{"id":315194,"date":"2024-02-24T12:00:17","date_gmt":"2024-02-24T06:30:17","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=315194"},"modified":"2024-02-29T10:45:30","modified_gmt":"2024-02-29T05:15:30","slug":"custodian-enemy-property-india-does-not-acquire-ownership-property-acts-as-a-trustee-management-administration-supreme-court","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/02\/24\/custodian-enemy-property-india-does-not-acquire-ownership-property-acts-as-a-trustee-management-administration-supreme-court\/","title":{"rendered":"Custodian for enemy property in India does not acquire ownership of property, only acts as trustee for management and administration: Supreme Court"},"content":{"rendered":"<div style=\"text-align: justify; line-height: 150%;\">\n<p><span style=\"font-weight: bold;\">Supreme Court:<\/span> In a civil appeal filed by the Lucknow Nagar Nigam (&#8216;Municipal Corporation&#8217;) against the judgment of the Allahabad High Court, wherein the Court has allowed the writ petition filed by respondent (&#8216;assessee&#8217;), thereby holding that the assessee is exempt from payment of property tax under the provisions of the U.P. Municipal Corporation Adhiniyam, 1959 (&#8216;Act of 1959&#8217;), the division bench of <span style=\"font-weight: bold;\">BV Nagarathna*<\/span> and Ujjal Bhuyan, JJ. while setting aside the impugned judgment, has held the following:<\/p>\n<ul style=\"list-style-type: disc;\">\n<li>\n<p>The Custodian for Enemy Property in India, in whom the enemy properties vest including the subject property, does not acquire ownership of the said properties. The enemy properties vest in the Custodian as a trustee only for the management and administration of such properties.<\/p>\n<\/li>\n<li>\n<p>The Central Government may, on reference or complaint or on its own motion initiate a process of divestment of enemy property vested in the Custodian to the owner thereof or to such other person vide Rule 15 of the Enemy Property Rules. Hence, the vesting of the enemy property in the Custodian is only as a temporary measure and he acts as a trustee of the said properties.<\/p>\n<\/li>\n<li>\n<p>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.<\/p>\n<\/li>\n<li>\n<p style=\"margin-bottom: 3%;\">As the enemy properties are not Union properties, clause (1) of Article 285 does not apply to enemy properties. Clause (2) of Article 285 is an exception to clause (1) and would apply only if the enemy properties are Union properties and not otherwise.<\/p>\n<\/li>\n<\/ul>\n<p style=\"font-weight: bold;\">Issues and Analysis:<\/p>\n<ul style=\"list-style-type: disc;\">\n<li>\n<p style=\"font-weight: bold;\">Whether statutory vesting of enemy property including the subject property in the Custodian amounts to expropriation and transfer of ownership to confer ownership of such enemy property on the Custodian?<\/p>\n<\/li>\n<\/ul>\n<p style=\"margin-bottom: 3%;\">The Court noted that the Parliament has enacted the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002841659\" target=\"_blank\" rel=\"noopener\">Enemy Property Act, 1968<\/a> (&#8216;Act 1968&#8217;) to provide for the continued vesting of enemy property vested in the Custodian of Enemy Property for India under the Defence of India Rules, 1962 and the Defence of India Rules, 1971 and for matters connected therewith.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court referred to the relevant provisions of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002841659\" target=\"_blank\" rel=\"noopener\">Act, 1968<\/a>, the expression &#8220;Custodian&#8221;, &#8220;enemy&#8221; or &#8220;enemy subject&#8221; or &#8220;enemy firm&#8221; and &#8220;enemy property&#8221;. It further took note of the Enemy Property Rules, 2015 and the Uttar Pradesh Municipalities Act, 1916.<\/p>\n<p style=\"margin-bottom: 3%;\"> The Court took note of Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001551808\" target=\"_blank\" rel=\"noopener\">2(c)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002841659\" target=\"_blank\" rel=\"noopener\">Act, 1968<\/a>, which defines enemy property, and said that it clearly states that 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 being vested in the Custodian. Therefore, the provision of the Act recognises the ownership of the enemy vis-&agrave;-vis the enemy property and the enemy property belonging to or held or managed on behalf of an enemy, an enemy subject or an enemy firm being vested in the Custodian. Further, it said that only the rights vis-&agrave;-vis enemy property vest in the Custodian. By that, the Custodian does not acquire ownership rights to the property. It continues to vest with the enemy. This is because ownership of immovable property can be transferred from one person to another i.e. transfer inter vivos can only be transferred in accordance with the provisions of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726942\" target=\"_blank\" rel=\"noopener\">Transfer of Property Act, 1882<\/a>.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court further added that by a deeming fiction and by operation of law the right, title and interest in any property vested in the Custodian under the Act shall be extinguished vis-&agrave;-vis any enemy or enemy subject or enemy firm once such property is vested in the Custodian only with regard to succession to such enemy property or transfer of such property by an enemy, enemy subject or enemy firm. This would imply that the enemy, enemy subject as well as enemy firm would continue to remain the owner of such property and would continue to vest with the Custodian on the death of the enemy.