Dehri Rohtas
Light Railway Company Limted Vs. District Board Bhojpur & Ors [1992] INSC 77
(12 March 1992)
Fathima
Beevi, M. (J) Fathima Beevi, M. (J) Agrawal, S.C.
(J)
CITATION:
1992 SCR (2) 155 1992 SCC (2) 598 JT 1992 (3) 573 1992 SCALE (1)637
ACT:
Bengal Cess Act, 1880 :
Sections
5 and 6-Cess-Payment of-Unregistered agreement entered into-Demands made
ignoring such agreement-Legality of.
Constitution
of India, 1950 :
Article
226-Writ-Remedies claimed-Party otherwise entitled to the remedy-Whether disentitled
on the sole ground of laches and delay.
HEAD NOTE:
The
appellant was engaged in the business of running a light railway and was liable
to pay cess under Section 5 of the Bengal Cess Act, 1880.
By way
of an unregistered agreement entered into between the appellant and the
respondent it was agreed that the appellant would pay a fixed sum of Rs. 10,000
p.a. towards cess irrespective of the profit or loss made by the
appellant-company. Accordingly the appellant was paying cess from 1953-54 till
1966-67.
In
1967 the respondent intimated the appellant that the State was not bound by the
unregistered agreement and raised a demand of Rs.9,86,809.33 towards arrears of
cess.
The
appellant instituted a suit before the sub-Judge to; enforce the said unregistered
agreement and to restrain the respondents from making any demand in excess of
the agreed sum or Rs.10,000 p.a. On the suit being dismissed, the appellant
preferred and appeal before the High Court. The appeal was also dismissed. The
first of the present appeals, is against the abovesaid judgement of the High
Court.
Meanwhile,
demand for arrears of cess for the years 1967-68 to 1971-72 was raised against
the appellant. In a Writ Petition filed before the High Court the appellant
challenged the demand. The High Court quashed the demand.
Thereupon
the appellant filed another Writ Petition 156 for quashing the demand notices
for the years 1953-54 to 1966-67. The High Court dismissed the Writ Petition,
and the other appeal has been filed against the said order.
The
appellant contended that the net profits of the company was referable partly to
its ownership of immovable property and partly to its ownership of movable
properties, and only that portion of net profit derived from the use of the
immovable property was liable to cess.
The
respondent contended that since the appellant did not challenge the demands
raised for the earlier years in the first Writ Petition, but only in the
subsequent Writ Petition filed after an inordinate delay of several years, its
claim was rightly rejected.
Disposing
of the appeals, this Court,
HELD
:1. It is true that the appellant could have, when instituting the suit,
agitated the question of legality of the demands and claimed relief in respect
of the earlier years while challenging the demand for the subsequent years in
the Writ Petition. But the failure to do so by itself in the circumstances of
the case does not disentitle the appellant from the remedies open under the
law. The demand is per se not based on the net profits of the immovable
property, but on the income of the business and is, therefore, without
authority. The appellant has offered explanation for not raising the question
of legality in the earlier proceedings. The authorities have proceeded under a
mistake of law as to the nature of the claim. The appellant did not include the
earlier demand in the Writ Petition because the suit to enforce the agreement
limiting the liability was pending in appeal, but the appellant did attempt to
raise the question in the appeal itself.
However,
the Court declined to entertain the additional ground as it was beyond the
scope of the suit. Thereafter, the Writ Petition was filed explaining all the
circumstances. The High Court considered the delay as inordinate. The High Court
failed to appreciate all material facts particularly the fact that the demand
was illegal as already declared by it in the earlier case. [160H; 161A-D]
2. The
principle on which the relief to the part on the grounds of laches or delay is
denied is that the right which have accrued to others by reason of the delay in
filing the petition should not be allowed to be disturbed unless is reasonable
explanation for the delay. The real 157 test to determine delay in such cases
is that the petitioner should come to the writ court before a parallel right is
created and that the lapse of time is not attributable to any laches or
negligence. The test is not to physical running of time. Where the circumstances
justifying the conduct exists, the illegality which is manifest cannot be
sustained on the sole ground of laches. [161E-H; 162A] Trilok Chand v. H.B. Munshi,
[1969] 2 SCR 824, distinguished.
