REMEDY TO REFUSAL OF REGISTRATION OF DOCUMENTS

 

Remedy to refusal of registration OF DOCUMENTS

 

The registration of documents such as sale deed, relinquishment deed, Power of Attorneys, Wills, Rent Deed etc is a common practice in everyday life. In every district, the office of Sub-Registrar is earmarked for the purpose of carrying out registration process. The registrar is authorized in terms of Section…..of Registration Act to carry out the registration of documents submitted, if the same are in order. The Sub-Registrar is also authorized to refuse the registration of documents, if according to Sub-Registrar, the registration of documents cannot be granted on account of the same not being in order or otherwise prohibited. The finding of Sub-registrar as regards refusal, however has to be based on cogent reasons and not arbitrary. The successive appellate tribunals for refusal to registration of documents or otherwise appellate remedy is prescribed against the order of grant of registration and refusal.   

The Registration Act 1908 itself encapsulates the mechanism of appeal/s 72 of the Registration Act, in  case executants or a party to the registration is aggrieved from refusal of registration. If the executants or a party to the documents presented for registration is aggrieved by refusal of registration of the said document, so presented with the Sub-Registrar, the appeal u/s 72 can be preferred by the aggrieved party before the Registrar of the District within 30 days from the date of the order of refusal. It may be of significance to iterate the provisions of section 72. The same are illustrated as under:

72: Appeal to Registrar from orders of Sub-Registrar refusing registration on ground other than denial of execution.-

(1) Except where the refusal is made on the ground of denial of execution, an appeal shall lie against an order of a Sub Registrar refusing to admit a document to registration (whether the registration of such document is compulsory or optional) to the Registrar to whom such Sub Registrar is subordinate, if presented to such Registrar within thirty days from the date of the order; and the Registrar may reverse or alter such order.

(2) If the order of the Registrar directs the document to be registered and the document is duly presented for registration within thirty days after the making of such order, the Sub-Registrar shall obey the same, and thereupon shall, so far as may be practicable, follow the procedure prescribed in sections 58, 59 and 60; and such registration shall take effect as if the document had been registered when it was first duly presented for registration.

The Chapter XII of the Act specifically deals with the reasons for refusal to register a document on the part of the Sub Registrar. Section 71 of the Act says that the Sub Registrar has to give reasons for refusal and Section 72 of the Act says that in case of refusal, an appeal would lie before the Registrar against the order of Sub Registrar.

The registrar is therefore empowered to deal with the appeal preferred by the aggrieved party. As evident, the Registrar may confirm or set aside the ord4er of refusal as impugned and in that event the Sub-Registrar shall be obligated to carry out the registration.

In this context, it is also relevant to point out that should the aggrieved party assailing the order of refusal of registration passed by Sub-Registrar is still aggrieved, then, the order passed in appeal by the Registrar could be impugned before civil courts of appropriate jurisdiction u/s 77 of the Registration Act, 1908. Therefore, the order passed by Sub-Registrar has a clear two tier of appellate authority.    

WHAT PROPERTIES ARE TRANSFERRABLE?

All properties are transferrable, if owned by a person or has the authority to transfer by necessary implication,, unless barred as per law.

The Division bench of Madras High Court in a matter reported as Ramayee v Sub-Registrar (2020 6 CTC 697) has been a celebrated judgment in this context. The SLP (Civil) 4844 of 2021 against the said judgment before supreme court stands dismissed.  The Madras High Court in W.P.No.2758 of 2023 relying on the Ramayee (Supra) has authored the judgment captioned as The Federal Bank Ltd. Vs. The Sub Registrar, & Ors and observed as under:

“29. …..when we deal with the various provisions of the Transfer of Property Act the question arises as to whether the transfer is restricted to one time in respect of the immovable property, unless the previous transfer or any agreement is set aside in the court of law, and other transfer is permissible? The answer is absolutely “No” for the following reasons: The property of any kind may be transferred, except as otherwise provided by the transfer of property Act or by any other law for the time being, as provided in Section 6 of the Transfer of property Act.

30. Every person competent to contract and entitled to transferable property, or authorised to dispose of transferable property not his own, is competent to transfer such property either wholly or in part, and either absolutely or conditionally, in the circumstances, to the extent and in the manner allowed and prescribed by any law for the time being in force, as per Section 7 of the Transfer of Property Act. The reading of the above section makes it very clear that even a person not entitled transferable property is competent to transfer such property when he was authorised to dispose of such property.

31. Section 41 of the Transfer of Property Act deals with the power of the ostensible owner to effect the transfer of the property with consent, express or implied of the real owner.

32. From the principle underlined in the Section 41 of the Transfer of Property Act is that the ostensible owner of the property, with the consent express or implied and representing himself as owner of the property though he is not having the title, can deal with the property. Similarly, Section 42 of the T.P. Act deals with the transfer by a person having authority to revoke the former transfer. When a person transfers any immovable property reserving power to revoke the transfer, and subsequently transfers the property for consideration to another transferee, such transfer operates in favour of such transferee subject to any condition attached to the exercise of the power as a revocation of the former transfer to the extent of the power.

33. Similarly section 43 of Transfer of Property Act deals with transfer by unauthorised person who subsequently acquires interest in the property transferred. The above section makes it very clear that even a person who has no title over the property purports to transfer to another by deed and when he subsequently acquires any interest in the property, sufficient to satisfy the transfer, the title would pass to the transferee without any further  act on the part of the transferor, provided the transferee has not rescinded the transfer and opts for such effectuation. The above principle also makes it very clear even a transfer by unauthorised person is not prohibited. Only the validity of the title would be subject to his acquiring subsequent interest in the property.

