Holding

The market value of land is to be taken into account only once; for a new, distinct building on the same plot the standard rent must be fixed under Section 6 of the Delhi Rent Control Act, and the Balbir Singh ratio applies.

Issues considered

Whether Section 6 of the Delhi Rent Control Act, 1958 applies for determining the standard rent of a new building, rendering Section 9(4) inapplicable.
Whether the ratio in Balbir Singh (1985) – that the market value of land cannot be considered twice – applies to a separate building constructed later on the same plot.
Whether conversion charges for change of use can be added to the market price of land for calculating standard rent.
Whether a factual issue not raised before the Single Judge can be introduced in Letters Patent Appeals.

Legislation cited

Delhi Municipal Corporation Act, 1957s. 114, s. 116
Delhi Rent Control Act, 1958s. 6, s. 9(4)

Subjects

property taxrateable valuestandard rentDelhi Municipal Corporation ActDelhi Rent Control Actland valuationseparate constructionconversion chargesappellate jurisdiction

Judgment

MUNICIPAL CORPORATION OF DELHi A
v.
I"" MIS EXPRESS NEWSPAPERS LTD.

JULY 16, 1998

[SUJATA V. MANOHAR ANDS. RAJENDRA BABU, JJ.] B

Delhi Municipal Corporation Act, 1957/Delhi Rent Control Act, 1958:
---.:
S 114/s. 6.(1) (BJ-Property Tax-New building constructed on a
portion of land of a pre-existing building-Rateable value. of new building- c
Determination of-Held, While determining rateable value of new construction
market value of land is not to be taken· into account again, as it has already
been considered while fixing value of pre-existing construction.

The respondent assessee acquired lease hold rights in respect of
certain land in the city of Delhi and constructed a building on a portion D
thereof. On completion of the construction the rateable yalue of the property
was determined in the year 1958-59 and was subsequently revised. Later, in
1978, the assessee started constructing a new building on the remaining
portion of the said land and the construction completed in 1981, the assessee
received notices proposing higher rateable value in respect of both the
E
buildings for subsequent assessment years. In respect of the new building,
assessment years involved were 1981-82 to 1986-87. The assessee challenged
the notices in the writ petitions before the High Court.

Single Judge of the High Court held that in order to fix the rateable
value under Delhi Municipal Corporation Act, 1957, the appellant-Corporation F
was not justified in applying the provisions ofs.9(4) of Delhi Rent Control
Act, 1958 for determining the standard rent of the new building and it should
have determined the standard rent under s.6 of the Delhi Rent Control Act.
The Single Judge, applying the ratio laid down by this Court in the case of
Balbir Singh,* held that since the value of the land as in 1958 had been added
to the cost of construction of the old building for· arriving at its standard G
rent, the market price of a part of the same land as in 1978, when construction
of the new building started, could not be added to the cost of construction of
-1 the new building while determining its standard rent. The appeals filed
~·
before the Division Bench of the High Court were dismissed. Aggrieved, the
Corporation filed the present appeals. H
685
686 SUPREME COURT REPORTS [1998] 3 S.C.R.

A It was submitted for the appellant-Corporation that the ratio of Balbir
Singh 's case would be applicable only when any addition was made to the
r
'
existing structure and not in the case like the present one where a separate
structure was erected subsequently on the same plot of land. It was also
contended that when the new building camp up on the plot the lessors were
entitled to levy conversion charges for change of user, and surh conversion
B charges levied in 1978 should be added to the market price of land at the
commencement of the old construction for arriving at the standard rent/
rateable value.

Dismissing the appeals, this Court

c HELD : 1.1. The High Court has rightly held that the correct section
which has to be applied in the instant case is s.6 of Delhi Rent Control Act,
1958. Since it is possible to calculate standard rent under s.6, there is no
question of resorting to s.9 (4). (692-G-H)

D 1.2. The High Court was right in holding that the ratio of Balbir
Si11gh 's* case applied to the instant case. In that case, this Court has
considered the situation where premises are constructed in stages and has
expressly dealt with different kinds of additions which may be made to the
original structure at a subsequent stage. It has observed that in such additions
three different situations may arise, in one of them the additions being of
E a distinct and separate unit of occupation. It was observed that the basic point
to be noted in such cases is that the formula set out in sub-sections (l)(A)(2)(b)
and (1) (B) (2)(b) of s.6 could not be applied for determining the standard rent
of an addition as ifthat addition was the only structure standing on the land.
A distinct and separate unit of occupation can be either constructed on the
old existing structure or adjoining it on the same plot of land. (694-C-G]
F
*Balbir Singh and Ors. v. Mis MC.D. and Ors., [1985] 1 SCC 167,
relied on.

