TaxTMI 
TaxTMI 
2024 (2) TMI 1184
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....t 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: 3. 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 pro....
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....f 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 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 withi....
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....he 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 28.05.20....
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....on "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....
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....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 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; ....
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.... 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 'pro....
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....s 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; 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 : 7. 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 a....
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....perty 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 : 9. Having heard learned senior counsel and learned counsel for the respective parties, the following points would arise for our consideration: 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 ....
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....nder 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 : 10. The Parliament has enacted....
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....Property appointed or deemed to have been appointed under that section; (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 terri....
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....aid Rules and continuing to vest in him immediately before the commencement of this Act, shall, as from such commencement, vest in the Custodian. (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 in....
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....n 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 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....
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....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 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 Gove....
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....n 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). (8) Notwithstanding anything contained in subsections (1) to (7), the Central Government may deal with or utilise the enemy property in such manner as it may deem fit. x x x 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 C....
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....o 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." 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, the....
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....on 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,- (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 ....
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.... 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, 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' no....
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....r 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." x x x 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 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 "R....
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....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 subsection (1) shall be levied in respect of any motor vehicle. (3) 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 provision to the contrary is made by Parliament. (i) A tax on the annual value of buildings or lands or both; ....
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....mmencement 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; (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 buildi....
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....dings 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 cooccupiers, 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. x x x 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 - x x x (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; x x x 179. Primary responsibility for certain property taxes on annual value. - (1) Except where otherwise prescribed, 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 fro....
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.... 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 : 14. At this stage, it would be useful to dilate on the jurisprudential aspec....
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....nsfer of 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 partpromised. 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 consti....
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....ent 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 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 owners....
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....e Government of India as defined under the provisions of the Act under consideration. 14.12 Thus, under the Act, the Custodian acts as a trustee. A trust is more than an obligation to use the property for the benefit of another; it is an obligation to use it for the benefit of another in whom it is already concurrently vested. Since the beneficiary is himself the owner of the enemy property, in the instant case, the Custodian who is the trustee appointed under the Act is therefore a statutory authority constituted for the administration of the enemy property, who is only a nominal owner of the property so administered by him vis-à-vis third parties. As already noted, the nominal ownership in the trustee is only for the purpose of using the rights and powers vesting with the trustee i.e., Custodian under the Act to be used by him or on behalf of the real owner of the property is absent, since he has left the country for an enemy country. 14.13 The trustee or Custodian under the Act may, in pursuance of the powers vested in him under the Act which actually creates a trust by operation of law, can lease or mortgage the property without the concurrence of the beneficiary u....
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....ive claim to a material object for the purpose of using the thing oneself by excluding interference of other persons. The claim of the possessor must be exclusive, which however need not be absolute. But animus possidendi need not amount to a claim or intent to use the thing as owner. The tenant or a pledgee may have possession no less real than that of the owner himself, just as a Custodian under the provisions of the Act in the instant case. Thus, the animus possidendi need not be a claim on one's own behalf. A trustee or Custodian under the Act may have possession of enemy property, though he claims an exclusive right of the thing on behalf of another than himself. This is vis-à-vis third parties. He definitely does not have a right of ownership over the enemy property possessed by him as the ownership of the said property continues in the enemy. (iv) The second concept is that to constitute possession, the animus domini is not in itself sufficient but must be embodied in a corpus. There are two aspects with regard to corpus of possession: first is the relationship of the possessor to other persons and the second, is the relation of the possessor to the thing pos....
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...., the enemy or enemy subject or enemy firm is outside India and to branches and agencies outside India of companies or bodies corporate registered or incorporated in India. That as per Explanation (1), the definition of enemy property in clause (c) of Section 2, it is clarified that "enemy property" 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 and always be deemed to be continued as an enemy property. Explanation (2) states that for the purposes of this clause, the expression enemy property shall mean and include and shall be deemed to have always meant and included all rights, titles and interest in, or any benefit arising out of, enemy property in the context of such property for the time being belonging to or held or managed on behalf of an enemy, an enemy subject or an enemy firm. The Explanation to sub-section (3) of Section 5 of the Act also states that for the purposes of this sub-section, "enemy property vested in the Custodian....
