Supreme Court clarifies tenant’s liability for municipal tax under West Bengal Premises Tenancy Act: M/S Popat & Kotecha Property vs. Ashim Kumar Dey (2018) INSC 704 (09 August 2018)

Date of the Judgment: 09 August 2018
Citation: (2018) INSC 704
Judges: Ranjan Gogoi, J., R. Banumathi, J., Navin Sinha, J.
Can a tenant be evicted for not paying their share of municipal taxes? The Supreme Court of India addressed this question in a recent case concerning the West Bengal Premises Tenancy Act, 1997. The court clarified that tenants are indeed responsible for paying their portion of municipal taxes as per the Kolkata Municipal Corporation Act, 1980, and failure to do so can lead to eviction. This judgment settles a key point regarding the obligations of tenants under the Act.

Case Background

The case involves a dispute between M/S Popat & Kotecha Property (the landlord) and Ashim Kumar Dey (the tenant). The original tenancy agreement, established in 1991, stipulated that the rent would cover all municipal taxes, with rent increases to match any tax enhancements. However, the West Bengal Premises Tenancy Act, 1997, was amended in 2001, adding Section 5(8), which made tenants directly responsible for their share of municipal taxes as occupiers. This amendment shifted the onus of tax payment from the landlord to the tenant.

In 2003, the municipal property tax was reassessed and increased. The landlord then divided the tax among the various tenants and notified Ashim Kumar Dey on February 7, 2003, to pay his share. The tenant responded on March 29, 2003, seeking a review of the tax apportionment. When the tenant failed to pay his share of the municipal tax, the landlord initiated eviction proceedings, arguing that the tenant had defaulted on rent payment.

Timeline

Course of Proceedings

The Trial Court dismissed the landlord’s eviction application, stating that the landlord did not provide sufficient evidence of the enhanced property tax and that the tenant was regularly depositing rent with the Rent Controller. On appeal, the High Court upheld the Trial Court’s decision, although on different grounds. The High Court reasoned that even if municipal taxes were considered part of the rent, the landlord could not unilaterally increase the rent through a notice under Section 20 of the 1997 Act. Instead, such an increase would require an order from the Rent Controller. The High Court dismissed the appeal as this requirement was not met.

Legal Framework

The core of this case revolves around Section 5(8) of the West Bengal Premises Tenancy Act, 1997, which states:

“Every tenant shall pay his share of municipal tax as an occupier of the premises in accordance with the provisions of the Kolkata Municipal Corporation Act, 1980 (West Bengal Act LIX of 1980) or the West Bengal Municipal Act, 1993 (West Bengal Act XXII of 1993).”

This provision makes it clear that tenants are obligated to pay their share of municipal taxes. Additionally, the Kolkata Municipal Corporation Act, 1980, outlines the procedures for assessing and recovering property taxes. The Supreme Court also considered Section 231 of the 1980 Act, which treats the apportioned tax on the tenant as part of the rent, recoverable as such.

Arguments

Landlord’s Arguments:

• The landlord argued that the 2001 amendment to the West Bengal Premises Tenancy Act, specifically Section 5(8), made the tenant liable to pay municipal taxes.
• The landlord contended that the tenant’s failure to pay the apportioned municipal tax constituted a default in rent payment, making the tenant liable for eviction.
• The landlord relied on the Supreme Court’s judgment in Calcutta Gujarati Education Society and another vs. Calcutta Municipal Corpn. and others (2003) 10 SCC 533, which held that municipal taxes are part of the rent payable by the tenant to the landlord.

Tenant’s Arguments:

• The tenant argued that the landlord could not unilaterally enhance the rent by demanding the municipal tax amount.
• The tenant claimed that the landlord had not provided sufficient documentary evidence regarding the enhancement of the property tax.
• The tenant contended that the municipal corporation, and not the landlord, was the appropriate authority to assess and apportion taxes among multiple tenants.
• The tenant sought a review of the tax apportionment, indicating disagreement with the calculation.

Innovativeness of the Argument: The landlord’s argument is innovative in the sense that it directly links the statutory obligation of the tenant to pay municipal taxes with the definition of rent, thereby providing a ground for eviction under the tenancy act.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue:

“Whether after the amendment of the West Bengal premises Tenancy Act by Amendment Act No. 14 of 2001 with effect from 10th July, 2001 [which had incorporated sub-section (8) to Section 5] whether a tenant who defaults in payment of his/her share of municipal tax as apportioned by the landlord would be in default of rent rendering him/her liable to eviction.”

