Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab. Pvt. Ltd. & Others

Judgment / Order of the Supreme Court

Judgment Nagarathna, J. Leave granted.

2Copy pinpoint2. The present Civil Appeal has been filed by the Lucknow Nagar Nigam (‘Municipal Corporation’) impugning the judgment of the High Court of Allahabad that has allowed the Writ Petition filed by respondent herein (‘the assessee’), thereby holding that the assessee is exempt from payment of property tax under the provisions of the UP Municipal Corporation Adhiniyam, 1959 (hereinafter referred to as “Act of 1959”, for brevity sake). Bird’s Eye View of the Controversy:

3Copy pinpoint3. Whether statutory vesting of property termed as enemy property under the provisions of the Enemy Property Act, 1968 (hereinafter referred to as “the Act” for the sake of convenience) amounts to expropriation which leads to the change of its status inasmuch as its ownership is transferred to the Union of India, is a question that has arisen in the present appeal. If there is a transfer of ownership by its statutory vesting in the Custodian for Enemy Property, whether the Union within the meaning of Article 285 of the Constitution of India would be entitled to exemption from payment of property or other local taxes to Municipal Corporation under the provision of the Act of 1959 is another question that has arisen in the present appeal. Further, despite becoming the property of the Union, whether, clause (2) of Article 285 enables the appellant herein to impose property or other local taxes on the respondent, which is the lessee of the subject property is the third question which arises in this appeal. Relevant Facts of the Case:

4Copy pinpoint4. The subject property is an Enemy Property within the meaning of the Act bearing House No.31/28/04(31/59) located on Mahatma Gandhi Marg, Lucknow, owned by the Raja of Mahmudabad, who migrated to Pakistan in the year 1947. A portion of the property is currently occupied and utilized for profit-generating purposes by the respondent-assessee, in this case. 4.1 Historically, prior to the fiscal year 1998-1999, the appellant- Municipal Corporation imposed and collected taxes in

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accordance with Rule No.174 ‘ka’ of the Act of 1959 from the assessee. However, in the fiscal year 1998-1999, it came to the Municipal Corporation’s attention that the assessee was operating a commercial establishment within the premises. Consequently, the appellant-Municipal Corporation conducted an assessment based on Capital Value and issued a notice to the assessee regarding the assessed Annual Value. 4.2 It is pertinent to note that respondent No.2, Office of the Custodian of Enemy Property for India (for short ‘the Custodian’), under the Ministry of Commerce, Government of India, issued a Certificate on 03.10.2002, stating that the subject property bearing premises No.53-54, Lawrie Building Hazaratganj, Lucknow, is Enemy Property vested with the Custodian. The Certificate also explicitly stated that the Custodian was obligated to pay house tax and other local taxes on behalf of this property. 4.3 The assessee, along with other tenants, inter-alia, contested the assessment orders issued by the Municipal Corporation and approached the High Court of Allahabad at Lucknow by filing Writ Petition being Misc. Bench No. 3979 of 2003. However, this legal action was ultimately uncontested by the tenants and was subsequently dismissed vide order dated 30.03.2017. 4.4 Due to outstanding dues of Rs.1,621,987.00/- under the head of House Tax concerning the Enemy Property No.31/58 Hazaratganj, the Municipal Corporation, vide letter dated 28.03.2005 notified the District Magistrate, Lucknow, of its intention to proceed with attachment and sealing of the said premises under Sections 506-509 of the Act of 1959. 4.5 At this juncture, it is necessary to state that Raja Mohammed Amir Mohammad Khan, the son of the Raja of Mahmudabad, who remained in India as an Indian citizen, had been actively seeking the release of enemy properties owned by his late father. He contended that these properties should no longer be vested with the Custodian after his father’s demise as they were now vested in him, an Indian citizen. While the Government had agreed to release 25% of these properties, it had not yet acted upon this commitment. In response, Raja Mohammed Amir Mohammad Khan approached the Bombay High Court by way of filing WP No.1524 of 1997. The High Court ruled

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in his favor, directing the Custodian to surrender possession of the properties to him. Being aggrieved with this decision, the Union of India approached this Court by way of filing SLP (C) No.22452 of 2001, which was converted to Civil Appeal No.2501 of 2002. This Court by its judgment dated 21.10.2005 reported in Union of India vs. Raja Mohammad Amir Mohammad Khan, (2005) 8 SCC 696 (‘Amir Mohammad Khan’), dismissed the appeal preferred by the Union of India and directed the Union of India to get the buildings (residence or offices) vacated from such officers and handover the possession to Raja Mohammed Amir Mohammad Khan within eight weeks. The Court further directed that the officers who are in occupation of buildings for their residences or for their offices shall immediately vacate and hand over the buildings or the properties to the Custodian to enable him to hand over the possession. 4.6 As a result of these orders, proceedings were initiated by various tenants, including respondent No.1. This Court, in SLP (Civil) No.14943 of 2006 vide order dated 08.09.2006, clarified its earlier judgment dated 21.10.2005 passed in Civil Appeal No.2501 of 2002. It was clarified by this Court that individuals who were allotted properties by the Custodian or who came into possession after 1965, i.e., following the declaration of Raja Mahmudabad’s property as an enemy property and the appointment of the Custodian, were required to vacate these properties. However, persons claiming possession prior to the Custodian’s appointment, based on valid tenancy agreements established by Raja Mahmudabad or his General Power of Attorney, were exempted from this directive. The enquiry conducted in pursuance to the above orders of this Court dated 08.09.2006 resulted in a report in favour of respondent No.1 herein as well as other similarly situated tenants. Ergo, they continued to remain in possession vide Amir Mohammad Khan. 4.7 Following these events, on 28.05.2011, the appellant No.3, issued a notice to the assessee, demanding payment of Rs. 7,57,239.00/-. The notice warned of proceedings for recovery and attachment through the District Magistrate under Section 64 if the payment was not settled within three days.

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4.8 Aggrieved by the aforesaid action, the assessee approached the High Court of Allahabad at Lucknow by filing Writ Petition being Misc. Bench No.2317 of 2012 seeking the following reliefs: "(a) issue a writ of prohibition or a writ, order or direction in the nature of prohibition prohibiting the opposite parties no.1 & 2 not to make any assessment or raise bill for payment of House Tax or Water Tax/ or the property in the name and style of Lawrie Building situated at 50, Hazratganj, Lucknow being the property of Union of India and exempted from State taxation; (b) issue a writ of certiorari or a writ, order or direction in the nature of certiorari quashing the impugned bills/ recovery notice in respect of payment of House Tax for the year 2010-11, issued by the opposite party no.I, contained in Annexure Number 1 to the writ petition; (c) issue a writ of certiorari or a writ, order or direction in the nature of certiorari quashing the impugned bills/recovery notice dated 28.5.2011, issued by the opposite party no.2, contained in Annexure Number 2 to the writ petition; and (d) issue a writ of mandamus or a writ, order or direction in the nature of mandamus commanding _the respondent numbers 1 to 3 to refund the amount of Rs.7,29,7461- and Rs.2 lacs deposited by the petitioner along with interest at the rate of 18% per annum and within such time as may kindly be stipulated by this Hon’ble Court” 4.9 During the pendency of the said proceedings, appellants’ counsel conceded that, as per the provisions of the Constitution of India, the appellants could not levy taxes on property belonging to the Government of India or Union properties. However, the appellants reserved the right to demand applicable fees for services rendered, such as water and sewerage charges. 4.10 By virtue of the impugned judgment and order dated 29.03.2017, the High Court allowed the writ petition and quashed the recovery notice dated 28.05.2011 on the ground that this case pertained

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exclusively to taxes, namely House Tax and Water Tax, which are not applicable to the respondent No.1 since the property in question is an enemy property. The High Court further directed respondent No.1 to make representations for the recovery of any amounts previously paid to the appellants. Hence, the appellants have preferred this civil appeal. Respondent No.2 has filed his counter affidavit which we have perused. Submissions: Submissions of the appellants:

5Copy pinpoint5. Sri Kavin Gulati, learned senior counsel appearing on behalf of the Municipal Corporation, at the outset, submitted that the High Court erroneously held that the House Tax and Water Tax levied herein are not leviable on the assessee respondent herein in respect of property which is admittedly an enemy property and not property of the Union or Central Government. Therefore, it was submitted: a) that the property is merely in the custody of the Custodian as specified under the Act. That the preamble of the Act provides that this is “An Act to provide for the continued vesting of Enemy Property”. That there is no declaration by the Union Government through any legislation declaring the properties to be the property of the Union Government. The only declaration that is contained is to vest the property in the Custodian without a further declaration that the property vests absolutely in the Union Government free from all encumbrances. That whenever the legislature desired that any property vests absolutely in the Central Government, it would be specifically provided so as in the case of Sections 16 and 17 of the Land Acquisition Act, 1984 as well as in the case of Section 269 of the Income Tax Act, 1961. But the same is conspicuous by its absence under the Act under consideration; b) that a perusal of the scheme of the Act, more particularly, the Preamble, Section 2(c) and its proviso, Sections 15(1), 17(1)(c), and 18 read with Rule 5(1) and proviso 2, 5(2), 5(3) and 15(1) cumulatively would establish that the Custodian has certain obligations regarding Enemy Property. However, the Central Government or the Custodian is not vested with ownership of

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the same. Section 2(c), which defines enemy property reads that it “means any property for the time being belonging to or held or managed on behalf of an enemy…”. That the expression “for the time being” would show that the nature of vesting is not permanent and that the vesting is only for the management of the enemy property; c) that for the Union Government to claim ownership of enemy property, it must follow the tenets of Article 300-A of the Constitution of India as well as other relevant provisions of the Constitution, which allow the acquisition of private properties only on payment of a fair compensation. This constitutional right is available to all persons and not just to citizens of India. Being aware of the aforesaid position that enemy properties do not become properties of the Union of India, the legislature has under Section 8(2)(vi) of the Act permitted the Custodian for Enemy Property to deposit Municipal Taxes vis-à-vis enemy property vested in him; d) that even though the Union of India may have overarching control over Enemy Properties, the status of the Union or Central Government is not that of an owner. The Custodian is a statutory authority in whom there is vesting of enemy property, which is different from having ownership over the same. The fact that the Custodian can sell properties to third parties is akin to the powers available to a Receiver or a Liquidator who can exercise similar powers of sale [vide Delhi Administration vs. Madan Lal Nangia, (2003) 10 SCC 321 (“Madan Lal Nangia”) Paras 14,15; Lieutenant Governor of Delhi vs. Matwal Chand (Dead) through LRs, (2015) 15 SCC 576 (“Matwal Chand”), Para 14; Municipal Commissioner of Dum Dum Municipality vs. Indian Tourism Development Corporation, (1995) 5 SCC 251 (“Dum Dum Municipality”), Paras 14,18, 22 and 35 and State of Andhra Pradesh vs. V.Subba Rao, 2011 SCC OnLine AP 838 (“Subba Rao”), Paras 23-25]; e) that Article 285 (1) is not attracted to the present case as the bar under Article 285 (1) is only applicable to the properties ‘of the Union’. Even when the property is given on lease by the Union to a private party, then under Section 179 of the Act of 1959, tax is to be levied on the ‘occupier’. Reliance was placed on the judgment of the Constitution Bench of this Court in Electronics

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Corporation of India vs. Secretary, Revenue Department, Govt. of Andhra Pradesh, (1999) 4 SCC 458 (“Electronics Corporation”) wherein it was held that Article 285 will not be applicable in cases when the land belonging to the Government of India was leased out to a Government Company; f) that this Court in Union of India vs. State of Uttar Pradesh, (2007) 11 SCC 324 held that service charges are a fee and cannot be said to be hit by Article 285 of the Constitution; g) that pursuant to this Court’s orders dated 19.11.2009 in Rajkot Municipal Corporation vs. Union of India, Civil Appeal No.9458-63 of 2003 (“Rajkot Municipal Corporation”), the Ministry of Urban Development, Government of India issued clarification/instructions dated 17.12.2009 to all Secretaries (Urban Development) of all State Governments. The relevant portion of the said clarification/instructions dated 17.12.2009 is as follows: “(1) The UOI & its Departments will pay service charges for the services provided by appellant Municipal Corporations. No Property Tax. will be paid by UOI but service charges calculated @ 75%, 50% or 33 1/3% of Property Tax levied on property owners will be paid, depending upon utilisation of full or partial or Nil Services. For this, purpose agreements will be entered into by UOI represented by concerned Departments with respective Municipal Corporation.” h) that due to non-payment of taxes since the year 1998-1999, Jal Sansthan Lucknow appellant No.3 herein, served final Notice under the provisions of the Land Revenue Act of the State of UP to respondent No.1 to pay the pending bills of Water Tax/ Sewer Tax/Water price of Rs. 7,57,239/- by 31.03.2011; i) that it is settled law that the exemption from state taxation of property of the Union Government is only against property taxes and not against all taxes including the commercial taxes and services by local administration/authorities. However, the High Court in its final Judgment and Order dated 29.03.2017, erroneously equated the commercial tenancy of a private person in Enemy Property with the property of the Central

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Government and accordingly, has quashed the recovery notice dated: 28.05.2011; j) that the Enemy Property occupied by private persons for private business interests is not synonymous with the interest of the State and is starkly in contrast to the objectives and scheme of the Constitution. Accordingly, it was contended that the interest or property of a private person i.e. respondent No.1 is not exempted from property taxes under Article 285 of the Constitution of India; k) that the Custodian under the Act is empowered to realize from occupants all taxes, fees and charges and pay to the local authority. In the present case, it is admitted by the Custodian- respondent No.2 that local taxes are payable to the local authority in respect of the enemy property in question vide Certificate dated 03.10.2002; l) that although the Municipal Commissioner granted a concession before the High Court, the said concession was due to a threat of summoning him to file a personal affidavit. In this regard, learned senior counsel argued that there can be no concession or estoppel against the statute. The power to levy tax is plenary. If the State is held to be bound by a concession made in one case, it would result in serious consequences for the State as such a concession is against public interest. That it was held in State of Uttar Pradesh vs. Uttar Pradesh Rajya Khanij Vikas Nigam Sangharsh Samiti, (2008) 12 SCC 675 that statement, assurance, or even an undertaking of any officer or counsel is irrelevant and that there can be no estoppel against the statute. With the aforesaid submission, learned senior counsel prayed that the impugned order passed by the High Court may be set aside. Submissions of the respondent No.1–assessee:

6Copy pinpoint6. Per contra, learned senior counsel Sri Guru Krishna Kumar, appearing for the assessee, supported the impugned judgment and submitted that the High Court has proceeded to pass the impugned order on a sound appreciation of the facts of the matter and the applicable law and the same would not call for any interference by this Court. It was further contended as under:

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a) that the appellant-Municipal Corporation has approached the court with unclean hands and has deliberately suppressed critical facts. The Municipal Corporation’s reliance on the case of Amir Mohammad Khan is misleading. In this regard, it was submitted that the Municipal Corporation has conspicuously omitted to disclose that the judgment in the aforementioned case has been rendered nugatory due to the promulgation of an Ordinance and the enactment of the Enemy Property (Amendment and Validation) Act, 2017 (hereinafter referred to as, “Amendment Act, 2017”). Further, as a result of the said judgment and various tenants’ claims, respondent No.1 herein approached this Court seeking a clarification. This Court by order dated 08.09.2006, clarified that persons in possession of properties based on duly authenticated tenancy agreements before the appointment of the Custodian declaring the property as enemy property would not be covered by the judgment in Amir Mohammad Khan. Accordingly, the respondent No.1 has continued to be in possession. b) Reliance was placed on the Amendment Act, 2017 as per which the enemy property vested in the Custodian will remain vested in the Custodian regardless of change in circumstances such as the death of the enemy; the extinction of the enemy status; the winding up of business or a change in nationality of the legal heir and successor. The Act further clarifies that “enemy property vested in the Custodian” includes all rights, titles, and interests in or benefits arising from such property. It includes the right of expropriation of the enemy property, in exercise of the police powers of the State. Also, the principles of acquisition or requisition and payment of compensation will not apply to such a legislation. c) that the property in question unequivocally belongs to the Central Government, specifically the Custodian; Enemy Property is thus ‘property of the Union.’ The assessee is merely a tenant of the Custodian of the Enemy Property and therefore, no taxes can be levied on this property. d) that Article 285 of the Constitution provides exemption from State taxation in respect of properties of the Union of India. He buttressed his submission by stating that how the property sought to be taxed is being used is irrelevant consideration

