Case: Western Coalfields Limited Vs. Special Area Development Authority, Korba and Another

Respondent 1 is the Special Area Development Authority, Korba, District Bilaspur, M.P., respondent 2 is its Chairman and respondent 3 is the State of Madhya Pradesh. Since the three appeals raise similar questions, we will refer to the facts of Civil Appeal No. 213 of 1979 only. Civil Appeals Nos. 1025 and 1026 of 1978 are by Western Coalfields LtdThe appellant, Bharat Aluminium Company Ltd., is a Government Company incorporated underthe Companies Act, 1956, the entire share capital being owned by the Government of India. Respondent 1, the Special Area Development Authority for the Korba Special Area, is con stituted under section 65 of the Madhya Pradesh Nagar Tatha Gram Nivesh Adhiniyam (23 of 1973), referred to hereinafter as the Act of 1973. That Act was passed by the Madhya Pradesh Legislature in order "to make provision for planning a nd development and use of land; to make better provision for the preparation of development plans and zoning plans with a view to ensuring that town planning schemes are made in a proper manner and their execution is made effective; to constitute Town and Country Planning Authority for proper implementation of town and country development plan; to provide for the development and administration of special areas through Special Area Development Authority; to make provision for the compulsory acquisition of land required for the purpose of the development plans and for purposes connected with the matters aforesaid". Chapter VIII of the Act, consisting of sections 64 to 71, is entitled "Special Areas". Section 64 empowers the S tate Government to declare any area as a special area by issuing a notification. Section 55 provides that for every Special Area there shall be a Special Area Development Authority consisting of a Chairman and such other members as the Gove rnment may determine from time to time. The Chairman and the members of the Development Authority are appointed by the Government. Section 68, which prescribes the functions of the Development Authority, lays down by clauses (v) and (vi) that the Development Authority shall make provision for the municipal services and municipal management of the Special Area. Section 69, by clauses (c) and (d), confers upon the Development Authority powers for the purpose of municipal administratio n and for the purpose of taxation. These two clauses of section 69 and clauses (v) and (vi) of section 68 were inserted in their present shape by Ordinance 26 of 1975 which came into force on February 27, 1976. The Ordinance was replaced by the Ma dhya Pradesh Nagar Tatha Gram Nivesh (Sanshodhan) Adhiniyam, 1976 (6 of 1976)Since there was no Municipal Corporation or Municipal Council in the Korba Special Area prior to the constitution of the Development Authority, the Government was required under sub-clause (b) above to direct whether the Madhya Pra desh Municipal Corporation Act, 1956, or the Madhya Pradesh Municipalities Act, 1961, shall apply to the Korba Special Area for the purposes of clauses (v) and (vi) of section 68 and clauses (c) and (d) of section 69. Such a direction was f irst issued by Notification dated January 28, 1976 published in the Government Gazette, dated February 27, 1976 by which the Development Authority, Korba, was directed to exercise the powers and perform the functions of a Class I Municipality constitut ed under the Madhya Pradesh Municipality Act, 1961. This Notification became effective from February 27, 1976 from which date Ordinance No. 26 of 1975 was made effective. By another Notification, dated March 15, 1977, published in Governmen t Gazette, dated July 15, 1977, the Development Authority, Korba, was directed under the aforesaid clauses of sections 68 and 69 to exercise the powers and perform the functions under the Madhya Pradesh Municipal Corporation Act, 1956.Section 127(1)(i) of the Madhya Pradesh Municipalities Act, 1961 empowers a municipal council to impose, in the whole or any part of the municipality, "a tax payable by the owners of houses, buildings or lands situated within the limits of Muni cipality with reference to a nnual letting value of the house, building or land called property tax". The corresponding provision in the Madhya Pradesh Municipal Corporation Act, 1956 is section 132 (1)(a). It says that"the Corporation shall impose a tax payable by the owners of buildings or lands situated within the city with reference to the gross annual letting value of the building or land called the property tax".The procedure for imposition of taxes is contained in section 129 of t he Municipalities Act and section 133 of the Municipal Corporation ActIn 1964, the Madhya Pradesh State Legislature had enacted the Madhya Pradesh Nagariya Sthawar Sampatti Kar Adhiniyam, which was made applicable to the whole State, i ncluding the urban areas. By section 36 of the aforesaid Adhiniyam, local authorities were prohibited from recovering the property tax from November 24, 1970Towards the beginning of 1976, the Government decided to abolish octroi tax and to impose in its place a tax on the entry of goods. To compensate the municipal councils and the municipal corporations for the loss arising from the abolition of the octroi tax, the Government decided to confer powers on these bodies for levying property tax. For