Municipal Corporation of The City of Ahmedabad
Vs. New Shorock Spg. & Wvg. Co., Ltd.  INSC 95 (17 April 1970)
17/04/1970 HEGDE, K.S.
CITATION: 1970 AIR 1292 1971 SCR (1) 288 1970
SCC (2) 280
RF 1971 SC 231 (5) RF 1973 SC1461 (566) RF
1975 SC1234 (7) D 1975 SC2037 (11) RF 1975 SC2299 (190,607) RF 1984 SC1780
(8,10) R 1992 SC 522 (17)
Bombay Provincial Municipal Corporation Act
(59 of 1949), s. 152A-Scope of-Constitutional validity of s. 152A(3).
The appellant Corporation assessed the
immovable properties of the respondents to property-tax for the year 1964-65
and 1965-66 on the basis of the 'flat rate' method under the Bombay Provincial
Municipal Corporation Act, 1949. The assessments were challenged in the High
Court but the petitions were dismissed. While appeals were pending in this
Court, the appellant initiated proceedings for the recovery of the taxes and
attached the properties of the respondents. The respondents challenged the
attachment proceedings but their petitions were again dismissed. In appeals
against those orders in this Court the respondents prayed for interim stay, but
this Court did not grant stay because the appellant undertook to return the
amounts if the respondents succeeded. This Court thereafter allowed the appeals
by the respondents. Meanwhile an amending Act entitled the Bombay Provincial
Municipal Corporation (Gujarat, Amendment) Act, 1968, was passed introducing s.
152A into the 1949 Act, but that provision
was not brought to the notice of this Court.
However, when. the respondents demanded
refund of the amounts illegally collected from them the appellant did not
comply and hence the respondents moved the High Court again.
Those petitions were allowed and the
appellant appealed to this Court. While the appeals were pending, the Bombay
Provincial Municipal Corporation (Gujarat Amendment and Validity Provisions)
Ordinance, 1969, was passed and sub-s. (3) was introduced in s- 152A.
HELD : Under s. 152A before a Corporation can
retain any amount collected as property tax, there must be an, assessment
according to law. But in the present case there Were no 'assessment orders in
accordance with the provisions of the 1949 Act and the rules as amended by the,
Amending Act, 1968. Therefore, the appellant was not entitled to retain, the
amounts collected as the section does not authorise the Corporation to retain
amounts illegally collected. [293 G; 294 D] (2) Sub-Section (3) of s. 152A,
commands the Corporation to refuse to refund the amount illegally collected
despite the orders of this Court and the High Court. It marks a direct inroad
into the judicial powers of the State. The Legislatures under the Constitution
have, within prescribed limits, powers to make laws prospectively as well as
retrospectively. By exercise of those powers the legislature can remove the
basis of a decision rendered by a competent, court thereby rendering the
But, no legislature in this Country-has power
to ask the instrumentalities of the State to disobey or disregard the decisions
given by courts. Therefore, s. 152A(3), introduced by the Ordinance is
repugnant to the Constitution. 1294 H; 295 A-C; 297 F] Shri Prithvi Cotton
Mills Ltd. v. Broach Borough Municipality  1 S.C.R. Mahal Chand Sethia v.
State of West Bengal Cr. A. No. 75/69 dt. 289 10-9-69 and Janpada Sabha,
Chhindwara v. Central Provinces Syndicate Ltd. and State of Madhya Pradesh v.
Amalgamated Coal Fields Ltd.  3 S.C.R. 745, followed.
The apart it authorises the Corporation to
retain the amounts illegally collected and' treat them as loans, that is,
authorises the collection of forced loans which is impermissible under the
State of Madhya Pradesh v. Ranojirao Shinde,
 3 S.C.R. 489, followed.
CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil
Appeals Nos. 2062 to 2064, 2072 and 2251 of 1968.
Appeals from the judgment and order dated
July 3, 4, 1969 of the Gujarat High Court in Special Civil Applications Nos. 52
of 1969 etc.
and Writ Petitions Nos. 51, 52 and 57 to 60
Petitions under Art. 32 of the Constitution
of India for the enforcement of fundamental rights.
B. Sen and 1. N. Shroff, for the appellants
(in C.A. No. 2062 of 1969) and respondent Nos. 2 to 4 (in V.P. Nos. 59 and 60
M. C. Setalvad and I. N. Shroff, for the
appellants (in C.A. No. 2063 of 1969) and respondents Nos. 2 to 4 (in W.P. Nos.
51 and 52 of 1970.
