The MCGB cannot take into consideration the substantial license fees charged by the different occupants of the seven units in the building in the year in question for the purpose of determining the rateable value of the building.

Headnote:
BOMBAY MUNICIPAL CORPORATION ACT - SECTION 217 - RATABLE VALUE - LICENCE FEES - RENT - CO-OPERATIVE SOCIETY - OWNERSHIP - POSSESSION - INTEREST - SHAREHOLDING - MEMBERSHIP - RIGHT TO RECOVER RENT OR LICENCE FEE - INDIVIDUAL MEMBER - SOCIETY - LANDLORD - CONCERNED WITH HIGHER AMOUNT EARNED BY INDIVIDUAL MEMBERS - NOT PERMISSIBLE - TWO DIFFERENT RATES AND NORMS FOR ARRIVING AT RENTAL VALUE - NOT ADOPTED.
Fact of the Case:

The Municipal Corporation of Greater Bombay (MCGB) served a notice to the Maker Bhavan No. 11 Commercial Premises Co-operative Society Limited (Society) for assessment of the rateable value of their building, which was proposed to be fixed at Rs. 5,02,555/-. The Society challenged this assessment, arguing that the rateable value could not exceed Rs. 1,50,000/-. The Additional Chief Judge of the Small Causes Court, upon hearing the parties, reduced the rateable value to Rs. 3,90,163/-.
Finding of the Court:

The court held that the MCGB could not take into consideration the substantial license fees charged by the different occupants of the seven units in the building in the year in question for the purpose of determining the rateable value of the building. The court further held that it was not permissible to apply two different rates and norms for arriving at the rental value of the building, one for the 17 owner-occupied units and another for the seven units given on leave and license.
Issues: Whether the MCGB could take into consideration the substantial license fees charged by the different occupants of the seven units in the building in the year in question for the purpose of determining the rateable value of the building.
Ratio Decidendi: The court relied on the decision of the Division Bench of the Bombay High Court in First Appeal No. 393 of 1975, wherein it was held that the MCGB had no right to take into account the amount of compensation received by the members of a housing society for the purpose of fixation of rateable value. The court also observed that in a co-operative society, the ownership vested in the society and the members had only a possessory interest, not as tenants of the society but as members thereof, as a direct incident of the shareholding or membership. The right to recover rent or license fee was of the member only as the creator of license or tenancy and the society could never claim the right to recover the license fee from its members' licensee or tenants.
Final Decision: The court dismissed the appeal filed by the MCGB and held that the parties would bear their own costs.

JUDGMENT - D.J. MOHARIR, J.:---This appeal challenges the order of Additional Chief Judge of the Small Causes Court passed in Municipal Appeal No. M/307 of 1974 under section 217 of the Bombay Municipal Corporation Act. The respondent Maker Bhavan No. 11 Commercial Premises Co-operative Society Limited (hereinafter referred to as the Society) is the owners of building abutting New Marine Lines. This building consists of, in all 24 commercial units and these units are in possession of different members of the Society being the share holders thereof. In the beginning all these 24 units were self-occupied in the sense that they were occupied and used by the respective members to whom these had been allotted by the respondent Society as the owner of the said building. After sometime, seven out of these 24 unit holders transferred possession of their respective units to certain other persons on a leave and licence basis, charging different considerations by way of licence fees. Unit this transfer of possession of the seven units, by the respective members of different persons, the Municipal Corporation had fixed the rateable value of the building at Rs. 135/- per 10 sq. meters. That, therefore, was the uniform application to all the units for determination of the rental value and the annual letting value. However, having probably come to know of these transactions the Municipal Corporation served the respondent Society with a notice for assessment of the rateable value which was proposed to be fixed at Rs. 5,02,555/-. The Society then filed a complaint on 11-1-1974, which was investigated to fix the rateable value at the sum of Rs. 5,02,555/- as aforesaid. This was challenged as being excessive by the Society and, therefore, an appeal was preferred to the Additional Chief Judge of the Small Causes Court. The rateable value as fixed was sought to be set aside and it was contended before the learned Additional Chief Judge that it could not exceed Rs. 1,50,000/-.

2. It appears that it was till the 1st April, 1972 that the building was being partly occupied and the rateable value as fixed till then was Rs. 1,01,285/-. After 1st April, 1972 revision of the rateable value was effected by reason of certain additions which were made in the units. The revision was, therefore, an upward one. Then, the unit Nos. 27, 17, 24, 7, 10, 8, 21 and 22 in the said building were given on a leave and licence basis by the respective allottee members to different commercial undertakings. The licence fee charged in each case was different, ranging as it appears from Rs. 4, 128.75 to Rs. 4,605/-. In support of its contention that the rateable value as fixed at Rs. 5,02,555/- was excessive, evidence was also led by the parties. According to the learned Additional Chief Judge, after consideration of the evidence as adduced, the point which still remained for consideration was whether the Municipal Corporation was right in taking the actual licence fee recovered for the purposes of fixing the rateable value in respect of the seven aforementioned units which had been given out on leave and licence basis. He observed that in respect of the other owner occupied 17 units the rental was taken at Rs. 135/- per 10 sq. meters which was not seriously challenged. As for the other seven units, however, the learned Judge found it entirely doubtful whether the consideration paid by the seven respective licenses in respect of the seven units could any way impinge upon the fixation and a further upward revision of the rateable value. The learned Judge held upon a consideration of the various authorities which were also cited before him that the licence fee charged to the seven different licensee, of the seven different units in the building could not legally be taken into consideration at all and the two different standards for fixation of rateable value could not be adopted by the Municipal Corporation in respect of different units of the very same building. In a co-operativ

Click Here to Read the rest of this document