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....may be specified in the notification. Since the Act is in continuation of the Defence of India Rules, 1962 as well as Defence of India Rules, 1971, as the case may be, the Custodian of Enemy Property for India appointed under the aforesaid Rules shall be deemed to have been appointed under Section 3 of the Act. The expressions "enemy" or "enemy subject" or "enemy firm" are defined in clause (b) of Section 2; The use of the words "for the time being", "belonging to" and "held" or "managed on behalf of an enemy, an enemy subject or an enemy firm" in clause (b) of Section 2 of the Act are significant. The said provision clearly recognizes ownership of the enemy property by the enemy or property held by an enemy or managed on behalf of an enemy, an enemy subject or an enemy firm. The proviso states that where an individual subject dies in the territories to which the Act extends, any property which immediately before his death belonged to or was held by him or managed on his behalf, may, notwithstanding his death, continue to be recorded as enemy property for the purposes of this Act. This proviso clearly recognizes that the death of an enemy would not result in the enemy property ceas....
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....owner of such property and would continue to vest with the Custodian on the death of the enemy. 15.5 The pertinent question which arises is, whether, vesting of any enemy property in the Custodian under the provisions of the Act which belonged or was held or managed on behalf of an enemy, an enemy subject or an enemy firm would result in "transfer of title" in the said enemy property to the Custodian and therefore to the Central Government or to the Union. In order to discern an answer to this question, it is necessary to read further the provisions of the Act from Section 7 onwards. 15.6 Section 7 states that any sum otherwise payable to an enemy, enemy subject or an enemy firm in the form of dividend, interests share profits or otherwise to or for the benefit of an enemy or an enemy subject or an enemy firm, unless otherwise ordered by the Central Government, be paid by the person by whom such sum would have been payable to the Custodian or such other 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 the Act. This provision indicates that the Custodian only holds in trust the sums payable by any ....
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....my or in respect of managing the enemy property would also clearly indicate that the Custodian of the Enemy Property holds the said property in trust or as a trustee and not as an owner of the enemy property or by exercising rights of ownership over the enemy property. Carrying on the business of the enemy and dealing with the property of the enemy vested in the Custodian is in order to protect the business belonging to an enemy or enemy subject or enemy firm, who has left the country. The Custodian of Enemy Property for India who acts on behalf of the Enemy holds in trust the enemy property vested in him under the provisions of the Act. He does so as a trustee and therefore, the principles and legal doctrines applicable to a trustee are applicable to the Custodian accordingly. 15.9 It is trite that a trustee or Custodian in the instant case can never be the owner of the property. The vesting of property in a trustee or the Custodian which, in the instant case, is enemy property as defined under the Act is for the purpose of managing the said property and protecting it, so that the property does not fall into the hands of trespassers, unauthorised persons or render it as being o....
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....he date of publication of the notification in the official gazette until the occupant of the land is granted the occupancy rights. This is however not the position when enemy property vests in the Custodian under the provisions of the Act. The vesting of enemy property in the Custodian is not free from encumbrances. Therefore, the expression 'vest' has no fixed connotation. It is a word of variable input and therefore has to be understood in different contexts and under different circumstances. Therefore, the context and situation in which the word is used in the statute is significant in order to interpret the said expression. Under certain statutes, the word 'vesting' would mean placing into possession and not conferring ownership of the person who comes into possession of property. Therefore, the word 'vesting' is a word of variable input and has more than one meaning which must be discerned and the exact connotation must be found by looking into the scheme of law and the context in which it is used. The setting in which it is used would lend colour to it and divulge the legislative intent. In State of Gujarat vs. The Board of Trustees of Port of Kandla, (1979) 1 GLR 732, ("T....
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....es that 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 Amendment Act, 2017 in accordance with the provisions of this Act, as amended by the Amendment Act, 2017. The sale proceeds have to be deposited into the Consolidated Fund of India and the details thereof have to be intimated to the Central Government. The directions issued by the Central Government, by way of general or special order, visà- vis disposal of enemy property is binding upon the Custodian and the buyer of the enemy properties and the other persons connected to such sale or disposal. Further, instead of the Custodian disposing of enemy property, any Ministry or Department of the Central Government may do so as authorised and the provision of Section 8A applies to such authority or Ministry or Depa....
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.... and when it thinks fit so to do. Where the Custodian executes and transfers any securities, he has to register them (securities) in the name of the transferee, notwithstanding that the regulations of the company do not permit such registration in the absence of the certificate, script or other evidence of title relating to the securities transferred. The expression securities includes shares, stocks, bonds, debentures and debenture stock but does not include bills of exchange. On sale of any immovable property vested in him to any person and on receipt of the sale proceeds of such property, the Custodian has to issue a certificate of sale in favour of the transferee and even in the absence of handing over the original title deeds of the property, the sale shall be valid and conclusive proof of transfer of ownership of such property to such person, who has the certificate registered in his name. Such transfer is obviously from the owner of the enemy property who is represented by the Custodian who only executes the sale and transfers the ownership of such property from the ownership of the enemy, enemy subject or enemy firm to the buyer of such property. The Custodian does not s....