1.3. In the present case, the premises were constructed in stages.
G When the premises at the first stage of construction were to be assessed for
rateable value, the assessing authority was to determine the standard ren't
of the premises then constructed under the applicable sub-section of s.6. In
the instant case the relevant provision is contained in s.6(1)(8)(2)(b) subject
to the application of sub-section (2), where sub-sections 1(1) (A) (2) (b) or
(1) (B) (2) (b) of s.6 are attracted the standard rent will be on the basis of
H the cost of construction and the market price of land. The market price of
M.C.D. v. EXPRESS NEWSPAPERS LTD. 687

the land cannot be added twice over once while determining the standard rent A
of the original structure and again while determining the standard rent of
the additional structure. Keeping in mind the upper limit fixed by the standard
rent and taking into account the various factors discussed in the judgment
in Balbir Singh, the assessing authority would then have to determine the
rent which the owner of the premises may reasonably expect to get if the B
premises are let out to a tenant. Such annual rent would represent the
rateable value of the premises. [693-D, H, E-F)

Balbir Singh and Ors. v. Mis MC.D. and Ors., [1985) 1 SCC 167;
Dewan Dau/at Raj Kapoor and Ors. v. New Delhi Municipal Committee and
Ors., [1980) 1 SCC 685 and Common Cause Registered Society v. Union of C
India and Ors., [1987) 4 SCC44, referred to.

1.4. In the instant case, the addition being a distinct and separate unit
of occupation raised at a different stage on the property already valued, the
market value of the land was not to be taken into account again as it had
already been considered while fixing the valuation of the pre-existing D
construction. [695-B-C)

2.1. The Division Bench of the High Court has observed that the point
that the lessor was entitled to levy conversion charges for change of user
was not taken in the counter affidavit filed before the Single Judge nor was
it so argued; and therefore, a disputed question of fact which was not taken E
or urged before the Single Judge could not be allowed to be taken for the
first time in the Letters Patent Appeals . This would apply with even more
force to the present appeals form the Letters Patent Appeals. [695-E)

2.2. Besides, the quantum of conversion charges in the present case
was the subject matter of dispute before this Court in the case of Express F
Newspapers Pvt. Ltd. and Ors.** In view of the fact that the exact nature of
the conversion charges has not been placed before the High Court or before
this Court and no claim was made by the appellant in the present case on
the basis of such conversion charges in the writ petitions, there is no reason
to entertain this Plea at this stage. [695-A; 696-C) G
**Express Newspapers Pvt. Ltd. and Ors v. Union of India and Ors.,
-t [1986) 1 SCC 13, referred to.
$

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3832-3837
of 1989. H
688 SUPREME COURT REPORTS [1998] 3 S.C.R.

A From the Judgment and Order dated 26.8.87 of the Delhi High Court in
L.P.A. Nos. 78-83of1987.

Ranjit Kumar and Ms. Anu Mohla for the Appellant.

Anoop G. Choudhruy, P.H. Parekh, Sanjay Bhartari and Ms. R. Deepamala
B for the Respondent.

The Judgment of the Court was delivered by

MRS. SUJATA V. M.\NOHAR, J. These appeals arise from decision
rendered by the Delhi High Court in a group of writ petitions which were filed
C by the respondent Mis. Express Newspapers Ltd. before the Delhi High
Court. These writ petitions challenged the rateable value of the property of
the respondent consisting of two buildings on land bearing plot nos.9 and
10, Bahadur Shah Zafar Marg, New Delhi.

