Corporation of Greater Bombay Vs. New Standard Engineering Co.
Ltd.  INSC 384 (7
K.J. (J) Shetty, K.J. (J) Ahmadi, A.M. (J) Sahai, R.M. (J)
1991 AIR 1362 1990 SCR Supl. (3) 478 1991 SCC (1) 611 JT 1991 (1) 174 1990
Municipal Corporation Act, 1888: Property Tax.
Property tax--Rateable value of Respond- ent's building--How to be
determined--Whether it is to be determined under sub-section (1) or sub-section
(3) of Section 154.
154--Explanation to Section 154(3)--"Recog- nised scheme of subsidised
housing for industrial workers or persons belonging to lower income groups or
poorer classes"--Consultation with corporation--Effect of non- observance
of statutory prescription of consultation Held prior consultation mandatory.
Respondent Company an industrial concern constructed a building to provide
housing accomodation for its workers under the Government Subsidised Scheme for
Industrial Work- ers after obtaining a certain amount of subsidy and loan from
the Government under an agreement dated 12.11.1959.
5 of the agreement required the Respondent Company to adhere to all the terms,
conditions and stipulations as in force at the date of 'Government of India Subsidised
Housing Scheme for Industrial Workers' Clause 8 of the agreement imposed
limitation on the company not to charge rent exceed- ing Rs.26.50 per month per
tenement inclusive of municipal rates and taxes.
the purpose of charging property tax on the Compa- ny's said building, the
Municipal Corporation made the assessment under subsection (1) of Section 154
of the Act.
making the assessment the annual letting value was fixed at an amount higher
than the actual rent charged for each tenement. The Company objected to the
assessment raising the plan that the building has been constructed under the recog-
nised Government subsidised housing scheme for industrial workers and it is
restrained from charging rent exceeding Rs.26.50 per month from each allottee.
Therefore the Rate- able Value should be fixed under sub-section (3) and not
under sub-section (1) of Section 154. The Corporation re- jected the
contentions of the Company. Appeal preferred by 479 the Respondent-Company to
the Small Causes Court was un- succesful. On further appeal the High Court
upheld the Respondent's claim and directed the Municipal Corporation to revise
the Rateable Value taking into account only the actual rentals recoverable by
the Respondent from each tenant which would be the Standard Rent for each of
the blocks. On the crucial point of prior consultation, the High Court held
that the same is more or less directive in nature and not to be regarded as
mandatory and therefore the omis- sion on the part of the Government to consult
the Corpora- tion cannot take the case out of the Explanation to sub- section
(3) of Section 154 of the Act and the Corporation would not be at liberty to
take the Rateable Value more than the actual rentals charged. The Corporation
has appealed to this court challenging the correctness of the decision of the
High Court. Allowing the appeal, setting aside the judgment of the High Court
and restoring that of the Small Causes Court, this Court,
Procedural safeguards which are so often imposed for the benefit of persons
affected by the exercise of administrative powers, are normally regarded as
mandatory, so that it is fatal to disregard them. Where there is a statutory
duty to consult persons affected, this must genu- inely be done and reasonable
opportunity for comment must be given. If the exercise of power is likely to
impair the proprietary or financial interests of named bodies to be consulted,
then generally the provision requiring consulta- tion before the statutory
power is exercised is construed as mandatory. [485G-H, 484H-485A] There must be
opportunity for the Corporation to express its views on the recognised scheme
and the terms thereof.
opinion expressed by it may not be binding on the Gov- ernment which may take
its own decision but nevertheless consultation with the Corporation must be
there on the essential points and the core of the subject involved. If there is
no such consultation the Corporation cannot be compelled to fix the rateable
value of the building under sub-section (3). The High Court seems to have erred
in this regard. The right to be consulted in opposition to a claim or proposal
which will adversely affect its financial inter- ests is to be regarded as
mandatory. [486F-G, E] Banwarilal Agarwalla v. State of Bihar & Ors.,
 1 SCR 33; Kali Pada Chowdhury v. Union
of India,  2 SCR 904; Naraynan Sankaran
Mooss v. The State of Kerala & Anr.,  1 SCC 68; Naraindas Indurkhya
v. State of M.P.,  4 SCC 788 and Agricultural, Horticultural and forest- ry
Industry Training Board v. Ayles- 480 bury Mushrooms Ltd.,  1 WLR 190,
CITED Administrative Law by H.R.R. Wade, 6th Ed. p. 247; De Smith's Judicial
Review of Administrative Action, 4th Edi- tion, pp. 144-45.