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Rajkot Municipal Corporation vs State of Gujarat and Ors.

Not available · 2024 INSC 596Decided 9 Aug 2024
Not available
Justice Abhay S. Oka · Justice Augustine George Masih

Background

A commercial property in Rajkot changed hands multiple times, with a tenant (Reliance Communications) continuing to occupy it throughout. The Rajkot Municipal Corporation had been raising property tax demands against the tenant for years, some of which were under legal challenge with partial stays. When the property was eventually sold to Avenue Supermarts Limited in September 2015, the Corporation issued a fresh demand notice to the new owner not only for the current year's tax but also for years of accumulated arrears predating the purchase, and sealed the premises when payment was not made. The new owner paid under protest and challenged the demand in the Gujarat High Court, which ruled that it could not be held liable for tax dues from before it acquired the property and ordered a partial refund.

Decision Breakdown

The Supreme Court examined the relevant provisions of the Gujarat Provincial Municipal Corporation Act, 1949 and agreed that a new owner is only the "person primarily liable" to pay property tax from the date they acquire ownership onward, not for arrears that accrued while the property belonged to someone else. Since the Corporation had failed to establish any legal basis to shift the earlier owner's or tenant's liability onto the new owner, and since separate proceedings challenging those older tax demands were still pending (with partial deposits already securing the amounts in court), directing a refund to the new owner did not risk any double payment or loss to the Corporation. The Court found no reason to interfere with the High Court's decision and dismissed the Corporation's appeal.

Lesson Learnt

When you buy property, you cannot ordinarily be forced to pay the previous owner's outstanding tax dues: a municipal corporation must recover old arrears from the person who was actually liable at the time, not from a new, unconnected purchaser.

Official source (sci.gov.in)View Judgment (PDF)

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