Full Text
HIGH COURT OF DELHI
Date of Decision: 28.05.2025
JUDGMENT
1. By way of present petitions filed under Article 226 of the Constitution of India, the petitioners, claiming themselves to be private unaided schools or educational societies or trusts, running unaided schools, have sought issuance of writ of certiorari, inter alia, for quashing of Final Report dated 30.09.2022 of the 5th Municipal Valuation Committee (hereinafter, the „5th MVC‟), whereby “Use Factor” of 2 was recommended in the formula by which property tax is calculated and charged in the city of Delhi.
2. Petitioners have sought interim stay of the implementation of Use Factor 2 as recommended by the 5th MVC, pending final disposal of the writ petitions. According to the Petitioners, the urgency is grave since the last date for availing a 15% rebate in the payment of property tax for the year 2025-26 is 30.06.2025.
3. In view of the urgency due to impending last date, the parties were heard on the Petitioners‟ abovementioned applications for interim stay on implementation of Use Factor 2.
4. Petitioners have challenged the arbitrariness of the differential sought to be created between Government owned or aided schools and unaided private schools (including Private Educational Institutions run by any organisation/body/trust, even if drawing part financial support from State) by assigning different Use Factors in the property tax formula. It is argued that differentia in the Use factor between government owned or aided schools and private unaided schools has no nexus with the object of charging properties for property tax. Petitioners have challenged the classification into two different Use Factors i.e. Use Factor of “1” for the government owned or aided schools and “2” for private unaided schools as arbitrary and irrational.
5. Learned Senior Counsels/counsels for the petitioners while criticising the 5th MVC report have contended that earlier, the 1st MVC had classified the private unaided schools in three categories with three different Use Factors i.e., from 1 to 3, depending upon the fee charged per month. It is contended that in the 5th MVC, though classification on the basis of fees structure has been done away with however, there is still no rationale for arbitrary classification of the schools by applying Use Factor 2 for the Private Educational Institutions run by trusts/society (even if drawing part financial support from Delhi Govt./UGC/GOI). In this regard, Ld. Senior Counsels have drawn attention of this Court to the Interim Report of the 5th MVC wherein, while considering the reference for fixation of base value per unit area of the vacant land or per unit area of covered space of building and factors for increase or decrease, the Committee undertook the case studies of property tax system in the cities of Bangalore, Patna, Mumbai as well as in Singapore. Learned Senior Counsels have further drawn the attention to para 3.5.[4] of Annexure III of the Report wherein Use Factor for private schools in Patna and Mumbai was stated to be 1.[5] and 0.[5] respectively.
6. It is contended that Central/State Govt./Local Bodies are exempted from payment of tax in terms of Sections 119 and 115 (1)(iv) of the DMC Act as well as Article 285 of the Constitution. On the other hand, the private schools who are not claiming any aid from the Govt. and not being a burden on the exchequer, are penalised to pay a higher property tax.
7. Petitioners have pressed for urgent relief for staying the implementation of the “Use Factor 2” which, according to them, is ex-facie arbitrary. It is argued that pending final adjudication in the writ petition, it will be equitable that the Petitioners are permitted to pay property tax for the year 2025-2026 at the hitherto applicable Use Factor of 1, in order to maintain status quo. To bolster their argument that no prejudice shall be caused to the Respondents if the tax is collected by them at the last applicable Use Factor of 1 till the last assessment year of 2024-25, Petitioners have referred to Section 123 of DMC Act, to argue that by virtue of these provisions the Corporation has a statutory first charge on the school land as a security for payment of Government dues. Reference in this regard is also made to Sections 6 and 7 of the Delhi School Education Act, 1973 as well as Rules 60, 93 and 94 of the Delhi School Education Rules, 1973 to submit that schools cannot even transfer any land or property without prior permission of the Corporation. It is submitted that the Corporation is fully secured in the event this court eventually upholds the applicability of the Use Factor of 2 in the final decision in this writ petition and in case a higher tax is payable than the tax paid under the protection of the interim order, the Corporation has the means to recover the difference in the tax amount under the above statutory provisions.
8. Pressing with their case for maintaining status quo existing prior to the recommendation of the 5th MVC, Petitioners have also referred to the order dated 15.07.2022 passed by this Court in W.P.(C) 6708/2021 and connected petitions wherein while considering the report of 3rd MVC wherein „Use Factor 3‟ was assigned to private unaided schools being run by any Organisation/Body/Trust, interim direction was passed thereby permitting the affected schools to apply „Use Factor 1‟ in the Self Assessed Property Tax Returns (SAPTR) filed by them. It is stated that the petitioners in the said writ have continued to file their SAPTR for subsequent years by applying the Use Factor 1.
