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Lagan Jute Machineries Co. Ltd. v. Candlewood Holdings Ltd. And Others
Factual and Procedural Background
The appeals arose out of execution proceedings concerning a consent decree dated 13-10-1982, later modified on 26-04-1990, relating to Premises No. 24, Park Street, Kolkata. The decree was originally passed by the Calcutta High Court on terms of settlement between the parties. It was subsequently transferred to the present respondent for execution, which sought (among other reliefs) recovery of immovable property and arrears of municipal dues—specifically consolidated rates, taxes and commercial surcharge levied under the Calcutta Municipal Corporation Act, 1980.
On 09-02-2000 a learned Single Judge, noting earlier non-payment of instalments recorded on 18-05-1999, declared the decree executable and appointed a Receiver to realise the outstanding municipal charges (Prayer (e) of the tabular statement). The judgment-debtor did not challenge that order. When the Receiver’s appointment was again affirmed on 23-03-2000, the judgment-debtor filed an intra-court appeal. A Division Bench dismissed that appeal, upholding execution. The present matters are the judgment-debtor’s further appeals to the Supreme Court.
Legal Issues Presented
- Whether commercial surcharge under the Calcutta Municipal Corporation Act, 1980 can be enforced in execution of the consent decree in the absence of a formal assessment and demand by the Municipal Corporation.
- Whether the appointment of a Receiver for realisation of consolidated rates, taxes and commercial surcharge was valid in execution proceedings under Section 47 of the Code of Civil Procedure, 1908.
- Whether the judgment-debtor is precluded from raising fresh objections by the principles of constructive res judicata and estoppel.
Arguments of the Parties
Appellant's Arguments
- Commercial surcharge becomes payable only after determination by the Municipal Corporation; no such assessment or demand exists, hence no liability arises.
- The surcharge provisions operate prospectively from 04-01-1984; amounts claimed for the post-1984 period are therefore not enforceable.
- The Corporation Act contemplates one consolidated rate bill to be paid by the owner and thereafter recovered from the occupier; absent such a bill, the appellant owes nothing.
- The execution application should not have been disposed of under Section 47 CPC.
Respondents' Arguments
- There is no dispute regarding the quantum; the appellant has in fact been paying the amounts, including commercial surcharge, as illustrated by letter dated 10-12-1999 enclosing rent and tax cheques.
- The consent decree (Clause (vii)) expressly binds the appellant to “punctually and regularly pay commercial surcharge… at such rate as the Municipal Corporation may determine.”
- Earlier Division Bench findings (18-05-1999) and the appellant’s withdrawn SLP established that objections to liability were already rejected or abandoned.
- Labels such as “without prejudice” on correspondence do not negate acknowledgement of liability.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Kamlabai v. Mangilal Dulichand Mantri (1987) 4 SCC 585 | Failure to raise available objections earlier attracts constructive res judicata in execution proceedings. | Used to emphasise that the appellant, having not raised objections when the award/decree was first filed or in prior executions, is barred from doing so now. |
| Mohanlal Goenka v. Benoy Kishna Mukherjee, AIR 1953 SC 65 | Recognition that constructive res judicata applies to execution proceedings. | Cited (via Kamlabai) to reinforce estoppel against belated objections by the judgment-debtor. |
Court's Reasoning and Analysis
1. Contractual Undertaking in Consent Decree: Clause (vii) of the 1982 consent decree obliges the appellant to pay commercial surcharge “at such rate as the Municipal Corporation may determine as and when the same is determined and becomes payable.” The Court observed that the appellant had honoured this clause for years and never disputed the calculations.
2. Evidentiary Admission of Liability: The letter dated 10-12-1999, though marked “without prejudice,” enclosed cheques covering rent, corporation tax and commercial surcharge at 50% of tax. The Court held that the phrase “without prejudice” did not negate the clear recognition of liability.
3. Constructive Res Judicata and Estoppel: Relying on Kamlabai and Mohanlal Goenka, the Court held that the appellant’s failure to raise these objections when the decree was passed, and its previous withdrawals of challenges (including an earlier SLP), barred the present objections.
4. Segregation of Claims: The High Court had already divided the dues into pre-1984 and post-1984 periods, finding no valid objection for either. The Supreme Court agreed that the appellant had offered no substantive defence for the pre-1984 dues and had accepted post-1984 liability in practice.
5. Irrelevance of Pending Municipal Assessment: Although the Municipal Corporation later completed assessments raising bills exceeding Rs 1 crore, the Court noted that the Corporation was not initially a party and this did not undermine the binding consent terms between the litigants.
6. Sufficiency of High Court Analysis: The Supreme Court found the Division Bench had taken “all the relevant factors” into account and applied the correct legal principles, leaving no ground for interference.
