Justice Manmohan also issued a notice to the municipal corporations seeking their responses in four weeks and listed the matter for further hearing on January 21.
It also asked DDA to deposit with the Registrar General a bank guarantee of Rs 50 crore by December 1.
The court also asked the Lt Governor to meanwhile hold a meeting of senior officials of Delhi Development Authority (DDA) and the municipal bodies to resolve the issue.
Attorney General Mukul Rohatgi, appearing for DDA, contended nazul lands are properties belonging to the union government and entrusted to the authority for the purpose of development.
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He said DDA holds the nazul properties as custodian on behalf of the Centre and there is no transfer of ownership of lands to it, thus, by the operation of Article 285 of the Constitution these properties are exempted from taxation by states.
The plea has alleged that in complete ignorance of the constitutional and statutory provisions, the respondent municipal corporations have been issuing demand notices and distress warrants against the authority seeking payment of property tax on the various properties.