9. The respondents, on the other hand, have opposed any interim relief staying the implementation of the disputed recommendations of the 5th MVC report. Very obviously, the Respondents have supported the 5th MVC report. Respondent highlighted the comprehensive nature of exercise undertaken by the MVC over 27 meetings wherein comments from all the stakeholders were invited besides carrying out comparative case study comparing the property tax regimes in place in different states across the country and also studied the Singapore regime.
10. It is further submitted that the reliance placed on the order dated 15.07.2022 passed in WP(C) 6708/2021 and connected petitions is misplaced since the said proceedings pertained to the 3rd MVC report which is no longer effective having been superseded by 5th In addition thereto, it is submitted that the Supreme Court in MCD v. Sri Aurobindo Education Society (Regd.),[1] restricted the benefit of the interim directions to apply Use Factor 1 to private unaided schools given in the judgement dated 23.08.2012 titled as Vinod Krishna Kaul v. Lt. Governor N.C.T. of Delhi[2], only to the petitioners in those proceedings, due to which no benefit could be claimed by the Petitioners herein of the said interim order.
11. In summary, the Respondent Corporation lastly submitted that the rationale behind the report of the 5th MVC will require a detailed comprehensive hearing, until then there is no reason to delay the implementation of recommendations that have been adopted by the Corporation by way of a validly passed resolution. The decision should be
12. I have heard learned counsel for the parties and gone through the records.
13. In my view, the issue requires a comprehensive hearing giving opportunity to both the parties to state their points of view, since the arbitrariness of a validly adopted decision of the Corporation is under challenge. However, the question of grant of interim relief has to be examined in the backdrop of history of the litigation around the issue of differential Use Factor.
14. It appears that a short overview of the different MVC‟s and the accompanying litigation is necessary before dealing with the application at hand. The challenge at the heart of these petitions is to one of the factors employed in the Unit Area Value method for calculation of property tax in Delhi. Under this method, which was introduced by virtue of the Delhi Municipal Corporation (Amendment) Act, 2003, tax for a particular property is based on the annual value of the property arrived at by multiplying the unit area value assigned to the colonies/localities by the covered area of the property and the multiplicative factors for occupancy, age, structure and use. The dispute in these petitions germinates from the Use Factor and its different values for government owned or aided schools and private unaided schools. The value of the Use Factor is directly proportional to the property tax payable, in other words, higher the Use Factor, higher the tax which needs to be paid.
15. In the 1st MVC report, which covered the tax period from 01.04.2002 to July/August 2020, while the Use Factor for government owned or aided schools was 1, for private unaided recognised schools it varied from 1-3, depending upon the fees which was charged by the school. The schools charging lesser fees were required to apply a lower Use Factor and hence pay lesser property tax.
16. The 2003 amendment and report of 1st MVC were challenged before a Division Bench of this court in the case of V.K. Kaul (Supra), wherein the Division Bench struck down fee based classification of private unaided schools for assigning Use Factor. The Court in its judgment dated 23.08.2012 held that there was no nexus between differentia and the object sought to be achieved. The classification was found to be arbitrary and violative of Article 14. Following was observed by the Division Bench in its order:- ….59. While we have no difficulty in agreeing with the respondents that there exists an intelligible differentia between government / governmentaided schools on the one hand and private un-aided schools on the other, the question that needs examination is whether this differentia has a nexus with the object of such classification. The apparent and ostensible object is that schools which are not running as profit earning businesses ought to be treated at par with government / government-aided schools. That is apparent from the fact that government / government aided schools have a use factor of 1 and so do private unaided schools, which charge fees upto Rs.600/- per month. The foundation on which the Use Factors of 2 and 3 are assigned to schools charging fees between Rs.601/- and Rs.1200/- per month and those charging fees in excess of Rs.1200/- per month, respectively, appears to be the reasoning or, shall we say, assumption that these schools are profit making enterprises. But, what if that were not true? What if the schools charging higher fees were imparting a better quality of education with a better infrastructure without any individual or group of individuals profiteering from the enterprise? In such a situation, the nexus between the intelligible differentia and the object would disappear rendering the classification to be violative of article 14 