34. Section 48 of the Transfer of Property Act deals with priority of rights created by transfer, which reads as follows: “48. Where a person purports to create by transfer at different times rights in or over the same immoveable property, and such rights cannot all exist or be exercised to their full extent together, each later created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created.”

35. The above section determines the priority when there are successive transfers, where the person creates transfer at different times right in or over the same immovable property, such rights cannot all exist or be exercised to their full extent together, each later created right shall, in the absence of a special contract or reservation bind the earlier transferee and be subject to the rights previously created.

36. Reading of the above section makes it clear that there is no bar for successive transfers. However, the rights in later transfer shall always be subject to the rights already created in the earlier transfer.

No condonation of delay is prescribed in an appeal before the Registrar

When an appeal against the order of Sub-Registrar is impugned before the Registrar, thereby refusing registration of a document and if the same is filed beyond 30 days prescribed for preferring appeal, the appeal cannot be entertained, in as much as there is no power for condonation of delay available to the Registrar. The following judicial precedents may be relevant in the context:

(i)          In a matter captioned as MISC. SINGLE No. - 3223 of 2006 Amrawati Vs Registrar/Apar Collector Pratapgarh & Ors the Allahabad High Court dealt with two questions up for consideration (i) "whether Registrar could have entertained appeal preferred after expiry of period of limitation" and (ii) "whether condonation of delay under Section 5 of Act, 1963 was permissible."

It is understood as per catena of judgments that in respect of proceedings before Tribunals/quasi judicial bodies limitation Act 1963 is not applicable, since it is applicable to the Courts). The delay condoned was therefore set aside in Amrawati (Supra).

(ii)        Earlier also, the Section 72 and 78 of Act, 1908 itself came up for consideration before a learned Single Judge in State of U.P. Vs. District Registrar, Meerut and others AIR 1971 All 390. Court held that District Registrar is a creation of Act, 1908 and to exercise only those powers that have been given to him under Act, 1908. He does not exercise powers of a Court, though he sits in appeal against the order of Sub-Registrar under Section 72 of Act, 1908 but the powers therein are limited. Under Section 72 of Act, 1908 he can only direct a document to be registered by Sub-Registrar, who has refused registration on the ground, other than denial of execution. The Court categorically said: "Although he exercises powers as an appellate authority under the Act, he does not sit as a court."

(iii)       The same was also reiterated in Raghuvir Narain Rastogi Vs. State of U.P & others 2005 (2) AWC 1814 (All) wherein Allahabad High Court held that Registrar, Additional Registrar or the Sub-Registrar cannot be treated as a Court and Section 5 of Act, 1963 shall not be applicable to proceedings under Act, 1908.

(iv)       In Chhedu Vs. Abdul Hasan 1975 ALJ 462 also Allahabad High Court has held that Registrar while hearing an appeal under Act, 1908 does not act as a Court though as an appellate authority his functions are quasi-judicial but it is like an Executive Officer vested with quasi judicial functions for the limited purpose of Act, 1908.

(v)         The Supreme Court has held in a matter reported as Sushila Devi Vs. Ramanandan Prasad & ors AIR 1976 SC 177, Court said that provisions of Act, 1963 apply only to proceedings in "Courts" and not to appeals or applications before bodies other than Courts such as quasi-judicial Tribunals or Executive Authorities, notwithstanding the fact that such bodies or authorities may be vested with certain specified powers conferred on Courts under the Code of Civil Procedure.

Thus, whereas the appellate powers are conferred on the Registrar against the orders granting or refusing registration, but the delay occasioned in preferring appeal cannot be condoned by the Registrar, on view of the fact that there are no express provisions to that effect and judicial precedents has set out that as well.

CONDONATION OF DELAY IS NOT PRESCRIBED  u/s 77 of REGISTRATION ACT 1908

What is of further significance that there is no provisions for condoning delay even for preferring appeal before a civil court u/s 77 against order in appeal passed by a Registrar u/s 72 of the Act. It is held so by Delhi High Court in a matter captioned as Sub- Registrar Iv-A & Anr Vs Sol Infotech Pvt. Ltd. (2018) 08 DEL CK 0383 (Regular First Appeal No. 358 Of 2017). The trial court had dismissed the suit as time barred by dismissing an application under Section 5 of the Limitation Act, 1963. It was upheld by Delhi High Court.

However, the Delhi High Court in Sub-Registrar IV A (Supra) has held as under:

“7. The present is a classic case where because of illegal actions of the competent authorities acting under the statutory powers under the Registration Act, the appellant/plaintiff has suffered grave prejudice and losses including not only time and money but also of mental harassment on account of non-registration of an otherwise valid Gift Deed”.

Though, the impugned judgment of the trial court was sustained as the suit was barred by limitation inasmuch as there is no provision for condonation of delay in filing of the suit as per Section 5 of the Limitation Act and which has been filed beyond period of 30 days as provided in Section 77 of the Registration Act, however, the appeal was disposed of with the following directions:-

(i) The appellant/plaintiff will be entitled within one month from today seek refund of the stamp duty amount from the Collector of Stamps after depositing the Gift Deed dated 21.10.2014 typed on the non-judicial stamp duty papers, and the Collector of Stamps will refund the amount of non-judicial stamp duty minus the normal charges deducted when stamp duty is sought to be refunded within the statutory period of six months.

