Case: Gulabchand Bapalal Modi Vs. Municipal Corporation Of Ahmedabad City

The appellant, as also certain other rate payers, challenged the said bills and notices in their said writ petitions mainly on the grounds : (1) that the Corporation and no authority to amend the rates with the object of including the said U.I. P. tax in the general tax so far levied by the Government under a different statute and given up by it under the said arrangement; (2) that the said bills and notices were illegal as thekept by the Corporation was not in accordance with the rules made under the Act and was not authenticated by the Commissioner as required there under; (3) that Sections 99, 123 and 129 (c) of the Act were unconstitutional in that they suffered from the vice of excessive delegation in so far as they did not fix the maximum rate at which the Corporation could levy the property tax and (4) that the said sections were also violative of Article 19(1)(f) and Article 31 as the tax was confiscatory in character.4. By its judgment, dated May 5, 1966, the High Court first disposed ofout of the said seventy writ petitions rejecting the contentions raised therein. Thereafter the judgment under review separately disposed of the remaining eighteen petitions, including that of the appellant, as, besides the points raised in the saidwrit petitioner, these eighteen writ petitions raised some additional points. The High Court in this judgment did not deal afresh the points already disposed of by it in the larger group of writ petitions and based its judgment in respect of them on its earlier judgment, dated May 5, 1966.5. In its judgment, dated May 5, 1955, the High Court elaborately examined the scheme and the objects of the Act and the rules and came to the followingthat the Corporation need not maintain separatefor each of the wards and could legally maintain onecovering all the words;(2) that the authentication provided for by Rule 19 of the said rules in Chapter VIII to Schedule A of the Act was not mandatory;(3) that the liability to pay the tax arose when entry under Rule 9 (e) was made in theand(4) that Section 129(c), read with Sections 99 and 127 did not suffer from the vice of excessive delegation as the Legislature had provided in the Act both its policy and principles guiding the Corporation in levying the said tax.The High Court also negatived the contention that under Section 129(c) by giving power to tax without laying down the maximum rate was violative of Article 19(1)(f) and/or Article 31 or Article 14. The High Court also rejected the additional contention raised in the petitions left over from the earlier batch ofpetitions and dismissed all of them. The correctness of the views expressed by the High Court in this judgment, as also in its earlier judgment by the combined effect of which altogether seventy writ petitions were negatived, is challenged in this appeal.

Reasoning: Mr. Iyengar gave up the third contention. We are. Therefore, left with his contentions (1) and (2) only foralready stated, Section 127(1) expressly provides that taxes can be levied only for the purposes of the Act. They cannot thus be raised for any functions other than the one provided by the Act. Section 82 requires all monies received by the Corporation under the Act to be credited to the Municipal Fund held by the Corporation in trust for the purposes of the Act. By reason of Section 86, no payment can be made out of the Municipal Fund unless it is covered by the current budget grant. Furthermore, Section 88 lays down that the moneys credited in the Municipal Fund shall be applied in payment of sums, charges and costs necessary for carrying the Act into effect, or payment directed or sanctioned by or under the Act. Section 89 restricts expenditure by the Corporation within the city except when provided by the Act or by a resolution by not less than half of total number of councilors. Under Section 95, the Commissioner is required annually to lay before the Standing Committee estimates of income and expenditure, and under Section 96, the Standing Committee has to prepare budget estimate A "having regard to all the requirements of this Act". The budget estimate then has to be laid before and passed by the Corporation. Similar provisions are made in Sections 97 and 98 for budget estimate B prepared by the Transport Manager. It is after all this has been done that the Corporation under Section 99 determines, on or before the 20th of February of each year, the rates at which property taxes under Section 127(1), but subject to the limitations and conditions laid down in Chapter XI, are to be levied for the next ensuing official year. Under Section 100, the Corporation either sends back the budget estimates A or B for further consideration, or adopts them with such alterations as it deems expedient. The conditions and limitations subject to which the Corporation can fix, under Section 99, the rates at which the property taxes are to be levied are those provided in Section 127(3) and (4), i.e., they can be assessed and levied in accordance with the provisions of the Act and the rules. These provisions clearly show that the ultimate control, both for raising the taxes and incurring expenditure, lies with