3. In
the instant case, the demands made for the years 1953-54 to 1966-67 on the
basis of the assessment on the net profits of the undertaking is clearly
unsustainable. The Cess Authorities have to make the assessment taking into
account only the net profits of the immovable properties used for the purpose
of the business by the company and the assessments have to be modified
accordingly. [162B-C]
4. In
view of the undertaking given by the appellant it was directed that on
reassessment if the amount paid by the appellant for these years is in excess
of the amount thus assessed the District Board shall not be liable to make any
refund of the excess and if the cess computed is in excess of the amount
already paid, the liability to pay such excess shall be on the appellant.
[162E-F]
CIVIL
APPELLATE JURIDICTION : Civil Appeal No. 3250 of 1983.
From
the Judgment and Order dated 6.1.1981 of the Patna High Court in C.W.J.C. No.
1266 of 1980.
WITH Civil
Appeal No. 3249 of 1983. S.K. Sinha for the Appellant. M.L. Verma and B.B.
Singh for the Respondents.
The Judgement
of the Court was delivered by FATHIMA BEEVI, J. The appellant M/s. Dehri Rohtas
Light Railway Company Limited carried on business of running a light railway
between Dehri-on-Sone to Tiura Pipradhih in the district of Rohtas , Bihar.
158
The railway line for the said light railway was laid over 67 kilometers. The area
covered was 413.55 acres owned and/or used by the company as a lessee. The
appellant was liable to pay cess to the District Board under section 5 of the
Bengal Cess Act IX of 1880.
An
unregistered agreement was entered into between the appellant and the District
Board of Shahabad, (now Bhojpur) on 7.8.1953. Thereby it was agreed that the
company will pay a fixed sum of Rs.10,000 per annum towards cess in respect of
the railway under the Bengal Cess Act IX of 1880 irrespective of the profits or
losses made by the company in its railway business . The company paid the cess
as per the agreement dated 7.8.1953 for the the period from 1953-54 to
1966-1967.
On
27.10.1967, the Collector made a demand of Rs.9.86,809.33 paise from the
appellant intimating therein that State was not bound by the unregistered
agreement dated 7.8.1953. The company instituted suit No.60 of 1968 before the
court of Third additional Sub Judge, Sasaram, to enforce the agreement and to
restrain the respondents from making any demand in excess of Rs.10,000 per
annum. The suit was dismissed by the judgment dated 13.9.1971. The first appeal
No.1242 of 1971 filed before the High Court against that decision was also
dismissed by the judgment dated 23.5.1980. Civil Appeal No.3249 of 1983 is directed
against this judgment of High Court.
In the
meantime the demand for the cess was raised against the company for the years
1967-1968 to 1971-1972.
This
demand was challenged by the company before the High Court by filing writ
petition No.1372 of 1974. The High Court by judgment dated 30.3.1979 quashed
the notice of demand with direction as to how the Cess is to be assessed under
section 6 read with section 5 of the Bengal Cess Act 1880. Based on this
judgment reported in 1979 Bihar Bar Council Journal 428, the appellant filed
C.W.J.C. No.1266 of 1980 under Article 226 of the Constitution before the Patna
High Court for quashing the demand notice for the period 1953-54 to 1966-67.
The High Court by judgment dated 6.1.1981 dismissed the writ petition in limine.
Civil Appeal No.3250 of 1983 is directed against the judgment of the High Court
Dated 6.1.1981.
The
Bengal Cess Act was applicable to the State of Bihar and under section 5 of the said Act all immovable
properties were liable to a local cess. The local cess was to be assessed under
section 6 on the annual value 159 of lands and, until provision to the contrary
is made by the parliament on the annual net profits from mines and quarries and
from tramways, railways and other immovable property.