(ii) Appellant/plaintiff will now be entitled to get a fresh Gift Deed executed on appropriate stamp duty, and the statutory authorities acting under the Registration Act, including the Sub-Registrar, are directed to register this Gift Deed if otherwise the Gift Deed is in order as regards the stamp duty, and the registration of the Gift Deed should not be refused on the ground that the Uldhanpur, Naveen Shahdara, Delhi-110032, having total Land Area 195.096 sq. meters and Plinth Area 166 sq. meters.

(iii) appellant/plaintiff is not the owner of the subject property bearing no. 1/11277-A/1, Gali No. 1, Subhash Park Extension, Village (iv) A copy of this judgment be sent to all the Sub-Registrars functioning in Delhi for information and compliance.

WRIT P{ETITION AGAINST ORDER OF REGISTRAR U/S 72 pf the Registration ACT, 1908

A Writ petition is not maintainable against the order passed by the Registrar u/s 72 of the Act. It is held by Delhi High Court In Alka Goel  Vs State Govt Of Nct Of Delhi & Ors (2023) 03 DEL CK 0207. It is held by the High Court that as appellate remedy available as per the Act u/s 72 before the Registrar and yet another appellate remedy u/s 77 of the Act before a civil court is provided against the order of Registrar, therefore, a writ petition shall not lie.

In Mahavir Singh & Ors. Vs GNCT Of Delhi & Ors (2022) 11 DEL CK 0140 In the Delhi High Court Case No : Civil Writ Petition No. 4194 Of 2022 has observed that the Registration Act 1908 is a complete code in itself and all reasons for refusal have been enumerated therein under Sections 19, 20, 21, 22, 23, 24, 25, 28, 32, 33, 34 and 35 of the said Act and the Act and if refusing the registration is beyond the scope of the said enactment, then appeal u/s 72 of the Act shall follow and another appeal before court against the order of Registrar u/s 77 of the Act shall also lie. The writ petition shall not lie in view of the specific appellate remedy available as per the Registration Act 1908.

In Santosh Devi  Vs State Of Haryana & Anr the High Court Of Punjab And Haryana At Chandigarh Case No : Civil Writ Petition No. 13486 Of 2017, it is held that writ petition shall not be maintainable in view of express appellate provisions available u/s 72 and 77 of the Registration act 1908.

CONCLUSION

The office of Sub-Registrar and Registrar are interface for the purpose of registration of documents of all hues and plenty of issues in routine, emerges as regards grant of registration or refusal in granting registration. The Registration Act 1908 is a comprehensible Act encapsulating the details of law and procedure. The appellate remedy against the order of Sub-Registrar is provided for before the Registrar and yet again before the Civil Courts. The limitation periods for preferring such appeals are Thirty (30) days and the delay cannot be condoned in this regard. The rule of procedure is abstract and simple. The writ petition before a court of record i.e high court being extra- ordinary jurisdiction is generally not entertained. It is also a settled proposition in law, that if appellate remedy is available, the writ petition shall not lie. However, if a situation of grave wrong emerges, then in such exceptional cases, the high court may entertain writ petition. The law as regards registration of property and documents, apart from procedural aspects of it has been dealt with in the foregoing lines.

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                                        Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com

      

PRODUCTION OF DOCUMENTS DURING CROSS EXAMINATION:PERMISSIBLE?

 

 

Production of documents during cross examination:permissible?

 

The common law and procedure as regards civil cases in pre-trial stage revolves around summons and pleadings. After pleadings are complete, issues are framed and when witnesses are being cross examined, what will be the fate of the documents sought to be introduced during cross examination? That aspect is being looked at herein. The basic rule, of course is to file all documents that a party to the lis relies upon or seeks to rely upon while filing plaint or written statement as the case may be. However, whether there is any embargo to place additional documents on record during examination or cross examination of a witness?

The hon’ble Delhi High Court has dealt with the matter in a matter captioned as BHAG SINGH GAMBHIR AND ORS Vs RAMA ARORA and bearing no. CS(OS) 132/2017.

In the aforesaid judgment, the Delhi High Court has held that the Courts have successively permitted a party to the lis to place the documents on record during cross examination. The following judgments are relied upon by the court in that regard:

(i)          Levaku Pedda Reddamma & Ors. Vs. Gottumukkala Venkata Subbamma & Anr. (Supreme Court) Civil Appeal No.4096 of 2022, SLP (C) No.7452/2022.

(ii)         Jindal Stainless (Hisar) Ltd. Vs. Sourabh Jinal & Ors., 2022 SCC OnLine Del 1, decision dated 03.01.2022, Delhi High Court.

(iii)       Sugandhi (dead) by legal representatives and Others vs. P. Rajkumar, (2020) 10 SCC 706.

(iv)       Subhash Chander vs. Shri Bhagwan Yadav, 2009 SCC OnLine Del 3818, Delhi High Court.

(v)         Pandharinath L. Bhandari vs. Bharti Trimbak Bhandari and Ors., 2021 SCC OnLine Bom 447, AIR 2021 Bom 155.

