REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
1 CIVIL APPEAL NOs. 4944-4945 OF 2016
M/s Welspun Projects Ltd.
(Formerly known as M/s MSK Projects
India Ltd.) .... Appellant(s)
Versus
Director, State Transport,
Punjab & Anr. .... Respondent(s)
2
J U D G M E N T
R.K. Agrawal, J.
1) Challenge in the above said appeals is to the legality of the
impugned common judgment and order dated 14.11.2011 rendered by learned
single Judge of the High Court for the States of Punjab & Haryana at
Chandigarh in F.A.O. Nos. 3372 and 3488 of 2011 whereby the High Court
allowed the appeals filed by the respondent-State.
2) Factual position in a nutshell is as follows:-
(a) On 22.06.2005, a Concession Agreement was entered into between the
Government of Punjab (through Director, State Transport, Punjab) and M/s
Welspun Projects Ltd. (formerly known as M/s MSK Projects India Ltd.)-the
appellant-Company to design, finance, construct, operate and maintain the
Bus Terminal Project at Jalandhar on Build, Operate and Transfer (B.O.T)
basis and to determine, levy, demand, collect and retain the fees for a
period of 8 years, 5 months and 21 days.
(b) A similar Concession Agreement was entered into between the parties
mentioned above for the Bus Terminal at Ludhiana on the same basis for a
period of 10 years and 3 months.
(c) On 16.08.2005 and 25.10.2005, lease deeds were entered into between
the parties for the project sites at Jalandhar and Ludhiana respectively.
According to the said lease deeds, the appellant-Company was required to
pay only the annual rent of Re. 1 as lease rental.
(d) On 26.11.2008, the Commissioner, Municipal Corporation, Jalandhar-
Respondent No. 2 herein issued a notice under Section 103 of the Punjab
Municipal Corporation Act, 1976 (in short ‘the Act’) stating that the
premises in question was assessed for an annual rental value of Rs.
3,98,73,600/- for the year 2008-09.
(e) Similarly, on 08.02.2010, the appellant-Company received a notice
from the Municipal Corporation, Ludhiana stating the house tax assessment
for the year 2008-09 and 2009-10 had been carried out and the said property
at Ludhiana was assessed at Rs.64,59,588.80/- for an annual rental value of
the premises.
(f) The appellant-Company informed Respondent No. 2 herein that it was
handling the project on BOT basis and as such the actual owner is the State
Transport Authorities. However, when the contents of the notices were
brought to the knowledge of the State Transport Authorities, the State
Transport Authorities informed that the appellant-Company is the actual
user, occupant and beneficiary of the properties of the Bus Terminals and
as such is liable to pay all taxes including House Tax as per the terms and
conditions of the Concession Agreements.
(g) Being aggrieved by the demand notices, the appellant-Company
approached the High Court. The High Court, vide order dated 09.02.2010
directed the appellant-Company to approach Punjab Infrastructure Regulatory
Authority (PIRA). The appellant-Company preferred Petition Nos. 1 and 2 of
2010 before the PIRA against the State Transport Authorities of Jalanadhar
and Ludhiana respectively.
(h) Vide orders dated 08.09.2010 and 15.12.2010, the PIRA allowed the
petitions filed by the appellant-Company. Being aggrieved by the above
orders, the State Transport Authorities preferred F.A.O. Nos. 3372 and 3488
of 2011 before the High Court.
(i) Learned single Judge of the High Court, vide common judgment and
order dated 14.11.2011, allowed the appeals filed by the respondents
herein.
(j) Aggrieved by the order dated 14.11.2011, the appellant-Company has
preferred these petitions before this Court by way of special leave.
3) We have heard learned counsel for the parties and perused the
records.
