Holding

A transferee is liable to pay property tax, including for periods prior to the transfer, and this liability is not negated by the absence of a notice under Section 126.

Summary

The Municipal Corporation of Delhi (MCD) assessed property tax on flats allotted to Trigon Investment and Trading Private Ltd. (the respondent) despite the absence of a registered sale deed and without serving a notice under Section 126 of the Delhi Municipal Corporation Act, 1957. The respondent argued that, without such notice, it could not be held liable for tax, especially for the period preceding the alleged transfer. The Supreme Court examined the interplay of Sections 126 and 128, holding that the liability to pay property tax is a first charge on the land or building and travels with the property, making the transferee liable even for periods prior to transfer. The Court clarified that Section 128(4) expressly preserves the transferee’s liability irrespective of any notice, and that Section 126’s procedural requirements do not extinguish this substantive liability. Consequently, the Court allowed MCD’s appeal, set aside the High Court and Additional District Judge orders, and remitted the matter for further determination on factual issues.

Issues considered

The extent of a transferee's liability for property tax under the Delhi Municipal Corporation Act, 1957, particularly for periods preceding the transfer.
Whether the absence of a notice under Section 126 bars the assessment of tax on the transferee.
The effect of Section 128(4) on the liability of the transferee despite non‑registration of the sale deed or lack of notice.

Legislation cited

Delhi Municipal Corporation Act, 1957s. 114, s. 115, s. 116, s. 120, s. 122, s. 123, s. 124, s. 126, s. 128(1), s. 128(4), s. 2(37)

Subjects

property taxtransfer of propertyliability of transfereeSection 126Section 128municipal corporationassessmentnotice requirementfirst charge

Judgment

I
I
I

A MUNICIPAL CORPORATION OF DELHI
v.
M/S. TRIGON INVESTMENT AND '
TRADING PRIVATE LTD. AND ANR.

APRIL 3, 1996
B
[B.P. JEEVAN REDDY AND KS. PARIPOORNAN, .TJ.]

Delhi Municipal Cmzwrarion Act, 1957 : Sections 2(37), 126, 128( 1)
and (4).
c Property ta;.-Building transferred to a person and possession
given-No sale deed was e.xecuted-Held : such a person was transferee as
well as ow1w-Hence liable to pay property tax even for pe1iod anterior to
transfel'"-Absence of notice-Plea of-Not available to transferee.

D Prope1ty ta:..-Intimation of transfer from parties-Absence of-Liability.
for entire outstanding prope1ty tax-Fixed 011 transferee after issue of call
letters and notice-Held: liability to pay outstanding prope1ty tax fixed 1ightly
on transferee.

Pmpe1ty ta:..-Assessment validly made--Piior to issue of call letters to
E transfere~eld: would continue to be valid despite no notice to transferee.

Word< and Phrases :

"Owner''-Meaning of-Jn the context of Section 128 of the Delhi
Municipal Cm)'oration Act, 1957.
F
The respondent-purchaser was allotted flats in a multi-storeyed
building for full consideration. Neither the builder nor the respondent
•
intimated the appellant-Corporation of the said allotment or of the
delivery of possession. The assessing officer of tlu: appellant-Corporation
after issuing a call letter and notice, fixed the liability of payment of
G property tax on the respondent-purchaser. The respondent addressed a
letter to the assessing oflicer asking for rectification of the afore-said
order. As no action was taken on its rectification application the respon-
dent tiled an appeal before the District Judge which was allowed. There-
upon, the appellant tiled a writ petition in the High Court, which was
H dismissed. Aggrieved by the High Court's Judgment the appellant
1158
t
I
M.C.D. v. TRIGON INVESTMENT 1159

preferred the present appeal. A
On behalf of the res1iondent, relying upon the definition of the
expression "Owner" in Section 2(37) of the Delhi Municipal Corporation
Act, 1957, it was contended that no assessment of property tax could be
made U]Jon it without a notice under Section 126 of the Act and in no event
could it be made liable to pay property tax for the period anterior to the B
senrice of such notice.

Allowing the appeal, this Court

HELD : 1.1. The words "but nothing in this section shall be held to
affect the liability of the transferee for the payment of the said tax" in
c
Section 128(4) of the Delhi Municipal Corporation Act, 1957 have to be
understood in the light of the preceding provisions, viz., that the levy of
the property tax is upon the lands and buildings, that the said tax con-
stitutes the first charge upon such lands and buildings and that while the
liability to pay tax lies upon the transferor, the transferee is not freed from D
the said liability on that account. The expression "transfer" is not defined
in the Act. Therefore, it has to be understood in its norntal sense, i.e., in
the sense it is understood in the Transl'er of Property Act but with the rider
that Section 128(1) of the Act recognises a transfer, even where the
• instrument of transfer is not registered. (1170-E-H]
E
1.2. The fact that possession of the flats was delivered to the respon-
dent, that the respondent has paid the full consideration for the said flats
and the further fact that the respondent has let out the flats and is in
exclusive receipt of the rent clearly establishes that he is a transferee
within the meaning of Section 128 of the Act. Indeed, he would be the F
"owner" as defined by Section 2(37) of the Act. He would be the "owner"
·' within the meaning of and for the purposes of the Act- whatever may be
the position in general law. In that sense, the respondent is equally liable
to pay the said taxes. (1170-H, 1171-A-B]