I. N. Shroff, for the appellants (in C.A.
Nos. 2064, 2072 and 2251 of 1969) and respondent Nos. 2 to 4 (in W.P. No. 57 and
58 of 1970).
S. T. Desai, R. N. Bannerjee, K. M. Desai and
Ravinder Narain, for respondents (in all the appeals) and the petitioners (in
all the petitions).
B. D. Sharma and R. N. Sachthey, for
respondent No. 1 (in all the petitions) The Judgment of the Court was delivered
by Hegde, J. These are connected proceedings. Herein the validity as well as
the interpretation of some of the provisions of the Bombay Provincial Municipal
Corporation Act, 1949 (Act 59 of 1949) (to be hereinafter referred to as the Act)
as amended from time to time by the Gujarat State comes up for consideration.
In these proceedings some of the Textile Mills of Ahmedabad are ranged against
the State of Gujarat as well as the Municipal Corporation of the City of
Ahmedabad. They are seeking to get refund of some amounts paid as property tax,
by them, which amounts according to them were illegally collected from them.
290 In order to understand the controversies
involved in these proceedings, it is best to set out the course of events leading
upto these proceedings. Various Textile Mills which are involved in these cases
will hereafter be referred to as the "companies". These companies own
immovable properties consisting of lands and buildings in the city of Ahmedabad
The Municipal Corporation of the City of
Ahmedabad (which will hereinafter be referred to as the
"Corporation") in the purported exercise of its power under the Act
and the rules framed there under assessed the immovable properties of the
companies to property tax for the assessment years 1964-65 and 1965-66. Those
assessments were done on the basis of the method popularly known as "flat
rate" method. According to that method in valuing the lands, the value of
plants and machinery were also taken into consideration. The buildings were
assessed on the basis of their floor area. Those assessments were challenged by
means of writ petitions under Arts. 226 and 227 of the Constitution before the
High Court of Gujarat, by the companies. Those petitions were dismissed by the
High Court. The aggrieved companies thereafter brought up the matters in appeal
to this Court.
During the pendency of those appeals, the
Corporation proceeded to assess those companies as well as others, to property
tax for the assessment year 1966-67. Those assessments were challenged before
this Court by some of the companies by means of writ petitions under Art. 32 of
the Constitution. Meanwhile on the strength of the assessment made for the
assessment years 1964-65 and 1965-66, the Corporation initiated proceedings for
recovery of the taxes due under those assessments. Some of the companies paid
the tax assessed but some others including the New Manek Chowk Spinning and
Weaving Mills Co. Ltd. did not pay the tax levied on them. Hence the Officers
of the Corporation resorted to the attachment 'of their properties. At that
stage, those companies challenged the validity of those attachment proceedings
before the High Court of Gujarat under Art. 226 of the Constitution. Those writ
petitions were dismissed. The High Court also refused to grant certificates
under Art. 133(1) of the Constitution. But the concerned companies appealed to
this Court after obtaining special leave from this Court. In those appeals,
those companies prayed for an interim stay of the recovery proceedings. This
Court declined to stay the proceedings in view of the undertaking given on
behalf of the Corporation to refund the tax collected within a month from the
date of the judgment of this Court, if those companies succeeded in the writ
petitions before this Court. By its judgment dated February 21, 1967, this
Court struck down the rules framed under the Act permitting the Corporation to
value the lands and buildings on the "flat rate" method. This, Court
opined that it was not permissible for the Corporation to value the premises on
the basis of the floor area nor could it take into consideration 291 the value
of plants and machinery in determining the rateable, value of the lands and
buildings. That decision is reported in 2, Supreme Court Reports p. 679
(New Manek Chowk Spinning and Heaving Mills Co. Ltd. and ors. v. Municipal
Corporation of the City of Ahmedabad and 'ors. In view of that conclusion the
assessments impugned in the writ petitions were set aside.
The judgment of this Court dealt with the
validity of the assessment for the year 1966-67. But at the time when that
judgment was delivered, the appeals filed by some of the companies in respect
of the assessment made for the years 1964-65 and 1965-66, were still pending in
this Court. On March 30, 1968, the State of Gujarat brought into force 'an Act
entitled, Bombay Provincial Municipal Corporation (Gujarat Amendment) Act, 1968
(hereinafter referred to as the amending Act). The appeals filed by the
companies in this Court cam up for hearing on April15, 1968. This Court allowed
those appeals following its decision in New Manek Chowk Spg. and Weaving Mills
Co. Ltd. and ors. case (supra).