4) Concession Agreement was entered into between the Government of
Punjab through the Director Transport, Punjab and M/s MSK Projects Ltd., to
design, finance, construct, operate and maintain the Bus Terminal Projects
at Jalandhar and Ludhiana on B.O.T. basis and to determine, levy, demand,
collect and retain the fees. Lease deeds were also executed between the
parties. Municipal Corporation is alleged to have issued notices for
recovery of House Tax which led to the issue in question. The appellant-
Company filed Petition No. 1 and Petition No. 2 before the PIRA which was
allowed vide orders dated 08.09.2010 and 15.12.2010. Being aggrieved by
the above said orders, the State Transport Authorities filed FAO Nos. 3372
and 3488 of 2011 before the High Court. Learned single Judge of the High
Court allowed the same vide common order dated 14.11.2011.
5) Learned senior counsel for the appellant-Company contended that
fastening the liability on the appellant– Company is manifestly erroneous
and is based on without complete and comprehensive appreciation of relevant
aspects of the case in proper manner and is liable to be set aside. There
is overwhelming material and also the case in Delhi Golf Club Ltd. and
Another vs. N.D.M.C., (2001) 2 SCC 633 is squarely applicable to the facts
of the present case and, therefore, the impugned order of the High Court is
liable to be set aside. Per contra learned Additional Advocate General for
the respondent-State strenuously argued that in view of the various clauses
in the Concession Agreement as well as the provisions of the Act, the High
Court was justified in fastening liability upon the appellant-Company for
payment of the house tax for the period under consideration.
6) Learned senior counsel for the appellant-Company strenuously
contended that it does not fall in the category of the “owner” as defined
under Section 2(35) of the Act and is neither an owner nor a tenant nor is
entitled to receive rent etc. In a special arrangement determined by the
Concession Agreements and the Lease Deeds, the appellant-Company is
required to pay only Re. 1/- as annual rent to the Director State
Transport, Punjab and is entitled to collect all the incomes from the
Project for a short and limited period so as to enable the appellant-
Company to recover the investments made in the Projects. Though the
buildings on the Project sites have been raised by the appellant-Company,
it has been done for the respondent-State who owns the land as well as the
building. Therefore, under section 97 of the Act, no house tax could be
levied on it. On the other hand, such a tax is entirely the liability of
the Director, State Transport, Punjab. The appellant-Company further
referred to Clause 13(e) of the Lease Deed which stipulates, “that except
the lease rental specified in Clause 6 of the Lease Deed, it (Lessor) shall
not levy any fee, rental, tax or any other charge on the lessee for the
demised premises”. It further stipulates that the appellant-Company will
only pay Re.1/- as annual lease rental.
7) Undoubtedly, the inter-se relationship between the parties and all
the relative rights and obligations are entirely governed by the Concession
Agreements and the Lease Deeds. It is thus to be seen first of all that if
these Agreements can provide any conclusive direction to settle the matter
in hand.
8) For appreciating the relevant provisions of the Lease Deeds and
Concession Agreements referred to above, it is to be mentioned here that
house tax is always assessed and paid in accordance with the provisions of
the Act. The definition of owner has been described in sub-Section 35 of
Section 2 which reads as under:
“2(35) “Owner” includes a person who for the time being is receiving or is
entitled to receive, the rent of any land or building whether on his own
account or on account of himself and others or as an agent, trustee,
guardian or receiver for any other person who should so receive the rent or
be entitled to receive it if the land or building or part thereof were let
to a tenant;”
9) Section 97(2) of the Act (as it stood at the relevant time) provides
with the incidence of tax on lands and buildings. It reads as under:-
“97(2) – Incidence of taxes on lands and buildings:-
If any land has been let for a term exceeding one year to a tenant and such
tenant has built upon the land, the taxes on land and buildings assessed in
respect of that land and the building erected thereon shall be primarily
leviable upon the said tenant, whether the land and building are in the
occupation of such tenant or sub-tenant of such tenant.”
10) Clause 6 and Clause 13(e) of the first lease deed dated 16.08.2005
are reproduced below:-
“6. The Lessee shall pay unto the Lessor an annual rent of Re 1/- as lease
rental, which shall be paid as an advance lease rental in single lump sum
payment of Rs. 15/- (in consideration of a possible extension of the
Concession Period) on or prior to the date upon which this deed is
executed.
13(e). That except the lease rental specified in Section 6 hereof, it shall
not levy any fee, rental, tax or any other charge on the Lessee for the
lease of the Demised Premises.”