1.3. The liability of the transferee to pay the property tax arises from G
the fact of his being the "owner" of the concerned land or building shou•d
not be mixed up or confused with the proviso to Section 126(1) of the Act.
Since the property tax constitutes first charge upon the land/building and
because the land/building is fastened with this liability, the liability travels
witb the land/building. The transferee is liable to pay the property tax due H
)

1160 SUPREME COURT REPORTS [1996] 3 S.C.R.

A thereon not only for the period snbset(Uent to transfer in his f'arnur hut even
for the period anterior to the transfer. What Section 128 does is to keep
alive and continue the liability of the transferor to pa)' property taxes evt'n
after the transfer till he gives the notice contemplated by Section 128(1).
While making him so liable, Section 128(~) declares that this liability cast
on the transferor shall not relieVt! the transferet' frorn the obligation to pa)'
B the said tax. This liability of the transferee is in no \Vay tiualitied, curtailed
or abridge hy any provision in Section 126. A contrary vie\\' \\'ould n1ake
Section 128(4) and Sections ll9 and 123 (property taxes being levied upon
th.elands/buildings nugatory and meaningless. [1171-B-E-G]

c 1.4. Section 126 of the Act does not have the effect of relieving a
transferee of a land/building from the liability to pay proper!~· taxes duly
assessed upon such land/building and that this liability extends even for
the period prior to the transfer in his favour and such taxes can he
recovered from him according to law. [171-H; 1172-A]

D
2.1. The Act does not contemplate the Corporation going about
e1u1uiring lVhether and when a particular land/building is transferred and
to whom. -Any notices re(1uired to be issued by the Corporation can be
validly issued to the transferor until he intimates the Corporation of the
Transfer and it would be a valid and sutlicient service in lau·; the transferee
E cannot contend that since he has not been served with tht! relevant notice,
~he assessn1ent made or any other action taken is bad in law. If he takes
a transfer fron1 a particular person, it is his duty to ensure that the
transferor sends the intimation contemplated by Section 128(1) and his
(transferee's) name is recorded as the O\vner in the place of the transferor.
F Unless the transferee's na1ne is rel'orcled as the "o\Vner" or ''s the person
pri1narily liable, the Municipalit)' cannot be found tllult \\ ith for not
1

sending relevant notices to the transferee. The substantive liability of the
•
11
0\\'ner" to pay taxes cannot be defeated by the non·intimation under
Section 128 or by the failure of the transferee to have his name entt!red in
the Municipal records. [1172-G-H, 1173-A-B)
G
2.2. If a valid asse.ss1nent \\'as made that assessment \\'ill continue to
he valid and no notice or fresh order was necessary, unless the assessrnent
~'as sought to be increased. Merely because a proceeding by \'ray of atlir~
n1ation of an existing levy \Vas taken with notict! to transferee by \\'ay of
H abundant caution, or under a mi.s~apprehension of law, the earlier assess·
'
\

M.C.D. v. TRIGON INVESTMENT [JEEV AN REDDY, J.] 1161

ment validly made is not effaced. If, however, there was no assessment A .
earlier and the present assessment is the only assessn1ent in respect of the
flats in tJuestion, then it is obvious that no tax can be levied for the anterior
period. [1173-C-D]

CIVIL APPELLATE .JURISDICTION : Civil Appeoi/No. 5356 of ·
~- B
From the Judgment and Order dated 10.2.94 of the Delhi High Court
in C.W.P. No. 411 of 1994.

Ms. Madhu Tewatia and Ranbir Yadav for the Appellants.
c
B.B. Jain, M.A. Khan and Pravir Kumar Jain for the Respondents.