When those appeals were heard neither the
State of Gujarat, nor the Corporation brought to the notice of this Court, the
provisions of the amending Act. After the judgment of this Court in those
appeals, the concerned companies called upon the 'Corporation to refund the
amounts illegally collected from them as property taxes for the assessment
years 1964-65 and 1965-66. The Corporation did not respond to the demands made
by those companies. Hence they again moved the High Court of Gujarat under Art.
226 of the Constitution seeking writs of Mandamus against the Corporation and
its Officers directing them to refund' the amounts illegally collected from
them and for a declaration that s. 152A of the Act newly introduced by the
amending Act is ultra vires the Constitution. The High Court of Gujarat allowed
those petitions. That Court did not go into the vires of s. 152A but on a
construction of that provision, it came to the conclusion that the said
provision did not permit the Corporation to withhold the amounts illegally
The appeals with which we are concerned now
were filed by the State of Gujarat and the Corporation against that decision.
During the pendency of those, appeals, the Corporation moved this Court to stay
the operation of the judgment of the High Court pending disposal of those
appeals. Those applications came up for hearing on November. 5, 1969. On that
date, this Court stayed the operation of the. judgment of the High Court of
Gujarat on the Corporation undertaking to pay interest on the. amounts in-
question at 6% per annum from the date on which they were collected till the
date of refund in the event of the appeals failing. A few days thereafter, the
Corporation moved this Court to modify that order. It wanted to resile from the
undertaking given by it. Hence this 292 Court modified its earlier order and
dismissed the stay applications on December 9, 1.969. On or about December 23,
1969 the Governor of Gujarat promulgated an Ordinance under Art. 213 of the
Constitution entitled Bombay Provincial Municipal ,Corporation (Gujarat
Amendment and Validating Provisions) Ordinance, 1969. This Ordinance will be
hereinafter referred to as "the Ordinance". That Ordinance came into
effect immediately. By means of that Ordinance, a new sub-section namely sub-s.
(3) was introduced into s. 152A. The effect of the insertion of sub-s. (3) in
s. 152A is to authorise the Corporation and its ,Officers to refuse to refund
the amount of tax illegally collected despite the orders of this Court as well
as the Gujarat High Court till the assessment or reassessment of property tax
is made in ,,accordance with the provisions of the Act as amended. But under
its provisions, the Corporation is required to pay interest at 6% on the amount
ultimately found liable to be refunded. In the writ petitions under
consideration the validity of the aforementioned provision is challenged.
This, in brief is the history of these cases.
In these proceedings three questions of law
arise for decision namely (1) What is the true scope of s. 152A (2) Is that
pro-vision ultra vires any of the provisions of the Constitution and (3) Is sub-s.
(3) of s. 152A (introduced by the Ordinance) violative. of the Constitution?
Section 152A reads as follows "(1) In the City of Ahmadabad if in respect
of premises included in the assessment, book relating to Special Property
Section, the levy, assessment, collection or recovery of any of the property
taxes for any official year preceding, the official year commencing on the 1st
April 1968 is affected by a decree or order of a court on the ground that the
determination of the rateable value of the premises on the basis of rental
value per foot of the floor area was not according to law or that sub-rules (2)
and (3) of rule 7 of the rules contained in Chapter VIII of Schedule A to this
Act were invalid, then it shall be lawful for the Municipal Corporation of the
City of Ahmedabad to assess or reassess in respect of such premises any such
property tax for any such official year at the rates applicable for that year
in 'accordance with the provisions of this Act and the rules as amended by the
Bombay Provincial Municipal Corporations (Gujarat Amendment) Act, 1968, as if
the said Act had been in force during the year for which 'any such tax is to be
assessed or reassessed; and accordingly the readable value of lands and
buildings in such 293 -premises may be fixed and any such tax, when assessed or
reassessed may be levied, collected and recovered by the said Corporation and
the provisions of this Act and the rules shall so far as may be apply to such
levy, collection and recovery and the fixation of rateable value and the
assessment or reassessment, levy collection and recovery of any such tax under
this section shall be valid: and shall, not; be called in question on the
ground that the- same were in any way inconsistent with the provisions of this
Act and the rules as in force prior to the commencement of the said Act
Provided that if in respect of any such premises the amount of tax assessed or
reassessed for any year in accordance with the provisions of this section
exceeds the, amount of tax which but for the decree or order of the court as
aforesaid could have been assessed for that year in respect of the premises,
then the amount of tax to be levied for that year in respect of the premises in
accordance with the provisions of this section shall be an amount arrived at
after deducting from the amount of tax so assessed or reassessed such amount as
may be equal to the amount as so in excess.