11) Another lease deed was executed on 25.10.2005. Clause 6 and Clause
13(e) of the said lease deed are reproduced below:-
“6. The Lessee shall pay unto the Lessor an annual rent of Re 1/- as lease
rental, which shall be paid as an advance lease rental in single lump sum
payment of Rs. 15/- (in consideration of a possible extension of the
Concession Period) on or prior to the date upon which this deed is
executed.
13(1)(e). That except the lease rental specified in Section 3 hereof, it
shall not levy any fee, rental, tax or any other charge on the Lessee for
the lease of the Demised Premises.”
12) From a perusal of the aforesaid clauses, it is clear that they are
identical and no change has been made. The Concession Agreement was
executed on 22.06.2005. Clause 24.1(a) of the Agreement, which is relevant
and heavily relied upon by the respondents, is reproduced below:-
“24.1 Local Taxation:-
The concession period shall include all charges towards import license,
toll, customs, duties, import duties, business taxes etc. that may be
levied in accordance with the applicable laws as on the proposal acceptance
date in India on the concessionaire’s equipment, plant and Machinery and
Materials (whether permanent, temporary or consumable) acquired for the
purpose of this concession agreement and on the services to be performed
under this concession agreement. Nothing in this concession agreement shall
relieve the concessionaire from its responsibility to pay any tax that may
be levied in India on profits made by it in respect of this concession
agreement.
13) It may be mentioned here that both the lease deeds were executed by
the Director, State Transport, Punjab for and on behalf of the Governor of
the State of Punjab. From a perusal of Clauses 6 and 13(e) of the lease
deeds reproduced above, we are of the opinion that the appellant-Company
was required to pay rent of Re. 1 only as lease rental and further the
Government has specifically mentioned that except the lease rental, it
shall not levy any fees, rent, tax or any other charge on the lessee for
the lease of the demised premises. We find that even though under the
provisions of Section 2(35) read with 97(2) of the Act, normally the tenant
who has been given land on lease for a term exceeding 1 (one) year is
primarily liable to pay taxes on lands and buildings yet in view of the
provisions of Section 157(1) of the Act, the Government is empowered to
exempt in whole or in part from the payment of any such tax any person or
class of persons or any property or description of property which in the
present case has been done on behalf of the government when the lease deeds
were executed. For ready reference, Section 157(1) of the Act is
reproduced below:-
“157. Powers of Government in regard to taxes-(1) The Government may by
order exempt in whole or in part from the payment of any such tax any
person or class of persons or any property or description of property.”
14) A reading of Concession Agreement dated 22.06.2005, more so, Clause
24.1(a) which deals with the local taxation states that the concession
period shall include all charges towards import license, toll, customs,
duties, import duties etc. which is to be payable by the appellant-Company.
In view of the specific exemption given under the lease deed regarding
payment of any taxes on the demised premises, in our considered opinion,
the appellant-Company is not at all required to pay any municipal taxes on
the demised premises. We may also mention here that the house tax was
being paid by the transport department prior to the signing of the
Concession Agreement and if it was intended that this burden should be
passed on to the appellant-Company, a clear clause interpreting this point
would have certainly been inserted in the Agreement itself. Not only this,
the Department continued to pay the house tax for 3 to 4 years even after
the date of the signing of the agreement.
15) In view of the forgoing discussion, we are of the considered opinion
that the appellant-Company is not liable to pay any house tax under the Act
and the demand and payment of house tax from the appellant-Company was
without the authority of law and the appellant-Company is entitled to the
refund of the amount of house tax paid by it alongwith rate of interest at
the rate of 10% p.a. from the date of deposit.
16) In view of the above, the impugned judgment and order of the High
Court dated 14.11.2011 is set aside and, consequently, the appeals are
allowed.
...…………….………………………J.
(ANIL R. DAVE)
[[[[
…....…………………………………J.
(R.K. AGRAWAL)
...…………….………………………J.
(L. NAGESWARA RAO)
NEW DELHI;
NOVEMBER 8, 2016.
