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       REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

              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)

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.

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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.   

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(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

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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.   

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(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

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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

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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.

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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:-

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“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

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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:-  a. 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

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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

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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.

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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.  

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