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....ality of the legal heir or successor. Thus, if no ownership rights are conferred on the Custodian and he is appointed vis-à-vis any enemy property as a Custodian, in law, he cannot be construed to be the owner of such property. This position is also discerned from the manner in which the Custodian acts vis-à-vis the enemy property as a protector of such property and not as its owner. If the Custodian himself cannot be construed to be the owner of the enemy property, then much less the Central Government or Union can be considered to be the owner of such property. In our view, the Union or the Central Government cannot usurp rights of ownership and exercise all such rights of ownership vis-à-vis enemy property. In the absence of any provision conferring such ownership on the Custodian, the Central Government, which appoints the Custodian of Enemy Property in India by issuance of a notification in the Official Gazette to carry on his functions under the provisions of the Act, cannot assume ownership rights over such property. The same is having regard to the fact that the Act is a piece of parliamentary legislation and therefore, the State Legislatures or Gove....
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....certificate has 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 other matter. 17.1 In our view, although the Custodian for the Enemy Property is empowered to alienate enemy property under the provisions of the Act, he does so as a trustee of the said property and not as the owner thereof or as the Central Government being the owner. As already stated, the ownership continues to remain with the enemy but the management and the custody of the property only remain with the Custodian and in the absence of the enemy, the Custodian is empowered to sell or alienate such property and can issue a sale certificate as is expedient to do so. This is in the interest of or benefit of the enemy property. Thus, the transfer of such enemy property by sale or otherwise is for and on behalf of the enemy who is not available in the country and in order to ensure that such property is not dissipated owing to the owner of the property being absent in the country. Thus in order to protect the enemy property, the Custodian is empowered to even sell the enemy property and deposit the sale proceeds with the Central Go....
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....ath of the enemy subject the said property would cease to be enemy property if the same is succeeded to by his heir who is a citizen of India. Hence the Custodian could not be permitted to continue with the possession thereof and would be duty bound to release the property to the true owner. In our view, it is only in respect of succession to the enemy property on death of the enemy which has been abrogated by the Parliament by insertion of Explanations (1) and (2) to clause (b) of Section 2 which defines enemy or enemy subject or enemy firm which are with effect from 21.03.2018. Therefore, the jurisprudential position of the Custodian for Enemy Property vis-à-vis the enemy continues to remain as that of a trustee although the enemy property may vest in such Custodian for the protection, preservation and management thereof. Thus, such vesting of property in the Custodian does not result in the transfer of ownership from the owner of the property who is an enemy or enemy subject or enemy firm within the meaning of clause (b) of Section 2 of the Act to the Custodian. When the Custodian appointed by the Central Government in whom enemy property vests is only a trustee and does ....
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....contra, Shri Guru Krishna Kumar, learned senior counsel appearing for the respondent-lessee contended that the subject property being enemy property vested with the Custodian under the Act is the property of the Union or Central Government and therefore, is exempt from any taxation under clause (1) of Article 285 of the Constitution. 17.8 Interestingly, while both learned ASG Sri Balbir Singh, appearing for the Union of India and Sri Gurukrishna Kumar, learned senior counsel appearing for the respondent-lessee have contended that the subject property is Union property, between them there is also a difference in their stand in the matter. While learned ASG contended that there is no exemption from payment of municipal taxes, on the other hand, learned senior counsel Sri Gurukrishna Kumar appearing for the respondent-lessee contended that the subject property being Union property is totally exempt from any kind of taxes to be paid to any Government or local authority. 17.9 But in view of our above analysis, we hold that the vesting of enemy property in the Custodian does not transfer ownership of such property in the Custodian and by that process in the Union or Central Governm....
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....a wide scope and includes not only tangible or intangible property but also all rights, title and interest in a property. Deprivation of property may take place in various ways, but where there is only control of property short of deprivation would not entail payment of compensation vide Indian Handicrafts Emporium vs. Union of India, (2003) 7 SCC 589, (Paras 109 and 111) and Chandigarh Housing Board vs. Major-General Devinder Singh (Retd.), (2007) 9 SCC 67, (Para 11). However, deprivation of property is to be distinguished from restriction of the rights following from ownership, which falls short of dispossession of the owner from those rights. Deprivation also takes within its nomenclature acquisition in accordance with law and not without any sanction of law. Before a person can be deprived of his right to property, the law must expressly and explicitly state so. Thus, the expression by authority of law means by or under a law made by the competent Legislature. 18.1 In KT Plantation Pvt. Ltd. vs. State of Karnataka, (2011) 9 SCC 1, it was observed that though the right to claim compensation or the obligation of the State to pay compensation to a person who is deprived of his ....
