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HIGH COURT OF DELHI
BADAR DURREZ AHMED & VEENA BIRBAL, JJ.
Vinod Krishna Kaul & Others
Versus
The Lt. Governor N.C.T. Of Delhi & Others
W.P.(C) 8030 OF 2003, 8403 & 17454-55 OF 2004, 10617, 7688, 7691, 8723 OF 2008, 9341, 9750, 9822, 9827, 9838, 10272, 11015, 11016, 11017, 11018, 11019, 11020, 11021 11290, 11294, 11586 & 11590 OF 2009
Decided On : 23-08-2012
The Delhi Municipal Corporation (Amendment) Act, 2003, which introduced the unit area method of levying property taxes in Delhi, was challenged on various grounds, including legislative competence, presidential assent, and arbitrariness. The court held that the Legislative Assembly of NCT of Delhi had the legislative competence to enact the Amendment Act of 2003, as Entry 49 of the State List (Taxes on lands and buildings) was not excluded from the domain of the Legislative Assembly by Article 239AA(3)(a) of the Constitution. The court also held that the Amendment Act of 2003 had received the assent of the President and that the first proviso to Article 239AA(3)(c) was satisfied. The court further held that the unit area method of valuation was not arbitrary and that the provisions of the Amendment Act of 2003 did not suffer from any arbitrariness or the vice of excessive delegation. However, the court found that the classification of schools based solely on the fee structure was violative of Article 14 of the Constitution and directed that all schools, irrespective of the fee structure, would have to be assigned a single Use Factor.
Fact of the Case:
The petitioners, various individuals and associations, challenged the Delhi Municipal Corporation (Amendment) Act, 2003, which introduced the unit area method of levying property taxes in Delhi. The petitioners argued that the Amendment Act of 2003 was beyond the legislative competence of the Legislative Assembly of NCT of Delhi, that it had not received the assent of the President in the manner stipulated in Article 239AA(3)(c) of the Constitution, that the unit area method of valuation was arbitrary and discriminatory, and that the provisions of the Amendment Act of 2003 suffered from arbitrariness and the vice of excessive delegation.
Finding of the Court:
The court held that the Legislative Assembly of NCT of Delhi had the legislative competence to enact the Amendment Act of 2003, as Entry 49 of the State List (Taxes on lands and buildings) was not excluded from the domain of the Legislative Assembly by Article 239AA(3)(a) of the Constitution. The court also held that the Amendment Act of 2003 had received the assent of the President and that the first proviso to Article 239AA(3)(c) was satisfied. The court further held that the unit area method of valuation was not arbitrary and that the provisions of the Amendment Act of 2003 did not suffer from any arbitrariness or the vice of excessive delegation. However, the court found that the classification of schools based solely on the fee structure was violative of Article 14 of the Constitution and directed that all schools, irrespective of the fee structure, would have to be assigned a single Use Factor.
Issues: 1. Whether the Legislative Assembly of NCT of Delhi had the legislative competence to enact the Delhi Municipal Corporation (Amendment) Act, 2003? 2. Whether the Amendment Act of 2003 had received the assent of the President in the manner stipulated in Article 239AA(3)(c) of the Constitution? 3. Whether the unit area method of valuation was arbitrary and discriminatory? 4. Whether the provisions of the Amendment Act of 2003 suffered from arbitrariness and the vice of excessive delegation?
Ratio Decidendi: 1. The court held that the Legislative Assembly of NCT of Delhi had the legislative competence to enact the Amendment Act of 2003, as Entry 49 of the State List (Taxes on lands and buildings) was not excluded from the domain of the Legislative Assembly by Article 239AA(3)(a) of the Constitution. The court reasoned that Entry 49 was an independent entry, unconnected with Entry 18 (Land, that is to say, rights in or over land, land tenures including the relation of landlord and tenant, and the collection of rents; transfer and alienation of agricultural land; land improvement and agricultural loans; colonization), and that Entry 18 was excluded from the domain of the Legislative Assembly by Article 239AA(3)(a) only insofar as it related to Entry 1, 2, and 18 of the State List. 2. The court held that the Amendment Act of 2003 had received the assent of the President and that the first proviso to Article 239AA(3)(c) was satisfied. The court reasoned that the Amendment Act of 2003 was reserved for the consideration of the President and had received his assent on 01.06.2003, and that the first proviso to Article 239AA(3)(c) clearly stated that a law made by the Legislative Assembly of NCT of Delhi would prevail in the National Capital Territory if it had been reserved for the consideration of the President and had received his assent. 3. The court held that the unit area method of valuation was not arbitrary and that the provisions of the Amendment Act of 2003 did not suffer from any arbitrariness or the vice of excessive delegation. The court reasoned that the unit area method of valuation was a recognized method of valuation, that the parameters used for classification of vacant lands and buildings were germane to the issue of classification of vacant lands and buildings so as to ensure that unequals were not treated equally, and that the provisions of the Amendment Act of 2003 provided clear guidelines for the classification of vacant lands and buildings and the determination of the base unit area values and the multiplicative factors. 4. The court found that the classification of schools based solely on the fee structure was violative of Article 14 of the Constitution and directed that all schools, irrespective of the fee structure, would have to be assigned a single Use Factor. The court reasoned that the classification of schools based solely on the fee structure was arbitrary and discriminatory, as it did not take into account the fact that some private unaided schools might be non-profit making bodies or entities that were imparting a better quality of education with a better infrastructure without any individual or group of individuals profiteering from the enterprise.