Accordingly,
the cess payable by the company in respect of its immovable properties on which
its railways are constructed and operated is to be assessed on the net profits
arising out of the said immovable properties and not on the net profits of the
entire business of running the railways which the company derived from its
railway undertaking.
The
Additional Collector made the demand for the sum of Rs.9,86,809.33 paise as
alleged due on account of cess in respect of the land of the company for the
years 1953-54 to 1966-1967 by various notices, although full payment of the
rent and cess as agreed upon was made for the relevant period. Demands are not
made on the net profits derived from the said lands used by the company for its
railways, but are based on the net profits of the entire business of the
railway undertaking. The company has filed returns showing the net profits not
of the said lands but of its railway business as a whole on the basis of which
the aforesaid cess demands had been made.
The
company filed the suit challenging the demand for the years 1953-54 to
1966-1967 on the basis of the agreement dated 7.8.1953 for restraining the
respondents from making any demands in excess of Rs.10,000/-. The suit was
dismissed on the sole ground that the State of Bihar did not consent to the agreement between the company and
the District Board.
The
demands for the subsequent years 1967-1968 to 1971- 1972 were challenged in
writ petition on the ground that the said demands for cess were based on the
net profits of the entire railway undertaking of the company and not on the
basis of net profits of the lands used for the said railway undertaking. The
High Court in allowing the writ petition and quashing the said notice accepted
the ground.
The
question, therefore, arising in these appeals is whether the appellant is
entitled to the same relief in respect of the demands for the earlier years.
Since the demands for the earlier years were the subject-matter of the
challenge in the suit which was pending, the company had not sought relief of
quashing the said demands in the writ petition filed earlier. The Challenge in
the suit as stated was only on the basis of the agreement 160 and not on the
ground of illegality. The company did not include the demands for the earlier
years in the first writ petition. It is, therefore, contended for the
respondents that the second writ petition filed after a long lapse of several
years had been rightly dismissed by the High Court.
It is
also contended that the demands could not be quashed in the civil suit on the
ground now urged. The learned counsel for the respondents, therefore, submitted
that these appeals should fail. He also placed reliance on the decision of this
Court in Trilok Chand v. H.B. Munshi, [1969] 2 SCR 824, in support of the judgement
of the High Court that the writ petition cannot be entertained after inordinate
delay.
The
appellant's learned counsel referred to the earlier decision of the High Court
wherein the Court observed thus :- "...net profits from the railways must
in the context of the Act, be given a restricted meaning and it is the net
profit from immovable properties of the railways which is liable to the payment
of the local cess. Thus the net profit of the company is referable partly to
its ownership of immovable property and partly to its ownership of movable
properties. It is only that portion of net profit which is derived from the use
of the immovable property of the petitioner Company which is liable to cess. If
that be the correct view the present demand contained in Annexures 3 to 7 is
not sustainable. Of course, it would be open to the authorities to re-assess
the cess in the light of the legal position as explained, and after determining
as to what portion of the net income is referable to its ownership of immovable
property." It is accordingly settled that the statutory basis of
chargeability under the Cess Act is the immovable property of the company. the
appellant's learned counsel maintained that the jurisdiction of the Cess
Authorities is, therefore, confined to levy of cess only on the net profits of
the company derived from the immovable properties and any different stand would
be hit by Article 265 of the Constitution of India.