The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J. Leave granted. Heard counsel for both the
parties. D

This appeal is preferred by the Municipal Corporation of Delhi
(Corporation) against the judgment and order of the Delhi High Court
dismissing the writ petition filed by it. The matter p_ertains to assessment
•
of property tax. Ms. Madhu Tewatia, learned counsel for the appellant-
Corporation, submits that the problem arising herein is a common one and E
the decisions of the nature questioned herein are resulting in loss of
substantial revenue legitimately due to the Corporation and, therefore, the
questions arising herein must be decided by this Court authoritatively to
serve as a guidance to the authorities under the Delhi Municipal Corpora-
tion Act, 1957 (Act). F

Saket Properties Private Limited constructed a multi-storeyed build-
ing on Plot No. 21, Yusuf Sarai Community Centre, New Delhi. Flats Nos.
302, 303 and 305 on the third floor of the said building were allotted to the
respondent-Trigon Investment and Trading Private Limited - under a letter
of allotment dated February 29, 1984 (Annexure R-1) subject to the terms G
and conditions mentioned therein. The respondent accepted the allotment
and paid a sum of Rs. 2,35,000 by way of earnest money to Saket Proper-
ties. On February 23, 1986 says the respondent, possession of the said flats
was handed over to and accepted by them (Annexure R-2). Neither the
Saket' Properties nor the respondent intimated the Corporation of the said H
1162 SUPREME COURT REPORTS [1996] 3 S.C.R.

A allotment or delivery of possession. This is an admitted fact. It is also the
admitted case of the parties that so far no sale deed(s) has been executed
and/or registered in respect of the said flats - as appears to be the general
position and practice obtaining in Delhic

On July 11, 1990, the Deputy Assistant Assessor and Collector,
B M.C.D. issued a "call letter for hearing of the objection under Section 126
of the Municipal Corporation Act, 1957" to the respondent requesting him
to attend the office in connection with the finalisation of the rental value
of the aforesaid flats. The respondent replied on July 17, 1990 stating that
Sri K.K. Dwivedi, its authorised representative, is being deputed to repre-
C sent the case and to discuss the matter and provide necessary information
to the officer. On August 10, 1990, another notice was issued by the said
officer to the respondent to attend, the office on August 17, 1990 alongwith
necessary documents and evidence. On August 30, 1990, the Deputy As-
sistant Assessor and Collector made the order of assessment. The order
dated August 30, 1990 recites the following facts :
D
(a) Though call letters dated July 11, 1990 and August 10, 1990 were
· sent to the tax-payer, no one had attended the office nor were any docu-
ments produced.

(b) The flats were purchased by the tax-payer from Saket Properties
E Private Limited (the original owner) and the possession of the flats was
offered to the respondent on April 1, 1985. Accordingly,· the liability of
payment of property tax by the respondent is fixed from April 1, 1985 as
per the terms of the agreement entered into between the builder/promoter
and the respondent.
F
(c) De jure title of the flats has not so far been bestowed upon the
respondent because no proper sale deed has been executed.

(d) A notice under Section l 26 of the Act with consolidated R.V. for
the entire building was given to the builderi)lromoter proposing the R.V.
G
(e) In the above circumstances, the assessment is made ex-parte; the
rental value is determined at Rs. 3,37,800 taking the prevailing rental value
in the said complex. The rateable value is determined at Rs. 3,04,020.
Billing shall be done on the above basis. •
H On receiving the aforesaid assessment order, the respondent ad-
M.C.D. v. TRIGON INVESTMENT [JEEV AN REDDY, J.j 1163

dressed a letter dated September 17, 1990 to the assessing officer asking A
for rectification of the said order. Two grouncl..s were mentioned in the
Jetter. They are :

"(!)The date of possession of the llat was 23.2.1987. 1.4.1985 which
has erroneously been mentioned in the order and attested photo-
state copy of the possession letter is enclosed. B
(2) The flats have been given on rent in March, 1987 @ Rs. 16,800
per month. The annual rent of these !lats would be Rs. 16,800 X
12 = Rs. 2,01,600 and (not ?) Rs. 3,37,800 as mentioned in the
assessment order.
c
Attested copy (Photo-state) of the rent receipt for the month of
May, 1989 is enclosed."

·The letter requested that the assessment order may be rectified in
the light of the above facts. It must be mentioned that no other objection, D
legal or factua~ was raised in the said letter apart from the two objections
mentioned above.

Probably finding that no action was being taken on its rectification
application, the respondent filed an appeal before the learned District
Judge, Delhi against the order of assessment dated August 30, 1990. In the E
Memorandum of Appeal, the respondent stated that possession of the flats
had been handed over to it on February 23, 1987 pursuant to the agreement
of sale but that no sale deed has been executed till then. It referred to the
letting out of the said flats and then stated that the Corporation has not
served any notice on it under Section 126 of the Act which is a pre-condi-
tion to a valid assessment. It was also submitted that the Corporation is F
• barred from making any assessment for any period prior to April 1, 1988
as no notice was served on it (appellant before the learned Additional
District Judge) till that date. It submitted that the rental value has been
wrongly assessed at Rs. 3,37,800 and that it ought to be Rs. 2,01,600 in the
light of the rent being received by it. G
On September 9, 1992, the appeal was allowed by the Learned
Additional District Judge in toto. It is equally relevant to notice the reasons
for the said order. It states :

(i) The asses..ment order itself states that though the said flats were H
1164 SUPREME COURT REPORTS [1996[ 3 S.C.R.

