2024 INSC 596
Civil Appeal No. 7873 of 2024 Page 1 of 14
NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7873 OF 2024
RAJKOT MUNICIPAL
CORPORATION … APPELLANT
VERSUS
STATE OF GUJARAT
AND ORS. ... RESPONDENTS
J U D G M E N T
AUGUSTINE GEORGE MASIH, J.
1. This Appeal challenges the Order dated 07.07.2016
(hereinafter referred to as “Impugned Order”) in
Special Civil Application No. 4577 of 2016 passed by
High Court of Gujarat wherein the Appellant herein
being Rajkot Municipal Corporation (hereinafter
referred to as “Appellant-Corporation”) was directed
to refund a portion of the property tax, which was
paid by the Respondent No. 02 herein, namely,
Avenue Supermarts Limited. Respondent No. 02 had
assailed the demand raised by Appellant-Corporation
seeking payment of property tax for the Assessment
Civil Appeal No. 7873 of 2024 Page 2 of 14
Year (hereinafter referred to as ‘AY’) 2015-16 along
with outstanding arrears of such tax dues amounting
to INR 2,97,02,324/- (Rupees Two Crores NinetySeven Lakhs Two Thousand Three Hundred and
Twenty-Four Only). As a consequence to the nonfulfilment of aforesaid payment of dues by the
predecessor-in-interest holder of the property, the
premises were sealed on 21.03.2016 with prior
indication to the Respondent No. 02.
2. The High Court of Gujarat vide Impugned Order had
allowed the Special Civil Application moved by the
Respondent No. 02 on the ground that the said
Respondent cannot be made liable for the payment of
arrears of property tax which arose prior to the
acquisition of ownership, that is, prior to 03.09.2015.
The High Court deprecated the approach of the
Appellant-Corporation in charging exorbitant
amount of dues from Respondent No. 02 as well as
the uncalled inclusion of further interest and penalty
on such outstanding arrears, which had already been
challenged by the predecessor and had been stayed
by the competent court. Considering the said
circumstances, the High Court directed the
Civil Appeal No. 7873 of 2024 Page 3 of 14
Appellant-Corporation to retain a portion of the
property tax to the tune of INR 14,85,000/- (Rupees
Fourteen Lakhs and Eighty-Five Thousand Only)
relating to the relevant AY 2015-16 for which
Respondent No. 02 had acquired ownership and
possession, that is, from 03.09.2015 and to refund
the rest of the amount of property tax along with
simple interest at 6 per cent per annum from the date
of recovery till the actual payment of refund. In
compliance with the aforesaid direction qua refund
by the High Court, the Appellant-Corporation has
already refunded such quantum of excessive property
tax to the Respondent No. 02.
3. Aggrieved by the direction to make the refund of
accrued amount of property tax dues, the AppellantCorporation is assailing the Impugned Order before
this Court.
4. It is the case of the Appellant-Corporation that the
Impugned Order directing the refund of property tax
is contrary to the provisions of Sections 139 and 140
of the Gujarat Provincial Municipal Corporation Act,
1949 (hereinafter referred to as “GPMC Act 1949”). It
is argued that a Commissioner, by virtue of Sub-
Civil Appeal No. 7873 of 2024 Page 4 of 14
Section (1) of Section 140 of the GPMC Act 1949, is
empowered to recover such outstanding property tax
dues from an occupier where a person primarily
liable to pay the tax, after being duly served with
demand notice, has failed to make the payment
thereof. Moreover, as per Sub-Section (4) of Section
140 of the GPMC Act 1949, such occupier may credit
the said payment from a person who was primarily
liable to discharge the liability of such dues. Thus, it
was argued that from a cumulative reading of
Sections 139 and 140 of the GPMC Act 1949, the
Appellant-Corporation was justified in recovering
arrears from Respondent No. 02.
5. Per contra, it is contended by Respondent No. 02 that
the property in question which is a commercial
complex known as Shivlink-IV bearing City Survey
No. 5095/1B, 5095/1C(P), Plot No. 68, situated at
Gondal Road, Rajkot, was acquired via Deed of
Conveyance dated 03.09.2015 from its predecessorin-interest, that is, Respondent Nos. 04 and 05.
Respondent No. 02 would be liable for the payment of
property tax from the date of acquisition of ownership
and not for any period before this date, as affirmed
Civil Appeal No. 7873 of 2024 Page 5 of 14
by the High Court. Respondent No. 02 points out that
Respondent No. 03, the lessee of the property prior to
03.09.2015, has challenged similar tax demands for
earlier years in both civil court and the High Court,
resulting in a stay on recovery actions. Consequently,
it was argued that until the conclusion of
adjudication of such pending appeals pertaining to
the arrears of any period before 03.05.2015, the
Appellant-Corporation cannot make recovery of the
said amount from Respondent No. 02.