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

• Calcutta Gujarati Education Society and another vs. Calcutta Municipal Corpn. and others (2003) 10 SCC 533 (Supreme Court of India): This case established that municipal taxes are part of the rent payable by the tenant to the landlord. The Court relied on the interpretation of Section 231 of the Kolkata Municipal Corporation Act, 1980, which creates a fiction that the “tax” apportioned on the tenant would be treated as “rent” and would be recoverable as such.
• Section 5(8) of the West Bengal Premises Tenancy Act, 1997: This provision mandates that tenants pay their share of municipal tax as occupiers.
• Section 231 of the Kolkata Municipal Corporation Act, 1980: This provision was interpreted to mean that the tax apportioned to the tenant is to be treated as part of the rent.

Judgment

How each authority was viewed by the Court?

• The Supreme Court followed Calcutta Gujarati Education Society and another vs. Calcutta Municipal Corpn. and others (2003) 10 SCC 533* to hold that municipal taxes are a part of the rent payable by the tenant to the landlord.
• The Court interpreted Section 5(8) of the West Bengal Premises Tenancy Act, 1997 to mean that tenants are liable to pay their share of municipal taxes.
• The Court interpreted Section 231 of the Kolkata Municipal Corporation Act, 1980 to mean that the tax apportioned to the tenant is to be treated as part of the rent.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the statutory obligations imposed on tenants by the 2001 amendment to the West Bengal Premises Tenancy Act, 1997. The Court emphasized that Section 5(8) of the Act clearly mandates that tenants must pay their share of municipal taxes. This statutory obligation, coupled with the interpretation of Section 231 of the Kolkata Municipal Corporation Act, 1980, which treats the tenant’s share of tax as part of the rent, formed the basis of the Court’s reasoning. The Court also relied on the precedent set in Calcutta Gujarati Education Society and another vs. Calcutta Municipal Corpn. and others, which established that municipal taxes are indeed a component of rent. The Court also noted that the tenant did not specifically deny the legitimacy of the tax calculation, further strengthening the landlord’s case.

Logical Reasoning:

The Court considered the argument that the landlord cannot unilaterally enhance the rent but rejected it, holding that the statutory obligation on the tenant to pay municipal taxes supersedes the terms of the tenancy agreement. The Court emphasized that the tenant’s obligation to pay municipal taxes arose directly from the law, not from the landlord’s demand. The Court also rejected the argument that the Municipal Corporation should apportion the taxes, holding that the landlord has the right to apportion the taxes among the tenants.

The Supreme Court stated, “With the amendment made to the Act with effect from 10th July, 2001 and upon incorporation of sub-section (8) of Section 5, the obligation to pay municipal taxes as an occupier of the premises fell upon the tenant. The relevant clauses in the rent agreement therefore stood superseded by the statutory obligation cast on the tenant by the amendment to the Act.”

The Court further noted, “In the present case, default on the part of the respondent-tenant is clear and evident. The obligation to pay municipal taxes on the tenant being over and above the obligation to pay the rent by virtue of the provisions of Section 5(8) of the 1997 Act, the High Court could not have imposed on the landlord the requirement of obtaining a formal order of enhancement of rent from the Rent Controller.”

Finally, the court held, “As already seen, in paragraph 45 of the report, extracted above, the provisions of Section 231 of the 1980 Act was also considered and it was held that municipal taxes would be a part of the “rent” payable by the tenant to the landlord.”

There were no dissenting opinions in this case.

Key Takeaways

• Tenants are legally obligated to pay their share of municipal taxes as per Section 5(8) of the West Bengal Premises Tenancy Act, 1997.
• Failure to pay the apportioned municipal tax can be considered a default in rent payment, making the tenant liable for eviction.
• Landlords can apportion municipal taxes among tenants, and the Municipal Corporation is not the sole authority for this.
• The statutory obligation to pay municipal taxes supersedes any conflicting clauses in the tenancy agreement.

Directions

The Supreme Court allowed the appeal and set aside the orders of the High Court and Trial Court. The application filed by the landlord for eviction of the tenant was allowed.

Development of Law

The ratio decidendi of this case is that under the West Bengal Premises Tenancy Act, 1997, as amended in 2001, tenants are directly responsible for paying their share of municipal taxes as part of their rent. This judgment clarifies the legal position and reinforces the statutory obligation of tenants, marking a change from previous interpretations where the responsibility was primarily on the landlord. The court’s reliance on Calcutta Gujarati Education Society case and the interpretation of Section 231 of the Kolkata Municipal Corporation Act, 1980, further solidifies this position.

Conclusion

The Supreme Court’s judgment in M/S Popat & Kotecha Property vs. Ashim Kumar Dey clarifies that tenants in West Bengal are legally bound to pay their share of municipal taxes. This obligation is not merely a contractual matter but a statutory requirement, and failure to comply can lead to eviction. The ruling underscores the importance of the 2001 amendment to the West Bengal Premises Tenancy Act and its impact on the responsibilities of tenants.