 

In Sugandhi (Supra) the Supreme Court has held in para no.9 that:

“9. It is often said that procedure is the handmaid of justice Procedural and technical hurdles shall not be allowed to come in the way of the court while doing substantial justice. If the procedural violation does not seriously cause prejudice to the adversary party, courts must lean towards doing substantial justice rather than relying upon procedural and technical violation. We should not forget the fact that litigation is nothing but a journey towards truth which is the foundation of justice and the court is required to take appropriate steps to thrash out the underlying truth in every dispute. Therefore, the court should take a lenient view when an application is made for production of the documents under sub rule (3).”

 

The Delhi High Court in the case of Subhash Chander vs. Shri Bhagwan Yadav, 2009 SCC OnLine Del 3818, held as follows:

“8. Order 7 Rule 14(4), Order 8 Rule 1 (A) (4), as well as Order 13 Rule 1(3) provide that the provisions requiring parties to file documents along with their pleadings and/or before the settlement of issues do not apply to documents produced for the cross examination of the witnesses of the other party. To the same effect, Section 145 of the Evidence Act also permits documents to be put to the witnesses, though it does not provide whether such documents should be already on the court record or can be produced / shown for the first time. However, in view of the unambiguous provisions of the CPC, it cannot be held that the document cannot be produced/shown for the first time during cross examination. If the witness to whom the said document is put, identifies his handwriting / signature or any writing / signatures of any other person on the said document or otherwise admits the said documents, the same poses no problem, because then the document stands admitted into evidence. However, the question arises as to what is the course to be followed if the witness denies the said document. Is the document to be kept on the court file or to be returned to the party producing the same?

9. This question also in my view is also not difficult to answer. It cannot possibly be said that the document should be returned to the party. If the document is so returned it will not be possible for the court to at a subsequent stage consider as to what was the document put and what was denied by the witness. In a given case, it is possible that the answer of the witness on being confronted with the document may not be unambiguous. It may still be open to the court to consider whether on the basis of the said answer of the witness, the document stands admitted or proved or not and/or what is the effect to be given to the said answer. Thus, the document cannot be returned and has to be necessarily placed on the court file.

10. The next question which arises is that if the document is so placed on the court file, whether it becomes / is to be treated as the document of the party producing the same and is that party entitled to prove the said document notwithstanding having not filed the same earlier, as required by law, or the use of the said document is to be confined only to confront the witness to whom it was put and it cannot be permitted to be proved by that party in its own evidence.

11. The legislative intent behind order 7 Rule 14(4) and Order 8 Rule 1A (4) and Order 13 Rule 1(3) appears to be to permit an element of surprise, which is very important in the cross examination of witnesses. A litigant may well be of the opinion that if the document on the basis whereof he seeks to demolish the case of the adversary is filed on the court record along with pleadings or before framing of issues, with resultant knowledge to the adversary, the adversary may come prepared with his replies thereto. On the contrary, if permitted to show/produce the document owing to element of surprise, the adversary or witness, may blurt out the truth. Once it is held that a litigant is entitled to such right, in my view it would be too harsh to make the same subject to the condition that the litigant would thereafter be deprived of the right to prove the said documents himself. Thus, if the witness to whom the document is put in cross examination fails to admit the document, the party so putting the document, in its own evidence would be entitled to prove the same. However, the same should not be understood as laying down that such party for the said reason and to prove the said document would be entitled to lead evidence which otherwise it is not entitled to as per scheme of CPC and evidence law. For instance, if the document is shown by the defendant to the plaintiff‟s witness and the plaintiff‟s witness denies the same, the defendant can prove the document in his own evidence. Conversely, if the plaintiff puts the document to the defendant‟s witness and the defendant‟s witness denies the same, the plaintiff if entitled to lead rebuttal evidence would in his rebuttal evidence be entitled to prove the same. However, if the plaintiff has no right of rebuttal evidence in a particular case, the plaintiff would not be entitled to another chance to prove the document. In such a case, the plaintiff has to make a choice of either relying upon the surprise element in showing the document or to file the document along with its pleadings and/or before the settlement of issues and to prove the same. Similarly, if the defendant chooses to confront the document to the plaintiff‟s witness in rebuttal, merely because the witness denies the document would not entitle the defendant to a chance to prove the document subsequently.”

 

The Bombay High Court in Bharti Trimbak Bhandari, 2021 SCC OnLine Bom 447, has held as follows:

 

“6. Question arising for consideration; are

a. Whether scheme of Code of Civil Procedure, 1908 (CPC for short) interdicts, the parties to the suit from confronting the witness of adverse party with a document, not on the Courts‟ record, but shown or produced to the witness for the first time in his cross-examination ?

b. The next question is: the party, which has otherwise failed to file documents at appropriate stage could be permitted to bring on record the document through evidence of the witness of adversary by putting or confronting him with such document?

7. The main object of the cross-examination is to bring out the falsity and to find out the truth and further to weaken qualify or destroy the case of Opponent and to establish the own case through Opponents‟ witness. Thus objects are to impeach the accuracy, credibility and general value of the evidence given in-chief, to sift the facts already stated by the witness, to detect and expose discrepancies or to illicit suppressed act, which will support the case of cross-examining party. The exercise of this right is regarded and one of the most efficacious for recovery of truth. Provisions of Section 137 of the Indian Evidence Act, 1872 empowers and Section 146 to 150, regulates cross examination of witness. Confronting witness, with a document is permissible to test veracity of witness; under Section 146 of the Evidence Act. Though the range of cross-examination is unlimited, it must relate to relevant facts. Thus „relevancy of document‟, to which witness is confronted with, is a essential condition. (Emphasis supplied)

8. Thus, to be stated that the provisions of Order-7 Rule-14(4), Order-8 Rule-1 (A)(4) and Order-13 Rule-3(a) of the CPC are exceptions to the Rules, regulating the production of documents by the Plaintiffs and Defendants alongwith the plaint and written statement. To achieve the desired result. While witness of adverse party is examined, if the party to the suit is not permitted to confront the witness with a document, which has not been produced with the pleadings, adverse party cannot test the veracity or impeach the credit of the witness. Thus, the legislation in its wisdom carved out aforesaid exceptions. Thus, in view of explicit provisions of CPC, it cannot be held that the document cannot be produced or shown, for the first time to the witness during the cross-examination, though it was not produced with the pleadings. The first question is answered accordingly.”