A purchased by Trigon Investment Private Limited, de fure title has not so
far been bestowed upon it since a proper sale deed is yet lo be executed.

(ii) ''.A conso/idaied notice of the entire bui 1ding was xiven lo the builder
w.ef 1.4.1985. However, since the tax-payer did not attend the office nor
the required documents \Vere sub1nitted, the assessing authority proceeded
B ex-parte and decided the case as above. On the face of it, the order is bad
in law."

(iii) "Admittedly no notice U/s. 126 of the D.M.C. Act has been
served upon the appellants (Trigon Investments). The notice if any was
served upon the Builder/promoter and no sale deed has yet been executed
c among the parties. Therefore, no title has passed on lo the appellants nor
the transfer appears to have been conveyed."

(iv) "Therefore, the appellants cannot be subjected to any tax for
such a year in which no notice has been served upon them. The order is
D accordingly set aside and is hereby quashed."

The appellant-Corporation questioned the order or the learned Ad-
ditional District Judge by way of a writ petition (C.W.P. No. 411 of 1994)
in the Delhi High Court. The writ petition was dismissed at the admission
stage without issuing a notice to the respondent. The order of the High
E Court posed the question arising in the matter thus : "The short question
which arises for decision is whether the petitioner-M.C.D. is entitled to
assess tax on any individual without serving a notice as contemplated
U/s.126". The order states that the property in question was constructed by
the builder who had entered into agreements for sale of various portions
F of the said properly with several parties, that in 1985 a notice under Section
126 is stated to have been issued to the builder in respect of the said •
property inviting objections and that later on, another notice under Section
126 was issued to the builder styling it as a consolidated notice. The order
further recites that the persons in whose !.avour the agreement for transfer
has been executed by the builder did not get their names mutated in the
G records of the Corporation and that call letter was issued to the respon-
dent, who is one of the transferees from the builder, in the year 1990 only.
The call letter is not a notice contemplated by Section 126 of the Acl. The
order then notices the submission of the learned counsel for the Corpora-
tion in the following words : "The Ld. Counsel for the petitioner has
H vehemently argued that even if no mutation had taken place in law, even
M.C.D. v. TRIGON INVESTMENT [JEEVAN REDDY, J. J 1165

then the person who had entered into an agreement with the builder for A
purchase of the particular tlat becomes liable to pay tax in view of Sec. 120
of th.e Municipal Corporation Act and as a matter of fact such person steps
into the shoes of the Original owner and the Notice served under Sec. 126
on the Builder be deemed a good notice served on the transferee from the
Builder". The High Court opined that the said submission i,. unacceptable.
It observed that under Section 120, the property tax is primarily the liability
B
of the lessor and then posed the question "(H)owever, the question arises
whether the persons who are liable to pay property tax by virtue of Sec.
120 of the Act can be made liable for Tax without serving a notice U/s. 126
of the Act." It answered the said question in the following words : "Section
126 of the Act lay down that the Commissioner may at any time amend the C
Assessment list and the proviso to that section makes it incumbent that no
person shall by reason of any such amendment become liable to pay any
tax or increase of tax in respect of any period prior to the commencement
of the Order in which the notice U/Sub-sec. 2 is given. Sub-sec. 2 makes it
clear that the Commissioner shall give to any person affected by the D
Assessment notice of not less than one month that he propose to make the
amendment and consider any objection which may be made by such
person. Admittedly, no notice as contemplated by these provisions had
been served on the Respondent." The High Court then referred to the
submission of the counsel for the Corporation based upon Section 128(4),
which makes it obligatory on the part of the vendor to intimate the factum E
of transfer to the Corporation and also making the failure to give such
notice punishable. The High Court observed, "mere fact that no such notice
had been given to the M.C.D. regarding transfer of the portion of the
property by the Builder would not mean that the M.C.D. is entitled to
recover property tax from the transferee without complying with the F
provisions of See. 126 of the Act." The High Court observed further, "in
case no intimation has been given lo the M.C.D. regarding transfer of the
property by the Owner and the M.C.D. on its own has not been able to
find the names of such transferees, the interest of the M.C.D. are well
protected by provisions of Sec. 128(4) where it is clearly laid down that the
liability to pay the property tax shall in that case will continue to be of the G
Owner and the Owner would also be subjected to the imposition of some
penalty."