6. Furthermore, the Appellant-Corporation as well as
the Respondent Nos. 04 and 05 have relied on Letter
dated 18.01.2016, whereby it was stated that the
Respondent No. 02 had kept INR 2,50,00,000/-
(Rupees Two Crores and Fifty Lakhs only) as a token
of assurance from Respondent Nos. 04 and 05 for
clearing arrears of property tax. As argued, this letter
was intended to ensure that in case of failure of
payment of such arrears by the Respondent Nos. 04
and 05 (predecessor owners), it shall be incumbent
on the Respondent No. 02 (subsequent owner) to
make the payment thereof. Addressing this
argument, Respondent No. 02 contended that mere
Civil Appeal No. 7873 of 2024 Page 6 of 14
deposit of security amount by Respondent Nos. 04
and 05 would not tantamount to assignment of
liability for payment of tax for a period for which
Respondent No. 02 did not have ownership.
Appellant-Corporation cannot be allowed to ascribe
obligation upon Respondent No. 02 to seek remedy of
refund from Respondent Nos. 04 and 05.
7. Having heard the Senior Counsel for the AppellantCorporation as well as the Respondents, it is
imperative to decipher the undisputed facts along
with the applicable provisions of the GPMC Act 1949.
8. The relevant factual backdrop leading to the present
Impugned Order commenced from the point where
the original owner of the said property, namely, M/s
Platinum Associates (hereinafter referred to as
“original owner”) entered into a Lease Agreement
dated 01.12.2007 with Respondent No. 03 herein,
namely, Reliance Communications Limited for an
office space. Subsequently, the original owner sold
the said property to Prabha Kantilal Pohkiya and
Jyoti Rakesh Gandhi (Respondent Nos. 04 and 05
respectively) vide Conveyance Deed dated
05.12.2007. It needs mention here that Respondent
Civil Appeal No. 7873 of 2024 Page 7 of 14
No. 03 continued to occupy the premises, thereupon,
Respondent No. 02 purchased the said property from
Respondent Nos. 04 and 05 through a Deed of
Conveyance dated 03.09.2015.
9. Appellant-Corporation had raised several demand
notices for payment of outstanding property tax on
the premises starting from the year 2008. A Notice
dated 29.07.2010 was issued by the AppellantCorporation calling upon the Respondent No. 03,
being in possession of the said property, to pay
outstanding arrears of property tax along with
penalty and other charges to the tune of INR
1,33,48,898/- (Rupees One Crores Thirty-Three
Lakhs Forty-Eight Thousand Eight Hundred and
Ninety-Eight Only) for the period commencing from
01.06.2008. The said demand was assailed by
Respondent No. 03 by filing Municipal Appeal No. 19
of 2010 before the Civil Court, Rajkot, wherein
Respondent No. 03 deposited 75% of the bill amount
in Court. Thereafter, for AY 2011-12, demand notice
was issued to the Respondent No. 03 seeking
payment of property tax for the said AY as well as the
arrears thereof, which was also challenged by
Civil Appeal No. 7873 of 2024 Page 8 of 14
Respondent No. 03 before Civil Court in Municipal
Appeal No. 1639 of 2011, where again 75% of the bill
amount was deposited. It is pertinent to note that
both these appeals are pending before the Civil Court
with the stay on the deposit of the remaining 25% bill
amounts continues.
10. Similar were the demands for the AYs 2012-13 and
2013-14, which were challenged before the High
Court in Special Civil Application No. 3074 of 2014
on the ground of retrospectively charging of the
arrears of property tax by the Appellant-Corporation.
The said Application was disposed of vide Order
dated 04.04.2014 with a direction to the AppellantCorporation to serve a copy of the demand notices to
the Respondent No. 03 in view of the uncertainty
surrounding receipt of such notice. Further, the
Appellant-Corporation was directed to consider the
objections to be raised by Respondent No. 03 before
issuing fresh bills. The Appellant-Corporation
consequent to the above order proceeded to issue
another demand notice for the AY 2014-15 upon
Respondent No. 03 seeking payment of property tax
inclusive of earlier arrears to the tune of INR
Civil Appeal No. 7873 of 2024 Page 9 of 14
2,51,09,857/- (Rupees Two Crores Fifty-One Lakhs
Nine Thousand Eight Hundred and Fifty-Seven Only).
Respondent No. 03 then initiated a challenge against
the said demand notices issued for the AYs 2012-13,
2013-14 and 2014-15 before High Court in Special
Civil Application No. 3600 of 2015, wherein the High
Court vide its Order dated 07.07.2016, directed a
stay on the further recovery subject to payment of
INR 60,00,000/- (Rupees Sixty Lakhs Only) as an
interim measure, which would operate pending the
appeal challenging the said recovery for the aforesaid
three AYs. It was clarified that the said direction for
stay would automatically vacate in the event of nonfiling of an appeal assailing the demand for the said
AYs.