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as far as the interpretation of Article 285 of the Constitution of India was concerned, vide NDMC vs. State of Punjab, (1997) 7 SCC 339 (“NDMC”). There is an absolute and emphatic ban on state taxation on the property of the Union and the use of such property is irrelevant. e) that apart from Article 285, Section 172 of the Act of 1959 specifically provides that the Corporation may impose taxes subject to the provisions of Article 285 of the Constitution. Likewise, Section 177 of the said Act provides exceptions in respect of the levy of tax amongst others to buildings and land vesting in the Union of India.​​ However, Section 8(2)(vi) of the Act and/or Section 173 of the Act of 1959 cannot amount to “law” authorizing levy of property tax on Union property in terms of Article 285(1) of the Constitution. f) that property vested in the Union was expressly excluded from the scope of general tax on land and building. In this regard, it was submitted that the impugned judgment was incorrect to the extent that it allows Union property to be taxed on the basis of an extended definition of ‘owner’, and is in conflict with the judgment of this Court in NDMC and therefore, not good law. The property in question is indisputably ‘property of the Union’ as per Article 285 of the Constitution. g) that the declaration of a property as enemy property would be by exercise of police power of the State. In other words, Article 300-A only limits the powers of the State inasmuch as no person shall be deprived of his property save by authority of law, implying that there can be no deprivation without any sanction of law. Deprivation by any other mode is not acquisition or taking possession under Article 300-A. It was submitted that war between two or more countries is a reason for which no compensation is payable for acquisition of enemy property. The Act as amended has not been (and cannot be) challenged by the Municipal Corporation and has to be treated as valid and be given its full effect. h) that the joint submission of Municipal Corporation and the Union of India that Section 8(2)(vi) of the Act is a law relatable to Article 285 of the Constitution of India was neither raised before the High Court nor in any pleading before this Court and is a clear afterthought raised for the first time during oral replies;

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i) in the alternative, this Court may balance the equities to make the demand prospective considering the grave hardship that the demand of entire past amount would cause to respondent No.1 in case this Court holds against respondent No.1. With the aforesaid submissions, it was prayed that the present appeal be dismissed as being devoid of any merit and the impugned order of the High Court be affirmed. Submissions of the respondent No.2:

7Copy pinpoint7. Learned counsel Sri Rupesh Kumar, appearing on behalf of the Custodian of the subject Enemy Property, respondent No.2 herein, submitted as under: a) that the subject property belongs to a Pakistani National namely, Raja of Mahmudabad and therefore, the property is vested in the Custodian of Enemy Property for India under the Act as amended by the Amendment Act, 2017 and is an undisputed enemy property; b) that the property belonging to the Union Government is exempted from state taxation under article 285(1) of the Constitution of India. However, there is no such exemption in respect of fee/ service charges or other charges and this position has been conclusively decided by this Court in Union of India vs. State of Uttar Pradesh, (2007) 11 SCC 324. Further, this stand has been reiterated by this Court in Rajkot Municipal Corporation. Consequently, the Ministry of Urban Development, Government of India vide order No.11025/ 26/2003 UCD dated l7.l2.2009 issued a clarification/direction regarding the levy of taxes and service charges in light of the judgments passed by this Court. c) that the respondent No.2 Custodian vide his certificate dated 03.10.2002 has already clarified that it is under an obligation to pay house tax and other local taxes as respondent No.1 is running a private business for profit from the said premises and therefore, not similar to a Central Government enterprise and accordingly is liable for taxation by the local authorities; d) that this Court in the case of NDMC has held that private parties are not exempted from taxation. Therefore, the private person in occupancy of enemy property for personal benefit is neither

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synonymous with Central Government nor can he agitate it before the Court. Learned ASG Sri Balbir Singh also made submissions in the matter later on. With the aforesaid submissions, it was prayed for this Court to pass orders as this Court may think fit and proper. Submissions of the respondent No.3 - State of Uttar Pradesh:

8Copy pinpoint8. State of Uttar Pradesh, at the outset, adopted the contentions raised by the appellant-Municipal Corporation and further submitted as under: a) Admittedly, respondent No.1-assessee is a private entity and a lessee of the Custodian of the enemy property in question and the demand was raised by the appellant-Municipal Corporation on the assessee and not on the Custodian or the Central Government. A private entity, that is running its business, on a property and continuing on lease under the Custodian as per the provisions of the Act cannot claim the benefit of Article 285 of the Constitution of India; b) that the Union of India has also taken a strident stand that though the property is vested in the Custodian for the enemy property in India, the running of the business by respondent No.1 is not akin or synonymous with the running of the business by the Central Government and that therefore tax is payable by respondent No.1 to the appellant herein; c) that vesting, as envisaged under the Act does not make such properties as properties owned by the Central Government or Union properties. In this connection, reference was made to the observations of this Court in Amir Mohammad Khan, which shall be discussed later in the judgment. In light of the aforesaid submissions, it was urged that the view taken by the Hon’ble High Court in the impugned judgment and order needs to be set aside. Points for consideration:

9Copy pinpoint9. Having heard learned senior counsel and learned counsel for the respective parties, the following points would arise for our consideration:

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1. Whether statutory vesting of enemy property including the subject property in the Custodian amounts to expropriation and transfer of ownership so as to confer ownership of such enemy property on the Custodian?

2. Consequently, if the ownership of such enemy property is conferred on the Custodian for Enemy Property, whether such property becomes Union property within the meaning of Article 285 of the Constitution and therefore, it is exempt from payment of property or other local taxes to the appellant-Municipal Corporation under the provisions of the Act of 1959?

3. Whether despite such enemy property becoming property of the Union, clause (2) of Article 285 of the Constitution enables appellant herein to impose property or other local taxes on the respondent which is lessee of the subject property?

4. Whether the High Court was right in holding in favour of the respondent?

5. What order? Since these questions are inter-related, they shall be considered together. Preface: 9.1 Before we proceed further, we would like to preface the discussion with a historical perspective. 9.2 Jean-Jacques Rousseau in his treatise the Social Contract said that “War is constituted by a relation between things, and not between persons… War then is a relation, not between man and man, but between State and State…” The general aim of the administration of enemy property is to eliminate enemy influence from the national economy. The mischief that such state instruments seek to cure is the provision of aid and comfort to the enemy, for instance, through the making available of funds for war financing. Enemy property can be disposed of by various means including custodianship, liquidation, expropriation, confiscation or nationalization. The means of custodianship imply a fiduciary administration. The whole raison d’etre of a statutory regime that seeks to administer enemy property through a custodianship is to preserve and protect the properties

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until the war is over. After all, the law of settlement of enemy property is governed not only by considerations of diplomatic strategy but also by fundamental principles of fair governance. 9.3 In 1962, in the wake of the Chinese aggression, the Custodian of Enemy Property for India was called upon to take charge of the Chinese assets in India with the object of vesting the movable and immovable properties of the Chinese subjects left in India under the Defence of India Rules, 1962 specifying the enemy nationals and the properties held by them. Similarly, in the wake of the Indo-Pak war of 1965 and 1971, there was migration of people from India to Pakistan. Under the Defence of India Rules framed under the Defence of India Act, 1962, the Government of India took over the properties and companies of such persons who had taken Pakistani nationality. 9.4 At this juncture, we may notice the expression ‘on behalf of an enemy’ occurring in the definition of enemy property in Rule 133-I of Defence of India (Amendment) Rules, 1962, and Subrule 4 of Rule 138 of Defence of India Rules, 1971 implying that the enemy property is only held and managed by the Custodian for a specific purpose. We ought to appreciate that the Statement of Objects and Reasons of the Enemy Property Act, 1968 intend to continue the vesting and maintenance of the properties by the Custodian of Enemy Property until the Government of India arrives at a settlement with the Governments of enemy countries. The intent of the Parliament is further illuminated by the Tashkent Declaration by India and Pakistan dated January 10, 1966, which included a clause stating that the two countries would discuss the return of the properties and assets taken over by either side in connection with the conflict. Legal framework: Provisions of the Act:

10Copy pinpoint10. The Parliament has enacted the said Act to provide for the continued vesting of enemy property vested in the Custodian of Enemy Property for India under the Defence of India Rules, 1962 and the Defence of India Rules, 1971 and for matters connected therewith. 10.1 Part IV of the Defence of India Rules, 1962 deals inter alia with restriction of movements and activities of persons. While

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Part XIV-A deals with control of trading with enemy, Part XIV-B deals with control of enemy firms. Section 133-A defines the expression ‘enemy’ inter alia to mean any individual resident in enemy territory. In Part XIV-B, the definition of enemy subject and enemy firm have been given and also the definition of enemy property. Under the said Rules, the Controllers, Deputy Controllers or Inspectors appointed by the Central Government had to carry out the supervision of firms suspected to be enemy firms and do all other ancillary and incidental acts as delineated under the said Rules. 10.2 Similarly, under the Defence of India Act, 1971, Part IV deals with restriction of movement and activities of person. Part XVI deals with control of trading with enemy and the definition of enemy is in Rule 130 of the said Rules and similarly, Controllers or Deputy Controller were appointed for controlling the trading with enemy. Part XVII deals with control of enemy firms to carry out the business of enemy firms, etc. Rule 151 of the 1971 Rules clearly states with a view to preserving enemy property, the Central Government may appoint a Custodian of Enemy Property for India and one or more Deputy Custodians and Assistant Custodians of Enemy Property for such local areas as may be prescribed. The Act under consideration is essentially to provide for the continued vesting of enemy property vested in the Custodian of Enemy Property for India under the Defence of India Rules, 1962, and the Defence of India Rules, 1971 and for matters connected therewith. 10.3 At this stage, we can refer to the relevant provisions of the Act. The expression “Custodian”, “enemy” or “enemy subject” or “enemy firm” and “enemy property” are defined as under: “2. Definitions.- In this Act, unless the context otherwise requires,- (a) “Custodian” means the Custodian of Enemy Property for India appointed or deemed to have been appointed under section 3 and includes a Deputy Custodian and an Assistant Custodian of Enemy Property appointed or deemed to have been appointed under that section;

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(b) “enemy” or “enemy subject” or “enemy firm” means a person or country who or which was an enemy, an enemy subject including his legal heir and successor whether or not a citizen of India or the citizen of a country which is not an enemy or the enemy, enemy subject or his legal heir and successor who has changed his nationality or an enemy firm, including its succeeding firm whether or not partners or members of such succeeding firm are citizen of India or the citizen of a country which is not an enemy or such firm which has changed its nationality, as the case may be, under the Defence of India Act, 1962, and the Defence of India Rules, 1962 or the Defence of India Act, 1971 (42 of 1971) and the Defence of India Rules, 1971, does not include a citizen of India other than those citizens of India, being the legal heir and successor of the “enemy” or “enemy subject” or “enemy firm”; (c) “enemy property” means any property for the time being belonging to or held or managed on behalf of an enemy, an enemy subject or an enemy firm: Provided that where an individual enemy subject dies in the territories to which this Act extends, or dies in the territories to which the Act extends or dies in any territory outside India, any property which immediately before his death, belonged to or was held by him or was managed on his behalf, may, notwithstanding his death, continue to be regarded as enemy property for the purposes of this Act;” 10.4 Section 3 of the Act deals with appointment of Custodian of Enemy Property for India and Deputy Custodian, while Section 4 deals with appointment of Inspectors of Enemy Property. Section 5 states that property vested in the Custodian of Enemy Property for India under the Defence of India Rules, 1962 to continue to vest in the Custodian. The said provisions read as under:

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“3. Appointment of Custodian of Enemy Property for India and Deputy Custodian, etc.—The Central Government may, by notification in the Official Gazette, appoint a Custodian of Enemy Property for India and one or more Deputy Custodians and Assistant Custodians of Enemy Property for such local areas as may be specified in the notification: Provided that the Custodian of Enemy Property for India and any Deputy Custodian or Assistant Custodian of Enemy Property appointed under the Defence of India Rules, 1962 or the Defence of India Rules, 1971, as the case may be, shall be deemed to have been appointed under this section.

4. Appointment of Inspectors of Enemy Property.— The Central Government may, either generally or for any particular area, by notification in the Official Gazette, appoint one or more Inspectors of Enemy Property for securing compliance with the provisions of this Act and may, by general or special order, provide for the distribution and allocation of the work to be performed by them for securing such compliance: Provided that every Inspector of Enemy Firms appointed under the Defence of India Rules, 1962 or the Defence of India Rules, 1971, as the case may be, shall be deemed to be an Inspector of Enemy Property appointed under this section.

5. Property vested in the Custodian of Enemy Property for India under the Defence of India Rules, 1962 to continue to vest in Custodian.—(1) Notwithstanding the expiration of the Defence of India Act, 1962 (51 of 1962), and the Defence of India Rules, 1962, all enemy property vested before such expiration in the Custodian of Enemy Property for India appointed under the said Rules and continuing to vest in him immediately before the commencement of this Act, shall, as from such commencement, vest in the Custodian.

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(2) Notwithstanding the expiration of the Defence of India Act, 1971 (42 of 1971) and the Defence of India Rules, 1971, all enemy property vested before such expiration in the Custodian of Enemy Property for India appointed under the said Rules and continuing to vest in him immediately before the commencement of the Enemy Property (Amendment) Act, 1977 (40 of 1977) shall, as from such commencement, vest in the Custodian. (3) The enemy property vested in the Custodian shall, notwithstanding that the enemy or the enemy subject or the enemy firm has ceased to be an enemy due to death, extinction, winding up of business or change of nationality or that the legal heir and successor is a citizen of India or the citizen of a country which is not an enemy, continue to remain, save as otherwise provided in this Act, vested in the Custodian. Explanation. – For the purposes of this sub-section, “enemy property vested in the Custodian” shall include and shall always be deemed to have been included all rights, titles, and interest in, or any benefit arising out of, such property vested in him under this Act.” 10.5 Section 5A and Section 5B were inserted with retrospective effect from 07.01.2016 and 10.07.1968 by Act 3 of 2017. They read as under: “5A. Issue of certificate by Custodian. —The Custodian may, after making such inquiry as he deems necessary, by order, declare that the property of the enemy or the enemy subject or the enemy firm described in the order, vests in him under this Act and issue a certificate to this effect and such certificate shall be the evidence of the facts stated therein. 5B. Law of succession or any custom or usage not to apply to enemy property.—Nothing contained in any law for the time being in force relating to succession or any custom or usage governing succession of property shall apply in relation to

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the enemy property under this Act and no person (including his legal heir and successor) shall have any right and shall be deemed not to have any right (including all rights, titles and interests or any benefit arising out of such property) in relation to such enemy property. Explanation.—For the purposes of this section, the expressions “custom” and “usage” signify any rule which, having been continuously and uniformly observed for a long time, has obtained the force of law in the matters of succession of property.” 10.6 Section 6 has been substituted by Section 6 of Act 3 of 2017 with retrospective effect from 10.07.1968. Prior to its substitution, it read as under: “6. Prohibition to transfer any property vested in Custodian by an enemy, enemy subject or enemy firm.—(1) No enemy or enemy subject or enemy firm shall have any right and shall never be deemed to have any right to transfer any property vested in the Custodian under this Act, whether before or after the commencement of this Act and any transfer of such property shall be void and shall always be deemed to have been void. (2) Where any property vested in the Custodian under this Act had been transferred, before the commencement of the Enemy Property (Amendment and Validation) Act, 2017, by an enemy or enemy subject or enemy firm and such transfer has been declared, by an order, made by the Central Government, to be void, and the property had been vested or deemed to have been vested in the Custodian by virtue of the said order made under section 6, as it stood before its substitution by section 6 of the Enemy Property (Amendment and Validation) Act, 2017 such property shall, notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, continue to vest or be deemed to have been vested in the