the councillors chosen by and responsible to the people.16. As aforesaid, the assessment and levy of the property taxes have to be in conformity with the Act and the rule. These rules contain inter alia Taxation Rules, which are part of the Act. Section 454, no doubt, empowers the Corporation to amend, alter and add to those rules, but such power is made under Section 455 subject to the sanction of the State Government. Under Section 456, the State Government can at any time require the Corporation to make rules under Section 454 in respect of any purpose or matter specified in Section 457, which includes item "(7) Municipal Taxes(a) The assessment and recovery of municipal taxes". Thus, although the Act does not prescribe the maximum rate at which the property taxes can be raised, the ultimate control for raising them is with the councillors responsible to the people. It is difficult, therefore, to sustain the plea that the power to levy the property tax is so unbridled as to make it possible for the corporation to levy it in an arbitrary manner orthe majority view in this decision, which is binding on us, shows that the mere fact that an Act delegation taxing power refrains from providing a maximum rate does not by itself render the delegation invalid.In the Municipal Corporation of Delhi v. Birla Mills, (1968 (3) SCR 251.)   the question as to the limits of delegation of taxing power once more arose.The Delhi Municipal Corporation Act, 1957, like the present Act, entrusted to the Delhi Corporation two kinds of functions, compulsory and optional. In relation to the former, the Act specified the maximum rate of tax the Corporation could raise, but not so in the case of tax relating to or for implementing the optional functions. The controversy was whether the Act contained provisions furnishing guidance to the Corporation in the exercise of the power to tax. After an analysis of the provisions of the Act, Wanchoo, C.J., pointed out the following factors which furnished sufficient guidance preventing the delegation becoming invalid(1) that the delegation was to an elected body responsible to the people, including those who pay taxes and to whom the councillors have every four years to turn to for being elected;(2) that the limits of taxation were to be found in the purposes of the Act for the implementation of which alone taxes could be raised and though this factor was not conclusive, it was nonetheless relevant and must be taken into account with other relevant factors;(3) that the impugned Section 150 itself contained a provision which required that the maximum rate fixed by the Corporation should have the approval of the Government;(4) that the Act contained provisions which required adoption of budget estimates by the Corporation annually; and(5) that there was a check by the courts of law where the power of taxation in used unreasonably or inor breach of the provisions and objections of the Act.From the provisions of the present Act, cited earlier, it will be seen that though factor (3) of the factors relied on by Wanchoo, C.J., is absent in Section 127, the rest are present. It is impossible to say that when a provisions requiring sanction of the Government to the maximum rate fixed by the Corporation is absent, the rest of the factors which exist in the Act loose their efficacy and cease to be guidelines. Furthermore, if the Corporation were to misuse the flexibility of the power given to it in fixing the rates, the State Legislature can at any moment withdraw that flexibility by fixing the maximum limit up to which the Corporation can tax. Indeed, the State Legislature has now done so by Section 4 of Gujarat Act 8 of 1968. In view of the decisions cited above it is not possible for us to agree with counsels contention that the Act confers on the Corporation such arbitrary and uncontrolled power as to render such conferment an excessive delegation.From the scheme of Rules 9 to 21, it is clear that the Commissioner first enters in theprescribed by Rule 9 the particulars set out in clauses (a) to (d) of that rule. Having done this, he proceeds to enter in thethe amount at which each building or land is assessed. He can do this under clause (e) naturally after (i) the rates of property taxes are fixed by the Corporation, (ii) the period fixed by public notice under Rule 13 and for the receipt of complaint under Rule 15 against rateable values entered under clause (b) has expired, and (iii) after such complaints, if any, have been disposed of.29. On a plain meaning of the language in Rule 10 the Commissioner has the option to maintain either oneook separately for each ward. But even if he were to do so, such wardwould collectively constitute "theConfronted with this difficulty, the High Court construed the rules to mean that Rule 10 was discretionary and not mandatory, but that Rules 13, 15 and 19 apply only when wardare kept, and that when they are read together, they show that the scheme was that where wardare prepared the Legislature intended to invest each of such books with a finality and did not intend that the question as to rateable value or the amount of tax should remain hanging fire until all the wardwere prepared. As regards Rule 19, the High Court held