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.... land from the owner to the State which is the acquiring authority, but the same would be subject to payment of a reasonable and fair compensation to the owner. 18.3 Further even under Article 296 of the Constitution, the manner in which ownership of certain types of property gets vested directly with the Union is stated when such property vests with the Union by virtue of the application of the doctrine of escheat or doctrine of bona vacantia. But under the provisions of the Act, the Custodian is appointed only to protect the property and to manage it as a trustee and not as an owner by vesting in the Custodian free from all encumbrances. By that, the Union cannot assume rights of ownership over such property through the Custodian. 19. Therefore, we see no substance in the arguments of learned ASG appearing for the Union of India as well as that of Sri Guru Krishna Kumar appearing for the respondent-lessee to the effect that enemy property vested with the Custodian becomes property of the Union. 20. There is another angle to the case which revolves around Article 285 of the Constitution. Clause (1) of Article 285 of the Constitution corresponds to the first paragraph of S....
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....property and income of State from Union taxation, respectively, by a 5:4 majority judgment speaking through B.P. Jeevan Reddy, J., it was observed that in a federation there are two coalescing units, namely, the Federal Government or the Centre and the States or the Provinces. Articles 285 and 289 deal with the concept of doctrine of immunity from taxation. While the immunity created in favour of the Union is absolute, the immunity created in favour of the States is a qualified one. Article 285 provides a complete and absolute ban on all taxes that could be imposed by a State on Union property. There is no way in which a State Legislature can levy a tax upon the property of the Union but Article 289 is distinct. Although, the property and income of a State is exempt from Union taxation, the same is qualified inasmuch as the aforesaid ban imposed by clause (1) of Article 289 would not prevent the Union from imposition or from imposing or authorising the imposition of, any tax to such extent, if any, as Parliament may by law provide in respect of - (a) a trade or business of any kind carried on by, or on behalf of, the Government of a State, or (b) any operations connected such trade....
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.... Another aspect which was argued in the said case was that the exemption provided by clause (1) of Article 289 would not apply to compensatory taxes like water tax, drainage tax and so on. However, it was contended that even in respect of a composite taxes, known as property tax, insofar as the taxes on the services are concerned, the ban under clause (1) of Article 289 would not apply. However, the Court did not express any opinion on this aspect of the matter. Article 285: 21.1 Article 285 speaks about the doctrine of immunity restricting the taxing powers of the governments in a federation. The doctrine is based on the principle that there ought to be inter-governmental tax immunities between the Centre and the States. In a Constitution such as ours which has a federal character, where both the Union and State Governments have the powers to levy taxes even on governmental property, the immunity is intended for the smooth working of the Governments and for saving time and efforts in cross taxation. Clause (1) of Article 285 deals with immunity of the property of the Union from State taxation. Article 285 embodies a narrower aspect of the doctrine of "Immunity of Instrumen....
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....ts buildings on requisitioned lands, the buildings become property of the Union within the meaning of Article 285 although, the Union is not the owner of the land upon which the building stands vide The Governor-General of India in Council vs. The Corporation of Calcutta, AIR 1948 Cal 116 affirmed by The Corporation of Calcutta vs. Governors of St. Thomas' School, Calcutta, AIR 1949 FC 121. 21.5 The immunity from taxation on property of the Union therefore depends upon the factum of the ownership of the property. If a property accrues to the Union by escheat, lapse or bona vacantia under Article 296 of the Constitution, such property would be immune from State taxation. Thus, where the Union Government is not the owner of the property but is a lessee from a private owner, a tax on such owner is not exempted under Article 285 of the Constitution. Similarly, where the Union Government is using the property for governmental purposes or has control over its use, does not give it immunity from State taxation. Conversely, where the Government is the lessor, a tax on the interest of the private lessee is not a tax on the property of the Union. Since the immunity is confined to property....
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.... of the said Article. However, it empowers Parliament to restrict the exception. In other words, any local taxes on Union property which were saved by virtue of clause (2) of Article 285 shall cease to be valid as soon as the Parliament by law provides to that effect. This implies that clause (2) of Article 285 which saves the existing power of the State and the local lawful bodies to tax Union property would continue and the status quo would be maintained till Parliament would legislate otherwise. In clause (2) of Article 285, the expression "liable or treated as liable" is of significance. The conditions necessary to bring a property within clause (2) of Article 285 in order to make it liable to taxation are as under: "(a) Physical existence of the property immediately before the commencement of the Constitution; (b) Liability of the property to the tax on that date; (c) Physical existence of the property now, i.e., at the time when the tax is sought to be levied; (d) Liability of the property to tax now; (e) The tax in question must be the 'same tax' as that which was levied or leviable at the commencement of the Constitution; ....