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Custodian and no person (including an enemy or enemy subject or enemy firm) shall have any right or deemed to have any right (including all rights, titles and interests or any benefit arising out of such property) over the said property vested or deemed to have been vested in the Custodian.” 10.7 Section 7 deals with payment to Custodian of money otherwise payable to an enemy, enemy subject or enemy firm, the same reads as under: “7. Payment to Custodian of money otherwise payable to an enemy, enemy subject or enemy firm. - (1) Any sum payable by way of dividend, interest, share profits or otherwise to or for the benefit of an enemy or an enemy subject or an enemy firm shall, unless otherwise ordered by the Central Government, be paid by the person by whom such sum would have been payable but for the prohibition under the Defence of India Rules, 1962 or the Defence of India Rules, 1971, as the case may be, to the Custodian or such person as may be authorised by him in this behalf and shall be held by the Custodian or such person subject to the provisions of this Act. (2) In cases in which money would, but for the prohibition under the Defence of India Rules, 1962 or the Defence of India Rules, 1971, as the case may be, be payable in a foreign currency to or for the benefit of an enemy or an enemy subject or an enemy firm (other than cases in which money is payable under a contract in which provision is made for a specified rate of exchange), the payment shall be made to the Custodian in rupee currency at the middle official rate of exchange fixed by the Reserve Bank of India on the date on which the payment became due to that enemy, enemy subject or enemy firm. (3) The Custodian shall, subject to the provisions of section 8, deal with any money paid to him under the Defence of India Rules, 1962 or the Defence of India Rules, 1971 as the case may be or under this

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Act and any property vested in him under this Act in such manner as the Central Government may direct.” 10.8 The powers of Custodian in respect of enemy property vested in him as amended are delineated in Section 8 which reads as under: “8. Power of Custodian in respect of enemy property vested in him.— (1) With respect to the property vested in the Custodian under this Act, the Custodian may take or authorise the taking of such measures as he considers necessary or expedient for preserving such property till it is disposed of in accordance with the provisions of this Act. (2) Without prejudice to the generality of the foregoing provision, the Custodian or such person as may be specifically authorised by him in this behalf, may, for the said purpose,— (i) carry on the business of the enemy; (ia) fix and collect the rent, standard rent, lease rent, licence fee or usage charges, as the case may be, in respect of enemy property; (ii) take action for recovering any money due to the enemy; (iii) make any contract and execute any document in the name and on behalf of the enemy; (iv) institute, defend or continue any suit or other legal proceeding, refer any dispute to arbitration and compromise any debts, claims or liabilities; (iva) secure vacant possession of the enemy property by evicting the unauthorised or illegal occupant or trespasser and remove unauthorised or illegal constructions, if any. (v) raise on the security of the property such loans as may be necessary; (vi) incur out of the property any expenditure including the payment of any taxes, duties, cesses and rates to Government or to any local authority and

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of any wages, salaries, pensions, provident fund contributions to, or in respect of, any employee of the enemy and the repayment of any debts due by the enemy to persons other than enemies; (vii) transfer by way of sale, mortgage or lease or otherwise dispose of any of the properties; (viii) invest any moneys held by him on behalf of enemies for the purchase of Treasury Bills or such other Government securities as may be approved by the Central Government for the purpose; (ix) make payments to the enemy and his dependents; (x) make payments on behalf of the enemy to persons other than those who are enemies, of dues outstanding on the 25th October, 1962 or on the 3rd December, 1971; and (xi) make such other payments out of the funds of the enemy as may be directed by the Central Government.” 10.9 Section 8A deals with sale of property by Custodian which has been inserted with retrospective effect from 07.01.2016 while Section 10A deals with power to issue certificate of sale. The same are extracted as under: “8A. Sale of property by Custodian.—(1) Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority or any law for the time being in force, the Custodian may, within such time as may be specified by the Central Government in this behalf, dispose of whether by sale or otherwise, as the case may be, with prior approval of the Central Government, by general or special order, enemy properties vested in him immediately before the date of commencement of the Enemy Property (Amendment and Validation) Act, 2017 in accordance with the provisions of this Act, as amended by the Enemy Property (Amendment and Validation) Act, 2017.

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(2) The Custodian may, for the purpose of disposal of enemy property under sub-section (1), make requisition of the services of any police officer to assist him and it shall be the duty of such officer to comply with such requisition. (3) The Custodian shall, on disposal of enemy property under sub-section (1) immediately deposit the sale proceeds into the Consolidated Fund of India and intimate details thereof to the Central Government. (4) The Custodian shall send a report to the Central Government at such intervals, as it may specify, for the enemy properties disposed of under sub-section (1), containing such details, (including the price for which such property has been sold and the particulars of the buyer to whom the properties have been sold or disposed of and the details of the proceeds of sale or disposal deposited into the Consolidated Fund of India) as it may specify. (5) The Central Government may, by general or special order, issue such directions to the Custodian on the matters relating to disposal of enemy property under sub-section (1) and such directions shall be binding upon the Custodian and the buyer of the enemy properties referred to in that sub-section and other persons connected to such sale or disposal. (6) The Central Government may, by general or special order, make such guidelines for disposal of enemy property under sub-section (1). (7) Notwithstanding anything contained in this section, the Central Government may direct that disposal of enemy property under sub-section (1) shall be made by any other authority or Ministry or Department instead of Custodian and in that case all the provisions of this section shall apply to such authority or Ministry or Department in respect of disposal of enemy property under sub-section (1).

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(8) Notwithstanding anything contained in sub- sections (1) to (7), the Central Government may deal with or utilise the enemy property in such manner as it may deem fit. xxx 10A. Power to issue certificate of sale.—(1) Where the Custodian proposes to sell any enemy immovable property vested in him, to any person, he may on receipt of the sale proceeds of such property, issue a certificate of sale in favour of such person and such certificate of sale shall, notwithstanding the fact that the original title deeds of the property have not been handed over to the transferee, be valid and conclusive proof of ownership of such property by such person. (2) Notwithstanding anything contained in any law for the time being in force, the certificate of sale, referred to in sub-section (1), issued by the Custodian shall be a valid instrument for the registration of the property in favour of the transferee and the registration in respect of enemy property for which such certificate of sale had been issued by the Custodian, shall not be refused on the ground of lack of original title deeds in respect of such property or for any such other reason.” 10.10 Section 9 states that all enemy property vested in the Custodian under this Act shall be exempt from attachment, seizure or sale in execution of a decree of a civil court or orders of any other authority. The same is extracted as under: “9. Exemption from attachment, etc. - All enemy property vested in the Custodian under this Act shall be exempt from attachment, seizure or sale in execution of decree of a civil court or orders of any other authority.” 10.11 Section 12 speaks of protection for complying with orders of Custodian and the same reads as under: “12. Protection for complying with orders of Custodian.- Where any order with respect to any money or property is addressed to any person by the

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Custodian and accompanied by a certificate of the Custodian that the money or property is money or property vested in him under this Act, the certificate shall be evidence of the facts stated therein and if that person complies with the orders of the Custodian, he shall not be liable to any suit or other legal proceeding by reason only of such compliance.” 10.12 Section 13 deals with validity of action taken in pursuance of orders of Custodian while Section 14 deals with proceeding against companies whose assets vest in custodian, which read as under: “13. Validity of action taken in pursuance of orders of Custodian.—Where under this Act,— (a) any money is paid to the Custodian; or (b) any property is vested in the Custodian or an order is given to any person by the Custodian in relation to any property which appears to the Custodian to be enemy property vested in him under this Act, neither the payment, vesting nor order of the Custodian nor any proceedings in consequence thereof shall be invalidated or affected by reason only that at a material time,— (i) some person who was or might have been interested in the money or property, and who was an enemy or an enemy firm, has died or had ceased to be an enemy or an enemy firm; or (ii) some person who was so interested and who was believed by the Custodian to be an enemy or an enemy firm, was not an enemy or an enemy firm.”

14. Proceedings against companies whose assets vest in Custodian - Where the enemy property vested in the Custodian under this Act consists of assets of a company, no proceeding, civil or criminal, shall be instituted under the Companies Act, 1956 (1 of 1956), against the company, or any director, manager or other officer thereof except with the consent in writing of the Custodian.”