The
question thus for consideration is whether the appellant should be deprived of
the relief on account of the laches and delay. It is true that the appellant
could have even when instituting the suit agitated the question 161 of legality
of the demands and claimed relief in respect of the earlier years while challenging
the demand for the subsequent years in the writ petition. But the failure to do
so by itself in the circumstances of the case, in our opinion, does not disentile
the appellant from the remedies open under the law. The demand is per se not
based on the net profits of the immovable property, but on the income of the
business and is, therefore, without authority. The appellant has offered
explanation for not raising the question of legality in the earlier
proceedings. It appears that the authorities proceeded under a mistake of law
as to the nature of the claim. The appellant did not include the earlier demand
in the writ petition because the suit to enforce the agreement limiting the
liability was pending in appeal but the appellant did attempt to raise the
question in the appeal itself. However, the Court declined to entertain the
additional ground as it was beyond the scope of the suit. Thereafter, the
present writ petition was filed explaining all the circumstances. The High
Court considered the delay as inordinate. In our view, the High Court failed to
appreciate all material facts particularly the fact that the demand is illegal
as already declared by it in the earlier case.
The
rule which says that the Court may not inquire into belated and stale claim is
not a rule of law but a rule of practice based on sound and proper exercise of
discretion.
Each
case must depend upon its own facts. It will all depend on what the breach of
the fundamental right and the remedy claimed are and how the delay arose. The
principle on which the relief to the party on the grounds of laches or delay is
denied is that the rights which have accrued to others by reason of the delay
is denied is that the rights which have accrued to others by reason of the
delay in filing the petition should not be allowed to be disturbed unless there
is reasonable explanation for the delay. The real test to determine delay in
such cases is that the petitioner should come to the writ court before a
parallel right is created and that the lapse of time is not attributable to any
laches or negligence. The test is not to physical running of time. Where the circumstances
justifying the conduct exists, the illegality which is manifest cannot be
sustained on the sole ground of laches.
The
decision in Trilok Chand (supra) relied on is distinguishable on the facts of
the present case. The levy is based on the net profits of the railway
undertaking was beyond the authority and the illegal nature of the same has
been questioned though belatedly in the pending proceedings after the
pronouncement of the High 162 Court in the matter relating to the subsequent
years. That being the case, the claim of the appellant cannot be turned down on
the sole ground of delay. We are of the opinion that the High Court was wrong
in dismissing the writ petition in limine and refusing to grant the relief
sought for. We however agree that suit has been rightly dismissed.
Since
the entire matter is before us, we do not consider that it is necessary to
remit back the case to the High Court for fresh disposal. In the light of the
earlier decision, it has to be held that the demands made for the years
1953-1954 to 1966-1967 on the basis of the assessment on a net profits of the
undertaking is clearly unsustainable. The Cess Authorities have to make the
assessment taking into account only the net profits of the immovable properties
used for the purposes of the business by the company and the assessments have
to the modified accordingly. It was submitted on behalf of the respondent that
the District Board has received the cess at the rate of Rs.10,000 per annum
and, if on revised assessment, the liability is reduced then the burden will be
cast on the District Board to refund the excess and that is one of the reasons
why the claim of the company cannot be entertained at this distance of time. It
was also submitted that under the terms of the agreement, the excess over Rs.10,000
is to be paid by the District Board and that would be an additional burden. It
is fairly conceded on behalf of the appellant that on the basis of the revised
assessment the company undertakes not to claim any refund from the District
Board and would pay the excess over Rs.10,000 without burdening the District
Board with the liability to pay the same in terms of the agreement. When such
undertaking is given by the company it is only just, fair and proper that the
claim of the company is entertained and the Cess Authority is directed to recompute
the cess payable for the years in question holding the demand already made as
illegal.
In
view of the above discussion while dismissing Civil Appeal No.3249 of 1983
arising from the suit and disposing of Civil Appeal No.3250 of 1983, we allow
the Writ Petition No.1266 of 1980 and make the following directions:- "The
appellant company is liable to pay for the years 1953-1954 to 1966-1967 the cess
as recomputed in the light of the decision in writ petition No.1372 of 1974. If
the amount paid 163 by the company for these years is in excess of the amount
thus assessed, the District Board shall not be liable to a make any refund of
the excess. If the cess recomputed exceeds the amount already paid, the
liability to pay such excess shall be on the appellant company." In the
circumstances of the case, the parties are directed to bear their respective
costs.
G.N.
Appeals disposed of.
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