 

                              CONCLUSION

The aforesaid judgments of hon’ble Supreme Court, Delhi High Court and Bombay High court has consistently maintained that there is no embargo in placing additional documents on record, even during the cross examination of witness to the plaintiff or defendant as the case may be, even if the documents are raised for the first time. The surprise element shall be the sine qua non of a trial and that may be a tool to elicit the truth and it is the bounden duty of the court to elicit truth so as to adjudicate the disputes fairly and effectually. The Courts are clothed with such power under section 151 of Code of Civil Procedure to secure the ends of justice and as regards the placing of documents as surprise, the same shall be covered under the trap of Order 13 of Code of Civil Procedure and section 145 of Indian Evidence Act as well. After all, a trial can neither be mechanical nor it could be allowed to be a mere ritualistic process. The prowess of a lawyer and probing mind of a judge should be allowed to be set in motion with a view to unravel the truth and it cannot be cast in a mud. The Order 13 of Code of Civil Procedure and Section 145 of Indian Evidence Act 1872, as also successive judgments of the Courts shall stand testimony to that.

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Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com

 

LAWYERS’ OFFICE NOT A COMMERCIAL ACTIVITY

 

Lawyers’ office not a commercial activity

For quite some time the discussions entailed about whether a lawyer’s office shall be deemed to be a commercial establishment or by virtue of its nature of rendering services to society it should not be treated as commercial establishment, Whether profession of lawyer could be treated as any other business so as to attract property tax imposed by a municipal corporation, as applicable to a commercial establishment and to that extent remained a bone of contention. The Delhi High Court in W.P. (C) 60/2014 has categorically held that services rendered by advocates are professional activities and cannot be classified/ categorized or be subject to tax under the category of business establishment or professional establishment. Merely, because, a lawyer uses his residence for working as a lawyer, that shall not imply that the same should be treated as commercial establishment. The said judgment was challenged by South Delhi Municipal Corporation before the hon’ble Division Bench and now the hon’ble Division bench in LPA No. 564/2015 and in a matter captioned as SOUTH DELHI MUNICIPAL CORPORATION (SDMC)  versus B N MAGON has upheld the judgment passed by the ld Single judge, thus settling the dust again.

At the outset it may be worthwhile to pinpoint the operative part of judgment rendered by ld Single Judge in B N MAGON W.P. (C) 60/2014  (Supra) . The same is as under:

“67. For the aforesaid reasons, this Court is of the view that if MPD 2021, DMC Act, 1957 and Bye-Laws, 2004 are read harmoniously, it would be apparent that where a professional activity is carried out by a professional belonging to a category and within the parameters mentioned in Clause 15.8 of MPD 2021, then the user of premises remains predominantly residential and the said property cannot be assessed to property tax as a „business building‟.

 

“68. Consequently, present petition is allowed and the impugned Assessment Order under Section 123D of DMC Act, 1957 passed on 22nd November, 2013 and issued on 11th December, 2013 bearing no. TAX/A&C/ SZ/2013/1139/10860 passed by Jt. Assessor & Collector, South Zone, R.K. Puram fixing value at Rs.60,000/- w.e.f. 1st April, 2004 as well as the demand, if any computed on the said basis along with levy for Assessment Years2004-05 to 2012-13 in respect of property bearing no. E-403, Greater Kailash-II, New Delhi-48 are quashed. The pending application also stands disposed of.”

 

The SDMC had contended that  clause 15.8 of MPD 2021 apropos professional activity does not in any way circumscribe the powers of the Corporation under sections 115 and 115A of the Delhi Municipal Corporation Act, 1957 (DMC Act‟) which read as under:

“115. Exemption of vacant lands and buildings from property tax.

(1) Save as otherwise provided in this Act, property tax shall be levied on all vacant lands and buildings in Delhi except (i) vacant lands and buildings (other than dwelling houses) exclusively used for agricultural purposes in accordance with the guidelines prescribed in the bye-laws;

(ii) any vacant land or building included in any village abadi, which is occupied for residential purpose by any original owner or his legal heir, subject to a maximum of one hundred square metres of covered space;

(iii) vacant lands or buildings or portions thereof exclusively used for the purpose of public worship;

(iv) vacant land or buildings or portions thereof, exclusively occupied and used, with the approval of[the Corporation]], for the purpose of public charity as may be specified in the bye-laws or for the purpose of medical relief to, or education of, the poor, free of charge;

(v) vacant lands or buildings exclusively used for the purpose of public burial or as cremation ground, or any other place used for the disposal of the dead, duly registered under this Act;

(vi) such heritage lands or buildings as are specifically notified for exemption by the Corporation as also such premises as are so specified by the Archeological Survey of India;

(vii) vacant lands and buildings owned exclusively by war widows, gallantry award winners in Defence Forces, Police and Paramilitary Forces as also civilians who have received bravery awards of the highest order from the Government including Annual Bravery Awards given by the President:

Provided that the exemption shall be subject to the condition that

(a) The premises in question is in self-occupation for residential use and no portion thereof is let out for any purpose, whatsoever;

(b) In case the person concerned has more than one property in Delhi, the exemption shall be applicable to only one property which is permanently used for self-residence;

(c) The benefit of exemption shall be limited to the life time of the person concerned, except where the award has been granted posthumously, in which case the exemption will be granted to the widow of the gallantry award winner;

(viii) vacant lands and buildings owned by, or vested in, the Corporation but not leased out or rented out, and in respect of which the property tax, if levied, would, under the provisions of this Act, be leviable primarily on the Corporation.