Under a lease deed dated 17th of March, 1958 executed between the
D respondent and the Secretary (Local Self-Government) to the Chief
Commissioner of Delhi, the respondent acquired lease hold rights in respect
of plot bearing nos. 9 and JO, Bahadur Shah Zafar Marg, New Delhi. The
premium paid by the respondent for acquiring lease hold rights of this land
was Rs. 96,955. A building was constructed on these plots. Construction
E commenced in 1958 and when it was completed the total cost of construction
came to Rs.31,78,945.47 (excluding the cost of the land). Under the provisions
of the Delhi Municipal Corporation Act, 1957, the rateable value of this
property was first determi11ed in the year 1958-59. It has been subsequently
revised. There were several disputes as to the revision of the rateable value
of this building which have been referred to in the judgment of the learned
F Single Judge of the Delhi High Court in these proceedings. We are, however,
not concerned with these disputes pertaining to the old building in the
present appeals.

At the time when the first building was constructed, an area of 2740 sq.
G yards out of the said plot was required to be kept as an open area because
of some drainage pipes passing through that portion. Drainage pipes were
subsequently realigned and shifted. Thereafter the respondent commenced
construction of a new building on the said portion of the plot, which, for the
sake of convenience, can be called the new building, in the year 1978. This
construction was completed on I 0th April, 1981. On that date, a notice was
H issued by the respondent to the appellant intimating the appellant that the
{

M.C.D. v. EXPRESS NEWSPAPERS LTD. [SUJATA V. MANOHAR, J.] 689
building had been completed, and permission was sought for use and A
occupation of the building under Section 346(2) of the Delhi Municipal
Corporation Act. This permission was not granted.

In fact prior to I 0th April, 1981, a notice had been served on the
respondent to the effect that this new construction was illegal and the
respondent should show cause why the same should not be demolished. The B
show cause notice was challenged and has been ultimately set aside by this
Court in separate proceedings which were taken by the respondent in that
connection (See Express Newspapers Pvt. ltd. and Ors. v. Union ofIndia and
Ors., (1986] I sec 133).
c
In respect of assessment year 1981-82, the respondent received a notice
dated I st of March, 1982 from the appellant in which the respondent was told
that the rateable value of the said property was proposed to be substantially
increased to Rs. 1,01,02,910. Subsequent notices were received proposing
higher rateable values in respect of these buildings for subsequent assessment
years. The rateable values so proposed to be fixed have been challenged by D
the respondent in this group of writ petitions filed by the respondent before
the Delhi High Court. This group of writ petitions pertains both to rateable
value of the first building as also the rateable value of the new building. The
present appeals, however, pertain only to the rateable value of the new
building. E

In respect of the new building, assessment years involved are 1981-82
to 1986-87. Learned Single Judge who heard these writ petitions, has in his
common judgment, dealt with the challenge with regard to the assessment of
the old building separately and the challenge with regard to the assessment
of the new building separately. In respect of the new building the learned F
Single Judge came to the conclusion that the appellant was not justified in
applying the provisions of Section 9(4) of the Delhi Rent Control Act, 1958
in order to determine the standard rent of the new building on the basis of
which rateable value has to be fixed under the Delhi Municipal Corporation
Act, 1957. The learned Single Judge has held that the standard rent has first G
to be determined under Section 6 of the Delhi Rent control Act; and that in
doing so, the ratio laid by this Court in the case of Balbir Singh and Ors.
v. Mis. M.C.D. and Ors., [1985] I SCC 167 must be applied. So that in
1 determining the standard rent of a new building the cost of land cannot be
again taken into account when the cost of the same land has already been
taken into account in determining the standard rent for the old building. He H
690 SUPREME COURT REPORTS [1998] 3 S.C.R.

A has held that since the value of the land as in 1958 had to be added to the 'l(
cost of construction of the old building for arriving at its standard rent and
rateable value, the market price of a part of the same land as in 1~78 (when
construction of the new building started) cannot be added to the cost of
construction of the new building while determining the standard rent of the
new building. This view has been upheld by a Division Bench of the Delhi
B High Court while dismissing Letters Patent Appeals filed before the Division
Bench challenging the findings given by the learned Single Judge relating to
the determination of the rateable value of the new building. The present
appeals are filed from the decision of the Division Bench. We are, therefore,
confined to the manner of determination of the rateable value of a new
C building constructed on the same plot of land on which an old building
already stands.