conferring powers to levy tax on the entry of goods in place of octroi tax, the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhyadesh, 1976 (6 of 1976) was promulgated. For conferring powers to levy property tax, Ordinance No. 4 of 1976 was promulgated. Both of these Ordinances were published in the Madhya Pradesh Gazette, dated April 30, 1976 from which date they came into force. Ordinance No. 4 of 1976 inserted certain provisions in the Municipalities Act an d the Municipal Corporation Act. This ordinance was replaced by Act No. 50 of 1976. By section 1(2) of that Act, the provisions inserted in the Municipalities Act and the Municipal Corporation Act, with which we are concerned, were deemed to have co me into force with effect from April 1, 1976. Section 127A which was inserted in the Municipalities Act for imposition of property tax reads as follows, in so far as relevant:"127A. (1) Notwithstanding anything contained in this cha pter, as and from the financial year 1976-77, there shall be charged, levied and paid for each financial year a tax on the lands or buildings or both situate in a municipality other than class IV municipality at the rate specified in the table below:(i) where the a nnual letting 6 per centumbut does not exceed letting valueRs. 6, 000(ii) X X X X X X(iii)X X X X X X(iv) X X X X X X(v) where the a nnual letting 20 per centumvalue exceeds of the annualRs. 24, 000 letting value(2) The property tax levied under sub-section (1) shall not be leviable in respect of the following properties, namely:(a) building and lands owned by or vesting in(i) the Union Government;(ii) the State Government;Similar provisions were inserted in sections 135 and 136 of the Municipal Corporation ActOn June 24, 1976, respondent 1 (the Special Area Development Authority, Korba) entered into an agreement with the appellant Company under which the Company agreed to contribute a sum of Rupees three lakhs a nnually to the "seed capital" of the Authority in consideration of the Authority agreeing not to exercise its power of taxation or of levying any other charges on the assets and activities of the Company under the Act of 1973 as amended from time to time or under any other Act or no tification. The agreement was to remain in force for a period of ten years beginning from the calendar year 1976 and the a nnual payments due from 1977 were to be made in January every year. The appellant Company paid the contribution for the year 19 76 as agreed. In the same year, the Company was called upon by the Sales Tax authorities to pay the tax on entry of goods which was introduced in substitution of the octroi tax. While the Company was pursuing that matter with the State Gov ernment, contending that it was not liable to pay the entry tax by reason of the aforesaid agreement, on January 4, 1977 respondent 1 made a further demand of Rs. 3 lakhs on the Company for contribution for the year 1977. That amount not hav ing been paid as provided in the agreement, respondent 1 terminated the agreement by its letter dated February 4, 1977. The Company sent a cheque for Rs. 3 lakhs to respondent 1 on April, 28, 1977.By a notice issued under section 65 o f the Act of 1973 on February 21, 1977 and by another notice issued under section 164(3) of the Madhya Pradesh Municipalities Act 1961 on April 15, 1977, the Chief Executive Officer of respondent 1 called upon the Company to pay a sum of Rs. 13, 22, 1 60 by way of property tax for the year 1976-77. By a letter dated May 21, 1977 respondent 1 reduced the demand by Rs. 3 lakhs being the amount paid by the Company by way of contribution for the year 1977, under the agreement of 1976. On July 16, 1977 t he Company was called upon to pay a further sum of Rs. 13, 65, 673.50 as property tax for the year 1977-78The appellant Company disputed its liability to pay the aforesaid amounts on the grounds, principally, that no tax was leviable on its pro perty since the Company was owned wholly by the Government of India and that respondent 1 was estopped from levying the property tax by reason of the agreement of 1976. Having failed to persuade respondent 1 to accept its point of view, the Compan y filed o Writ Petition in the Madhya Pradesh High Court asking that the demands be quashed. Civil Appeal No. 213 of 1979 by special leave is directed against the dismissal of the Writ PetitionIn the other two appeals (Nos. 1025 and 1026 of 197 8), the appellant, Western Coalfields Ltd., is also a hundred per cent undertaking of the Government of India. That Company has been called upon by respondent 1 to pay property tax for the years 1976-77 and 1977-78 in the sum of Rs. 3, 71, 461 for each year. The Writ Petitions (61 and 62 of 1978) filed by it were dismissed by the High Court, following the judgment delivered in the Writ Petition filed by the Bharat Aluminium Company LtdCivil Misc. Petitions Nos. 13211 of 1979 and 3767 of 1980 are for intervention by the Jammu and Kashmir State Agro Industries Corporation Ltd. and the Delhi Municipal Corporation respectively. The Delhi High Court has held in L.P.A. 105 of 1979 that the Delhi Municipal Corporation has the power to levy property-tax on the property of the Jammu and Kashmir State Agro Industries Corporation Ltd., whose share capital is owned by the State of Jammu and Kashmir and the Union of India in the proportion of 51% and 49% respect ively.