(2) Where any such property tax in respect of
any such premises is assessed or reassessed under subsection (1) for any
official year and in respect of the same premises, the property- tax for that
year has already been collected or recovered, then the amount of tax so
collected or recovered shall be-taken into account in determining the amount of
tax to be levied and collected under subsection (1) and if the amount already
Collected or recovered exceeds the amount to be so levied and collected, the
excess shall be refunded in accordance with the rules." We are in
agreement with the High Court that this section does not empower the
Corporation to retain the amounts illegally collected as property tax.. Under
this section before a Corporation can retain any amount collected as property
tax, there must be an assessment according to law.
What the section authorises, the Corporation
is that, despite the fact that certain assessments have been set aside by
courts, it shall be lawful for the Corporation to 'assess or reassess the
premises concerned in those decisions to property tax for the concerned
assessment years at the rates applicable for those years in accordance with the
provisions of the Act and the rules as:amended by the amending Act as if the:
said Act has been, in force during the years. for which such tax is to assessed
or reassessed and accordingly fix the rateable value of L 12 Sup CI 70-5 294
lands and buildings of those premises and assess or reassess the tax payable
and when the tax is so assessed or reassessed, the tax so assessed may be
levied, collected 'and recovered by the Corporation and for that purpose the provisions
of the amending Act and the rules shall, so far as may, be apply to such
collection and proceedings preceding those collections. That provision further
says that the fixation of rateable value so made and the collection and
recovery of such tax shall be valid and shall not be called in question on the
ground that the same were in any way inconsistent with the provisions of the
Act and the rules in force prior to the commencement of the amending Act. The
section also authorises the Corporation to deduct from the amounts earlier
illegally collected the tax assessed according to law. All that the proviso to
that section says is that the Corporation shall pay simple interest at the rate
of six per centum for annum on the amount of excess liable to be refunded under
sub-s. (2) from the date of the decree or order of the court referred to in
sub-s. ( 1 ) to the date on which such excess is refunded.
At this stage it may be noted that there had
been no assessment orders even when these appeals were heard. In view of our
above conclusion that s. 152A does not authorise the Corporation to retain the
amounts illegally collected, it is unnecessary for us to examine the validity
of that section.
This takes us to the validity of sub-s. (3)
of S. 152A introduced into that section by means of the Ordinance.
That provision reads "Notwithstanding
anything contained in any judgment, decree or order of any court, it shall be
lawful, and shall be deemed always to have been lawful, for the Municipal
Corporation of the City of Ahmedabad to withhold refund of the amount already
collected or recovered in respect of any of the property taxes to which
sub-section (1) applies till assessment or reassessment of such property taxes
is made, and the amount of tax to be levied and collected is determined under
subsection (1 ) :
Provided that the Corporation shall pay
simple interest at the rate of six per cent per annum on the amount of excess
liable to be, refunded under subsection (2), from the date of decree or order d
the court referred to in sub-section (1) to the date on which such excess is
refunded." This is a strange provision. Prime facie that provision appears
to command the Corporation to refuse to refund the amount illegally collected
despite the orders of this Court and the High Court.
295 The State of Gujarat was not well advised
in introducing this provision. That provision attempts to make a direct inroad
into the judicial powers of the State. The legislatures under our Constitution
have within the prescribed limits, powers to make laws prospectively as well as
retrospectively. By exercise of those powers, the legislature can remove the
basis of a decision rendered by a competent court thereby rendering that
But no legislature in this country has power
to ask the instrumentalities of the State to disobey or disregard the decisions
given by courts. The limits of the power of legislatures to interfere with the
directions issued by courts were considered by several decisions of this Court.
In Shri Prithvi Cotton Mills Ltd. and anr. v.
The Broach Borough Municipality and ors. (1) our present Chief Justice speaking
for the Constitution Bench of the Court observed "Before we examine s. 3
to find out whether it is effective in its purpose or not we may say a few
words about validating statutes in general. When a legislature sets out, to
validate a tax declared by a court to be ille- gally collected under an
ineffective or an invalid law, the cause for ineffectiveness or invalidity must
be removed before validation can be said to take place effectively. The most
important condition of course, is that the legislature must possess the power
to impose the tax, for, if it does not, the action must ever remain ineffective
and illegal. Granted legislative competence, it is not sufficient to declare
merely that the decision of the court shall not bind. for that is tantamount to
reversing the decision in exercise of judicial power which the legis- lature
does not possess or exercise. A court's decision must always bind unless the
conditions on which it is based are so fundamentally altered that the decision
could not have been given in the altered circumstances. Ordinarily, a court
holds a tax to be invalidly imposed because the power to tax is wanting or the
statute or the rules or both are invalid or do not sufficiently create the
jurisdiction. Validation of a tax so declared illegal may be done only if the
grounds of illegality or invalidity are capable of being removed and are in
fact re- moved and the tax thus made legal. Sometime this is done by providing
for jurisdiction where jurisdiction had not been properly invested before.