-----------------------
10
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
1 CIVIL APPEAL NOs. 4944-4945 OF 2016
M/s Welspun Projects Ltd.
(Formerly known as M/s MSK Projects
India Ltd.) .... Appellant(s)
Versus
Director, State Transport,
Punjab & Anr. .... Respondent(s)
2
J U D G M E N T
R.K. Agrawal, J.
1) Challenge in the above said appeals is to the legality of the
impugned common judgment and order dated 14.11.2011 rendered by learned
single Judge of the High Court for the States of Punjab & Haryana at
Chandigarh in F.A.O. Nos. 3372 and 3488 of 2011 whereby the High Court
allowed the appeals filed by the respondent-State.
2) Factual position in a nutshell is as follows:-
(a) On 22.06.2005, a Concession Agreement was entered into between the
Government of Punjab (through Director, State Transport, Punjab) and M/s
Welspun Projects Ltd. (formerly known as M/s MSK Projects India Ltd.)-the
appellant-Company to design, finance, construct, operate and maintain the
Bus Terminal Project at Jalandhar on Build, Operate and Transfer (B.O.T)
basis and to determine, levy, demand, collect and retain the fees for a
period of 8 years, 5 months and 21 days.
(b) A similar Concession Agreement was entered into between the parties
mentioned above for the Bus Terminal at Ludhiana on the same basis for a
period of 10 years and 3 months.
(c) On 16.08.2005 and 25.10.2005, lease deeds were entered into between
the parties for the project sites at Jalandhar and Ludhiana respectively.
According to the said lease deeds, the appellant-Company was required to
pay only the annual rent of Re. 1 as lease rental.
(d) On 26.11.2008, the Commissioner, Municipal Corporation, Jalandhar-
Respondent No. 2 herein issued a notice under Section 103 of the Punjab
Municipal Corporation Act, 1976 (in short ‘the Act’) stating that the
premises in question was assessed for an annual rental value of Rs.
3,98,73,600/- for the year 2008-09.
(e) Similarly, on 08.02.2010, the appellant-Company received a notice
from the Municipal Corporation, Ludhiana stating the house tax assessment
for the year 2008-09 and 2009-10 had been carried out and the said property
at Ludhiana was assessed at Rs.64,59,588.80/- for an annual rental value of
the premises.
(f) The appellant-Company informed Respondent No. 2 herein that it was
handling the project on BOT basis and as such the actual owner is the State
Transport Authorities. However, when the contents of the notices were
brought to the knowledge of the State Transport Authorities, the State
Transport Authorities informed that the appellant-Company is the actual
user, occupant and beneficiary of the properties of the Bus Terminals and
as such is liable to pay all taxes including House Tax as per the terms and
conditions of the Concession Agreements.
(g) Being aggrieved by the demand notices, the appellant-Company
approached the High Court. The High Court, vide order dated 09.02.2010
directed the appellant-Company to approach Punjab Infrastructure Regulatory
Authority (PIRA). The appellant-Company preferred Petition Nos. 1 and 2 of
2010 before the PIRA against the State Transport Authorities of Jalanadhar
and Ludhiana respectively.
(h) Vide orders dated 08.09.2010 and 15.12.2010, the PIRA allowed the
petitions filed by the appellant-Company. Being aggrieved by the above
orders, the State Transport Authorities preferred F.A.O. Nos. 3372 and 3488
of 2011 before the High Court.
(i) Learned single Judge of the High Court, vide common judgment and
order dated 14.11.2011, allowed the appeals filed by the respondents
herein.
(j) Aggrieved by the order dated 14.11.2011, the appellant-Company has
preferred these petitions before this Court by way of special leave.
3) We have heard learned counsel for the parties and perused the
records.