of the Constitution. Therefore, a classification based merely on the fee structure would not be a satisfactory means of achieving the object. Perhaps, one Use Factor could be assigned to all schools which are not profit making bodies / entities, irrespective of the fee structure. And, a higher Use Factor could be assigned to schools which are being run on a profit-making basis. We have no means to ascertain as to whether the petitioners before us fall into one or the other category. While we agree with the petitioners that the fee structure cannot be the sole determinative factor for ascribing a particular Use Factor, we are also clear that it is not for us to do this exercise. Consequently, we direct that this grievance of the petitioners with regard to the Use Factor assigned to school buildings be considered by the Corporation and the MVC in the light of observations made above. In the meanwhile, however, as we have found the classification based on fee structure alone to be violative of Article 14 of the Constitution and beyond the mandate of the amended Act of 1957, all schools, irrespective of the fee structure, would have to be assigned a single Use Factor. And, since government / government aided schools have been assigned a UF of one (1), that would be applicable for all schools till the exercise is completed by the MVC and the Corporation in the light of the discussion above.” (emphasis supplied)
17. The above decision in V.K. Kaul (Supra) pertaining to 1st MVC, was challenged before the Supreme Court by way of Civil Appeal No. 149/2013. The 1st MVC report was in effect from 01.04.2002 to July/August 2020.
18. In the meantime, the 3rd MVC report dated 10.07.2012 pertaining to the tax years July/August 2020 to 31.03.2023 was announced wherein Use Factor 3 was assigned to private unaided schools, being run by any Organization/Body/Trust, as compared to government run or aided schools which had Use Factor as 1. The 3rd MVC report was challenged before this Court in W.P.(C) 6708/2021 and connected petitions. In these writ petitions, vide interim order dated 15.07.2022, the petitioners therein were permitted to pay tax applying Use Factor 1, pending final decision in the said writ petitions. The interim order was challenged in appeal, wherein the Division Bench vide order dated 11.10.2023 chose not to interfere with the interim order, considering the interim nature of relief and the fact that the writ petition were pending final adjudication.
19. Whilst the challenge to 3rd MVC report was still pending in court, the 5th MVC report was adopted on 04.11.2022 for the subsequent tax period 01.04.2023 onwards. In this report, the Use Factor for schools other than those owned or aided by the Government was fixed at 2 versus 3 as assigned in the 3rd MVC to private unaided schools. This 5th MVC report is the subject matter of the present petitions.
20. However, subsequently, the appeal against the interim directions to apply Use Factor 1 to private unaided schools given in V.K. Kaul (Supra) pertaining to 1st MVC, finally came to be decided by Supreme Court in MCD v. Sri Aurobindo Education Society (Regd.) (Supra). The Supreme Court criticised the interim arrangement put in place by the High Court applying the Use Factor of 1 en masse for all the private unaided schools in the city and instead confined the said interim arrangement to the 26 petitioners in the said petition. It was further directed that in cases where the tax has already been paid as per the impugned higher Use Factors, there was no compulsion on the MCD to refund the excessive tax so paid. The relevant excerpts are extracted hereunder:
government aided schools or private schools (Unaided and self-financing schools) would have to be assigned use factor of „1‟. We find that such a broad direction could not have been given by the High Court in respect of all schools in Delhi. At best it could have been only restricted to those writ petitioners who had approached the Court and who had been successful before the High Court in establishing that the determination of the use factor on the basis of the fee structure was erroneous.
28. The further contention of the learned counsel for the appellant(s) was that even insofar as the respondents are concerned, the direction would have to be modified inasmuch as the new criteria as determined would have to be made applicable from the year 2003 onwards. But for the earlier period what was determined would apply. We cannot accept the said submission vis-a-vis the original writ petitioners before the High Court inasmuch as nothing prevented the MCD from re-determining criteria for the use factor at an early date. The impugned judgment is dated 23.08.2012, however, the determination has been made only in the year 2016 and thereafter, in the years 2020 and 2023. Therefore, we find that sufficient time has lapsed for determining the said criteria and therefore, at this stage it may not be proper to modify the same insofar as the writ petitioners before the High Court are concerned.
29. In the circumstances, we restrict the direction which has been given in respect of the “all schools” in Delhi to only twenty-six schools, educational institutions societies, which were the petitioners before the Delhi High Court and not to anybody else.