Under Section 114 of the Delhi Municipal Corporation Act, 1957, property
taxes shall be levied on lands and buildings on Delhi and shall consist, inter
alia, of a general tax of not less than I 0% and not more than 30% of the
D rateable value of lands and buildings within urban are.as. Under Section 116
of the said Act, the rateable value of any lands or buildings assessable to
property taxes shall be the annual rent at which such land or building might
reasonably be expected to be let from year to year - less certain amounts
which are specified in that section. We are not concerned with other parts of
E Section 116. Property tax, therefore, is leviable as a percentage of the rateable
value of lands and buildings. Such rateable value has to be determined on
the basis of the annual rent at which such land or building might reasonable
be expected to be let from year to year.

Where, however, the building whose rateable value is to be determined
F is subject to any Rent Control legislation, this Court has held in the case of
Balbir Singh (supra) that the rateable value of a building is limited by the
measure of standard rent arrived at by the assessing authority by applying
the principles laid down in the Rent Act and cannot exceed the figure of the
standard rent so arrived at by the assessing authority. This Court relied upon
its earlier decision in Dewan Dau/at Rai Kapoor and Ors. v. New Delhi
G Municipal Committee and Ors., [I 980] l sec 685 for this purpose. Therefore,
in the present case, we must examine the provisions of the Delhi Rent Control
Act, 1958 which are applicable to the old as well as the new building in
question.

Section 6 of the Delhi Rent Control Act, 1958 deals with standard rent.
H The relevant provisions of Section 6 and Section 7 as they stood at the
M.C.D. v. EXPRESS NEWSPAPERS LTD. [SUJATA V. MANOHAR, J.] 691
relevant time are as follows: A
"6. Standard rent:

(I) Subject to the provisions of subsection (2), 'standard rent', in
relation to any premises, means-

(A) in the case of residential premises- B
(I)

(2) Where such premises have been let out at any time on or
after the 2nd day of June, 1994,-

(a) ................ .
c
(b) in any other case, the rent calculated on the basis of
seven and one-half per cent per annum of the aggregate
amount of the reasonable cost of construction and the
market price of the land comprised in the premises on the D
date of the commencement of the construction.

Provided..................... .

(B) In the case of premises other than residential premises-

(I)
E
(2) Where the premises have been let out at any time on or
after the 2nd day of June, 1994,-

(a)

i (b) in any other case, the rent calculated on the basis of seven F
and one-half per cent per annum of the aggregate amount
of the reasonable cost of construction and the market
price of the land comprised in the premises on the date of
the commencement of the construction.

Provided..................... . G
(2) Notwithstanding anything contained in sub-section (I),-
(a) ................ .

(b) In the case of any premises, whether residential or not,
constructed on or after the 9th day of June, 1955, including H
692 SUPREME COURT REPORTS [1998) 3 S.C.R.

A premises constructed after the commencement of this Act, the r
'
annual rent calculated with reference to the rent agreed upon
between the landlord and the tenant when such premises were
first let out shall be deemed to be the standard rent for a period
of five years from the date of such letting out.

B (3)

7. Lawful increase of standard rent in certain cases and recovery
of other charges.- (I) Where a landlord has at any time, before the ,~
commencement of this Act with or without the approval of the tenant
or after the commencement of this Act with the written approval of
c the tenant or of the Controller, incurred expenditure for any
improvement, addi~ion or structural alteration in the premises, not
being expenditure on decoration or tenantable repairs necessary or
usual for such premises, and the cost of that improvement, addition
or alteration has not been taken into account in determining the rent
of the premises, the landlord may lawfully increase the standard rent
D per year by an amount not exceeding seven and one-half per cent of
such cost.

(2) .............. "

In the present case, the relevant provision is contained in Section
E 6(l)(B)(2)(b) subject to the application of sub-section (2). Under Section 9(4),
however, it is provided as folfows:

"9(4): Where for any reason it is not possible to determine the standard
rent of any premises on the principles set forth under Section 6, the
Controller may fix such rent as would be reasonable having regard to
F t
the situation, locality and condition of the premises and the amenities
provided therein and where there are similar or nearly similar premises
in the locality, having regard also to the standard rent payable in
respect of such premises."