4) Concession Agreement was entered into between the Government of
Punjab through the Director Transport, Punjab and M/s MSK Projects Ltd., to
design, finance, construct, operate and maintain the Bus Terminal Projects
at Jalandhar and Ludhiana on B.O.T. basis and to determine, levy, demand,
collect and retain the fees. Lease deeds were also executed between the
parties. Municipal Corporation is alleged to have issued notices for
recovery of House Tax which led to the issue in question. The appellant-
Company filed Petition No. 1 and Petition No. 2 before the PIRA which was
allowed vide orders dated 08.09.2010 and 15.12.2010. Being aggrieved by
the above said orders, the State Transport Authorities filed FAO Nos. 3372
and 3488 of 2011 before the High Court. Learned single Judge of the High
Court allowed the same vide common order dated 14.11.2011.
5) Learned senior counsel for the appellant-Company contended that
fastening the liability on the appellant– Company is manifestly erroneous
and is based on without complete and comprehensive appreciation of relevant
aspects of the case in proper manner and is liable to be set aside. There
is overwhelming material and also the case in Delhi Golf Club Ltd. and
Another vs. N.D.M.C., (2001) 2 SCC 633 is squarely applicable to the facts
of the present case and, therefore, the impugned order of the High Court is
liable to be set aside. Per contra learned Additional Advocate General for
the respondent-State strenuously argued that in view of the various clauses
in the Concession Agreement as well as the provisions of the Act, the High
Court was justified in fastening liability upon the appellant-Company for
payment of the house tax for the period under consideration.
6) Learned senior counsel for the appellant-Company strenuously
contended that it does not fall in the category of the “owner” as defined
under Section 2(35) of the Act and is neither an owner nor a tenant nor is
entitled to receive rent etc. In a special arrangement determined by the
Concession Agreements and the Lease Deeds, the appellant-Company is
required to pay only Re. 1/- as annual rent to the Director State
Transport, Punjab and is entitled to collect all the incomes from the
Project for a short and limited period so as to enable the appellant-
Company to recover the investments made in the Projects. Though the
buildings on the Project sites have been raised by the appellant-Company,
it has been done for the respondent-State who owns the land as well as the
building. Therefore, under section 97 of the Act, no house tax could be
levied on it. On the other hand, such a tax is entirely the liability of
the Director, State Transport, Punjab. The appellant-Company further
referred to Clause 13(e) of the Lease Deed which stipulates, “that except
the lease rental specified in Clause 6 of the Lease Deed, it (Lessor) shall
not levy any fee, rental, tax or any other charge on the lessee for the
demised premises”. It further stipulates that the appellant-Company will
only pay Re.1/- as annual lease rental.
7) Undoubtedly, the inter-se relationship between the parties and all
the relative rights and obligations are entirely governed by the Concession
Agreements and the Lease Deeds. It is thus to be seen first of all that if
these Agreements can provide any conclusive direction to settle the matter
in hand.
8) For appreciating the relevant provisions of the Lease Deeds and
Concession Agreements referred to above, it is to be mentioned here that
house tax is always assessed and paid in accordance with the provisions of
the Act. The definition of owner has been described in sub-Section 35 of
Section 2 which reads as under:
“2(35) “Owner” includes a person who for the time being is receiving or is
entitled to receive, the rent of any land or building whether on his own
account or on account of himself and others or as an agent, trustee,
guardian or receiver for any other person who should so receive the rent or
be entitled to receive it if the land or building or part thereof were let
to a tenant;”
9) Section 97(2) of the Act (as it stood at the relevant time) provides
with the incidence of tax on lands and buildings. It reads as under:-
“97(2) – Incidence of taxes on lands and buildings:-
If any land has been let for a term exceeding one year to a tenant and such
tenant has built upon the land, the taxes on land and buildings assessed in
respect of that land and the building erected thereon shall be primarily
leviable upon the said tenant, whether the land and building are in the
occupation of such tenant or sub-tenant of such tenant.”
10) Clause 6 and Clause 13(e) of the first lease deed dated 16.08.2005
are reproduced below:-
“6. The Lessee shall pay unto the Lessor an annual rent of Re 1/- as lease
rental, which shall be paid as an advance lease rental in single lump sum
payment of Rs. 15/- (in consideration of a possible extension of the
Concession Period) on or prior to the date upon which this deed is
executed.
13(e). That except the lease rental specified in Section 6 hereof, it shall
not levy any fee, rental, tax or any other charge on the Lessee for the
lease of the Demised Premises.”
