MUNICIPAL CORPORATION OF CITY OF AHMEDABAD AYODAYA GNG AND MFG CO LIMITED Vs. NEW SHROCK SPG AND WVG CO LTD

JUDGEMENT

(1.) 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 amount according to them were illegally collected from them.

(2.) 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 Textiles 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 thereunder 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 Articles 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 Articles 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 Article 226 of the Constitution. Those writ petitions were dismissed. The High Court also refused to grant certificates under Article 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 the value of plants and machinery in determining the ratable value of the lands and buildings. That decision is reported in (1967) 2 SCR 679, New Manek Chowk Spinning and Weaving Mills Co. Ltd. vs. Municipal Corporation of the City of Ahmedabad. In view of that conclusion the assessments impugned in the writ petitions were set aside.

(3.) 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 came up for hearing on April 15, 1968. This Court allowed those appeals following its decisions in New Manek Chowk Spg. and Weaving Mills Co. Ltd. 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 Article 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 Section 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 Section 152A but on a constitution of that provision it came to the conclusion that the said provision did not permit the Corporation to withhold the amounts illegally collected. 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, 969. 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 resale from the undertaking given by it. Hence this Court modified its earlier order and dismissed the stay applications on December 9, 1969. On or about December 23, 1969 the Governor of Gujarat promulgated an Ordinance under Article 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-section (3) was introduced into Section 152A. The effect of the insertion of sub-section (3) in Section 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.