1996 Supreme(SC) 718

1996(3) Supreme 666
SUPREME COURT OF INDIA
B.P. Jeeuan Reddy and K.S. Paripoornan, JJ.
Municipal Corporation of Delhi-Appellant
versus
M/s. Trigon Investment and Trading Private Ltd. & Anr. -Respondents
Civil Appeal No. 5356 of 1996
(Arising out of SLP (C) No. 11799 of 1994)
Decided on 3-4-1996
Counsel for the Parties :
For the Appellant : Ms. Madhu Tewatia

IMPORTANT POINT
Property taxes being a first charge upon building/flats, can be recovered either from the builder/promoter or from the transferee thereof and 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) of the Delhi Municipal Corporation Act.

Headnote:Delhi Municipal Corporation Act, 1957-Sections 126 and 128-Property tax-Assessment of-Multi storeyed building-Flats on third floor of the building allotted to respondent-Neither builder nor respondent intimated the Corporation of the said allotment or delivery of possession-No sale deed executed and/or registered in respect of the said flats-Order of assessment -Liability of payment of tax-Order challenged on ground that no notice served under Section 126 and Corporation is barred from making any assessment for any period prior to 1-4-1988-Whether petitioner-MCD is entitled to assess tax on any individual without serving a notice under Section 126?

       Held : According to us, the scheme and purport of the above provisions is this: the property 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)1. The primary liability to pay taxes is upon the lessor where 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 (Section 124). The lists prepared under Section 124 can be amended at any time in any of the situations mentioned in sub-section (1) 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 alteration 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 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)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 by the registered document, such notice has to be given within three months of the registration and if the transfer is effected under an instrument of transfer which is 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 land or building until he gives such notice [Sections 128(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 transferee for the payment of the said tax" in sub-section (4) of Section 128 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 upon the lands and buildings, that the said tax constitutes the first charge upon such lands and buildings and that white the liability to pay tax 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 registered. The fact that possession of the flats was delivered to the respondent, 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. 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 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 constitutes first charge upon the land/ building and because the land/building 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 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 tax, 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 amendment. So far as transferee is concerned, 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 transferee 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. (Para 12)

       Further held that if an assessment of property taxes was made upon the builder, the said property taxes constitute a first charge upon the building irrespective 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 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 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. (Para 13)

       Consequently held that the Act places the obligation upon the transferor to intimate the Corporation of any transfer and. also 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 required 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 sufficient service in law; the transferee cannot contend that since he has not been served with the relavant notice, the assessment made or any other action taken is ban 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 re-corded 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 Municipality 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 his name entered in the Municipal records. (Para 14)

       Then held that if a valid assessment was made at any time 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 misapprehension of law, the earlier assessment validly 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 concerned 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 illegal or invalid. (Para 15)

       A separate assessment was made by the Corporation in respect of the flats in question with notice to builder with 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 too because the taxes constitute the first charge upon the flats and also by virtue of Section 128(4). (Para 15)