Indore Municipal Corporation v. Gujarat Co-Operative Housing Society Ltd. & Anr.

Judgment

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2377-78 of 1980 etc. etc. From the Judgment and order dated 2.3.79 of the Madhya Pradesh High Court in Misc. Petition No. 781 of 1974. B.Sen, Sunil Gupta, D.N.Mishra, S.K.Gambhir and Vivek Gambhir for the Appellants. L.N.Gupta, S.R.Phodnis, Sunil Gupta and D.N.Mishra the Respondents. The Judgment of the Court was delivt?red by YOGESHW AR DAY AL, J. This order will dispose of C.A.2377 and 2379of1980 and S.L.P.(C) 10376of1981. C.As. 2377 and 2378of1980 have been filed against two separate judgments of the learned Single Judge of the Madhya Pradesh High Court dated 2.3.1979 by the Indore Municipal Corporation. The impugned order in C.A.2377 of 1980 was passed in Civil Miscellaneous Petition No. 781of1974 filed by Gujarati Co-operative Housing Society Ltd. and Another v. The Indore Municipal Corporation and Others and the impugned order in C.A.2378 of 1980 was passed in Miscellaneous Petition No.253of1974 filed by the Madhya Pradesh Awas SamasyaNivaran Sanstha and another v. The Indore Municipal Corporation and other. · MUNIOP AL CORPN. v. CO-OPT.

HOUSING SOCIETY [YOGESHW AR DAYAL, J.] 15 The S.L.P.(C)No. 10376 of 1981 has been filed by M/s M.T. Cloth Market Merchants Association against the Indore Municipal Corporation and others against the judgment of a division bench of the High Court dated 25.7.1981 in Miscellaneous Petition No. 172of1980. The division bench in the impugned judgment approved the decision of the Single Judge which is subject matter of C.A. 2378 of 1980 but dissented from the decision of the same learned Single Judge, which is the subject matter of C.A.2377 of 1980. Heard. Special Leave granted. In C.A.2377 of 1980 the order impugned, on behalf of the respondents in the writ petition, was a bill dated 26th October, 1971 (filed as annexure-J to the writ petition) and a demand notice dated 14.8.1973 (filed as annexure-M to the writ petition) by which a demand for payment of lighting rate and drainage tax had been made by Indore Municipal Corporation from petitioner No. 2, Gaya Prasad Sahu in the writ petition in respect of house No. 25, Mohalla Vallabh Nagar, Indore for the period commencing from 1971-72.

In the aforesaid bill dated 26th October, 1971 the demand related to lightning rate and drainage tax for the year 1971-72 (see page 30 of the paper book) and D demand notice dated 14.8.1973 inter alia related to lightning rate and drainage tax in respect of arrears and current dues up to 31.3.1974 (see page 36-37 of the paper book). These taxes have been levied under Section 132 of the Madhya Prndesh Municipal Corporation Act, 1956 (hereinafter referred to as the Act). The learned Single Judge quashed the demand on the ground that the basis of the demand were illegal.

The demand for lightning rate and drainage tax had been made on the basis of annual letting value of the writ petitioners' property calculated in accordance with the annual letting values prepared by the State Government under the provisions of Madhya Pradesh Sthawar Sampatti Kar Adhiniyam, 1964 (hereinafter referred to as the Adhiniyam) and not in accordance with the mode prescribed in Section 138 of the Act even though those taxes have been imposed under Section 132 of the Act. It was held that the drainage tax and lightning rate under the Act is to be assessed in accordance with the annual letting value determined under Section 138 of the An and that the assessment of the said rate and tax with reference to the annual value determined under the Adhiniyam was illegal and consequently the bill served on the writ petitioner w'lS liable to be quashed. On this ground the aforesaid demands made in annexurc-J &M (as filed in the writ petition) was quashed by the learned Single Judge.

On the same basis the impugned order dated 2.3.1979 in C.A.No. 2378, was passed by the learned Single Judge where the writ petition was filed to quash a demand No. 855 dated 8.2.1974 (annexure-H to the writ petition) in relation to general sanitary cess made by the Indore Municipal Corporation from the writ petitioner No. 2, Lax.man Das 16 [1991) SUPP. 3 S. C.R. ~ in respect of House No. 121, Mahatma Gandhi Road, Indore for the period commencing from 1973-74. The general sanitary cess had been levied at the rate of 2 per cent on the annual letting value of the house property under Section 132(l)(c) of the Act which enabled the Corporation to impose general sanitary cess for the construction and maintenance of public latrines for the removal and disposal of refuse.