 

[115A. Unit of assessment.—

(1) Every building and every vacant land shall be assessed as a single unit:

Provided that where portions of any building or vacant land are separately owned so as to be entirely independent and capable of separate enjoyment, notwithstanding the fact that access to such separate portions is made through a common passage or a common stair case, as the case may be, such separately owned portions may be assessed separately.

(2) All buildings, to the extent they are contiguous or are within the same cartilage or are on the same foundation and are owned by the same owner or co-owners as an undivided property, shall be treated as one unit for the purpose of assessment under this Act:

Provided that if any such building is sub-divided into separate shares which are not entirely independent and capable of separate enjoyment, the Commissioner may, on application from the owners or the co-owners, apportion the valuation and assessment of such building among the co-owners according to the value of their respective shares, treating the entire building as a single unit.

(3) Each residential unit with its percentage of the undivided interest in the common areas and facilities, constructed or purchased and owned by, or under the control of, any housing co-operative society registered under any law regulating co-operative housing for the time being in force, shall be assessed separately.

(4) Each apartment and its percentage of the undivided interest in the common areas and facilities in a building within the meaning of any law regulating apartment ownership for the time being in force, shall be assessed separately.

(5) If the ownership of any vacant land or building or any portion thereof is sub-divided into separate shares, or if more than one adjoining vacant land or building or portion thereof comes under one ownership by amalgamation, the Commissioner may, on an application from the owner or the co-owners, as the case may be, separate, or amalgamate, as the case may be, such vacant land or building or portion thereof so as to ensure conformity with the provisions of this section.

(6) Notwithstanding any assessment made in respect of any vacant lands or buildings before the commencement of the Delhi Municipal Corporation (Amendment) Act, 2003, the Commissioner may, on his own or otherwise, amalgamate, or separate, or continue to assess, such vacant lands or buildings or portions thereof so as to ensure conformity with the provisions of this section.

(7) The Commissioner shall, upon an application made in this behalf by an owner, lessee, sub-lessee, or occupier of any vacant land or building and upon payment of such fee as may be prescribed in the byelaws, furnish to such owner, lessee, sub-lessee, or occupier, as the case may be, information regarding the apportionment of the property tax on such vacant land or building among the several occupiers of such vacant land or building for the current period of assessment or for any preceding period of assessment:

Provided that nothing in this sub-section shall prevent the Corporation from recovering the arrear dues on account of property tax from any such person, jointly or severally.”

 

According to SDMC, the corporation has powers to levy property tax on all lands and buildings under its jurisdiction and unless specifically excluded, all the activities in any building shall be put to tax. Further as per MPD clause 15.8, clearly contains that user of professional activity would have to be in less than 50% of the sanctioned FAR

 

The said MPD clause reads as under:

 

“15.8 PROFESSIONAL ACTIVITY

Subject to the general terms and conditions specified in para 15.4, professional activity is permissible in plotted development and group housing under the following specific conditions:

xxx

In group housing, and plotted development with multiple dwelling units, professional activity shall be permitted on any floor subject to maximum of 50% of

the permissible or sanctioned FAR, whichever is less, of each dwelling unit.

iii. In the case of plotted development with single dwelling unit, professional activity shall be permissible on any one floor only, but restricted to less than 50%

of the permissible or sanctioned FAR whichever is less on that plot.

 

It is held by the hon’ble Delhi High Court that MPD, 2021 clearly permits professional activity in residential buildings, subject to certain conditions. However, what is to be noted is that the said provision of MPD, does not empower the Corporation to levy tax for professional activity being carried out from residential buildings .Section 115 and 115A of the DMC Act, as quoted hereinabove, empowers the MCD to levy taxes but only in terms of and to the extent specified in the statute. Categories of buildings, user-wise, have been defined under clause 9 (a) and (b) (i) and (ii) of the DMC (Property Tax) Bye-laws, 2004, as under:

“.... 9. Definitions of use-wise categories of buildings. -For the purposes of clause (f) of sub-section (1) of section 116 A, the usewise

(a) "residential building" shall mean any building used for dwelling purposes by a family/families/individual but excludes any premises for commercial use including lodging, guest house, hotel or similar purposes:

(b) "business building" shall mean any building or part thereof used for transaction of business or for keeping of accounts and records or for similar other purposes, and such buildings shall include:

 (i) offices (other than offices of Central Government, State Government and local bodies), banks, professional establishments, court houses, and libraries for the principal function of transaction of public business and keeping of books and records;

(ii) office buildings (premises) solely or principally used as office or for office purpose; and...”