Holding and Implications
APPEALS DISMISSED.
The Supreme Court affirmed the Calcutta High Court’s order appointing a Receiver and enforcing recovery of consolidated rates, taxes and commercial surcharge under the consent decree. Execution proceedings will therefore proceed, and the judgment-debtor remains liable for the assessed municipal dues. The decision turns on established principles of consent decrees and constructive res judicata; it sets no new precedent beyond reaffirming those doctrines.
Dr. Arijit Pasayat, J.— Challenge in these appeals is to the order passed by a Division Bench of the Calcutta High Court in an appeal which was directed against the order of the learned Single Judge dated 23-3-2000. By the said order, the learned Single Judge in that application for execution appointed Receiver for realisation of commercial charges and consolidated rates and taxes in terms of Prayer (e) of Column 10 of the tabular statement. The order was passed on 9-2-2000 wherein it was recorded in terms of earlier order dated 18-5-1999 that the judgment-debtor did not pay any instalment and in that view the decree dated 13-10-1982 had become executable. The second order dated 9-2-2000 was not challenged in any proceedings. The application was made by the tabular statement before the learned Single Judge for execution of the decree dated 13-10-1982. The said decree was passed by consent of the parties and parties filed their terms of settlement in the Court on the basis of which the said consent decree was made. The decree was subsequently modified by consent of parties by order dated 26-4-1990 and subsequently the decree was transferred by the then decree-holder in favour of the applicant respondent for execution proceedings. The execution proceedings were related to recovery of the immovable property and money on account of rates, taxes and commercial surcharge levied by Municipal Corporation of Calcutta (in short “the Corporation”) under the Calcutta Municipal Corporation Act, 1980 (in short “the Corporation Act”) which operated prospectively from 4-1-1984. An order was made in terms of Prayer (b) of the tabular statement on the earlier occasion and also in terms of Prayer (f) as recorded in the order dated 2-9-2000. By another order dated 30-3-2000 application was rejected.
2. Stand of the appellant was that the learned Single Judge was incorrect in passing the order directing execution by way of appointment of Receiver since the commercial surcharge is not payable according to the Corporation Act and the consolidated rates and taxes are determined by the Corporation. Stand before the High Court was that since no rate had been produced and it was not so as determined by the Corporation, there is no question of paying any amount by way of surcharge. It was urged that the Corporation Act envisages one consolidated rate bill payable by the owner which is recoverable by the owner from the occupier. It was urged that the earlier order dated 10-3-1999 as well as the order of the Division Bench did not consider this aspect. Therefore, it was submitted that the application should not have been disposed of under Section 47 of the Code of Civil Procedure, 1908 (in short “CPC”).
3. Stand of the respondents, on the other hand, was that there was no dispute with regard to amount payable and the appellant had in fact paid the amount. The question was considered by the earlier Division Bench by an order dated 18-5-1999. The order was challenged before this Court by SLP which was not accepted. Reference was also made to a letter dated 10-12-1999, which clearly indicated the liability for commercial surcharge. The Division Bench considered the respective stand. It was noted that the claim can be divided into two parts. One part of the claim is from 1976 up to 4-1-1984, when the Corporation Act came into force and the second portion of the claim is subsequent to coming into operation of the said Act.
4. So far as the first portion is concerned, there was no argument on behalf of the appellant. It was not explained as to what would be its stand for non-payment of the dues prior to the operation of the Act. It was, however, submitted by the appellant that under the law prevalent at the relevant time, the rate bill should have been presented to the occupier for payment and since there was no such presentation, the question of non-payment does not arise. The High Court did not accept this stand with reference to the consent decree. The High Court also did not accept this stand that after the Corporation Act came into operation, there was one consolidated rate bill and amount was not determined and the primary obligation being “owner to pay and thereafter recover from the appellant”, and as such the appellant is not liable. It was noted that it all along made payment in terms of Clause 7 of the terms of the settlement before the High Court on the basis of which the consent decree was passed. There was no dispute with regard to the amount raised at any point of time.
5. The Division Bench also did not find any relevance of the fact that letter dated 10-12-1999 was issued under the heading “without prejudice”. The High Court was of the view that it is clear from the letter that there was no dispute with regard to the amount and the expression “without prejudice” referred to any other contention that could have been raised by the appellant. Since the appellant was paying the amount without any dispute, the stands raised were not acceptable. In the earlier round also, the Division Bench noted this stand which was indicated in the memorandum of appeal and SLP before this Court was withdrawn. The appeal was accordingly dismissed.
6. In support of the appeals, it has been contended as follows:
(1) Commercial surcharge only becomes payable after the same is determined by the Corporation. Since that has not been done and there is no assessment and no demand by the Corporation, the question of any liability does not arise.