11. The present dispute arises from Demand Notice dated
11.03.2016 which was issued by the AppellantCorporation to Respondent No. 02, seeking not only
the payment of property tax for the AY 2015-16 but
also the outstanding dues amounting to INR
2,97,02,324/- (Rupees Two Crores Ninety-Seven
Lakhs Two Thousand Three Hundred and TwentyFour Only). It was also mentioned therein that on
Civil Appeal No. 7873 of 2024 Page 10 of 14
failure to discharge the payment of the said liability,
the said property would be sealed. Because of nondischarge of the demand as raised, the property in
question which was now under the ownership and
possession of Respondent No. 02 with effect from
03.09.2015 was sealed on 21.03.2016 with prior
indication vide affixation of public notice on the said
property. Furthermore, a final notice dated
20.02.2016 was issued by the Appellant-Corporation
for attachment of the said property and for issuance
of warrant of sale owing to failure of payment of the
said outstanding arrears along with penalties and
charges within five days from the date of such notice.
12. It is in pursuance thereto, that the Respondent No.
02 proceeded to deposit the outstanding dues qua the
said property and challenged the aforesaid action of
the Appellant-Corporation before High Court on the
grounds as recorded above.
13. It is evident from the aforementioned factual strata
that the Respondent No. 02 would fall in the category
of Section 139(1)(b)(iii) of GPMC Act 1949 being the
owner of the said property. It is clear and undisputed
that the Respondent No. 02 had purchased the said
Civil Appeal No. 7873 of 2024 Page 11 of 14
property from Respondent Nos. 04 and 05. Therefore,
till 03.09.2015, the “person primarily liable to make
payment” from a co-joint reading of Sections 139 and
140 of the GPMC Act 1949 was the lessor of the said
property, that is, Respondent Nos. 04 and 05. The
liability prior to 03.09.2015, thus, cannot be foisted
upon Respondent No. 02. The High Court was thus
correct in observing that Respondent No. 02 was
liable to pay property tax from the date of acquisition
of ownership. Further the High Court, had been
conscious enough while directing deduction of the
liability of the tax from Respondent No. 02 for the
relevant period, that is, subsequent to the date of
purchase being 03.09.2015, prior to making refund
of the remaining amount along with interest. It may
be added here that this Impugned Order has been
duly complied with by the Appellant-Corporation and
the amount has already been refunded as evidenced
from Communication dated 25.07.2016 and Letter
dated 28.07.2016.
14. Although considering the above factual matrix the
challenge against the direction for refund in the
Impugned Order in light of the provision of Section
Civil Appeal No. 7873 of 2024 Page 12 of 14
140 of the GPMC Act 1949, has become a mere
academic exercise, yet we may proceed to look at it
from another perspective. Here, Respondent No. 03,
the lessee of the property, acknowledged the
demands raised by the Appellant-Corporation for the
period prior to 03.09.2015 and even challenged the
same in the statutory appeals. The said challenge
pertaining to the demands for previous three AYs,
that is, from 2012-13 to 2014-15 were disposed of via
an interim stay Order upon deposition of certain
amount. It is apposite to note herein that the
Appellant-Corporation has neither challenged the
said stay Order dated 07.07.2016 passed in Special
Civil Application No. 3600 of 2015 nor has contested
before us that the Respondent No. 02 has not filed
statutory appeals as directed therein. So, the
contention of the Respondent No. 02 that pending
such adjudication of appeals the AppellantCorporation cannot challenge the correctness of
directions of the High Court for refund of the
amounts as deposited by Respondent No. 02 cannot
be faulted with.
Civil Appeal No. 7873 of 2024 Page 13 of 14
15. Another aspect which cannot be lost sight of is that
75% of the due amounts as per the bills raised by the
Appellant-Corporation for the AYs 2010-11 and
2011-12 stand deposited before Civil Court, Rajkot in
Municipal Appeal Nos. 19 of 2010 and 1639 of 2011,
securing a major portion of the liability subject to
outcome of the appeals where the AppellantCorporation, being a party thereto and is contesting,
cannot be permitted to take double benefit. Moreover,
in case the said appeals get dismissed, the deposited
amount would eventually be paid to the AppellantCorporation. This would result in a situation where
the Appellant-Corporation would have a sum
deposited in its favour equivalent to over and above
the actual outstanding amount. Thence, to obviate
such double payment in favour of the AppellantCorporation and causing disruption in the pending
litigation against the demands accrued prior to
03.09.2015, we are of the opinion that the order
directing refund by the High Court stands justified
considering the peculiarity of the aforesaid facts and
circumstances.
Civil Appeal No. 7873 of 2024 Page 14 of 14
16. In light of the aforesaid discussion, we do not find any
ground to interfere with the Impugned Order dated
07.07.2016 passed by the High Court. The appeal is,
therefore, dismissed.
17. Pending applications, if any, also stand disposed of.
There will be no orders as to costs.
……………………………….J.
(ABHAY S. OKA)
……………………………………..J.
(AUGUSTINE GEORGE MASIH)
NEW DELHI;
AUGUST 09, 2024.