THE CONTENTIONS OF MCD

As per the SDMC as regards i) a building or a part thereof is used for transaction of business or for keeping of books, accounts and records, it shall be considered as a “business building” and therefore subject to levy of property tax;

AND that a lawyer's services fall within the sphere of professional activity and, that part of a building which is used for professional activity, would fall within the definition of a 'business building' as per clause 9(b)(i) of the Bye-laws; iii) that clause 9(b)(ii) categorically includes office buildings premises solely or principally used as office or for office purposes; that the definition of 'business building' or 'mercantile building' contained in other statutes were extraneous to the determination of the annual value under the Unit Area System of Property Tax;

AND the ambit of that 'business building' was wide as well as inclusive under the Delhi Municipal Corporation Act, 1957

AND that activities being carried out by advocates/professionals are commercial and non-domestic in nature, therefore the same are subject to tax and simply because such activity is carried out from residential premises, as per permitted user under MPD 2021, the activity would not become residential.

                              THE VIEWS OF COURTS

The hon’ble High Court has rejected the contention of SDMC (Now MCD) as it is held to be ex facie untenable. It is so, because, there is no such deeming provision in law, for taxation. As noted hereinabove taxation powers have to be specifically mentioned and categories of taxable activity have to be defined.

A Division Bench of the Bombay High Court in Sakharam Narayan Kherdekar v. City of Nagpur Corporation and others AIR 1964 Bombay 200 wherein it has been held that an office of an advocate is not covered under the expression „commercial establishment‟ under the Bombay Shops and Establishments Act, 1948. The relevant portion of the said judgment is reproduced hereinbelow:-

“26. Thus, the very concept of any activity which can justly be called a commercial activity, must imply some investment of capital and the activity, must run the risk of profit or loss. Understood in this sense, therefore, we are inclined to hold that it is not every establishment in the sense of premises or buildings where business, trade or profession is carried on that is intended to be governed by the Act, but only those premises though carrying on one or other of these kinds of activities which are of a commercial nature……. There is no precise definition of what a profession is, but it is possible to gather what is meant by professional activities from other pronouncements... ... ...

35. In our opinion, enough has been stated above to indicate how the profession of an Advocate is of a class apart, not only from other professions but also from any other commercial activity in which a person may be employed. It is possible to conceive of any commercial activities where services of a professional man like engineer, or architect or draftsman may be utilised, but we cannot conceive of commercial venture where services of a lawyer, not for his own benefit but as a means of providing advice and legal aid to others on behalf of a corporation or an organised body may be made available as part of their commercial activity. The relations between a counsel and his client are not analogous to those of a trader and his customer. The client is not his customer; there is a certain fiduciary relation between them, when the counsel accepts a brief”.

 

It is thus held further that a lawyer’s obligations do not end with the disposal of the case; they continue so far as the lawyer is concerned. He has obligations not only to the client but also to the Court, and generally to the administration of justice, in which he performs a healthy and necessary function. It was thus observed that the profession of a lawyer cannot be possibly carried out as a commercial venture in any sense of the term. Moreover, part a lawyer plays in the administration of justice partakes to some extent, of participation in discharging sovereign or regal functions of the State. In this task the lawyer plays a vital and important role. The court therefore rejected the contention of corporation that a lawyer's profession is a kind of profession which can be said to be carried on as profession of commercial nature. It is inherently improbable in the nature of things that the profession of a lawyer could be viewed as a commercial venture. In. fact, the commercial character of business, which is an essential condition of a commercial activity is absent in the lawyer's profession.

 

The Delhi High Court has further held that whether a lawyer works in his office or appears in Court, it cannot be said that he is carrying on his profession in any of these places where the activity can be said to be of a commercial nature. It is not a commercial activity and the very nature of the work is such that it is incapable of being of a commercial nature.

The Supreme Court in M.P. Electricity Board and Others v. Shiv Narayan and Another (2005) 7 SCC 283, wherein it has been held under:-

The expression ―commerce or ―commercial necessarily has a concept of a trading activity. Trading activity may involve any kind of activity, be it a transport or supply of goods. Generic term for almost all aspects is buying and selling. But in legal profession, there is no such kind of buying or selling nor any trading of any kind whatsoever. Therefore, to compare legal profession with that of trade and business is a far from correct approach and it will totally be misplaced.”

 

The Supreme Court has held that the “power to tax must be express, else no power to tax”1. Under the DMC Act there is no power to tax “professional activities” carried out from residential buildings. Professional activities are permitted under MPD 2010, under certain conditions. The Master Plan has force of law2. The language of section 116 A (1) of the DMC Act, 1957 does not include tax on professional activities. Interestingly, clause 9 (b) (i) and (ii) of the Bye-laws refer only to „professional establishment‟ but does not define the expressions “professional‟ or “establishment‟.

The Supreme Court in The Bangalore Turf Club Ltd. Vs. Regional Director, Employees State Insurance Corporation (2014) 9 SCC 657 while holding that a „race-club‟ is an establishment for the purposes of ESI Act referred to words and phrases as well as Corpus Juris Secundum and Dictionary meaning of the word „Establishment‟. The relevant portion of the said judgment is reproduced hereinbelow:

“35. Therefore, it can be simply stated that an “establishment” is a term which can have a wide meaning. It would be any place where business is conducted, or in other words, it would be any place of business.......”

 

Consequently, the expression “establishment‟ refers to those buildings which have a separate identifiable existence and where business is conducted.