<\/p>\n<p style=\"margin-bottom: 3%;\">Further, the Court said that under the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002841659\" target=\"_blank\" rel=\"noopener\">Act, 1968<\/a>, the vesting of the enemy property in the Custodian is not free from encumbrances but vesting is in accordance with the status of the property as held by the enemy, enemy subject or enemy firm prior to its vesting. Therefore, only when enemy property vests in the Custodian free from all encumbrances will be a transfer of ownership from the owner of such property to the Custodian. This is because under the Act, Custodian holds or manages the property for and on behalf of the enemy, enemy subject or enemy firm only temporarily and there is no transfer of ownership to the Custodian or the Union of India. Hence, there is no necessity of payment of compensation to the owners of such properties.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court also said that 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&#8217;s 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 to ensure that such property is not dissipated owing to the owner of the property being absent in the country. Thus, to protect the enemy property, the Custodian is empowered to even sell the enemy property and deposit the sale proceeds with the Central Government.<\/p>\n<p style=\"margin-bottom: 3%;\">Thus, the Court held 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 Government, but since the Custodian is only a trustee of the enemy property, the same is liable to tax in accordance with law, including to the Municipal Corporation. The Custodian is only authorised to pay the taxes on the subject enemy property by virtue of Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001551820\" target=\"_blank\" rel=\"noopener\">8(2)<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002841659\" target=\"_blank\" rel=\"noopener\">Act, 1968<\/a>.<\/p>\n<p style=\"\">Further, it held that the Custodian while doing so is not acting on behalf of the Union Government being the owner of the enemy property, rather, the Custodian who is appointed by the Central Government under the provisions of the Act, which is a Central legislation only discharges his duties and functions under the provisions of the Parliamentary legislation i.e. the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002841659\" target=\"_blank\" rel=\"noopener\">Act, 1968<\/a>. Such discharge of duties and functions, including the payment of taxes in relation to the enemy property vested in him would not also by the same logic imply that the Custodian is acting as if the property vested in him has become the Union property.<\/p>\n<ul style=\"list-style-type: disc;\">\n<li>\n<p style=\"font-weight: bold;\">Consequently, if the ownership of such enemy property is conferred on the Custodian for Enemy Property, whether such property becomes Union property within the meaning of Article <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001575094\" target=\"_blank\" rel=\"noopener\">285<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726967\" target=\"_blank\" rel=\"noopener\">Constitution<\/a> and therefore, it is exempt from payment of property or other local taxes to the Municipal Corporation under the provisions of the Act of 1959?<\/p>\n<\/li>\n<li>\n<p style=\"margin-bottom: 3%; font-weight: bold;\">Whether despite such enemy property becoming property of the Union, clause (2) of Article <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001575094\" target=\"_blank\" rel=\"noopener\">285<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726967\" target=\"_blank\" rel=\"noopener\">Constitution<\/a> enables Municipal Corporation to impose property or other local taxes on the respondent which is lessee of the subject property?<\/p>\n<\/li>\n<\/ul>\n<p style=\"margin-bottom: 3%;\">After taking note of Articles <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001575094\" target=\"_blank\" rel=\"noopener\">285<\/a> and <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001575098\" target=\"_blank\" rel=\"noopener\">289<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726967\" target=\"_blank\" rel=\"noopener\">Constitution<\/a>, the Court said that it provide for the immunity of the property of the Union and the State from mutual taxation on the basis of the Federal principle.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court said that under Article <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001575107\" target=\"_blank\" rel=\"noopener\">296<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726967\" target=\"_blank\" rel=\"noopener\">Constitution<\/a>, 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. Thus, the Union cannot assume rights of ownership over such property through the Custodian.<\/p>\n<p style=\"margin-bottom: 3%;\">Further, it said that when enemy property is not the property of the Union within the meaning of Article <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001575094\" target=\"_blank\" rel=\"noopener\">285<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726967\" target=\"_blank\" rel=\"noopener\">Constitution<\/a>, there is no exemption from taxes imposed on by a State or by any authority within a State.<\/p>\n<p style=\"margin-bottom: 3%;\">Thus, while both the Municipal Corporation and the Union of India are at <span style=\"font-style: italic;\">ad idem<\/span> on the legal position that the property tax is liable to be paid to the Municipal Corporation in the instant case, but it is for different reasons or basis.