11) Another lease deed was executed on 25.10.2005. Clause 6 and Clause
13(e) of the said lease deed are reproduced below:-
“6. The Lessee shall pay unto the Lessor an annual rent of Re 1/- as lease
rental, which shall be paid as an advance lease rental in single lump sum
payment of Rs. 15/- (in consideration of a possible extension of the
Concession Period) on or prior to the date upon which this deed is
executed.
13(1)(e). That except the lease rental specified in Section 3 hereof, it
shall not levy any fee, rental, tax or any other charge on the Lessee for
the lease of the Demised Premises.”
12) From a perusal of the aforesaid clauses, it is clear that they are
identical and no change has been made. The Concession Agreement was
executed on 22.06.2005. Clause 24.1(a) of the Agreement, which is relevant
and heavily relied upon by the respondents, is reproduced below:-
“24.1 Local Taxation:-
The concession period shall include all charges towards import license,
toll, customs, duties, import duties, business taxes etc. that may be
levied in accordance with the applicable laws as on the proposal acceptance
date in India on the concessionaire’s equipment, plant and Machinery and
Materials (whether permanent, temporary or consumable) acquired for the
purpose of this concession agreement and on the services to be performed
under this concession agreement. Nothing in this concession agreement shall
relieve the concessionaire from its responsibility to pay any tax that may
be levied in India on profits made by it in respect of this concession
agreement.
13) It may be mentioned here that both the lease deeds were executed by
the Director, State Transport, Punjab for and on behalf of the Governor of
the State of Punjab. From a perusal of Clauses 6 and 13(e) of the lease
deeds reproduced above, we are of the opinion that the appellant-Company
was required to pay rent of Re. 1 only as lease rental and further the
Government has specifically mentioned that except the lease rental, it
shall not levy any fees, rent, tax or any other charge on the lessee for
the lease of the demised premises. We find that even though under the
provisions of Section 2(35) read with 97(2) of the Act, normally the tenant
who has been given land on lease for a term exceeding 1 (one) year is
primarily liable to pay taxes on lands and buildings yet in view of the
provisions of Section 157(1) of the Act, the Government is empowered to
exempt in whole or in part from the payment of any such tax any person or
class of persons or any property or description of property which in the
present case has been done on behalf of the government when the lease deeds
were executed. For ready reference, Section 157(1) of the Act is
reproduced below:-
“157. Powers of Government in regard to taxes-(1) The Government may by
order exempt in whole or in part from the payment of any such tax any
person or class of persons or any property or description of property.”
14) A reading of Concession Agreement dated 22.06.2005, more so, Clause
24.1(a) which deals with the local taxation states that the concession
period shall include all charges towards import license, toll, customs,
duties, import duties etc. which is to be payable by the appellant-Company.
In view of the specific exemption given under the lease deed regarding
payment of any taxes on the demised premises, in our considered opinion,
the appellant-Company is not at all required to pay any municipal taxes on
the demised premises. We may also mention here that the house tax was
being paid by the transport department prior to the signing of the
Concession Agreement and if it was intended that this burden should be
passed on to the appellant-Company, a clear clause interpreting this point
would have certainly been inserted in the Agreement itself. Not only this,
the Department continued to pay the house tax for 3 to 4 years even after
the date of the signing of the agreement.
15) In view of the forgoing discussion, we are of the considered opinion
that the appellant-Company is not liable to pay any house tax under the Act
and the demand and payment of house tax from the appellant-Company was
without the authority of law and the appellant-Company is entitled to the
refund of the amount of house tax paid by it alongwith rate of interest at
the rate of 10% p.a. from the date of deposit.
16) In view of the above, the impugned judgment and order of the High
Court dated 14.11.2011 is set aside and, consequently, the appeals are
allowed.
...…………….………………………J.
(ANIL R. DAVE)
[[[[
…....…………………………………J.
(R.K. AGRAWAL)
...…………….………………………J.
(L. NAGESWARA RAO)
NEW DELHI;
NOVEMBER 8, 2016.
-----------------------
10
