Title: LUCKNOW NAGAR NIGAM & OTHERS VERSUS KOHLI BROTHERS COLOUR LAB. PVT. LTD. & OTHERS
Citation: CIVIL APPEAL NO. 2878 OF 2024 (Arising out of S.L.P. (Civil) No.17402 of 2017
Dated on: 22.2.2024
Coram: HON’BLE JUSTICE B.V NAGRATHNA & JUSTICE UJJAL BHAYUN
The Lucknow Nagar Nigam has filed an appeal against the High Court’s decision to relieve the respondent from paying property tax on enemy property vested in the Custodian under the Enemy Property Act, 1968.Justice B.V. Nagarathna and Justice Ujjal Bhuyan decided the dispute and rendered the ruling.
Brief facts of the case
The lawsuit revolves around a building called House on Mahatma Gandhi Marg in Lucknow, which has historical significance as an enemy property Enemy property is defined as any property belonging to, held or managed on behalf of an enemy, an enemy subject or an enemy firm. Enemy includes any country that committed an act of aggression against India, and its citizens and companies. The property was originally owned by the Raja of Mahmudabad, who moved to Pakistan in 1947, and has since been the subject of legal contention. The property is currently occupied and used for profit by the respondent-assesses.
Historically, the Municipal Corporation assessed property taxes under Rule No. 174 ‘ka’ of the Act of 1959. However, the revelation of commercial activity on the grounds resulted in a reassessment based on capital value. This resulted in a series of legal processes, with the Office of the Custodian of Enemy Property for India declaring the property as enemy property in 2002. the taxes had to be paid to the property by the custodian.
Legal conflicts ensued between the Municipal Corporation, tenants, and the Custodian’s office. Despite efforts by the Raja’s son, Raja Mohammed Amir Mohammad Khan, to secure the release of enemy properties, possession surrender orders were issued. During these procedures, in 2011, the Municipal Corporation issued a recovery notice requesting payment from the assesses.
The assesses challenged the property’s taxation and filed a writ petition requesting relief, citing the property’s status as an enemy property. In 2017, the High Court granted the writ petition, quashing the recovery order and directing representations for any prior payments paid by the respondent.
Appellants arguments
Firstly, it was argued that the property in question, while in the custody of the Custodian of Enemy Property, did not belong to the Union Government. They noted that the lack of legislation specifically stating the property as belonging to the Union Government demonstrated that the Custodian’s responsibility was restricted to management rather than ownership. They also emphasized the transient nature of the Custodian’s control over enemy possessions, implying that ownership did not rest permanently with the government. Furthermore, they invoked constitutional rules governing the acquisition of private property, arguing that the Union Government must follow due procedure and offer fair compensation if it claims possession. The appellants also contended against the applicability of Article 285 of the Constitution, claiming that it only applied to properties directly. They also used legal precedents to support their argument that concessions made by municipal governments could not bind the state against its plenary jurisdiction to raise taxes. Finally, they asked the court to overturn the High Court’s verdict in light of their arguments.
Respondents’ arguments
They Respondents maintained that the property in question, which was declared enemy property and vested in the Custodian, was immune from state taxation under Article 285 of the Constitution. This immunity, they argued, was supported by judicial precedents and specific provisions of the Enemy Property Act of 1959. Furthermore, they stressed the clarity brought about by the 2017 Amendment Act on the property’s status, as well as the fact that declaring it enemy property was a legitimate exercise of police power. Overall, the respondents encouraged the court to uphold the challenged verdict, which accurately evaluated the law and facts of the case.
Court analysis and judgement
The Supreme Court ruled that enemy property vested in the Custodian of Enemy Property for India under the Enemy Property Act of 1968 did not constitute the property of the Union of India, and so is not free from state taxation under Article 285 of the Constitution. The Court further ruled that the respondent, as a lessee of the enemy property, cannot claim the exemption and must pay property tax and other local taxes to the appellant, the Lucknow Nagar Nigam. The Court based their ruling on the following grounds:
The Enemy Property Act of 1968 does not transfer ownership of the enemy property to the Custodian or the Union, but rather vests the property in the Custodian for preservation and management until government decided otherwise.
The Custodian acts as a trustee or fiduciary for the enemy property, not as an owner. The Custodian cannot dispose of enemy property without the prior approval of the Central Government.
The enemy property remains the property of the enemy subject or the enemy firm unless the Central Government acquires it through a particular notification under Section 12 of the Act.
The enemy’s property does not fall under Article 285 of the Constitution, which exempts Union property from state taxation. Article 285 only applies to property owned by the Union, not property vested in the Union or its officers for a specified purpose.
The responder, as a private person and not an agency of the Union, is not entitled to the benefits of Article 285 and must pay local taxes in accordance with municipal legislation. The respondent cannot avoid tax duty by claiming that he occupies enemy property as the Custodian’s lessee. As a result, the contested HC order was reversed, allowing the appellant to levy taxes beginning with the current fiscal year. No refunds for previously paid taxes were issued to ensure conformity with applicable regulations.
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Written by- Namitha Ramesh
