Municipal Corpn.Of Greater Mumbai vs Harish Lamba Of Bombay, Indian ...

2. The appellant is a corporate body constituted under the provisions of the Mumbai Municipal Corporation Act, 1888 (for short, “1888 Act” or “the Act”) and respondent No.1 is a sole proprietor in the business, which was carried on by him in the name and style of Volga Frozen Foods and Ice Cream Company, hereinafter referred to as the “said firm”. The stated business was located at Volga House, 1­C, K.K. Marg, Mahalaxmi, Bombay­400034, hereinafter referred to as the “said premises”. The respondent No.2 is the landlord of respondent No.1 in respect of the said premises. The respondent No.3 is the tenant of respondent No.2 in respect of the remainder area of the said building other than the area in possession of respondent No.1. The respondent No.1’s firm required 10 lakh gallons of water for its frozen food and ice cream business, which was being supplied by the appellant (under the fixed quota of 10 lakh gallons of water) till October, 1983. On 29th October, 1983, an illegal strike call was given by the workmen in the factory of respondent No.1, due to which the production work in the factory was suspended by the 3 management. Therefore, the respondent No.1 wrote to the appellant on 2nd February, 1987 and 15th October, 1987, requesting to discontinue the water quota allotted and then charge them on actual consumption basis, as they did not require the large quantity of water any more due to shut down of the production. Besides, a new water meter came to be installed on 15th October, 1987. Later on, the appellant informed respondent No.1 vide letter dated 27 th January, 1992, that his water connection will be cut off as requested by the company. That was finally done on 25 th October, 1993. Since then, respondent No.1 is dependent on water supply by private water tankers.

3. Accordingly, respondent No.1 wrote to the appellant vide letter dated 10th December, 1993 that since the water connection to the premises has been disrupted/cut off by the Water Department and he having paid all the dues until then amounting to Rs.46,794/­ (Rupees Forty Six Thousand Seven Hundred Ninety Four Only), the appellant ought to install a new water meter. Upon receipt of this communication, the appellant demanded a deposit of Rs.72,000/­ (Rupees Seventy 4 Two Thousand Only) for processing the request for a new water meter. However, respondent No.1 did not pay the said amount on the ground of financial crisis because of closure of the factory. The respondent No.1 in turn requested the appellant to accept the deposit amount in installments of Rs.5,000/­ (Rupees Five Thousand Only), which request was declined by the appellant. Therefore, there was no water connection/meter in the premises of respondent No.1 since 25th October, 1993.

4. The appellant thereafter in 1997 started raising bills for the period from 1st October, 1993 including towards water benefit tax in respect of the subject premises. In January, 1997, seven bills of water tax and water benefit tax were raised in respect of the said building (for the period from 1 st October, 1993 to 30th September, 1998) aggregating to Rs.10,60,312/­ (Rupees Ten Lakh Sixty Thousand Three Hundred Twelve Only). The respondent No.3 paid his share of the bill in protest but respondent No.1, on advice, refused to pay his prorata share of the bill.

5. Resultantly, on 5th August, 1998, the appellant issued Warrant of Attachment and levied an attachment upon the said premises and building for the arrears of stated tax being property tax amounting to Rs.9,11,708/­ (Rupees Nine Lakh Eleven Thousand Seven Hundred Eight Only) and further penalty of Rs.1,48,503/­ (Rupees One Lakh Forty Eight Thousand Five Hundred Three Only). Thus, the aggregate demand was for Rs.10,60,312/­(Rupees Ten Lakh Sixty Thousand Three Hundred Twelve Only), against respondent No.1. Further, vide letter dated 18 th November, 1999, issued by the Legal Department of the appellant, respondents were informed that if the arrears of taxes were not paid, the appellant would proceed to advertise the public auction relating to premises occupied by respondent No.1.

6. Being aggrieved, respondent No.1 filed Writ Petition No.1206 of 1999 before the High Court of Judicature at Bombay to quash/set aside the bills and demand raised by the appellant and the Warrant of Attachment dated 5 th August, 1998 for recovery of the amount. The High Court was pleased to quash and set aside the bills/demands along with the 6 Warrant of Attachment dated 5th August, 1998, vide impugned order dated 21st November, 2006. For that, the High Court relied upon the judgment of this Court in Municipal Corporation of Greater Bombay Vs. M/s. Nagpal Printing Mills and Another1. The High Court held that the corporation can levy charge only in respect of water supplied to and consumed by the consumer and to be levied on the basis of measurement or estimated measurement. It concluded that as, admittedly, supply of water to the premises was stopped from 25th October, 1993, there was no consumption by the respondents and hence they were not liable for any water charge or tax, as the case may be.

“Provided that, the Corporation shall not levy property tax leviable under this clause, on residential buildings or residential tenements, having carpet area of 46.45 sq. meter (500 sq. feet) or less.

That is not the case over here. All that the respondents have done is to merely make demands for charges which had become due prior to issuance of the bills. That cannot be said to be levying of tax with retrospective effect. The first contention must therefore, be rejected.”

27. The next question is: whether the respondents should be called upon to pay statutory interest on the delayed payment of principal amount stated in the impugned demand notices. We find merits in the submission of the respondents that they be relieved from the liability to pay statutory interest for the period spent by them in pursuing the proceedings in good faith before the High Court and thereafter before this Court. Inasmuch as, time so spent is not attributable to the inaction or neglect of respondents in making payment; moreso because of the interim orders operating in favour of the respondents during the pendency of writ petition before the High Court and also because the impugned demand notices were set aside by the High Court. As the said notices will be revived in terms of this order, therefore, the respondents are entitled to an 30 equitable arrangement to meet the ends of justice. Somewhat similar situation has been dealt with in State of Rajasthan and Another Vs. J.K. Synthetics Limited and Another6 and Kanoria Chemicals and Industries Ltd. and Others Vs. U.P. State Electricity Board and Others7. Applying the principle underlying these decisions, we deem it appropriate to quantify the interest component at the rate of 18% per annum on the outstanding principal tax amount or the statutory interest as may have been prescribed under the extant Regulations, whichever is less, for the period during the pendency of writ petition and the present appeal, as the case may be. For rest of the default period, from the date of demand notices until payment of the outstanding amount mentioned therein, the respondents shall be liable to pay interest at the rate as prescribed in the extant Regulations applicable in that regard. This would meet the ends of justice.

30. The appeal is allowed in the aforementioned terms. Impugned judgment of the High Court is set aside. No order as to costs.

31. All pending applications are also disposed of in the above terms.

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J (A.M. Khanwilkar) ……………………………..

J (Ajay Rastogi) New Delhi;

October 22, 2019.