Ms. Madhu Tewatia, learned counsel for the Corporation, invited our
attention to the relevant provisions of the Act and ~ubmitted that the view H
)

1166 SUPREME COURT REPORTS [1996J 3 S.C.R.

A taken. by the High Court is inconsistent therewith. Admittedly, she sub-
mitted, neither the builder nor the purchaser-respondent had intimated the
('.orporalion of the said transaction hct.\VCCn them. Prior lo 1990, the
Corporation was not aware that the respondent had purchased the said
llals. The Corporation had in due course given notices to the builder in the
year 1985 who failed to respond lo the same. The liability lo pay laxes got
B fastened to the premises in accordance with law and that liability is not
erased by the failure of the builder to respondent to the notices. When the
Corporation came to know that the respondent has purchased the said
llats, it issued notices, "call letters", to it in the year 1990 and made the
assessment order dated August 30, 1990. The learned Additional District
C Judge has allowed the appeal on a ground which is altogether different
from the grounds urged by the respondent in the appeal. The learned
Additional District Judge states - according to the learned counsel, er-
roneously - that since de jure title has not been transferred to the respon-
dent, the respondent cannot be subjected to any tax in respect of an year
for which no notice has been served upon him and that notices served upon
D the builder/promoter are of no avail against the respondent. But when it
came to High Court, the view taken by the High Court is that even if
transferor and transferee have failed to comply with the mandatory
statutory requirement in Section 128, still no tax can be levied upon the
transferee until and unless a notice under Section 126 is served upon him.
E For the period prior to the service of such notice upon the transferee, the
Corporation's remedy is suggested to be against the transferor. Counsel
submits that this is contrary to law. The learned counsel also pointed out
that on receiving the assessment order dated August 30, 1990 the respon-
dent filed an application for rectification wherein it did not dispute or deny
its liability to pay the property tax in respect of the said flats; its only
F sub1nis!.ion was that since possession of the fl1:1ts have been delivered to it
on February 23, 1987, the tax must be levied only from March 1987 and
not from April 1, 1985. (It, of course, disputed the quantum of rental value
also.) Learned counsel also relied upon clause (12) of the Allotment Jetter,
according to which the allottees/purchasers were made liable for "their
G share of ground rent, property taxes, water charges and any other cesses
which may by levied on the property". The said clause also contemplates
that the Corporation will normally be expected to demand the property
taxes directly from the allottees/purchasers. This clause says the learned
counsel, clearly makes the purchaser liable for the property taxes levied on
•
the said flats irrespective of the fact whether the levy was prior to allotment
H letter and/or delivery of possession or subsequent thereto.
M.C.D. v. TRIGON INVESTMENT [JEEVAN REDDY, .T.J 1167

Shri B.B. Jain, learned counsel for the first respondent, relied upon A
the decision of the expression "Owner" in clause (37) of Section 2 of the
Act and submitted that no assessment of property tax can be made upon
the respondent until and unless a notice under Section 126 is served upon
it and in no event can the respondent be made liable to pay the property
tax for the period anterior to the service of the notice under Section 126. B
The learned counsel relied upon certain decisions of the Delhi High Court
referred to in the first respondent's counter and submitted that no tax can
be levied upon a building until the completion certificate is issued. He
pointed out that possession of the flat was handed over to the respondent
only on February 23, 1987 and hence, no tax can ever be levied for the
period anterior to the said date. Counsel submitted that until and unless C
and assessment is made with notice to the respondent as contemplated by
Section 126, it cannot be made liable for the tax and certainly not for the
anterior period.

It is necessary to notice the relevant provisions of the Act. for a D
proper appreciation of the questions arising herein. Among the taxes which
the Corporation is empowered to levy by Section 113, "property taxes" is
the first one. Sections 114 to 135 occur under the sub-heading "property
taxes". Section 114(1) states that "save as otherwise provided in this Act,
the property taxes shall be levied on lands and buildings in Delhi and shall
consist of the following, namely.... ". Section 115 specifies the premises in E
respect of which property taxes are to be levied while Section 116
prescribes the basis upon which the rateable value of the lands and
buildings has to be determined. Section 120(1) then says that "the property
taxes shall be primarily leviable as follows : (a) if the land or building is
let, upon the lessor; (b) if the land or building is sub-let, upon the superior
lessor; ( c) if the land or building is unlet, upon the person in whom the F
right to let the same vests." Section 122 declares that on the failure to pay
taxes by the person primarily liable therefor, it shall be open to the
Commissioner to recover the same "from every occupier of such land or
building by attachment, in accordance with section 162 of the rent payable
by such occupier, a portion of the total sum due which bears, as nearly as G
may be, the same proportion to that sum as the rent annually payable by
,. such occupier bears to the total amount of rent annually payable in respect
of the whole of the land or building". Sub-section (2) empowers the
occupier from whom the amount is recovered under sub-section (1) to
claim reimbursement from the person primarily liable/owner. Section 123
declares that "property taxes due under this Act in respect of any land or H
1168 SUPREME COURT REPORTS [1996] 3 S.C.R.

