No Shelter In Litigation Delay | Kerala High Court Upholds Property Tax Demand On Occupied Premises But Quashes Penal Interest
Isabella Mariam
The High Court of Kerala Division Bench of Justice Dr. A.K. Jayasankaran Nambiar and Justice P.M. Manoj upheld the direction for payment of property tax dues for the period from 2009–10 to 2021–22, while setting aside the direction to pay 12% interest per annum. The Court also quashed the revenue recovery notice, along with previously impugned demand notices, and directed the Corporation to compute outstanding dues afresh and issue a statement to the assessee. The appeal was disposed of with a limited modification to the judgment of the learned Single Judge.
The appellant, represented by his power of attorney holder, had approached the High Court against a judgment rendered in a writ petition concerning a property located in Ernakulam. The construction of the building had been completed in 2001 pursuant to an approved plan, and both completion and occupancy certificates were issued the same year. The approved plan earmarked certain portions of the building as recreational area and car park.
From 2001 until the financial year 2009–10, the appellant paid property tax in respect of the entire property, including the areas designated for non-residential use under the approved plan. However, for the subsequent period up to 2021–22, the appellant ceased payment of tax on the disputed portions, citing pending litigation regarding alleged unauthorized construction and usage of these earmarked spaces.
The appellant's primary grievance in the writ petition was that the Corporation had not issued any demand notice under Section 539 of the Kerala Municipality Act, 1994, for the years 2009–10 to 2021–22 until 12.09.2022. He argued that the delayed issuance of the notices invalidated the demand under the limitation provisions of the statute.
The learned Single Judge found that the delay in issuing demand notices was attributable to the pendency of litigation initiated by the appellant, including challenges to demolition orders concerning the disputed construction. Holding that no litigant should benefit from court proceedings in a manner that prejudices the legitimate rights of the other party, the Single Judge rejected the limitation defense. The Court, however, acknowledged the Corporation’s lapse in not issuing formal demand notices earlier and exempted the appellant from payment of penal interest. The demand notices were quashed, but the appellant was directed to pay the tax due along with simple interest at 12% per annum.
The appellant thereafter filed a writ appeal, challenging the legality of the Single Judge’s findings, particularly the imposition of interest and confirmation of the underlying tax liability.
The Division Bench examined the records and submissions of both sides. It recorded : “It is not in dispute before us that the property tax dues in respect of the buildings constructed by the appellant was being paid from the date of receipt of the occupancy certificate in respect of the same upto 2009-10.”
The Court noted that the pendency of litigation was the reason the Corporation had deferred issuing formal demand notices. However, this circumstance did not extinguish the appellant’s tax liability. As the Court stated : “Merely for that reason it will not be open to the appellant to refrain from paying the property tax which was otherwise due in respect of the building in accordance with the approved plan and in respect of which he had already obtained an occupancy certificate, and in fact occupied the premises.”
The Court held that payment obligations persisted despite the absence of demand notices. It further recorded : “The mere fact that the Corporation did not choose to issue a demand notice for a period when the assessee refrained from paying the tax on account of pending litigation between the parties, and in the absence of any order staying the demand of such tax, cannot be a reason to prevent the Corporation from collecting the tax amounts at a later stage of the proceedings.”
The Bench rejected the contention that the absence of formal demands nullified the liability, stating :
“In our view, the non-issuance of a formal demand notice seeking recovery of the property tax dues in respect of the disputed areas can only result in deprivation of penal interest, that is due from the assessee to the Corporation.”
Addressing the claim that the premises were not taxable, the Court concluded : “As far as the principal liability of the appellant to pay the property tax dues in respect of the disputed area for the period between 2009-10 to 2021-22 is concerned, we find that there can be no valid justification for non payment of the tax by the appellant, more so, when it is not his case that the premises were not occupied by him during the said period.”
On the imposition of 12% interest, the Court made a key observation : “We also delete that portion of the judgment of the learned Single Judge that directs the appellant to pay interest at the rate of 12% per annum since, in the light of the reasoning given by the learned Single Judge for deleting the penal interest, there cannot be a separate direction to pay interest at the rate of 12% for the alleged delayed payment of property tax.”
The Division Bench upheld the decision of the learned Single Judge concerning the appellant’s obligation to pay the assessed property tax for the period from 2009–10 to 2021–22.
It agreed that the liability to pay the tax remained unaffected and that there was no valid ground to avoid payment for the disputed portion of the building during this period.
However, the Bench modified the earlier judgment by removing the direction to pay simple interest at 12% per annum.
This modification was made in view of the Court’s reasoning that, since penal interest was already excluded due to the absence of a formal demand, levying simple interest separately would be inconsistent.
In addition to this limited modification, the rest of the directions issued by the Single Judge were maintained.
The Court also clarified that, alongside the demand notices which had already been quashed, the revenue recovery notice issued subsequently would also be set aside. The Bench took note of the appellant’s compliance with an interim direction under which property tax for the years 2019 to 2022 had already been remitted.
The Corporation was instructed to account for these payments when calculating the balance outstanding. Within two weeks of receiving a certified copy of the judgment, the Corporation is required to provide the appellant with an updated statement detailing the remaining tax dues. Upon receipt of this statement, the appellant is expected to settle the balance within six weeks.
The writ appeal is disposed accordingly.
Advocates Representing the Parties
For the Petitioners: P.G. Jayashankar, P.K. Reshma (Kalarickal), S. Rajeev , Sajana V.H, Shaiju George, Aadersh R.S. Panicker, Advocates
For the Respondents: C.N. Prabhakaran, Advocate; Vinitha B., Senior Government Pleader
Case Title: Vinu Koshy Abraham v. Corporation of Cochin & Another
Neutral Citation: 2025:KER:34192
Case Number: WA No. 2085 of 2023
Bench: Justice Dr. A.K. Jayasankaran Nambiar and Justice P.M. Manoj
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