent of possession, management and control
over the property temporarily. The object of the Act was to
prevent a subject of an enemy State from carrying on business
and trading in the property situated in India. It is, therefore,
contemplated that temporary vesting of the property takes
place in the Custodian so that the property till such time, as
it is enemy property, cannot be used for such purpose. The
question considered was, whether, after the inheritance of the
property by the respondent therein who was a citizen of India,
upon the death of the original owner of the property who was
declared to be an enemy, the property continued to be enemy
property? It was answered in the negative. It was observed
that the definition of enemy provided under Section 2 (b) of
the Act excluded a citizen of India as an enemy or enemy
subject or an enemy firm. Therefore, the respondent herein
who was born in India and his Indian citizenship not being
in question could not by any stretch of imagination be held
to be enemy or enemy subject under Section 2(b). Similarly,
under Section 2(c) the property belonging to enemy could not
be termed as an enemy property.
22.3 It was further observed that after the death of the enemy, the
right, title and interest of the enemy was succeeded to by his
heirs who are Indian citizens. Therefore, the enemy property
would cease to be a property belonging of the enemy, hence
the Custodian could not be permitted to continue with the
possession of such property. In this regard, it was observed
that the reliance placed by the Union of India on Section 13
of the Act was totally misplaced. That in the said case this
Court noted that Union of India - appellant therein had agreed
to release 25% of the property in favour of the respondent
therein on production of proof of his having succeeded to the
property of his father. That the property of an enemy could
[2024] 2 S.C.R. 931
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
be released in favour of an Indian citizen provided he had
succeeded to the estate of the deceased enemy subject. That
the title of the enemy property did not vest with the Custodian
but the property vested in the Custodian for the purposes of
management, control and possession of the properties only.
In the said case, Union of India had admitted that under the
provision of the Act, title of the property of an enemy does
not vest in the Custodian but the Custodian takes over the
enemy property only for the purpose of possession, control
and management. That an Indian citizen is excluded from the
definition of an “enemy” or “enemy subject” under Section
2(b) of the Act. That on the death of the enemy subject, his
successors and legal heirs being Indian citizens were entitled
to succeed to the subject property as it ceased to be an
enemy property. That even though a decision was taken to
release only 25% of the property to the respondent therein,
the same was also not implemented, for over three decades.
Therefore, the direction was issued to the appellant-Union
of India therein to get the buildings (residence or offices)
vacated from such officers and hand over the possession to
the respondent therein within eight weeks. The appeal of the
Union of India was dismissed with costs of Rs.5 lakhs. This
decision was rendered on 21.10.2005.
22.4 Thereafter, on 08.09.2006 in the case of Kohli Brothers
vs. Amir Mohammad Khan, (2012) 12 SCC 625 (“Kohli
Brothers”), this Court disposed of certain Special Leave
Petitions with the clarification that persons who were inducted/
allotted properties by the Custodian or who came in possession
after 1965 i.e. on or after declaring the property of the Raja
of Mahmudabad as enemy property and appointment of the
Custodian, had to vacate the properties in their possession.
But persons claiming possession prior to the appointment of
the Custodian declaring the property of Raja of Mahmudabad,
father of the respondent therein, as enemy property, based
on duly authenticated tenancy created by the then Raja of
Mahmudabad or his general power of attorney was not to be
covered by this Court’s judgment passed in Amir Mohammad
Khan.
932 [2024] 2 S.C.R.
Digital Supreme Court Reports
In this regard, it would be useful to reiterate the statement
and objects of the Act wherein it has been stated that
immovable property, cash balances and firms belonging to
Chinese nationals in India were vested in the Custodian of
Enemy Property for India appointed under the Defence of
India Rules, 1962. Similarly, upon the aggression by Pakistan
in 1965, enemy properties were vested in the Custodian of
Enemy Property under the power derived from the Defence
of India Rules, 1962. That the properties vested in the
Custodian of Enemy Property in India has to continue as it
has not been possible for the Government of India so far to
arrive at a settlement with the respective Governments of
those countries.
On a perusal of the impugned order, it is noted that the
learned counsel appearing for the appellant-Lucknow Nagar
Nigam had submitted before the High Court that the Nagar
Nigam may not charge in respect of property of Central
Government but may demand fee, if any, with respect to
services provided like water charge or sewerage charge. The
present case relates to house tax and water tax. The High
Court construed the said submission as an admission of the
fact that the subject property is the Central Government’s
property and therefore, quashed the recovery sought to be
made by the appellant-Nagar Nigam. In fact, the submission
of the learned counsel for the appellant-Nagar Nigam has to
be construed in the context of the provisions of the Act as
well as the relevant provisions of the Constitution which we
have now interpreted.
Therefore, whatever amount have already been deposited
by the respondent herein, the same shall not be refunded to
them. But, if no other demand has been made till date, such
demand shall not be made. However, from the current fiscal
year onwards (2024-2025), the appellant shall be entitled to
levy and collect the property tax as well as water tax and
sewerage charges and any other local taxes in accordance
with law. We have granted a relaxation to the respondent in
view of the fact that the High Court by the impugned order
dated 29.03.2017, had held in favour of the respondent herein
[2024] 2 S.C.R. 933
Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab.
Pvt. Ltd. & Others
and we are now reversing the said order.
In view of the aforesaid discussion, we arrive at the following
conclusions:
1) That the Custodian for Enemy Property in India, in whom
the enemy properties vest including the subject property,
does not acquire ownership of the said properties. The
enemy properties vest in the Custodian as a trustee
only for the management and administration of such
properties.
2) That the Central Government may, on a reference or
complaint or on its own motion initiate a process of
divestment of enemy property vested in the Custodian to
the owner thereof or to such other person vide Rule 15
of the Rules. Hence, the vesting of the enemy property
in the Custodian is only as a temporary measure and
he acts as a trustee of the said properties.
3) That in view of the above conclusion, Union of India
cannot assume ownership of the enemy properties
once the said property is vested in the Custodian. This
is because, there is no transfer of ownership from the
owner of the enemy property to the Custodian and
consequently, there is no ownership rights transferred
to the Union of India. Therefore, the enemy properties
which vest in the Custodian are not Union properties.
4) As the enemy properties are not Union properties, clause
(1) of Article 285 does not apply to enemy properties.
Clause (2) of Article 285 is an exception to clause (1)
and would apply only if the enemy properties are Union
properties and not otherwise.
5) In view of the above, the High Court was not right in
holding that the respondent as occupier of the subject
property, is not liable to pay any property tax or other
local taxes to the appellant. In the result, the impugned
order of the High Court dated 29.03.2017 passed in Misc.
Bench No.2317 of 2012 is liable to be set aside and is
accordingly set aside.
934 [2024] 2 S.C.R.
Digital Supreme Court Reports
6) Consequently, any demand for payment of taxes under
the Act of 1959 made and thereby paid by the respondent
to the appellant-authority shall not be refunded. However,
if no demand notices have been issued till date, the
same shall not be issued but from the current fiscal year
onwards (2024-2025), the appellant shall be entitled to
levy and collect the property tax as well as water tax
and sewerage charges and any other local taxes in
accordance with law.
In the result, the appeal is allowed in the aforesaid terms.
Parties to bear their respective costs.
Headnotes prepared by: Bibhuti Bhushan Bose Result of the case:
Appeal allowed.
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