The annual letting value of the house property was the base for calculation of the cess from the property owner and in this ~ase also the annual letting value on the basis of which the demand was made was in accordance with the provisions of the Adhiniyam and not in accordance with the mode prescribed under Section 138 of the Act even though the cess had been imposed under Section 132(l)(c) of the Act. In the impugned order passed by the division bench, which is the subject matter of the S.L.P. (C); No. 10376 of 1981 the learned division bench was · concerned with the legality of the demand for drainage tax and lighting rate, general sanitary cess and the validity of graduated flat rate. The division bench found the general sanitary cess in force w.e.f. 24.8.1973 till 31st March, 1976 to be illegal. Consequently, the division bench quashed the demand for general sanitary cess.

The division bench, however, upheld the demand for drainage tax and lightning rate as well as graduated flat rate. Consequently, the division bench partly allowed the writ petition. To the extent the division bench declined the relief, the petitioners have filed the Special leave Petition. The petitioners in this Special Leave Petition have challenged the decision relating to drainage tax, lighting rate and graduated flat rate and have relied upon the decision of learned Single Bench which is the subject matter of C.A.2377 of 1980. For appreciating the points involved in the cases it will be necessary to refer to the relevant provisions of the· Act and the bye-laws framed under the Act and the provisions of the Adhiniyam. · We will first notice the factual position about the various bye-laws anq the resolution passed by the Municipal Corporation in relation to these taxes and the cess.

The draft bye-laws for the general sanitary cess are called "the Indore Municipal Corporation General Sanitary Cess (assessment, collection and refund) Bye-laws, 1973 (hereinafter referred to as the Draft General Sanitary Cess Bye-laws, 1973). They appear at pages 115 to 119 of the paper book of the S.L.P. The final bye-laws in relation to general sanitary cess, however, came to be published in the prescribed manner only on 9th January, 1976. The General sanitary cess had been 'introduced by the Iridore Municipal Corporation w.e.f. 1.4.1973. The relevant bye-law for assessment of MUNICJP AL CORPN. v. CO-OPT. HOUSING SOCIETY !YOGESHW AR DAYAL, J.] 17 general sanitary cess is bye-law No. 4. The assessment u~der these bye-laws A is to be made on the basis of the annual letting value of any building or land at the rate of 2 per cent prepared in accordance with the·provisions of section 1~8 of the Act.

The DraftGeneral Sanitary Cess Bye-laws 1973 appear at pages 115 to 119 of the paper book of the S.L.P. but the final bye-laws as published in the Gazette on 9.1.1976 are not part of the paper book. The proposed bye-laws in relation ,to drainage tax are at pages 97 to 99 • but the final bye-laws in relation to drainage tax were not filed with the appear i book. The draft bye-laws were called "Indore Municipal Corporation Draft Drainage Tax (Assessment, Collection, Refund) Bye-laws 1973 (hereinafter referred to as the Draft Drainage Tax Bye-laws, 1973). But the final bye-laws in relation to drainage tax came to be published only on 12.2.1976 from which c date they became enforceable and as translated are called "Indore Municipal Corporation Drainage Tax (Assessment, Collection an.d Refund) Bye-laws, 1975 (hereinafter referred to as the Drainage Bye-laws 1975):

Bye-law No.4 thereof contemplates that the assessment of drainage tax on the annual letting value of any building or land at the rate of Rs. 1.50 per cent or such rate as may from tim~ to time be fixed by the Corporation in accordance with the provisions of Section 138 of the Act and the assessment shall be done in the manner laid down for assessment of property tax in Sections 139 to 159 of the Act. The drainage tax was, however, levied by the Corporation w.e.f. 1.4.1971. · The bye-laws in relation to lighting rate were published by a Notification dated 18th April,1974 in the Madhya Pradesh GilZetty dated 24th May, 1974 and came into effect from date of publication. They are called "Indore Municipal Lightning Rate (Assessment, Collection and Refund) Bye-laws 1974. The releyant bye~law for assessment of lightning rate is bye-law No. 4 which prescribes that the assessment of lighting rate will be on the basis of determination of annual letting value for assessment of property tax in accordance with the _Act The position thus bOils down to this that. the bye-laws in relation to lightning rate came into force on 24.5.1974, general sanitary cess on 9.1.1976 and drainage tax on 12.2.1976.