A building shall, subject to the prior payment of the land revenue, if any, due
to the Government thereon, be a first charge ..... (b) in the case of any other
land or building, upon such land or building and upon the goods and other
movable properties, if any, found within or upon such land or building and
belonging to the person liable for such taxes". Section 124 prescribes the
procedure according to which assessment list of all lands and buildings in
B Delhi is to be prepared. Section 126 provides for the amendment of the
assessment list. In view of the strong reliance placed upon the said section,
it would be appropriate to set out sub-section (1) and (2) thereof in full.
They read:

"126. -Amendme11t of assessme11t list: (l) The Commissioner may,
c at any time, amend the assessment list -

(a) by inserting therein the name of any person whose name ought
to be inserted; or

(b) by inserting therein any land or building previously omitted; or
D
(c) by striking out the same of any person not liable for the payment
of property taxes; or

(d) by increasing or reducing for adequate reasons the amount of
any rateable value and of the assessment thereupon; or
E
(e) by making or cancelling any entry exempting any land or
building from liability to any property tax; or

(f) by altering the assessment on the land or building which has
been erroneously valued or assessed through fraud, mistake or
F accident; or
l
(g) by inserting or altering an entry in respect of any building
erected, re-erected, altered or added to, after the preparaLion of
the assessment list;

G Provided that no person shall by reason of any such amendment
become liable to pay any tax or increase of tax in respect of any
period prior to the commencement of the year (in which the notice
under sub-section (2) is given).

(2) Before making any amendment under sub-section (1) the
H Commissioner shall give to any person affected by the amendment,
~·
\

'
M.C.D. v. TRIGON INVESTMENT [JEEVAN REDDY, J.] 1169

notice of not less than one month that he proposes to make the A
amendment and consider any objections which may be made by
such person."

Section 128 is equally relevant. Sub-section (1) of Section 128
provides that "whenever the title of any person primarily liable for the
payment of property taxes on any land or building is transferred, the person B
whose title is transferred and the person to whom the same is to be
transferred shall within three months after the execution of the instrument
of transfer or after its registration, if it is registered, or after the transfer
is effected, if no instrument is executed, give notice of such transfer in
writing to the Commissioner". Sub-section (4) is of crucial relevance and it C
reads :

"Every person who makes a transfer as aforesaid without giving
such notice to the Commissioner shall, in addition to any penalty
to which he may be subjected under the provisions of this Act,
continue liable for the payment of all property taxes from time to D
time p~yable in respect of the land or building transferred until he
gives such notice or until the transfer has been recorded in the
Commissioner's book, but nothing in this section shall be held to
affect the liability of the transferee for the payment of the said tax."
E
Section 131 empowers the Commissioner to call for information and
returns and also to enter on premises to enable him to determine the
rateable value of any land or building.

Now, what do the above provisions mean and indicate ? According
to us, the Scheme and purport of the above provisions is this : the property F
taxes are levied upon the lands and buildings in Delhi [Section 114(1)).
Property taxes due under the Act in respect of any land or building
constitute first charge upon such land and building subject only to the prior
payment of the land revenue, if any, due to the Government thereon
[Section 123(1)]. The primary liability to pay taxes is upon the lessor where G
the building is let and upon the person entitled to let it, where the building
is not let (Section 120). If the person primarily liable fails to pay the tax,
it can be recovered from the occupier who in turn. is entitled to be
reimbursed by the person primarily liable (Section 122). Assessment lists
containing the specified particulars have to be prepared by the Corporation H
1170 SUPREME COURT REP ORTS (1996] 3 S.C.R.

A [Section 124]. The lists prepared under Section 124 can be amended at any
time in any of the situations mentioned in sub-section (l) of Section 126.
The situations specified in sub-section (1) of Section 126 inter alia are
insertion of the name of a person whose name ought to be inserted,
insertion of any land or building which was omitted and insertion or
B alteratiqn of any entry in respect of any building re-erected, altered or
added after the preparation of the assessment list. Before making any
amendment under sub-section (1) the Commissioner shall give to any
person affected by amendment a notice of not less than one month of his
intention to make the amendment and consider any objection received in
C that behalf [Section 126(2)]. No person shall become liable to pay any tax
or increase of tax in respect of any period prior to the Commencement of
the year in which notice under sub-section (2) is given [Proviso to Section
126(1)]. Where a land or building is transferred, the transferor is bound to
give notice of such transfer to the Commissioner. If the transfer is effected
D by the registered document, such notice has to be given within three
months of the registration and if the transfer is effected under an instru-
ment of transfer which in not registered, within three months of the
execution of such instrument. Failure to give such notice renders the
transferor liable not only to penalty but also to payment of all property
taxes from time to time payable in respect of such or building until he gives
E such notice [Section 1~(1) and (4)). At the same time, sub-section (4) of
Section 128 expressly provides that the continued liability to pay the taxes
cast upon the transferor (in addition to penalty) shall not affect the liability
of the transferee for the payment of the said tax. Now, what do the words
"but nothing in this section shall be held to affect the liability of the
F transferee for the payment of the said tax" in sub-section (4) of Section J 28
mean and signify ? In our opinion, the said words have to be understood
in the light of the preceding provisions, viz., that the levy of the property
tax is upun the lands and buildings, that the said tax constitutes the first
charge upon such lands and buildings and that while the liability to pay tax
G lies upon the transferor, the transferee is not freed from the said liability
on that account. The expression "transfer" is not defined in the Act. If so,
it has to be understood in its normal sense, i.e., in the sense it is understood
in the Transfer of Property Act but with the rider that Section 128(1)
recognises a transfer, even where the instrument of transfer is not
H registered. The fact that possession of the flaL' was delivered to the
M.C.D. v. TRIGON INVESTMENT [JEEVAN REDDY,J.] 1171