(2) Commercial surcharge became payable under the Act since 4-1-1984 and the same is not payable.
7. In the consent decree, Clause (vii) is of considerable relevance in the present dispute. The same reads as follows:
“The defendant further undertakes and agrees to punctually and regularly pay commercial surcharge on consolidated rates @ 50% of the amount of corporation tax or at such rate as Municipal Corporation of Calcutta may determine as and when the same is determined and becomes payable and the defendant shall keep the plaintiff or person claiming through the plaintiff fully discharged and indemnified.”
8. Reference also needs to be made to letter dated 10-12-1999. The said reads as follows:
“M/s Candlewood Holdings Limited,
24, Park Street,
Calcutta 700 016
Dear Sir,
Sub.: Payment of rent for the month of October 1999 without prejudice.
Enclosed please find the four Manager's Cheques Nos. 056083, 056084, 056085, 056086 dated 9-12-1999 payable at UCO Bank, Free School Street Branch for Rs 1,53,182 on account of rent payable for October 1999. The amount in the cheque is arrived as below:
Rent Rs 1,26,943.00 Corporation tax Rs 46,270.84 Commercial surcharge @ 50% of corporation tax Rs 23,135.44 Rs 1,96,349.00 Less: 1. Tax 20% on Rs 1,26,943.50 =Rs 25,389.00 2. Surcharge 10% on I. Tax. =Rs 2,539.00 Rs 27,928.00 Rs 1,68,421.78 Less: Arrear I. Tax and surcharge: Actual I. Tax and surcharge since April 1999 to September 1999 =Rs 1,67,568.00 Less: Deducted during earlier said months =Rs 1,52,328.00 Rs 15,240.00 Net amount: Rs 1,53,181.78
With best regards,
Yours faithfully,
For Lagan Jute Machinery Co. Ltd.
sd/-
B.B Chakraborty
Supervisor (Cashier)
Encl.: As above.”
9. At this juncture, it would be appropriate to take note of what was stated in Kamlabai v. Mangilal Dulichand Mantri (1987) 4 SCC 585. It was noted as follows:
“28. The next question which is of some importance is about raising of the objections at the earlier stage. Admittedly when the award was filed in the court, notice was served and no objection was raised. If the tenant intended to raise the objection that this decree on the basis of the award could not be passed as it was in contravention of Clause 13 of the Rent Act and therefore was absolutely without jurisdiction, such an objection could have been raised there and then. The tenant admittedly did not raise this objection which was open to him. In this view of the matter, the contention on behalf of the appellant about the constructive res judicata also is of some significance. This question of constructive res judicata in execution proceedings came before this Court in Mohanlal Goenka v. Benoy Kishna Mukherjee AIR 1953 SC 65. In this decision following the earlier decision of the Privy Council, this Court ruled that the principles of constructive res judicata will be applicable even in execution proceedings.
29. It is also clear that when the decree was passed on the basis of award and notice was issued to the judgment-debtor respondent no such objection was raised. It is also clear that the decree was put in execution on more than one occasions and this objection was for the first time raised only in 1983. In this view of the matter also the contention of the learned counsel for the appellant that by not raising this objection earlier the judgment-debtor has lost his right to raise this objection and he is estopped, deserves to be accepted, although in the light of what we have discussed earlier, it is not necessary to go into this question, having come to the conclusion on the first question against the respondent.”
10. It is to be noted that in the earlier SLP the stand was that there was no liability prior to 1984. In other words the dispute related to post 1984 and also there is no dispute after 1997. It is also to be noted that there was no point raised relating to interest (sic amount) before the High Court.
11. Admittedly, Municipal Corporation was not a party before the High Court and was subsequently impleaded. It is stated before this Court that so far as the appellant is concerned, the Corporation has completed the assessment proceedings and bills amounting to Rs 1,02,23,706.88p., have been raised.
12. It is pointed out that in terms of the order dated 24-7-2000 of the Deputy Municipal Commissioner (Revenue HQ) the said premises were surveyed and assessed. The assessment was made from April 1974 to March 2001, when it was found that a total amount of tax payable, in respect of the said premises, as assessed is Rs 26,47,07,167 out of which approximately Rs 7.70 crores, which includes Rs 1,10,50,624.51p. in suspense A/c., have been realised. However, more than Rs 18.7 crores of tax is due from the premises. The details of yearwise valuation and tax liability contained in a summary report on annual valuation with tax liabilities of Premises No. 24, Park Street, Kolkata. A copy of the report has been filed.
13. The High Court has referred to all the relevant factors and has kept in view the correct position in law. That being so, there is no merit in these appeals which are accordingly dismissed.
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