It appears that before the aforesaid bye-laws were made effective in relation to drainage tax the resolution No. 925 dated 10th march, 1970 was passed by the Corporation proposing to levy drainage tax at a particular rate on a particular baSis. This resolution was passed at a special meeting of the Corporation under sub-section (2) of Section 132 of the Act and the proposal , was mace effective by the order oftheAdministratorNo.491dated26.10.19701' H MUNICIPAL.CORPN. 11. CO-OPT. HOUSiNG SOCIETY [YOGESHWAR DAYAL, J.J 19 the Administrator for imposition of these truC:es as well as the rate of ~uch taxes and also the basis being the annual letting value as determined by the Corporation of the State Government for imposition of property tax from time to time._ The general sanitary cess were enforced from 1.4."i973 but the byelaws in relation thereto werefinally approved and published only on 9.1.1976.

The proposal in relation to imposition of sanitary cess did not' give any option to adopt ihe annual letting value determined under the Adhiniyam if no annual letting value was determined for the imposition of property tax under the Act. There is thus a distinction between general sanitary cess on the one hand and drainage tax and lightning rate on the other. The basis for computing these taxes is given in the byt'.~laws but the bye-laws become' effective only on their publication in the Gazette. Thus before the bye-laws Qecame effective the - resolutions of the Corporation/Administrator held the field. - We may now examine the provisions of the Act and the Adhiniyam of · 1964.

As we have noticed earlier that for sometime the properties within the Corporation and the Municipalities areas were subjected to property tax by two authorities namefythe~llnicipal Corporation and the State Government simultaneously but the power of the Municipalities was taken away iii view of D enactinent of Section 36 of the Adhiniyam. The power of the Corporation was restored only w.e.f. 1.4.1976. The property tax w~ the main tax which was being recovered by the Municipal Corporation and the Mµnicipalitics and for collection of prope~y tax the Municipalities and the Corporations were preparing annual letting value of the properties . .But when the power of the Munici- , palities and the Corporation wiis taken away -in view of Section 36 of the Adhiniyam, the Corporation was not maintaining any list of annual letting value determined under the Act. Section 132 of the Madhya Pradesh Municipal Corporation Act, 1956 enumerates the taxes which can be imposed by a Municipal Corporation.

The -F Section, in so far as relevant for purposes of this case, reads as follows: "Sec. 132. Taxes to be imposed under this Act. ·(a) a tax payable by the owners 9f buildings lailds situated within the city with reference to the gross annualletting value of the building - G or land called the property tax; - xxx xxx xxx a general sanitary cess for the constructlon and maintenance of public latrines and for removal and disposal of refuse; 20 [1991] SUPP. 3 S. C.R. ( d) a water rate; provided that the water tax shall be levied only in respect of the premises~ (a) to which the private water-supply is furnished from, or which arc connected by means of commm:1ication pipes with any Municipal or Government water works; or (b) which are situated in a portion of the city in which the Commissioner has given the public notice' that the Coij>oration has arranged to supply water from Municipal .and Government waterworks by means of private water connections or'jmblic.stand-pots, fountains or by any other means. -(2)

In addition to the taxes mentioned in sub-section (1) the Corporation, may; for the purposes of this Act, impose any of the following taxes, namely : xxx xxx ·xxx a lighting rate where the lighting of public streets, places and buildings is undertaken by the Corporation : xxx xxx .xxx a dtainage tiix, where a syst~~ o(drafn~ge has been introduced; xxx xxx . xxx (3) Subject to the provisions of Article 277 of the Constitution of India any tax which immediately before the commencement of the Madhya Pradesh Municipal Corporation Law (Extension) Act, 1960 (13 of 1960) was being lawfully levied by the Corporation may, notwithstanding that such tax is not specifie4 in sub-section (1) or (2), continue to be levi~d by the Corporation. (4) The imposition of any tax under this section shall be subject to the provisions of the Act and of any othei enactment for the time being in force .. MUNICIPAL CORPN. v. CO-OPT. HOUSING SOCIETY [YOGESHW AR DAY AI~).] 21 (5)