The Allahabad High Court in Satya Prakash Singh and Anr. vs. State of U.P. & Ors. Writ Petition No.16843/2011 also set aside the assessment of the ground floor

portion as commercial despite the fact that a Doctor was running a clinic therein. The Allahabad High Court held that the work of a Doctor, Chartered Accountant or a Lawyer or any Consultant, is a profession which is distinct from any trade or business. The Allahabad High Court further held that running a clinic/dispensary/laboratory from a residential area would not be covered by the expression “commercial establishment‟ or a “shop‟ within the meaning of Sub-section (4) and 16 of Section 2 of the Adhiniyam and its market value was not determinable as a commercial building as provided under Rule 2(d) of the Rules.

 

In K. Kanagasabai vs. The Superintending Engineer, W.P.(C) 21731/2003 the Madras High Court made a distinction between the office of a lawyer in a residence and an office of a lawyer in a commercial place.

“52. The distinction between “professional activity” and “professional establishment‟ can be illustrated by the following example. A “professional‟s office‟ would be a “professional  establishment‟ when the usage of the office space is in excess of the conditions stipulated in Clause 15.8 of the MPD 2021 or if the said office is situated in a building designated as commercial or business in the MPD 2021 and Zonal Plan. In the opinion of this Court, a premise would not become business premise just because a lawyer read his office file or did some official work at his residence”.

The Professional activity‟ as defined and permitted by the MPD 2021 has not been diluted or subject to tax by Bye-law 9(b). After all, the intent the authorities could not have been to take back the concession given by the MPD 2021 in Clause 15.8 in the form of permissible activity by levying property tax!”

As regards the professional activity and professional services rendered by advocates, a Division Bench of the Bombay High Court has in Sakharam Narayan Kherdekar v. City of Nagpur Corporation & Ors., AIR 1964 Bombay 200, has held that the discharge of professional activities by advocates would not be covered under the expression “business” nor would it be professional establishment because the word “establishment” would only refer to as “shops‟ as defined in the Bombay Shops and Establishment Act, 1948.

It was thus held that no tax can be levied in the absence of a statutory empowerment. The MCD‟s powers to levy property tax are embodied in Section 115 and 115-A of the DMC Act. The Byelaws have been enacted under Sections 481 and 483 of the Act. Clause 9 of the Bye-laws, as noted hereinabove, defines the categories under which property tax can be levied. Rate of taxation is another issue but for taxation to extend to a class of activity, such activity must be specified, defined and included in that class/category. Neither the Act nor the Byelaws define “professional activity” carried out by advocates, architects and doctors, etc.

A Constitution Bench of the Supreme Court in Commissioner of Customs and Others vs. Dilip Kumar and Company and others (2018) 9 SCC 1, has held that:

 

i)                when the language of the statute is plain and unambiguous, court has to seal and understand the plain language as such, and there is no scope of interpretation,

ii)              all cases of literal interpretation would involve strict rule of interpretation, but strict rule may not necessarily involve the former, especially in the area of taxation, thus, strict interpretation does not encompass strict literalism into its fold;

iii)            every taxing statute including charging, computation and exemption clause (at the threshold stage) should be interpreted strictly;

iv)            in a taxation statute there is no room for any intendment;

v)               in taxation statutes contextual or purposive interpretation cannot be applied, nor can any resort be made to look to other supporting material. Equity has no place in interpreting a tax statute.

 

What needs to be seen is whether “professional activity” by lawyers would be classified under clause 9 (a) (b) (i) and (ii) of the Delhi Municipal Corporation (Property Taxes) Bye-laws, 2004. The DMC Act does not define “professional activity”. What it defines has been discussed hereinabove. Also in V. Sasidharan v. M/s. Peter and Karunakar and others AIR 1984 SC 1700 the Supreme Court has held that “professional activity” of lawyers does not fall within the category of “commercial establishment‟ or “business activity‟ and the firm of lawyers is not a “commercial establishment‟.

 

Relevant portion of the said judgment is reproduced as under:

 “10. Learned counsel for the appellant argues that a lawyer's office is a commercial establishment because, persons who are employed in that office are mainly engaged in office work. This argument overlooks that, under the second clause of the definition in Section 2(4), “commercial establishment‟ means “an establishment or administrative service in which the persons employed are mainly engaged in office work”. Partly, we go back to the same question as to whether a lawyer's office is an “establishment‟ within the meaning of the Act. The other aspect which this argument fails to take note of is that a lawyer's office is not an “administrative service‟. It seems to us doing violence to the language of the second clause of Section 2(4) to hold that a lawyer's office is an “administrative service‟.

REMARK

The hon’ble High Court has thus held that office of a lawyer or of a firm of lawyers is not a “commercial establishment‟ within the meaning of the Act. This conclusion is strengthened by the other provisions of the Act. The division bench thus concurred with the reasoning of ld single judge and held that the office of a lawyer or of a firm of lawyers is not a “commercial establishment‟ within the meaning of Section 2(4) of the Act.” The rule of strict interpretation of taxation statute has to be applied. There is no scope of reading any derivative meaning or of reading any intendment of the statute. Insofar as the statute has not included “professional activity” of lawyers as “commercial activity” the former cannot be put to tax on that premise. It is held that the aforesaid Bye-laws cannot seek to over-reach the statute itself. It is further held in the light of above that the assessment order issued by the MCD under section 123 D of the DMC Act, 1957 along with any demand, were rightly quashed.

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                                           Anil K Khaware

                                           Founder & Senior Associate

                                           Societylawandjustice.com