“The Union of India cannot assume ownership of the enemy properties once the said property is vested in the Custodian.”: Supreme Court.
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In New Delhi on February 22, The Supreme Court held- Enemy properties vested with government-appointed custodians are not assets of the central government which cannot seek exemption from paying municipal cess, including house and water taxes.
The verdict was rendered by a bench comprising Justices BV Nagarathna and Ujjal Bhuyan on Thursday (22 Feb), following an appeal by the Lucknow Municipal Corporation against an Allahabad High Court ruling stating that the civic body cannot demand property taxes from occupants of an enemy property.
The property under consideration, situated on Mahatma Gandhi Marg in Lucknow, was formerly owned by the ‘Raja’ of Mahmudabad, Mohammad Amir Ahmed Khan, who migrated to Pakistan in 1947. Despite this, Khan’s son and wife remained in India and later sought its return following the ‘Raja’s’ demise.
A segment of the property is currently occupied and utilized for profit-generating purposes by Kohli Brothers Colour Lab Pvt Ltd, a respondent-assessee who contested the demand for house and other taxes by the civic body.
“The Union of India cannot assume ownership of the enemy properties once the said property is vested in the Custodian. This is because, there is no transfer of ownership from the owner of the enemy property to the Custodian and consequently, there is no ownership rights transferred to the Union of India. Therefore, the enemy properties which vest in the Custodian are not Union properties,”
-Justice Nagarathna, authoring the 143-page judgment, stated.
“When the Custodian appointed by the Central Government in whom enemy property vests is only a trustee and does not adorn the status of an owner of such enemy property, consequently, the Central Government or the Union even within the meaning of Article 285 of the Constitution cannot usurp the ownership of such property,” it held.
The ruling emphasized that the ‘Custodian for Enemy Property in India’ does not acquire ownership of such assets and serves solely as a trustee for their management and administration.
The bench ruled that vesting enemy property in the custodian is only a temporary measure and hence, the central government cannot claim exemption from civic taxes under Article 285 of the Constitution.
Article 285 reads:
“The property of the Union shall, save 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”.
“As the enemy properties are not Union properties, clause (1) of Article 285 does not apply to enemy properties..,”
-the top court held.
The apex court set aside the high court verdict, saying it was not right in holding that the respondent (Kohli Brothers Colour Lab Pvt Ltd), one of the occupiers of the enemy property, was not liable to pay any property tax or other local taxes to the appellant.
The verdict said the amount already paid as taxes to the civic body shall not be refunded.
“However, if no demand notices have been issued till date, the same shall not be issued but from the current fiscal year onwards (2024-2025), the appellant shall be entitled to levy and collect the property tax as well as water tax and sewerage charges and any other local taxes in accordance with law,”
-the bench said while allowing the appeal of the Lucknow Municipal Corporation.
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The bench also dealt with the question whether statutory vesting of assets termed as enemy property under the provisions of the Enemy Property Act, 1968 amounted to expropriation leading to change of its status with regard to the ownership.
“We emphasise again that mere vesting of enemy property in the Custodian does not transfer ownership of the same from the enemy to the Union or to the Central Government; the ownership remains with the enemy but the Custodian only protects and manages the enemy property and in discharging his duties as the Custodian or the protector of enemy property he acts in accordance with the provision of the Act and on the instructions or guidance of the Central Government…,”
-it said.
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