that "if a singleis prepared, then the amounts of tax entered in thewill not be conclusive evidence".32. Such a conclusion means that Rule 19, as also Rules 13 and 15 would apply only to wardand therefore, there would be no authentication and certification where oneis kept and entries in such a singlewould not be conclusive evidence as regards the quantum of tax entered in it under clause (e) of Rule 9. But once it is held that Rule 10 is discretionary and the Commissioner can maintain oneor several wardas the High Court has done, it is hardly possible that the Legislature which gave such an option could have intended that Rule 19 should apply only to wardand not where oneis kept and deprive the Corporation of the benefit of entries in it being treated as conclusive evidence.33. It is true that a genuine difficulty arises in construing these rules as a result of the use of the expression "wardin Rules 13, 15 and 19, and the use of the expressionin the rest of the rules. At the same time acceptance of the appellants contention or the interpretation by the High Court would crate difficulties. The contention that Rule 10 should be construed as mandatory ignores : (1) the permissive language of the rule, and (2) the deliberate department made by the Legislature from Section 157 of the Bombay Corporation Act. If it intended thatfor each ward should be kept, there was no necessity for it to depart from the language of Section 157 of that Act. The fact that it made such a departure is a sure indication that it did not. Unless compelled by the context and the content of the other rules, there would be no justification not be give to Rule 10 the plain meaning of its language, particularly in view of the fact that the Act is intended to apply not to one but to an indefinite number of cities, each differing in conditions from the other, a factor which, as aforesaid, let the Legislature to make a departure from the said Section 157.34. But a far more serious difficulty would arise if the conclusion reached by the High Court were to be accepted. If Rule 19 were to be interpreted as applying to wardand not where oneis kept, Rules 13 and 15 must also on the same reasoning be construed in the same way. The Legislature could not have intended that the entry under clause (e) of Rule 9, as regards the quantum of property tax leviable on each building and land, would became conclusive evidence only where wardare kept and notok is kept. Clause (e) of Rule 9 requires the Commissioner to enter in thethe amount at which each building is assessed to each of the property taxes. The object of authentication under Rule 19 is to make such entry conclusive evidence of the amount being leviable on each such building and land for the particular official year. It is the amount of tax entered under clause (e) of Rule 9 to which is given the attribute of conclusive evidence, so that the Corporation can thenceforth proceed to issue bills for those amounts and serve demand notices. Thecannot object to such bills and notices on the ground that the amounts therein set out are not correct by reason of some error or such similar reason. Rule 19 confers conclusiveness only to that extent and not to the rateable value or the tax fixed or charged, as both are subject to an appeal under Section 406. Rule 19, therefore, was intended to enable the Corporation to proceed to make demands so soon as entries are made as provided by clause (e) of Rule 9 and the Commissioner has given thereafter his authentication that there exists no valid objection to the rateable value entered under the said clause (e). Since the object of Rule 19 is to make the entry as to the amount of tax conclusive evidence so as to enable the Commissioner to issue the bills, the Legislature could not have intended to apply the rule only when wardare kept and notok is maintained, especially when in Rule 10 it has deliberately given discretion to the Commissioner to maintain either oneWe are in agreement with the High Court that the liability to pay the tax arises under Rule 30 and Rule 9 (e) and is not dependent on authentication, which, as aforesaid, is intended for a limited purpose. But that does not mean that the provision as to authentication applies only when wardare kept, or that Rule 19 does not apply where oneis prepared. If Rule 19 were to be so construed, Rules 13 and 15 also would have on the same reasoning to be likewise construed. That would mean that the notice to enable the rate payers to take inspection under Rule 13 and the notice under Rule 15 fixing the date on or before which complaints against rateable value can be made, would have to be given only where wardare kept and notSince, for the reasons given earlier, Rule 10 has to be construed as permissive and not mandatory, and the construction adopted by the High Court in regard to Rules 13, 15 and 19 is bound to create anomalies pointed out above, the conclusion we must reach is that it was through inadvertence that the old language used in Sections 157 to 168 of the Bombay Corporation Act was allowed to be retained without carrying out the change of language necessitated as a result of Rule 10 giving discretion to the Commissioner either to maintain one book or several books