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10.13 Section 17 pertains to levy of fees and the same reads as under: “17. Levy of fees.— (1) There shall be levied by the Custodian fees equal to five per centum of— (a) the amount of moneys paid to him; (b) the proceeds of the sale or transfer of any property which has been vested in him under this Act; and (c) the value of the residual property, if any, at the time of its transfer to the original owner or other person specified by the Central Government under section 18: Provided that in the case of an enemy whose property is allowed by the Custodian to be managed by some person specially authorised in that behalf, there shall be levied a fee of five per centum of the gross income of the enemy or such less fee as may be specifically fixed by the Central Government after taking into consideration the cost of direct management incurred by that Government, the cost of superior supervision and any risks that may be incurred by that Government in respect of the management: Provided further that the Central Government may, for reasons to be recorded in writing, reduce or remit the fees leviable under this sub-section in any special case or class of cases. Explanation.—In this sub-section “gross income of the enemy” means income derived out of the properties of the enemy vested in the Custodian under this Act. (2) The value of any property for the purpose of assessing the fees shall be the price which, in the opinion of the Central Government or of an authority empowered in this behalf by the Central Government, such property would fetch if sold in the open market. (3) The fees in respect of property may be levied out of any proceeds of the sale or transfer thereof or out of any income accrued therefrom or out of any other

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property belonging to the same enemy and vested in the Custodian under this Act. (4) The fees levied under this section shall be credited to the Central Government.” 10.14 Section 18 deals with transfer of property vested as enemy property in certain cases and the said provision reads as under: “18. Transfer of property vested as enemy property in certain cases.—The Central Government may, on receipt of a representation from a person, aggrieved by an order vesting a property as enemy property in the Custodian within a period of thirty days from the date of receipt of such order or from the date of its publication in the Official Gazette, whichever is earlier and after giving a reasonable opportunity of being heard, if it is of the opinion that any enemy property vested in the Custodian under this Act and remaining with him was not an enemy property, it may by general or special order, direct the Custodian that such property vested as enemy property in the Custodian may be transferred to the person from whom such property was acquired and vested in the Custodian.” 10.15 Section 18A, Section 18B and Section 18C though related to Section 18, however, are not relevant for the purposes of this case. Section 22 gives overriding effect to this Act and the same reads as under: “22. Effect of laws inconsistent with the Act.—The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, (including any law of succession or any custom or usage in relation to succession of property).” Section 22A is a validation clause which reads as under: “22A. Validation.—Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority,—

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(a) the provisions of this Act, as amended by the Enemy Property (Amendment and Validation) Act, 2017, shall have and shall always be deemed to have effect for all purposes as if the provisions of this Act, as amended by the said Act, had been in force at all material times; (b) any enemy property divested from the Custodian to any person under the provisions of this Act, as it stood immediately before the commencement of the Enemy Property (Amendment and Validation) Act, 2017, shall stand transferred to and vest or continue to vest, free from all encumbrances, in the Custodian in the same manner as it was vested in the Custodian before such divesting of enemy property under the provisions of this Act, as if the provisions of this Act, as amended by the aforesaid Act, were in force at all material times; (c) no suit or other proceedings shall, without prejudice to the generality of the foregoing provisions, be maintained or continued in any court or tribunal or authority for the enforcement of any decree or order or direction given by such court or tribunal or authority directing divestment of enemy property from the Custodian vested in him under section 5 of this Act, as it stood before the commencement of the Enemy Property (Amendment and Validation) Act, 2017, and such enemy property shall continue to vest in the Custodian under section 5 of this Act, as amended by the aforesaid Act, as the said section, as amended by the aforesaid Act was in force at all material times; (d) any transfer of any enemy property, vested in the Custodian, by virtue of any order of attachment, seizure or sale in execution of decree of a civil court or orders of any tribunal or other authority in respect of enemy property vested in the Custodian which is contrary to the provisions of this Act, as amended by the Enemy Property

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(Amendment and Validation) Act, 2017, shall be deemed to be null and void and notwithstanding such transfer, continue to vest in the Custodian under this Act.” 10.16 Section 24 states that certain orders made under the Defence of India Rules, 1962, to continue in force and the same is extracted as under: “24. Certain orders made under the Defence of India Rules, 1962, to continue in force. - (1) Every order which was made under the Defence of India Rules, 1962, by the Central Government or by the Custodian of Enemy Property for India appointed under those Rules, relating to enemy property and which was in force immediately before the expiration thereof shall, in so far as such order is not inconsistent with the provisions of this Act, be deemed to continue in force and to have been made under this Act. (2) Every order which was made under the Defence of India Rules, 1971 by the Central Government or by the Custodian of Enemy Property for India appointed under those rules relating to enemy property and which was in force immediately before the expiration thereof shall, in so far as such order is not inconsistent with the provisions of this Act, be deemed to continue in force and to have been made under this Act.” The Enemy Property Rules, 2015: 10.17 The Enemy Property Rules, 2015 deal with procedure for identification of immovable property, procedure for declaration and vesting of the enemy property. While Rule 5 deals with procedure for preservation, management and control of immovable property, Rule 6 deals with procedure for taking possession of moveable property; on the other hand, Rule 7 deals with procedure for taking possession of certain moveable property. Rule 15 deals with procedure for divestment of enemy property vested in Custodian which reads as under: “15. Procedure for divestment of enemy property vested in Custodian.- (1) The Central Government may, on a reference or complaint or on its own motion,

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initiate process for divestment of an enemy property vested in the Custodian, to the owner thereof or to such other person. (2) An officer of the rank of Joint Secretary or above in the Government of India shall be the Chairperson of the proceedings for divestment of the enemy property under this rule. (3) The Chairperson shall give thirty days’ notice to all concerned including the Custodian, requiring them to submit a reply, produce all documentary evidence and appear in person or through authorised representative: Provided that if any party fails to appear on the date fixed for hearing, then a second and final notice shall be served through registered post and if he again fails to appear after the second notice, then the proceedings shall be heard ex parte: Provided further that the Chairperson shall record the reasons for such ex parte proceedings. (4) The notices shall be served on all concerned parties before each hearing. (5) The presenting officer who has been engaged for presentation of the case on behalf of the Central Government, shall examine such witnesses and documentary evidences in respect of the property as he thinks fit. (6) On completion of the proceedings, the details including depositions shall be furnished to the parties. (7) The Chairperson, after examining the evidence and calling for further reports and inquiry as may be necessary, shall pass such orders thereon as it thinks fit, and a copy of the said orders shall be sent to the parties.”

11Copy pinpoint11. Articles 285, 289, 296 and 300-A of the Constitution of India are relevant while interpreting the Act and read as under: “285. Exemption of property of the Union from State taxation.—(1) The property of the Union shall, save

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in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State. (2) Nothing in clause (1) shall, until Parliament by law otherwise provides, prevent any authority within a State from levying any tax on any property of the Union to which such property was immediately before the commencement of this Constitution liable or treated as liable, so long as that tax continues to be levied in that State. xxx

289. Exemption of property and income of a State from Union taxation.— (1) The property and income of a State shall be exempt from Union taxation. (2) Nothing in clause (1) shall prevent the Union from imposing, or authorising the imposition of any tax to such extent, if any, as Parliament may by law provide in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith. (3) Nothing in clause (2) shall apply to any trade or business, or to be incidental to the ordinary functions of Government.” xxx

296. Property accruing by escheat or lapse or as bona vacantia. - Subject as hereinafter provided, any property in the territory of India which, if this Constitution had not come into operation, would have accrued to His Majesty or, as the case may be, to the Ruler of an Indian State by escheat or lapse, or as bona vacantia for want of a rightful owner, shall, if it is property situate in a State, vest in such State, and shall, in any other case, vest in the Union: Provided that any property which at the date when it would have so accrued to His Majesty or to the Ruler of an Indian State was in the possession or under the control of the

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Government of India or the Government of a State shall, according as the purposes for which it was then used or held were purposes of the Union or of a State, vest in the Union or in that State. Explanation: In this article, the expressions “Ruler” and “Indian State” have the same meanings as in Article 363. xxx 300-A. Persons not to be deprived of property save by authority of law.- No person shall be deprived of his property save by authority of law.”

