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Issues: (i) Whether vesting of enemy property in the Custodian transfers ownership to the Custodian or the Union of India. (ii) Whether enemy property is exempt from property tax and other local taxes under Article 285 of the Constitution, and whether such taxes can be levied on the occupier or lessee.
Issue (i): Whether vesting of enemy property in the Custodian transfers ownership to the Custodian or the Union of India.
Analysis: The statutory scheme of the Enemy Property Act, 1968 treats enemy property as property belonging to or held on behalf of an enemy, while vesting it in the Custodian for preservation, management and control. The powers conferred on the Custodian, including collection of rent, payment of dues, disposal with approval, and issuance of certificates, were held to be powers of administration exercised as a trustee and not incidents of ownership. The provisions dealing with continued vesting, restriction on transfer, and divestment further showed that the vesting is protective and temporary, and does not amount to expropriation or a transfer of title to the Custodian or the Union.
Conclusion: Vesting does not transfer ownership to the Custodian or the Union of India. The Custodian holds the property as trustee for management and administration.
Issue (ii): Whether enemy property is exempt from property tax and other local taxes under Article 285 of the Constitution, and whether such taxes can be levied on the occupier or lessee.
Analysis: Article 285 exempts only the property of the Union from State taxation. Since enemy property vested in the Custodian is not Union property, the constitutional immunity does not arise. Even on the assumption that such property could be treated as Union property, clause (2) of Article 285 preserves pre-Constitution liabilities to the same tax where the property was previously liable to such levy. The relevant municipal law in force before the Constitution subjected buildings and lands in Lucknow to municipal taxation, and the later municipal enactment continued that position subject to Article 285. Section 8(2)(vi) of the Enemy Property Act, 1968 also authorises payment of taxes, duties, cesses and rates from the property. Therefore, the occupier or lessee cannot claim exemption from municipal taxation merely because the property is enemy property.
Conclusion: Enemy property is not exempt under Article 285, and the municipal property tax and allied local levies are lawfully recoverable in accordance with the Act and the municipal law.
Final Conclusion: The impugned view that the subject property was immune from municipal taxation was unsustainable, and the municipal demand was held to be maintainable in law, subject to the directions issued regarding past and future recovery.
Ratio Decidendi: Vesting of enemy property in the Custodian under the Enemy Property Act is a statutory vesting for preservation and administration, not a transfer of ownership; therefore, such property is not Union property for the purpose of Article 285, and municipal taxes lawfully applicable to the property may be levied and recovered.
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