Enemy property vested in the Custodian does not transfer ownership to the Union, thus remains liable for local taxation under Article 285 of the Constitution.

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 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