Sometimes this is done by re-enacting retrospectively a valid and legal taxing
provision and then by fiction making the tax already collected to stand under
the re-enacted law." (1)  1 S.C.R. 388 296 In Mehal Chand Sethia v.
State of West Bengal(1), officer, J.. speaking for the Court stated the legal
position in these words, "The argument of counsel for the appellant was that
although it was open to the State Legislature by an. Act and the Governor by an
Ordinance to amend the West Bengal Criminal Law Amendment (Special Courts) Act,
1949, it was incompetent for either of them to validate an order of transfer
which had already been quashed by the issue of a writ of certiorari by the High
Court and the order of transfer being virtually dead, could not be resuscitated
by the Governor or, the:
Legislature and the validating measures could
not touch any adjudication by, the Court.
It appears to us that the High Court took the
correct view and the Fourth Special Court had clearly gone wrong in its
appreciation of the scope and effect of the. Validating Act and Ordinance. A
legislature of a State is competent to pass any measure which is within the
legislative competence under the Constitution of India. Of course, this is
subject to the provisions of Part HI of the Constitution. Laws can be enacted
either by the Ordinance making power of a Governor or the Legislature of a
State in respect of the topics covered by the entries in the appropriate List
in the Seventh Schedule to the Constitution. Subject to the above limitations
laws can be prospective as also retrospective in operation. court of law can
pronounce upon the validity of any law and declare the same to be null and void
if it was beyond the legislative competence of the legislature or if it
infringed the rights enshrined in Part III of the Constitution.
Needless to add it can strike down or declare
invalid any Act or direction of a State Government which is not authorised by
The position of a Legislature is however
different. It cannot declare any decision of a court of law to be void or of no
effect." Again Shah, J. (one of us) in Janpada Sabha, Chhindwara v. The
Central Provinces Syndicate Ltd. and anr. and State of Madhya Pradesh v.
Amalgamated Coal Fields Ltd. and anr. (2) ; speaking for the Constitution Bench
explained the legal position in these words :
"The relevant words which purported to
validate the imposition, assessment and collection of cess on coal may be
recalled they are 'cesses imposed, assessed or collected by the Board in
pursuance of the notifications' (1) Cr. Appeal No. 75/69 decided on 10-9- 1969.
(2)  3 S.C.R. 745.
297 notices specified in the Schedule shall,
for all purposes, be deemed to be-, and to have always been validly imposed,
assessed or collected as if the enactment under which they were so issued stood
amended at all material times so as to empower the Board to issue the said
notifications/notices. Thereby the enactments, i.e. Act 4 of 1920 and the
Rules, framed under the Act pursuant to which the notifications and notices
were issued, must be deemed to have been amended by the Act. But the Act does
not set out the amendments intended to be made in the enactments. Act 18 of
1964 is a piece of clumsy drafting. By a fiction it deems the Act of 1920 and
the rules framed thereunder to have been amended without disclosing the text or
even the nature of the amendments." Proceeding further, it was observed
"On the words used in the Act, it is plain that the legislature attempted
to overrule or set aside the decision of this Court. That in our judgment, is
not open to the Legislature to do under our constitutional scheme. It is open
to the Legislature within certain limits to amend the provisions of an Act
retrospectively and to declare what the law shall be deemed to have been, but
it is not open to the Legislature to say that a judgment of a court properly
constituted and rendered in exercise of its powers in a matter brought before
it shall be deemed to be ineffective and the interpretation of the law shall be
otherwise than as declared by the Court." We are clearly of, the opinion
that sub-s. (3) of s. 152A introduced by the Ordinance is repugnant to our Constitution.
That apart, the said provision authorities the Corporation to retain the
,amounts illegally collected and treat them as loans. That ,is an authority to
collect forced loans. Such conferment of power is impermissible under our
Constitution-see State of Madhya Pradesh v.
Ranojirao Shinde and anr. ( 4 ) In the
result, the above appeals are 'dismissed with costs and the writ petitions
allowed and s. 152A(3) is struck down. The petitioners are entitled to their
costs in those petitions-one hearing fee both in the appeals and in the writ
Y.P. Appeals dismissed.
(4)  3 S.C.R. 489.