The Municipal taxes shall be assessed and levied in accordance with thy provisions of this Act and the rules and bye-laws made thereunder : (6) The Government may, by notification in the Gazette, prescribe such maximum and minimum limits with respect to the amount or ' to the rate or both as may be specified in such notification within which the Corporation may impose taxes mentioned in sub-sections (1) and (2). A perusal of the section quoted above would show that the taxes mentioned in sub-section (1) are obligatory. In other words, the Corporation must impose these taxes. General sanitary tax and water rate fall under this category. The taxes mentioned in sub-section (2) are not obligatory but they can also be imposed by the Corporation; lighting rate and drainage tax come under this cla5s.

Apart from the taxes which can be imposed under sub-sections (1) and (2), the Corporation can continue to levy any tax not mentioned therein which immediately before the commencement of the M.P.Municipal Corporation Law (Extension) Act, 1960 was being lawfully levied by the Corporation. The taxes as provided in sub-section (5) arc to be assessed and levied in accordance with the provisions of the Act and the rules land bye-laws made thereunder. Sub-section (6) authorities the Government to prescribe maximum and minimum limits of the taxes. , 3. The procedure for imposition of taxes is contained in section 133 which reads as follows : Sec: 133 Procedure for imposing tax - (l) The Corporation may at a special meeting bring forward ·a resolution to propose the imposition of any tax under section 132 defining the class of persons or description of property proposed to be taxed~ the amount or rate of tax to be imposed and the system of assessment to be adopted.

Provided that no such resolution shall be passed by the Corporation for the imposition of any tax corning under clause (o) of subsection (2) of section 132 unless the Government shall have first given their approval to the selection of the tax by the Corporation: (2) Such resolution shall be published in the Gazette and in such · other manner as may be prescribed by bye-laws. Any perso1i 22 SUPREME. COURT ~EPORTS . [1991] ·SUPP. 3. S. C. R. residing· within the city and objecting lO. the proposed tax may, within thirty 9ays from the publication of the resolution in the Gazette, submit his objection in writing to the Corporation and the Corporation shall at a special meeting talce his objection into consideration. (2-A) If the Corporation decides to amend its proposals or any of · them it shall publish amended proposals, along :with ·a notice indicating that they are iri modification of those previously pul>- lished for objections. (2-B).

Ariy objections which may J:>e received to .the ainended , proposals within thirty days shall be dealt with in the manner prescribed in sub-section (2cA). (2-C) Tile Corporation · sha}l publish . its final·. proposals in • the. Gazette., and the tax shall then come. into force on such date as lllay · be specified iii that notification. (3) A notification of the imposition of a tax under this section . shall ~ conclusiv.e evidence that the. i.ax has j)een impos~d in accordance with the provisions of this Act · ( 4) Nothing contained in this section shall apply . to. tax mentioned in clause (a) of sub-section (1) of se~tion .132 which shall be charged and levied in accordance with s~tio~ 135." Briefly stated, the first step is Pl;l.ssing of a resolution .defining the class of persons, description of property proposed to be taxed, the amounts or rate of tax to be imposed and. tl1e system of ass~ssment. to be adopted. The resolution is published in the Government.

Gazette for inviting' objecti0ns. Objections filed within thirty days are cof!sidered by the Corporation. The Corporation then publishes its final propos~s and the tax· comes into, force on the date as· may be specified in the notification. The notification of the imposition of tax is conclusive evidence that the tax has b~en .imposed in accordance with the provisions of the Act. , Property tax is one of the taxes which the. Corporation can impose (sec section 132 (l)(a)). The imposition of this tax is regulated by sections 135 to 159. The rate of property tax is relatable to annual value which is defined in · section 138. The preparation of assessment list is covered by seetions 143 to 153. It is als9 clear from the provisions of section 133 thai the Coryoration may MUNICIPAL CORPN. v. CO-OPT. HOUSING SOCIETY [YOGESHWAR DAYAL, J.] 23 by special meeting bring forward resolutions about the system of assessment A to be adopted.