respondent, that the respondent has paid the full consideration for the said A
flats and the further fact that the respondent has let out the flats and is in
exclusive receipt of the rent clearly establishes that he is a transferee within
the meaning of Section 128. Indeed, he would be the "owner" as defined
by clause (37) in Section 2 of the Act. He would be the "owner" within the
meaning of and for the purposes of the Act - whatever may be the position B
in general law. In that sense, the respondent is equally liable to pay the
said taxes. This liability of the transferee arising from the fact of his being
the "owner" of the concerned land or building should not be mixed up or
confused with the proviso to Section 126(1). Since the property tax con-
stitutes first charge upon the land/building and because the land/building C
is fastened with this liability, the liability travels with the land/building. The
transferee is liable to pay the property taxes due thereon not only for the
period subsequent to transfer in his favour but even for the period anterior
to the transfer. What Section 128 does is to keep alive and continue the
liability of the transferor to pay property taxes even after the transfer till D
he gives the notice contemplated by Section 128(1). While making him so
liable, Section 128(4) declares that this liability cast on the transferor shall
not relieve the transferee from the obligation to pay the said ta'I:, as
explained above. This liability of the transferee is in no way qualified,
curtailed or abridged by any provision in Section 126. Section 126 deals
with amendment of assessment list and the procedural aspects concerning E
amendment. By way of illustration, take a case where property tax is
assessed on a building, say, with effect from April 1, 1985. The building is
transferred on April 1, 1987 but the transferor does not give notice of
transfer. Later, on April 1, 1990, the name of the transferee is inserted in
the place of the name of the transferor by amending the assessment list. F
Can the transferee say in such a case that he is not liable to pay taxes for
the period prior to April 1, 1990 ? If he can say so in law, would it not
make Section 128(4) and Sections 119 and 123 (property taxes being levied
upon the lands/buildings and their constituting a first charge on such
lands/buildings) nugatory and meaningless ? So far as transferee is con- G
cerned, therefore, Section 126 does not in any manner cut down his liability
or exonerate him from the liability resting upon him by virtue of other
provisions in Chapter VIII. For the purposes of this case, it is not necessary
to go into the scope .and purport of Section 126. It is enough to clarify that
whatever its scope and purport, it does not have the effect of relieving a H
1172 SUPREME COURT REPORTS [1996] 3 S.C.R.

A trans[cree of a land/building from the liability to pay property taxes duly
assessed upon such land/building and that this liability extends even for the
period prior to the transfer in his favour and such taxes can be recovered
from him according to law.

Now, coming to the facts of the case, we may make it clear that there
B
are certain factual aspects which we cannot decide in this appeal for the
reason that they have not been gone into or pronounced upon either by
the assessing authority or by the Learned Additional District Judge or by
the High Court. They are : what was the notice given to the builder in 1985
and what happened pursuant thereto ? Whether any assessment of proper- ·
'
c ty tax upon the building as a whole, or upon the flats in question, as the
case may be, was made pursuant to such notice or not ? If an assessment
was already made pursuant to the notices issued to the builder in the years
1.985/86, why was another assessment made on August 30, 1990 and why
does the order of assessment say that the "liability of payment of property
tax by the flat owner is fixed from April I., 1985 as per agreement and terms
D with the builder/promoter"? Or was it a case of increase in the R.V.? It is
obvious that if an assessment of property taxes was made upon the builder,
the said property taxes constitute a fir>t charge upon the building irrespec-
tive of the fact whether the assessment was made on the building treating
it as one unit (as compendium of several flats) or upon each flat or groups
of flats separately. Such property taxes, being a first charge upon such
E building/flats, can be recovered either from the builder/promoter or from
the transferee thereof. Their liability is joint and several subject to the rider
that the liability of the builder/promoter ceases once he gives a notice
contemplated by Section 128(1). In other words, if the tax had been
assessed pursuant to the notices served upon the builder/promoter in the
F years 1985 or 1986, as the case may be, or at any time earlier to the
assessment order dated August 30, 1990, such tax has to be paid by one or
the other among the transferor and transferee.