12Copy pinpoint12. The Uttar Pradesh Municipalities Act, 1916 (hereinafter referred to as “Act of 1916”) consolidates and amends the law relating to Municipalities in the erstwhile United Provinces and presently State of Uttar Pradesh. The city of Lucknow was a municipality and later was constituted as Nagar Nigam or Corporation under the Act of 1959 and till then the Act of 1916 was applicable. Hence, the relevant provisions of the Act of 1916 are extracted as under: “128. Taxes which may be imposed.- (1) Subject to any general rules or special order of the State Government in this behalf, the taxes which a Municipality may impose in the whole or part of a municipality are,- (i) a tax on the annual value of building or lands or of both; (ii) a tax on trades and callings carried on within the municipal limits and deriving special advantages from, or imposing special burdens on municipal services; (iii) a tax on trades, callings and vocations including all employments remunerated by salary or fees; (iii-a) a theatre tax which means a tax on amusements or entertainments; (iv) a tax on vehicles and other conveyances plying for hire or kept within the municipality or on boats moored therein; (v) a tax on dogs kept within the municipality;

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(vi) a tax on animals used for riding, driving, draught or burden, when kept within the municipality; (vii) [***] (viii) [***] (ix) a tax on inhabitants assessed according to their circumstances and property; (x) a water tax on the annual value of buildings or lands or of both; (x-a) a drainage tax on the annual value of buildings leviable on such buildings as are situated within a distance, to be fixed by rule in this behalf for each municipality from the nearest sewer line; (xi) a scavenging tax; (xii) a conservancy tax for the collection, removal and disposal of excrementious and polluted matter from privies, urinals, cesspools; (xiii) [***] (xiii-A) [***] (xiii-B) a tax on deeds of transfer of immovable property situated within the limits of the municipality; (xiv) [***] (2) Provided that taxes under clauses (iii) and (ix) of sub- section (1) shall not be levied at the same time [***] nor shall the taxes under clauses (x-a) and (xii) of sub-section (1) be levied at the same time; Provided further that no tax under clause (xiii-B) of sub- section (1) shall be levied on deeds of transfer of immovable property situated within such area of the municipality as forms part of the local area of any Improvement Trust created under Section 3 of the U.P. Town Improvement Act, 1919 (UP Act No. VIII of 1919): Provided also that no tax under clause (iv) of sub-section (1) shall be levied in respect of any motor vehicle. (3) Nothing in this section shall authorize the imposition

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of any tax which the State Legislature has no power to impose in the State under the Constitution: Provided that a Municipality which immediately before the commencement of the Constitution was lawfully levying any such tax under this section as then in force, may continue to levy that tax until provision to the contrary is made by Parliament. (i) A tax on the annual value of buildings or lands or both; (ii) A water tax on the annual value of buildings or lands or both; (iii) A drainage tax on the annual value of buildings leviable on such buildings as are situated within a distance, to be fixed by rules in this behalf for each municipality from the nearest sewer lines; (iv) A conservancy tax for the collection, removal and disposal of excrementious and polluted matter from privies, urinals, cesspools; (2) xxx (3) The municipal taxes shall be assessed and levied in accordance with the provisions of this Act and the rules and bye-laws framed thereunder. (4) Nothing in this section shall authorize the imposition of any tax which the State Legislature has no power to impose in the State under the Constitution: Provided that a Municipality which immediately before the commencement of the Constitution was lawfully levying any such tax under this section as then in force, may continue to levy that tax until provisions to the contrary is made by the Parliament. xxx 129-A. Levy of tax on annual value of buildings or lands or both.- The Tax on annual value of buildings or lands or both shall be levied in respect of all buildings and lands situated in the municipal limit except,- xxx

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(e) building and land vested in the Union of India, except where provisions of clause (2) of Article 285 of the Constitution of India, apply;” 12.1 Section 140 of the said Act defines annual value.

13Copy pinpoint13. The relevant provisions of the Act of 1959 are extracted as under as they are applicable to Lucknow Nagar Nigam (Municipal Corporation) – the appellant herein: “172. Taxes to be imposed under this Act. – (1) For the purposes of this Act and subject to the provisions thereof and of Article 285 of the Constitution of India the Corporation shall impose the following taxes, namely- (a) property taxes; xxx (3) The Corporation taxes shall be assessed and levied in accordance with the provisions of this Act and the rules and bye-laws framed thereunder. (4) Nothing in this section shall authorize the imposition of any tax which the State Legislature has no power to impose in the State under the Constitution of India: Provided that where any tax was being lawfully levied in the area included in the City immediately before the commencement of the Constitution of India such tax may continue to be levied and applied for the purposes of this Act until provision to the contrary is made by Parliament.

173. Property taxes leviable. – (1) For the purposes of sub-section (1) of Section172 property taxes shall comprise the following taxes which shall, subject to the exceptions, limitations and conditions hereinafter provided, be levied on buildings and lands in the City - (a) a general tax which may be levied, if the Corporation so determines, on a graduated scale; (b) a water tax; (c) drainage tax leviable in areas provided with sewer system by the Corporation;

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(d) a conservancy tax in areas in which the Corporation undertakes, the collection; removal and disposal of excrementitious and polluted matter from privies, urinals and cesspools. (2) Save as otherwise expressly provided in this Act or rules made thereunder, these taxes shall be levied on the annual value of buildings or land as the case may be: Provided that the aggregate of the property taxes shall in no case be less than 15 per cent nor more than 25 per cent of the annual value of the building of land or both assessed to such taxes.

174. Definition of “Annual Value” – “Annual value” means – (a) in the case of railway stations, colleges, schools, hostels, factories, commercial buildings, and other non-residential buildings, a proportion not below 5 per cent, to be fixed by rule made in this behalf of the sum obtained by adding the estimated present cost of erecting the building, less depreciation at a rate to be fixed by rules, to the estimated value of the land appurtenant thereto; and (b) in the case of a building or land not falling within the provisions of clause (a), the gross annual rent for which such building exclusive of furniture or machinery therein, or such land is actually let, or where the building or land is not let or in the opinion of the assessing authority is let for a sum less than its fair letting value, might reasonably be expected to be let from year to year. Provided that where the annual value of any building would, by reason of exceptional circumstances, in the opinion of the Corporation, be excessive if calculated in the aforesaid manner, the Corporation may fix the annual value at any less amount which appears to it equitable. Provided further that where the Corporation so resolves, the annual value in the case of owner occupied buildings and land shall for the purposes of assessment of property taxes be deemed to be 25 per cent less than the annual value otherwise determined under this Section.

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175. Restrictions on imposition of water tax.-The imposition of a tax under clause (b) of sub-section (1) of Section 173 shall be subject to the restriction that the tax shall not be imposed – (i) on any land exclusively for agricultural purposes, unless the water is supplied by the Corporation for such purposes; or (ii) on a plot of land or building the annual value whereof does not exceed rupees three hundred and sixty and to which no water is supplied by the Corporation; or (iii) on any plot or building, no part of which is within the radius prescribed for the City, from the nearest stand-pipe or other waterworks whereat water is made available to the public by the Corporation. Explanation. - For the purposes of this section – (a) ‘building’ shall include the compound, if any, thereof, and, where there are several buildings in a common compound, all such buildings, and the common compound; (b) ‘a plot of land’ means any piece of land held by a single occupier, or held in common by several co-occupiers, whereof no one portion is entirely separated from any other portion by the land of another occupier or of other occupiers or by public property. xxx

177. General tax on what premises to be levied. – The general tax shall be levied in respect of all buildings and lands in the City except - xxx (f) buildings and lands vesting in the Union of India except where provisions of clause (2) of Article 285 of the Constitution of India apply; xxx

179. Primary responsibility for certain property taxes on annual value. – (1) Except where otherwise prescribed,

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every tax (other than a drainage tax or a conservancy tax) on the annual value of buildings or lands shall be leviable primarily from the actual occupier of the property upon which the tax is assessed, if he is the owner of the buildings or lands or holds them on a building or other lease from the Central or the State Government or from the Corporation, or on a building lease from any person. (2) In any other case the tax shall be primarily leviable as follows, namely, - (a) if the property is let from the lessor; (b) if the property is sublet from the superior lessor; (c) if the property is unlet from the person in whom the right to let the same vests. (d) if the property is let in pursuance of an order under the Uttar Pradesh Urban Buildings (Regulations of Letting, Rent and Eviction) Act, 1972, from the tenant. (3) On failure to recover any sum due on account of such tax from the person primarily liable, the Mukhya Nagar Adhikari may recover from the occupier of any part of the buildings or lands in respect of which it is due that portion thereof which bears to the whole amount due the same ratio as the rent annually payable by such occupier bears to the aggregate amount of rent payable in respect of the whole of the said building or lands, or to the aggregate amount of the letting value thereof in the authenticated assessment list. (4) An occupier who makes any payment for which he is not primarily liable under the foregoing provisions shall, in the absence of any contract to the contrary, be entitled to be reimbursed by the person primarily liable.