30. It is needless to observe that w.e.f. the date of notifying the criteria on 30.09.2020 or even earlier and thereafter w.e.f. 2023, not only the writ petitioners who filed the writ petitions before the High Court but all others who are amenable to the payment of property tax insofar as schools and educational institutions/societies are concerned, will have to comply in terms of the said direction which was only till the completion of the determination of the criteria of the use factor.
31. It is also brought to our notice by learned counsel for the appellant as well as learned senior counsel and learned counsel for the respondents that office order dated 19.04.2023 with regard to implementation of the recommendations of the Fifth MVC by the MCD has been issued with effect from 01.04.2023 and the same is a subject matter of writ petitions before the Delhi High Court. It may also be that in respect of MVC 2019- 2020 there are challenges to the notification issued by the MCD, subsequent to the passing of the impugned judgment and they are pending consideration before the High Court. In the circumstances, while taking note of the said submission we say that this order is applicable up to the period 31.03.2023 insofar as the respondents herein/writ petitioners before the High court, in this batch of cases are concerned. We also observe that the aforesaid discussion as well as the directions issued are only restricted insofar as the impugned order is concerned and the challenge to the re-determination of the use factor would be considered on its own merits.”
21. Thus, it is evident that the present situation is different from when the previous orders fixing the „Use Factor 1‟ for private unaided schools came to be passed. At the time of those orders, the decision in VK Kaul (Supra) was still in effect.
22. Pertinently, the Division Bench in V K Kaul (Supra) held that the fee charged cannot be made the basis for applying a varied Use Factor among the same class i.e., private unaided schools. The court left it to the MCD to assign a value based on other factors which the court was of the opinion was an exercise not for the court to indulge in.
23. According to this court, the Division Bench in V K Kaul (Supra) has already prima facie opined that there exists an intelligible differentia between the government and private unaided schools. It is deemed apposite to take note of the following observation of the Division Bench: - “….While we have no difficulty in agreeing with the respondents that there exists an intelligible differentia between government / government-aided schools on the one hand and private un-aided schools on the other, the question that needs examination is whether this differentia has a nexus with the object of such classification……” It is pertinent to note that this intelligible differentia between government schools and private schools has also been upheld by another Division Bench of this Court in Independent Thought v. Union of India,[3] wherein, in the context of Section 18 of the Right of Children to Free and 2020 SCC OnLine Del 3115 Compulsory Education Act, 2009, which exempts government schools from getting the certificate of recognition which private schools are mandated to get, it was held that the classification of government schools and private schools was a valid classification. Reference may be made to the extract reproduced hereunder: -
24. In view of the observations of the Division Benches on the existence of an intelligible differentia, as stated above, judicial propriety demands that this court is bound by such findings. In the opinion of this Court, the enquiry by the Division Bench in V.K. Kaul (Supra) was not confined to the rationality of a fee-based differentiation of the Use Factor. The rationality of differential per se between the government and unaided schools, rather than mere assigned values, is a question the Division Bench was seized of. Moreover, the Supreme Court, in Sri Aurobindo Education Society (Supra) has not set aside the finding of the Division Bench on the aspect of classification and has only restricted the applicability of the interim direction of paying as per Use Factor 1 to the original 26 petitioners before the High Court, and that too, only till 31.03.2023, whereafter the 5th MVC has come into effect. Thus, even those petitioners have to abide by the Use Factor stipulated by the 5th MVC.
25. Pertinently, the 5th MVC report has come into effect which fixes the Use Factor for schools other than government owned or aided schools at 2, as opposed to 3 in the 3rd MVC. The challenges to the validity of this differentiation would be decided at the time of the final adjudication of these petitions. Insofar as the payment of property tax for the period 2025-26 for which the last date to avail rebate is stated to be 30.06.2025 is concerned, this Court is of the view that the petitioners shall pay the same in accordance with the 5th
26. The prayer to fix the Use Factor as 1 for private unaided schools is hence rejected. Consequently, the present applications are dismissed. W.P.(C) 10626/2023, W.P.(C) 6680/2025, W.P.(C) 6681/2025, W.P.(C) 10625/2023, W.P.(C) 4786/2024, W.P.(C) 4787/2024, W.P.(C) 9495/2024 & W.P.(C) 13345/2024 List these petitions for hearing on 19.08.2025.
MANOJ KUMAR OHRI (JUDGE) MAY 28, 2025 (corrected & released on 11.06.2025)