Court's reasoning:
It is well-settled that if an earlier legislation is incorporated into a later legislation, the provisions of earlier law which are incorporated into the later law become a part and parcel of the later law. Therefore, amendments made in the earlier law after the date of incorporation cannot, by their own force, be read into the later law. That is because the legislatu re, which adopts by incorporation the existing provisions of another law, cannot be assumed to intend to bind itself to all future amendments or modifications which may be made in the earlier law. In other words, the incorporating Act does nothing more than borrow certain provisions of an existing Act and instead of setting out, verbatim, those provisions in its own creation, refers to them as a matter of convenience in the mode of draftingFinally, in State of Madhya Pr adesh v. M. V. Narasimhan this Court held, after an examination of the relevant decisions, that the broad principle that where a subsequent Act incorporates provisions of a previous Act then the borrowed provisions become an int egral and independent part of the subsequent Act and are totally unaffected by any repeal or amendment in the previous Act, is subject to four exceptions, one of which is that the principle will not apply to cases "where the subsequent Act and th e previous Act are supplemental to each other".Applying these principles, we are of the opinion that in the instant case, subsequent amendments made to the Municipal Corporation Act and the Municipalities Act will also apply to the power of taxation provided for in section 69(d) of the Act of 1973. The Act of 1973 did not, by section 69(d), incorporate in its true signification any particular provision of the two earlier Acts. It provides that, for the purpose of taxati on, the Special Area Development Authority shall have the powers which a Municipal Corporation or a Municipal Council has under the Madhya Pradesh Municipal Corporation Act, 1956 or the Madhya Pradesh Municipalities Act, 1961. The case there fore is not one of incorporation but of mere reference to the powers conferred by the earlier Acts. As observed in Nathella Sampathu Chetty, there is a distinction between a mere reference to or a citation of one statute in another and an incorporation which in effect means the bodily lifting of the provisions of one enactment and making them part of another, so much so that the repeal of the former leaves the latter wholly untouchedApart from this the position is put beyond doubt by the language of sections 129 and 133 of two Acts. Section 129 of the Madhya Pradesh Municipalities Act pr escribes the procedure for "the imposition of any tax under section 127". Similarly section 133 of the Madhya Pradesh Municipal Corporation Act prescribes the procedure for "the imposition of any tax under section 132". The property tax is impose d by respondent 1 under section 127A of the Municipalities Act and section 135 of the Municipal Corporation Act. It is not imposed under section 127 of the former Act or section 132 of the latter Act. It is therefore not necessary to follow the proced ure prescribed by sections 129 and 133 of the respective Acts. This position is made clear, out of abundant caution, by clause (4) of section 133 of the Municipal Corporation Act, which provides that nothing contained in section 1 33 shall apply to the tax mentioned in clause (a) of sub-section (1) of section 132, which shall be charged and levied in accordance with section 135. Section 132(1)(a) refers to property taxIt is not possible to accept this submission because sections 127A and 135 of the two Acts in question leave no such choice open to the taxing authority. The obligation which the statute places upon it is to impose tax on lands where there are lands only and they can be taxed, on buildings where buildings alone can be brought to tax and on both lands and buildings where lands are built upon and both can be brought to tax. This is not, as said by the Attorney General rationalising the taxing power. What we have said is the plain meaning of the taxing provisionThe s hort answer to this contention is that even though the entire share capital of the appellant companies has been subscribed by the Government of India, it cannot be predicated that the companies themselves are owned by the Government of India. The companies, which are incorporated under the Companies Act, have a corporate personality of their own, distinct from that of the Government of India. The lands and buildings are vested in and owned by the companies: the Governmen t of India only owns the share capitalApart from the fact that there is no data before us showing that the property tax constitutes an impediment in the achievement of the goals of the Coal Mi nes Nationalisation Act, the provisions of the M.P. Act of 1973, under which Special Areas and Special Area Development Authorities are constituted afford an effective answer to the Attorney Generals contention. Entry 23 of List II relates to "Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union". Entry 54 of List I relates to "Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest". It is true that on account of the declaration contained in section 2 of the Mines and Minerals (Development and Regulation) Act, 1957, the legislative field covered by Entry 23 of List II will pass on to Parliament by virtue of Entry 54, List I. But in order to judge whether, on that account, the State l egislature loses its competence to pass the Act of 1973, it is necessary to have regard to the object and purpose of that Act and to the relevant provisions thereof, under which Special Area Development Authorities are given the power to tax lands and buildings within their jurisdiction. We have set out the objects of the Act at the