G The appellant has purported to fix the standard rent of the new building
under Section 9(4). Both the Single Judge as well as the Division Bench have,
however, rightly held that the correct section which has to be applied is
Section 6 and the relevant parts thereof. As it is possible to calculate standard t
rent under Section 6 there is no question resorting to Section 9(4).

H The entire question of fixation of rateable value in the cases where the
M.C.D. v. EXPRESS NEWSPAPERS LTD. [SUJATA V. MANOHAR, J.] 693
--.)
. Delhi Rent Control Act is applicable to the premises, has been considered at A
length by this Court in the case of Balbir Singh (supra). After considering
in detail the provisions of the Delhi Rent Control Act and the D~lhi Municipal
Corporation Act this Court has given its findings in respect of four different .
categories of cases. It has dealt with:

(1) Determination of rateable value of self-occupied residential and B
non-residential premises;

(2) Determination of rateable value of premises which are partly self-
-C·
occupied and partly tenanted;

(3) Building whose rateable value is to be determined stands ~n
land which is lease hold land with a restriction that the lease
c
hold interest shall not be transferable without the approval of
the lessor; and

(4) Where the premises are constructed in stages.

The fourth category directly covers the present case. In the fourth
D
category of premises, when the premises at the first stage of construction are
to be assessed for rateable value, the assessing authority has to determine
the standard rent of the premises then constructed under the applicable sub-
section of Section 6. Where sub-sections (I )(A)(2)(b) or (I )(B)(2)(b) of Section
6 are attracted the standard rent will be on the basis of the cost of construction E
and the market price of land. Keeping in mind the upper limit fixed by the
standard rent and taking into account the various factors discussed in the
judgment in Balbir Singh (supra) the assessing authority would then have
to determine the rent which the owner of the premises may reasonably exptct
to get if the premises are let out to a tenant. Such annual rent would represent
the rateable value of the premises. F

However, this Court has observed in the above judgment that, "The
formula set out in sub-section (! )(A)(2)(b) and (I )(B)(2)(b) of Section 6 cannot
be applied for determining the standard rent of an addition as ifthat addition
was the only structure standing on the land. The assessing authorities cannot
G
determine the standard renfofthe additional structure by taking the reasonable
. cost of construction of the additional structure and adding to it the market
price of land and applying the statutory percentage of 7 1/2 to the aggregate
1 amount. The market price of the land cannot be added twice over, once while
determining the standard rent of the original structure and again while
determining the standard rent of the additional structure. Once the addition H
694 SUPREME COURT REPORTS [1998] 3 S.C.R.

A is made, the formula set out in sub-section (l)(A)(2)(b) and (J)(B)(2)(b) of
Section 6 can be applied only in relation to the premi"ses as a whole and where
the additional structure consists of a distinct and separate unit for occupation,
the standard rent would have to be apportioned in the manner indicated in
this judgment".