180. Liability for payment of other such taxes. – (1) A drainage tax, or a conservancy tax on the annual value of buildings or lands shall be levied from the actual occupier of the property upon which the taxes are assessed: Provided that, where such property is let to more occupiers than one, the Mukhya Nagar Adhikari may at his option

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levy the tax from the lessor instead of from the actual occupiers. (2) A lessor from whom a tax is levied under the proviso to sub-section (1) may, in the absence of a contract to the contrary, recover the tax from any or all of the actual occupiers.

181. Property taxes to be a first charge on premises on which they are assessed. – (1) Property taxes due under this Act in respect of any building or land shall, subject to the prior payment of the land revenue, if any, due to the State Government thereupon, be a first charge, in the case of any building or land held immediately from the State, upon the interest in such building or land of the person liable for such taxes and upon the movable property, if any, found within or upon such building or land and belonging to such person; and, in the case of any other building or land, upon the said building or land and belonging to the person liable for such taxes. Explanation. - The term «property taxes» in this section shall be deemed to include any charges payable for water supplied to any premises and the costs of recovery of property taxes as specified in the rules. (2) In any decree in a suit for the enforcement of the charge created by subsection (1), the Court may order the payment to the Corporation of interest on the sum found to be due at such rate as the Court deems reasonable from the date of the institution of the suit until realization, and such interest and the cost of enforcing the said charge, including the costs of the suit and the cost of bringing the premises or movable property in question to sale under the decree, shall, subject as aforesaid, be a first charge on such premises and movable property along with the amount found to be due, and the Court may direct payment thereof to be made to the Corporation out of the sale proceeds.” Legal status of the Custodian under the Act:

14Copy pinpoint14. At this stage, it would be useful to dilate on the jurisprudential aspect of ownership of property and examine the nuances thereof vis-à-vis the status of the Custodian of Enemy Property for India under the Act.

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14.1 According to Salmond on Jurisprudence, the expression ‘ownership’ in a generic sense, extends to all classes of rights, whether proprietary or personal, in rem or in personam, in re propria or in re aliena. Every man is the owner of the rights which he owns. Ownership in its generic sense as a relation in which a person stands to any right vested in him, is opposed to two other possible relations between a person and a right. In the first place, it is opposed to possession. A man has possessory right without owning it or secondly, he may own a right without possessing it. Thirdly, the ownership and possession may be united as they usually are, in the context of de jure and the de facto relation being co-existent or coincident. 14.2 In the first of the above, possession is a de facto relationship while the second is de jure ownership or relationship. In the second sense, the ownership of a right is opposed to the encumbrance of it. The owner of the right is he, in whom the right itself is vested, while the encumbrancer of it is he, in whom, is vested, not the right itself, but some adverse, dominant and limiting right in respect of it. In law, there are no separate names for every distinct kind of encumbrancer. However, an encumbrance is opposite to ownership; every encumbrancer is nevertheless himself the owner of the encumbrance, that is to say, he, in whom, an encumbrance stands in a definite relation, not merely to it, but also to the right encumbered by it. How is ownership acquired? : 14.3 Ownership is an important right vis-à-vis any property and more so immovable property. What are the modes of acquisition of ownership? Under the provisions of the Transfer of Property Act, 1882, acquisition of ownership in relation to immovable property is by a transfer or conveyance. The expression “transfer” is defined with reference to the word convey which is an assurance inter vivos under the provisions of the said Act. Thus, the transferor must have an interest in the property before he can convey it. A person who has no interest in the property, cannot convey any interest in the property, in other words, he cannot sever himself from it and yet convey it. Further, there are various modes of transfer of

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immovable property known to law. Section 54 of the Transfer of Property Act defines a sale to be a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. The definition of sale itself indicates that in order to constitute a sale, there must be transfer of ownership from one person to another, i.e., all rights and interests in the property which is possessed by a person are transferred by him with his free consent to another person for a price called consideration. The conveyance has to be regarded in accordance with law. Then only the transaction of sale is complete and title in the property passes from the seller to the buyer. The transferor cannot retain any part of his interest or right in that property or else it would not be a sale. On the other hand, any transfer by operation of law, or by or in execution of a decree or order of a court within the meaning of Section 2(d) of the Transfer of Property Act are outside the scope of Section 54, and need not be registered. Thus, where the property is sold at a court auction, a certificate of sale issued by the court is enough as the purchaser’s document of title. But in order to constitute a sale, the parties must intend to transfer the ownership of the property for a price to be paid in present time or in future. Sub-section (2) of Section 55 states that the seller shall be deemed to contract with the buyer that interest which the seller professes to transfer to the buyer which subsists and he has power to transfer the same. Proviso thereto further states that, where the sale is made by a person in a fiduciary character, he shall be deemed to contract with the buyer that the seller has done no act whereby the property is encumbered or whereby he is hindered from transferring it. 14.4 Similarly, gift is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee. Such acceptance must be made during the lifetime of the donor and while he is still capable of giving. If the donee dies before acceptance, the gift is void. The donor is the person who gives. Any person who is sui juris can make a gift of his property. Therefore, it is only a person who is the owner of the property, can gift

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his property and according to the provisions of the Transfer of Property Act. 14.5 In the same vein, an exchange is when an exchange of immovable property takes place when two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only. A transfer of property in completion of an exchange can be made only in a manner provided for the transfer of such property by sale. In the case of an exchange also, the person must have the ownership in the property before the same can be exchanged for any immovable property. 14.6 Similarly, transfer of ownership of movable property is by sale, gift or exchange and in the case of a sale, the provisions of the Sale of Goods Act, 1930 would apply. 14.7 Transfer of ownership other than transfer inter vivos is by succession or inheritance under a testament or a will/codicil in which case, the provisions of the Indian Succession Act, 1925 would have to be adhered to. 14.8 In the context of acquisition of land under the power of eminent domain such as under the provisions of Land Acquisition Act, 1894 or the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, there is divesting of ownership of the owner of the property only when land “vests absolutely in the Government free from all encumbrances” such as under Section 16 of the Land Acquisition Act, 1894. This Court in Fruit and Vegetable Merchants Union, Subzi Mandi, Delhi vs. Delhi Improvement Trust, Regal Buildings, Cannaught Place, AIR 1957 SC 344 has held that the property acquired becomes the property of the Government without any conditions or limitations either as to title or possession when it vests free from all encumbrances in the Government. The word encumbrances means a burden or charge upon property or a claim or lien upon an estate or on the land. Encumber means burden of legal liability on property, and therefore, when there is encumbrance on a land, it constitutes a burden on the title which diminishes the value of the land. But where the land acquired by the State is free from all encumbrances, it vests

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absolutely and free from all encumbrances. In such a case, it would be an incidence of transfer of ownership from the owner of the land to the Government as there would be divesting of land from its true owner. 14.9 Amongst the distinct kinds of ownerships, a trust ownership and beneficial ownership is relevant to the case. A trust is a very important and curious instance of duplicate ownership. According to Salmond, the trust property is that which is owned by two persons at the same time, the relation between the two owners being such that one of them is under an obligation to use his ownership for the benefit of the other. The former is called the ‘trustee’ and his ownership is the ‘trust ownership’; the latter is called the ‘beneficiary’ and his is beneficial ownership. 14.10 The trustee’s ownership of any property is a matter of form rather than a substance and nominal rather than real. A trustee is not effectively an owner at all but in essence a mere agent, upon whom the law has conferred the power and imposed the duty of administering the property of another person. The trustee is a person to whom the property, substantially that of someone else is technically attributed by the law on the footing that the rights and powers that it vests under him are to be used by him on behalf of the real owner. As between the trustee and beneficiary, the law recognises that the property belongs to the latter and not to the former. But as between the trustee and the third persons, the fiction prevails, inasmuch as the trustee is clothed with the rights of his beneficiary and personate or represent him in dealings with the world at large. This principle is actuated under various provisions of the Act including Section 8 thereof vis-à-vis an enemy who is the owner of a property and the Custodian in whom the property vests under the provisions of the Act. This position becomes clear on a reading of the Rules under the Defence of India Rules, 1962 and 1971 as discussed above. 14.11 Thus, the trusteeship is to protect the rights and interests of persons, who, for any reason are unable effectively to protect them for themselves. The law vests those rights and interests for safe custody in a trustee, who is capable of guarding them