commencement of this judgment. one of which is to provide for the development and administration of Special Areas through Special Area Develop ment Authorities, Section 64 of the Act of 1973, which provides for the constitution of the special areas, lays down by sub-section (4) that: Notwithstanding anything contained in the Madhya Pradesh Municipal Corporation Act, 1956, the Madhya P radesh Municipalities Act, 1961, or the Madhya Pradesh Panchayats Act, 1962, the Municipal Corporation, Municipal Council, Notified Area Committee or a Panchayat, as the case may be, shall, in relation to the special area and as from the date the Special Area Development Authority undertakes the functions under clause (v) or clause (vi) of section 68 cease to exercise the powers and perform the function and duties which the Special Area Development Authority is competent to exercise and perform under the Act of 1973. Section 68 defines the functions of the Special Area Development Authority, one of which, as prescribed by clause (v), is to provide the municipal services as specified in sections 123 and 1 24 of the Madhya Pradesh Municipalities Act, 1961. Section 69, which defines the powers of the Authority, shows that those powers are conferred, inter alia, for the purpose of municipal administration. Surely, the functions, powers and duties of Municipalities do not become an occupied field by reason of the declaration contained in section 2 of the Mines and Minerals (Development and Regulation) Act, 1957. Though, therefore, on account of that declaration, the legislative field covered by Entry 23, List II may pass on to the Parliament by virtue of Entry 54, List I, the competence of the State Government to enact laws for municipal administration will remain unaffected by that declaration.Entry 5 of List II relates to "Local Government, that is to say, the constitution and powers of municipal corporations and other local authorities for the purpose of local self-Government". It is in pursuance of this power that the State Legislature enacted the Act of 1973. The power to impose tax on lands and buildings is derived by the State Legislature from Entry 49 of List II: "Taxes on lands and buildings". The power of the municipalities to levy tax on lands and buildings has been confer red by the State Legislature on the Special Area Development Authorities. Those authorities have the power to levy that tax in order effectively to discharge the municipal functions which are passed on to them. Entry 54 of List I doe s not contemplate the taking over of municipal functionsThat the declaration in section 2 of the Mines and Minerals (Regulation and Development) Act, 1957 does not result in invalidation of every State legislation relating to mines and minerals is demonstrated effectively by the decisi on in State of Haryana &Anr. v. Chanan Mal. The Haryana State Legislature passedthe Haryana Minerals (Vesting of Rights) Act, 1973, under which two notifications were issued for acquisition of right to saltpeter, a minor mineral, and for a uctioning certain saltpeter bearing areas. It was held by this Court that the Haryana Act was not in any way repugnant to the provisions of the Act of 1957 made by Parliament and that the ownership rights could be validly acquired by the State Governme nt under the State Act.The decision of a Constitution Bench of this Court in The Ishwari Khetan Sugar Mills (P) Ltd. v. The State of Uttar Pradesh &Ors., is even more to the point. In that case, 12 sugar undertakings stood transferred to and were vested in a Government undertaking under the U.P. Sugar Undertakings (Acquisition) Ordinance, 1971, which later became an Act. It was contended on behalf of the sugar undertakings that since sugar is a declared industry unde rthe Industries (Development and Regulation) Act, 1951, Parliament alone was competent to pass a law on the subject and the State Legislature had no competence to pass the impugned Act by reason of Entry 52, List I read with Entry 24, List II. The majority, speaking through one of us, Desai J., held that the legislative power of the State under Entry 24, List II, was eroded only to the extent to which control was assumed by the Union Government pursuant to the declaration made by the Parliament in respect of a declared industry and that the field occupied by such enactment was the measure of the erosion of the legislative competence of the State legislature. Since the Central Act was primarily concerned with the deve lopment and regulation of declared industries and not with the ownership of industrial undertakings, it was held that the State legislature had the competence to enact the impugned law. Justice Pathak and Justice Koshal, who gave a separate judgment concurring with the conclusion of the majority, preferred to rest their decision on the circumstance that the impugned legislation fell within Entry 42, List III- Acquisition and requisition of property- and was therefore within the competence of the State LegislatureIn the High Court, an additional point was taken, based upon the agreement dated June 24, 1976, which was entered into between the appellant Companies and respondent 1. It was contended in the High Court that respondent 1 had waived its power of taxation by that agreement and, therefore, the imposition of property tax was invalid. The Hig h Court has given weighty reasons for rejecting that argument and we endorse those reasons. We adopt, particularly, the reasoning of the High Court that in the meeting of January 29, 1976, respondent 1 had decided to give up its right to impose the Octroi tax only. The Chairman of respondent 1, therefore, acted beyond the scope of his authority in entering into the agreement with the appellant Companies, under which respondent 1 bound itself not to impose any tax whatsoever