It is equally necessary to clarify that the Act places the obligation
upon the transferor to intimate the Corporation of any transfer and also
G provides for the consequences flowing from failure to inform. The Act does
not contemplate the Corporation going about enquiring whether and when
a particular land/building is transferred and to whom ? Any notices re-
quired to be issued by the Corporation can be validly issued to the
transferor until he intimates the Corporation of the transfer and it would
H be a valid and sufficient service in law; the transferee cannot contend that
M.C.D. v. TRIGON INVESTMENT [JEEVAN REDDY,J.] 1173

since he has not been served with the relevant notice, the assessment made A
or any other action taken is bad in law. If he takes a transfer from a
particular person, it is his duty to ensure that the transferor sends the
intimation contemplated by Section 128(1) and his (transferee's) name is
recorded as the owner in the place of the transferor. Unless the transferee's
name is recorded as the "owner" or as the person primarily liable, the B
M unieipality cannot be found fault with for not sending relevant notices to
the transferee. The substantive liability of the "owner" to pay taxes cannot
be defeated by the non-intimation under Section 128 or by the failure of
the transferee to have him name entered in the Municipal records.

It is again made clear that if a valid assessment was made any time C
prior to 1990, that assessment will continue to be valid and no notice or
fresh order was necessary in the year 1990, unless the assessment was
sought to be increased. Merely because a proceeding by way of affirmation
of an existing levy was taken with notice to transferee by way of abundant
caution, or under a mis-apprehension of law, the earlier assessment validly D
made is not effaced. If, however, there was no assessment earlier and the
1990 assessment is the only assessment in respect of the flats in question,
then it is obvious that no tax can be levied for the anterior period. The
respondent cannot contend that because no notice was given to him, any
assessment made prior to 1990, with notice to builder/ promoter (whether
on the building as a whole or on each flat or group of flats separately) is E
illegal or invalid. In this behalf, it is relevant to notice the following
averment made by the respondent in Para 3-F (prenultimate para) Of his
counter/affidavit filed in this appeal. It is stated therein :

"It would also be relevant to place on record that the notice under F
section 126 of the DMC Act <lated 21.3.86 was issued and served
upon M/S. Saket Properties Private Limited proposing to increase
the rateable value of Rs. 1,22,500 per annum to Rs. 12,42,000 per
annum w.e.f. 1-4-85 for the reason 'Newly Built Property' against
which the builder had filed objections dated 25.4.86 (copy annexed
hereto marked as Annexure-R-2) whereby the builder had specifi- G
cally brought out to the notice of the respondent that the building
was incomplete and was under construction. These objections were
never considered by the respondent and had visited this assessee
with an assessment w.e.f. 1-4-85 without application of mind espe-
cially when the said property was not liable to be assessed as per H
1174 SUPREME COURT REPORTS (1996] 3 S.C.R.

A the law laid down by the Delhi High Court and the substantive law
contained in section 129 of the DMC Act reproduced herein above,
against all norms and for the reasons best known to it."

This paragraph tends to show that a separate assessment was made by the
Corporation in respect o[ the flats in question with notice to builder with
B effect from April 1, 1985. If this is so and if it has become final, it is obvious
that it can be recovered both from the builder (Saket Properties Private
Limited) and the (first) respondent herein. It should be remembered that
the builder has failed to intimate the Corporation as required by Section
128(1) and, therefore, it continues to be liable. But so does the transferee
c too because the taxes constitute the first charge upon the flats and also by
virtue to Section 128( 4). While deciding the matter pursuant to this order,
the learned Additional District .I udge shall also take the above averment
into consideration. ...

The Act does not contemplate a situation - it is necessary to em-
D phasise - nor.should the courts create a situation by a process of interpreta-
tion, where both the transferor and transferee escape the tax which has
been duly assessed.

The appeal is accordingly allowed. The orders of the High Court and
E the Learned Additional District Judge are set aside and the matter is
remitted to the Learned Additional District Judge for disposal of the
appeal according to law and in the light or the position of law explained
hereinabove. Learned Additional District Judge shall be entitled to call
upon both the parties to adduce necessary evidence to decide the questions
F arising herein, both factual and legali according to law. Learned Additional
District Judge shall dispose of the appeal within four months form the date
of receipt of the copy of this Order. Both the parties shall present them-
selves before the Learned Additional District Judge on April 16, 1996
which is specified as the date of hearing in the appeal before the Learned
Additional District Judge. It shall also be open to the parties to file such
G documentary evidence as they wish to in support of their respective cases.
No oral evidence shall, however, be permitted
•
There shall be no order as to costs.

H v.s.s. Appeal allowed.