The bye-laws are framed under section427 of the Ac.t and Section.431 provides that all bye-laws shall be published in the Gazette. The effect of these provisions is that the bye-laws become part of the Act Thus the Corporation while providing the system of assessment for various taxes can propose a basis but after the bye-laws provided the system of assessment, the Corporation has . to abide by that system of assessment. So far as the drainage t:aX is concerned, there were no bye~laws till 12.2. 1976. The resolutions of the Corporation could thus hold the field by providing a method of assessment till 12.2.1976. Similarly, the resolution in relation to general-sanitary cess could also hold the field till the publication of bye~laws in relation thereto on 9.1.1976 and similarly for lighting rate till the publication of bye-laws in relatiori thereto on 24.5.1974.

But the resolutions if they come in conflict with the method of assessment then the resolution w.e.f. from which date the bye-laws come into force, will become illegal and ineffective. · So far as the general sanitary cess is concerned, the resolutions of the Corporation provide only one method namely to assess it in accordance with the annual letting value of the property tax· provided under the Act. The option, however, was available to ·the Corporation in relation to drainage tax and lighting rate. The Corporation could in view of the resolution follow the option of Working out these taxes Ort the basis of annual Jetting value prepared under the Adhiniyam. Therefore, so (ar as drainage tax is concerned, it could continue · such basis till 12.2.1976 and as far as the· lighting rate is concerned till 24.5.1974. After 24.5.1974; in relation to lighting rate, determination of it on· the basis of annual letting value prepared under the Adhiniyam will become bad.

Therefore, dealing with the matter further we may notice another change which was brought about w.e.f. 1.4.1976. With effect from 1.4J976 section 143 was added to the Act which provides as under :- Section. 143. Assessment of annual value and duration of assessment (1) The annual value of any land or building situate within the city as determined under the Madhya Pradesh Nagariya Sthawar Sampatti Kar Adhiniyam, 1964 (No. 14 of 1964) or the rules made · thereunder, and in force for the purpose of that Act immediately before the 1st day·of April; 1976 shallbe deemed to be the annual value for the assessment of property tax on such land ot building · H 24 [1991] SUPP. j s. C ..

R: under this Act. until such time as the Commissioner makes a fresh valuation and determines annual value under this Act of the land and buildings therein and the annual value .of such land or buildings shall remain unchanged for a period of one year and may be revised thereafter by the Commissioner at the termination of successive period of .one year.· (2) The Commissioner may, instead of making a new assessment every year, adopt the existing assessment, with such alteration as _he thinks fit, as the assessments for each new year, giving to persons affected by such alterations the same notice of the altered valuation and assessment as would have been .required if a new asses.sment had been prepared. (3)

The Commissioner shall arrange for a survey for the purpose of assessment of each part of the city at least once in five yeais save for the omission, with the previous consent of the Standing Committee, of any small areas which might be more conveniently . re-assessed in a s_ubsequent year." By its very wording Section 143 is prospective and it m~es that the annual value of the building as under the Adhiniyam to be deemed to be the annual value for the assessment of property tax or land or building under the . Act Until such time as . the. Commissioner makes a fresh valuation and prepares annual value specifically under the Act and sub-section (2) thereof gives power to the Commissioner to adopt the existing value of such land after following the procedure.

The effect of enactment of Section 143 of the Act. w.e.f.1.4.1976 is that from such date the Cori>oration could legitimately adopt the annual value prepared under the Adhiniyam as the basis for determination : of the aforesaid three taxes. Until a new list is prep~ed, the annual value so adopted by Section 143 · is deemed to be the annual value under the Act. The annual value so enforced ior the .purpose of assessment of property tax under the Act cciulci also be use.:. for assessment of drainage tax, lighting rate and general sanitary cess.

We have already mentioned earlier that so far as drainage tax and lighting rate are concerned, their assessment could be.made by the Corporation on the basis of the annual value fixed under the Adhiniyam in view cif the resolutions passed by the Corporation and the orders made by the Administrator till the bye-laws came into effect in relation thereto and in vi~ of Sectioi:i 143 there is again no difficulty in assessing general sanitary cess on the basis of annual value adopted by Section 143 for the period from 1st April, 1976 onwards. I L~_ r MUNICIPAL CORPN. v. CO-OPT. HOUSING SOCIETY [YOGESHW AR DAYAL, J.] 25 We may now deal with the decision of the division bench in relation to·· A the imposition of water rate known as "graduated flat rate"_ the tax ·known by this name is in reality water rate imposed by the Corporation. The Corporation supplies water in the corporation limits. The Corporation was earlier a Municipality governed by the Indore Municipal Act (Act No.4 of 1909).