Final Decision: The court dismissed the writ petitions, subject to the observations and directions in respect of private unaided schools. The parties were left to bear their own costs.
BADAR DURREZ AHMED, J
1. In all these petitions (26 in number), there is a challenge to the unit area method of levying property axes in Delhi introduced by virtue of the Delhi Municipal Corporation (Amendment) Act, 2003. It is prayed that the Delhi Municipal Corporation (Amendment) Act, 2003 and the Delhi Municipal Corporation (Property Tax) Bye-laws, 2004 be declared as unconstitutional and as being void ab initio. The challenge, which is common to all the petitions, is founded on the following pleas: (I) The Legislative Assembly for the National Capital Territory lacked the legislative competence to enact the Delhi Municipal Corporation (Amendment) Act, 2003; (II) The Presidential Assent in the manner stipulated in Article 239AA(3)(c) was not there; (III) the unit area method is not a recognised system of valuation; (IV) There are no guidelines for the exercise of power under the new Section 116A and for classification; and (V) A flat rate of taxation under the unit area method is arbitrary and discriminatory and is, therefore, illegal. Apart from these pleas, which have been taken by all the petitioners, there are some specific pleas with regard to private unaided schools (22 petitions).
I. Legislative competence
2. It was contended on behalf of the petitioners that the Legislative Assembly for the National Capital Territory, while enacting the Delhi Municipal Corporation (Amendment) Act, 2003 (hereinafter referred to as "the Amendment act of 2003"), lacked the legislative competence to do so. This was a twofold contention. In the first place, it was contended that the property tax regime which had been put in place by virtue of the Delhi Municipal Corporation Act, 1957 (hereinafter referred to as "the said Act of 1957") had been done so by Parliament. As such, the property taxes levied under the said Act of 1957 constituted union taxation and therefore the same could not be altered by a legislature created for the Union Territory of Delhi and it could only be altered or varied by a law made by Parliament. For this proposition, the learned counsel for the petitioners placed reliance on the Supreme Court decision in the case of New Delhi Municipal Council v. State of Punjab: (1997) 7 SCC 339. Secondly, it was contended that by virtue of article 239AA(3)(a) of the Constitution of India, the legislative assembly of the National Capital Territory had power to make laws for the whole or any part of the National Capital Territory with respect to any of the matters enumerated in the State List or in the Concurrent List insofar as any such matter was applicable to Union territories except matters with respect to Entries 1, 2 and 18 of the State List and Entries 64, 65 and 66 of that list insofar as they relate to the said Entries 1, 2 and 18. It was contended that Entry 18 of the State List pertained to “land” and therefore property taxes fell under that entry. And, since the legislative assembly of the National Capital Territory did not have the power to make a law in respect of Entry 18 of the State List, it, consequently, lacked legislative competence while enacting the Amendment Act of 2003 by which a new regime of property taxes based on the unit area method had been put in place replacing the old regime of property taxation under the said Act of 1957 which had been enacted by Parliament. It was also contended that Entry 64 of the State List insofar as it related to Entry 18 thereof was also excluded from the legislative powers of the legislative assembly of the National Capital Territory. Entry 64 referred to offences against laws with respect to any of the matters in the said list. It was submitted that the penalties prescribed under the Amendment Act of 2003, since they related to Entry 18 of the State List, were also beyond the legislative competence of the legislative assembly of the National Capital Territory. On the basis of these two contentions, it was submitted that the Amendment Act of 2003, being beyond t
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