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court viewed that there would be no transfer of ownership, and such properties vest in the Custodian for their protection and management only. By such vesting, the Union cannot usurp ownership of such properties. Thus, it remarked when many persons who are resident in India left their properties and settled in enemy countries, the Custodian has taken possession of such properties which is only for the purpose of protection and maintenance and to be handed over as and when a conducive environment between the countries arises.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court added that the Constitution hasclearly differentiated between &#8216;vesting of properties&#8217; in the Union or a State which is totally distinct from &#8216;vesting of enemy properties&#8217; in the Custodian for Enemy Property. It further observed that it was never the intention of the legislature under the Defence of India Rules, 1962 and 1971 or under the provisions of the Act that enemy subjects would lose all their right, title and interest in the properties once the said properties vest in the Custodian and thereby become Union properties.<\/p>\n<p style=\"margin-bottom: 3%;\">Therefore, it was held that the properties do not vest with the Union within the meaning of Article <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001575094\" target=\"_blank\" rel=\"noopener\">285<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726967\" target=\"_blank\" rel=\"noopener\">Constitution<\/a>, and the said Article has no application to enemy properties. As Clause (2) of Article 285 is an exception to clause (1) and would apply only if the enemy properties are Union properties and not otherwise.<\/p>\n<p style=\"margin-bottom: 3%;\">Further, it said that from the current fiscal year onwards (2024-2025), the Municipal Corporation shall be entitled to levy and collect the property tax, water tax and sewerage charges and any other local taxes in accordance with law.<\/p>\n<ul style=\"list-style-type: disc;\">\n<li>\n<p style=\"font-weight: bold;\">Whether the High Court was right in holding in favour of the respondent?<\/p>\n<\/li>\n<\/ul>\n<p style=\"margin-bottom: 3%;\">The Court held that the High Court was not right in holding that the respondent, as occupier of the subject property, is not liable to pay any property tax or other local taxes to the Municipal Corporation.<\/p>\n<p style=\"margin-bottom: 3%;\">[<span style=\"font-weight: bold; color: #632423;\">Lucknow Nagar Nigam v. Kohli Brothers Colour Lab, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/gs890S53\" target=\"_blank\" rel=\"noopener\">2024 SCC OnLine SC 188<\/a>, decided on 22-02-2024<\/span>]<\/p>\n<p style=\"text-indent: 18pt;\"><strong><span style=\"color: #000080;\">Judgment Authored by: Justice BV Nagarathna<\/span><\/strong><\/p>\n<blockquote class=\"wp-embedded-content\" data-secret=\"YeDBVyhTe1\"><p><a href=\"https:\/\/www.scconline.com\/blog\/post\/2023\/11\/16\/justice-bv-nagarathna-igniting-hope-for-the-first-ever-women-chief-justice-of-india\/\">Justice BV Nagarathna igniting hope for the first ever women Chief Justice of India<\/a><\/p><\/blockquote>\n<p><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; clip: rect(1px, 1px, 1px, 1px);\" title=\"&#8220;Justice BV Nagarathna igniting hope for the first ever women Chief Justice of India&#8221; &#8212; SCC Times\" src=\"https:\/\/www.scconline.com\/blog\/post\/2023\/11\/16\/justice-bv-nagarathna-igniting-hope-for-the-first-ever-women-chief-justice-of-india\/embed\/#?secret=Tj184ofiUr#?secret=YeDBVyhTe1\" data-secret=\"YeDBVyhTe1\" width=\"600\" height=\"338\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe><\/p>\n<h3 style=\"color: #000080;\">Buy Constitution of India &nbsp;<a href=\"https:\/\/www.ebcwebstore.com\/product\/the-constitution-of-india-coat-pocket-edition?products_id=100647\" target=\"_blank\" rel=\"noopener\">HERE<\/a><\/h3>\n<p style=\"margin-bottom: 3%;\"><a href=\"https:\/\/www.ebcwebstore.com\/product\/the-constitution-of-india-coat-pocket-edition?products_id=100647\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/s3.amazonaws.com\/ebcwebstore\/images\/the-constitution-of-india-coat-pocket-edition-Gopal-Sankaranarayanan-ebc-front-cover.JPG\" alt=\"Constitution of India\" width=\"300\" height=\"200\" class=\"aligncenter size-large wp-image-294438\" \/><\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p style=\"font-style: italic;\">Supreme Court directed that any demand for payment of taxes under the UP Municipal Corporation Adhiniyam, 1959 made and thereby paid by the respondent to Municipal Corporation shall not be refunded.<\/p>\n","protected":false},"author":67512,"featured_media":315243,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,9],"tags":[48073,6361,3621,36937,53105,5363,2621,33302,65704,65705],"class_list":["post-315194","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-supremecourt","tag-custodian","tag-enemy-property","tag-municipal_corporation","tag-ownership-of-property","tag-property-tax","tag-supreme-court","tag-Tax","tag-trustee","tag-union-governement","tag-vesting-of-enemy-properties"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.4 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Custodian for enemy property in India does not acquire ownership of property, only acts as a trustee for its management and 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