Section 21 {x) of this Act authorised the Municipality to impose water rate (where water is supplied by. the Municipality). The water rate was imposed under the provisions of .the Indore Municipal Act. There were separate rates for houses in which water connection was taken with meters or without meters and · different rates for those houses where no water connection· was at all taken.The water rate for houses where no water connection was taken imposed on the theory that the house owners must be taking water from some public tap or stand pot or fountain provided by the Municipality. The water rate imposed on houses where there is no wa.ter connection is known as ''graduated flat rate" That rate is revised from time tO time. It was last revised by the Indore Municipality by a Notification dated 22nd December, 1940. The graduated flat rate in this Notification is on the basis of rental value of the houses.

The graduated flat rate at the aforesaid revised rate continued to be in force even after the enforcement.of the Act and the Constitution of Indore Municipality as a Corporation under this Act. The challenge before the High Court to the assessment of graduated flat rate was with thnevision of graduated flat rate by the Administrator's order dated 18th May 1973 passed under Section 162 of the ' Act· The petitioners had filed 'objections to the bill in relation to graduated flat rate (annexure-S to the S.L.P.) which was sent under postal certificate. It may be noticed that the graduated flat rate is now related to the area: of the building and not to the rental value. The argument before the High Court was that it was not open to the Corporation to exercise the power or revision . of tax under section 162(2) as this was not a tax covered under sub-section (1) or (2) of Section 132 ·or the Act.

It was admitted before the High Court that before a notification for revising the rate was issued the sanction of the Government had been obtained. However, it is clear that the graduated flat rate is covered by the provisions of Section 132(1)(d) and the water tax is leviable in respect of the premises. It is clear from clause (d) of sub-section (1) of Section 132 that water tax could be levied in respect of premises not only where premises are connected by means of municipal pipes or Government water pots but where the premises were situated in a portion of the city in which the Commissioner has given public notice that the Corporation has arranged to supply water from municipal or Government pots by means of providing water connection or public stand-pots, fountains or by any other means. No objection was raised before the Commissioner, Municipal Corporation of Indore that for godowns no water rate could be charged and that they were not subject to water 26 (1991) SUPP. 3 S. C.R. A . rate for the purposes of Indore Municipal Act. ·But so far as the Act is concerned, .water rate is leviable lo the premises without distinction lo the nature of th.e premises or their user.

Before us an argument was put forward that since the premises arc made godowns no water supply is provided. We are afraid that what clause (d) of subsection (1) of Section 132 talks aboutis not in relation lo any house, building or godowns but refers to expression "premises". The premises is _a very wide word and includes building~ of all types whether residential, commercial or factory etc. etc. Merely because the premises are godowns, it cannot be urged that the water rate or graduated flat rate could not be imposed. We are also of the view that it is not fair again to permit the petitioner to urge that the water rate is not applicable to the premises in dispute as no such objection was also taken. either in the objection petition before the Commissioner referred to earlier, or in the writ petition before the High Court nor in the Special Leave Petition. The result of the above discussion is that C.A. 2378 ofl980 and Civil Appealarising out of S.L.P. (C) No. 10376 of 1981 i.n relation to drainage tax, general sanitary cess and water rate are dismissed.

However, in relation to the bill regarding lighting ~ate impugned in the judgment of the division bench, it is held to be partly illegal and unenforceable for the period from 24.5.1974 to . 31.3. 1976 as basis of assessment was contrary to th~ relevant Indore Municipal Lighting Rate (Assessment, Collection & Refund) Bye-laws, 1974. But the demand for lighting rate after 1.4.1976 is valid and to that extent, in relation to lighting rate, the impugned order of the division bench is confirmed to the aforesaid extent. In regard to C.A.2377 of 1980 where the bill dated 26th October, 1971 and the demand notice dated 14th August, 1973 in relation to lighting rate and drainage tax are only challenged, the impugned judgment of the High Court is set aside and the appeal is allowed. Parties are, however, left to bear their own costs. T.N.A. Appeals disposed of.