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....at subject to Article 285 of the Constitution, the corporation shall impose, inter alia, property taxes assessed and levied in accordance with the provisions of the Act of 1959 and the rules and bye-laws framed thereunder. Sub-section (4) of Section 172 of the Act of 1959 states that nothing in the said subsection 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 the Act of 1959 until provision to the contrary is made by Parliament. Section 172, in fact, summarises Article 285 of the Constitution in the context of levy of property taxes imposed under the said Act by the Corporation. Section 173 deals with property tax leviable which is again subject to Section 172(1) of the Act of 1959. It includes a general tax, a water tax, drainage tax and conservancy tax. The said taxes shall be levied on the annual value of the building and land, as the case may be. However, the aggregate of....
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....ies was earlier governed by the Act of 1916. On a perusal of the relevant provisions of the Act of 1916, it becomes clear that the property tax was leviable on the subject property. Act of 1916 is a pre- Constitution enactment and therefore immediately before the commencement of the Constitution, the subject property was liable to property tax under the Act of 1916 and therefore until the Parliament by law provides otherwise, the appellant corporation can continue to levy municipal taxes including the property tax on the subject property as it was liable to pay such tax prior to the commencement of the Constitution under the provisions of 1916 Act. For ease of reference, the relevant provisions of the 1916 Act are also extracted above. Therefore, even as per the provisions of clause (2) of Article 285 even if the subject property is assumed to be Union property under clause (2) of Article 285, the appellant-Corporation is entitled to levy the property tax and the municipal tax on the said property even though, it vests with the Custodian under the provisions of the Act. That is why under Section 8 of the Act, Custodian is duty bound to pay the taxes, duties, cesses and rates to the....
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.... is because the Act is a piece of Parliamentary legislation and in order to achieve a uniform policy vis-à-vis management and administration of enemy properties throughout the length and breadth of the country. It, therefore, cannot be held that the properties vest with the Union within the meaning of Article 285 of the Constitution. In our view, the said Article has no application to enemy properties. 22. In Amir Mohammad Khan case, the father of the respondent therein was a Raja, who had migrated to Pakistan in 1957 and became a citizen of that country. However, the respondent therein and his mother (since deceased) continued to reside in India as Indian citizen. Under the provisions of the Enemy Property (Custody and Registration) Order, 1965, the property of the respondent's father in India vested in the Custodian of Enemy Property. After the enactment of the Act under consideration, by virtue of Section 24 thereof, the property continued to be vested in the Custodian. In 1973, the Raja died in London. The respondent then sought the Government of India and the Custodian to release that property as the same stood vested in him as an Indian citizen. In 1981, the Governm....
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....esting of the property takes place in the Custodian so that the property till such time, as it is enemy property, cannot be used for such purpose. The question considered was, whether, after the inheritance of the property by the respondent therein who was a citizen of India, upon the death of the original owner of the property who was declared to be an enemy, the property continued to be enemy property? It was answered in the negative. It was observed that the definition of enemy provided under Section 2 (b) of the Act excluded a citizen of India as an enemy or enemy subject or an enemy firm. Therefore, the respondent herein who was born in India and his Indian citizenship not being in question could not by any stretch of imagination be held to be enemy or enemy subject under Section 2(b). Similarly, under Section 2(c) the property belonging to enemy could not be termed as an enemy property. 22.3 It was further observed that after the death of the enemy, the right, title and interest of the enemy was succeeded to by his heirs who are Indian citizens. Therefore, the enemy property would cease to be a property belonging of the enemy, hence the Custodian could not be permitted to ....
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....her of the respondent therein, as enemy property, based on duly authenticated tenancy created by the then Raja of Mahmudabad or his general power of attorney was not to be covered by this Court's judgment passed in Amir Mohammad Khan. In this regard, it would be useful to reiterate the statement and objects of the Act wherein it has been stated that immovable property, cash balances and firms belonging to Chinese nationals in India were vested in the Custodian of Enemy Property for India appointed under the Defence of India Rules, 1962. Similarly, upon the aggression by Pakistan in 1965, enemy properties were vested in the Custodian of Enemy Property under the power derived from the Defence of India Rules, 1962. That the properties vested in the Custodian of Enemy Property in India has to continue as it has not been possible for the Government of India so far to arrive at a settlement with the respective Governments of those countries. On a perusal of the impugned order, it is noted that the learned counsel appearing for the appellant-Lucknow Nagar Nigam had submitted before the High Court that the Nagar Nigam may not charge in respect of property of Central Government bu....