B It was contended before us that the ratio of Balbir Singh 's case (Supra)
would be applicable only when there is any addition made to the existing
structure. It will not apply where a separate structure is erected later on the
same plot of land. This contention is not borne out by the ratio of the
decision in Balbir Singh 's case (Supra). In paragraph 19, while dealing with
C the fourth category of cases, this Court has expressly dealt with different
kinds of additions which may be made to the original structure at a subsequent
stage. It has observed (page 194) that three different situations may arise.
Firstly, the addition may not be of a distinct and separate unit of occupation
but may be merely by way of extension of the existing premises which are self-
occupied. In such a case the original premises together with the additional
D structure would have to be treated as a single unit for the purpose of
assessment. Secondly, the existing premises before the addition might be
tenanted and the addition might be to the tenanted premises so that the
additional structure also forms part of the same tenancy and thirdly, the
addition may be of a distinct and separate unit of occupation and in such a
E case the rateable value of the premises would have to be determined on the
basis of the formula earlier laid down in the judgment for assessing the
rateable value of the premises which are partly self-occupied and partly
tenanted. It is observed thereafter, "The basic point to be noted in all these
cases is - and this is what we have already emphasised earlier -that the
formula set out in sub-sections (l)(A)(2)(b) and (l)(B)(2)(b) of Section 6
F cannot be applied for determining the standard rent of an addition, as if that
addition was the only structure standing on the land". A distinct· and separate
unit of occupation can be either constructed on the old existing structure or
adjoining it on the same plot of land. The ratio of Balbir Singh (Supra) will
apply in either case.
G The Single Judge as weil as the Division Be·nch have rightly come to
the conclusion that the ratio of Balbir Singh 's case (Supra) applies to the
present case. It is also pointed out before us that an application for clarification
in Balbir Singh's case (Supra) has been dismissed by this Court. In the case
of Common Cause Registered Society v. Union of India & Ors., [1987] 4 SCC
t
H 44, this Court, after citing the relevant passages from Balbir. Singh 's case
M.C.D. v. EXPRESS NEWSPAPERS LTD. (SUJATA V. MANOHAR, J.] 695
(Supra), and noting that an application for clarification was already dismissed A
,' on certain other aspects and the remaining applications were before it, observed
that no clarification is required in cases relating to subsequent construction
as a separate unit. This Court rejected the contention that the ratio of Balbir
Singh 's case (Supra) was confined only to cases of subsequent construction
upon existing construction and would not apply to a separate construction
oµ the same land. It observed, (at page 47) "This Court had, therefore,
B
indicated that when at a different stage, additional construction was raised
on the property already valued, the market value of the land was not to be
taken into account as it had already been considered while fixing the valuation
of the pre-existing construction". This Court, therefore, said that there was
no ambiguity in the ratio laid down by Balbir Singh 's case (Supra). c
It was also contended before us that when the additional constn1ction
came up on the said plot, the lessors were entitled to levy conversion charges
for change of user. Such conversion charges levied in 1978 should be added
to the market price of land at the commencement of the old construction for
arriving at the standard rent/rateable value. This contention was not raised D

-- before the Single Judge. The Division Bench in its judgment has observed
that this point does not appear to have been taken in the counter affidavit
filed before the Single Judge nor was it so argued. Therefore, a disputed
question of fact which was not taken or urged before the learned Single Judge
could not be allowed to be taken for the first time in the Letters Patent E
Appeals. This would apply with even more force to the prese1.t appeals from
the Letters Patent Appeals.

The quantum of such conversion charges in the present case was the
subject matter of dispute before this Court in the case of Express Newspapers
Pvt. Ltd. and Ors. (Supra). This Court in its judgment (from paragraphs 185 F
to 198) has dealt with the determination of the amount of such conversion
charges. It has, inter alia, said that such conversion charges should be
determined by a duly constituted Tribunal or in a suit. We fail to see how
these conversion charges can be considered as a part of the market price of
land at the commencement of old construction. Under Clause 2(7) of the
Lease Deed dated 17th March, 1958 the Lessee will not, inter alia, permit the
G
said premises to be used for any purpose otherwise than as a Newspaper
Press with such number of residential flats on the topmost floor as the Chief
j Commissioner of Delhi, may in his absolute discretion, allow for bona fide
staff of the Press. From the limited material available on record, conversion
charges appear to have been claimed by the lessees under this clause. H
696 SUPREME COURT REPORTS [1998] 3 S.C.R.

A The ..lessees also appear to have claimed conversion charges for the ,..
change the use of 2740 Sq. yds. of open area originally required to be kept '
open because of the drainage lines running through it. The respondent, after
diverting the drainage pipes was permitted to built on this area. These charges
were, therefore, for a change in the use of the land or buildings at a point
B of time subsequent to the lease. They are not by way of additional price of
the land. In view of the fact that the exact nature of these conversion charges
has not been placed before the High Court or before us, and no claim was
made by the appellant in the present case on the basis of such conversion
charges in the writ petitions, we do not see nay reason to entertain this plea
at this stage.
c The appeals are, therefore, dismissed with costs.

RP. Appeals dismissed.