Union of India Vs Municipal Corporation of Delhi & Anr. (Delhi High Court)
The Delhi High Court has intervened in a dispute between Northern Railways, Delhi Division, and the Municipal Corporation of Delhi (MCD) concerning the payment of property-related dues. The railway division had challenged a distress warrant issued by the MCD on July 2, 2025, attaching Rs. 14,84,61,840 for alleged non-payment of service charges for the Assessment Years 2023-24 and 2024-25. The petition also contested a demand notice dated March 12, 2025, for property tax, which the Railways argued was contrary to Article 285 of the Constitution of India.
Constitutional and Policy Framework
Article 285 of the Constitution generally exempts the property of the Union from state taxation. This principle has been reinforced by judicial pronouncements. The petitioner relied on the Supreme Court’s judgment in Rajkot Municipal Corporation & Ors. Versus Union of India (Civil Appeal Nos. 9458-9463/2003). In this case, the Supreme Court unequivocally directed that the Union of India (UOI) and its departments are obligated to pay service charges for services rendered by municipal corporations, rather than property tax.
Further buttressing their argument, the Railways cited an Office Memorandum (OM) dated December 15/17, 2009, issued by the Ministry of Urban Development, UOI. This OM clarifies that no property tax is payable by the Union, only service charges. These charges are calculated at a reduced rate: 75% of the property tax for full utilization of services, 50% for partial utilization, and 33 1/3% for no utilization. The OM also stipulates that an agreement should be entered into between the UOI departments and the respective municipal corporations for this purpose.
