V S ALEVOOR Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) The petitioners who are residents of Hubli-Dharwad Municipal Corporation fall into three categories, namely, those who utilise the water supplied by the Corporation for their domestic purpose, nursing homes and hotels and lodgings. By a resolution dated 5-7-86 the Corporation proposed an increase in the water rates at graded rates from 0.25 paise to Rs. 1.60 per 1000 litres with a minimum of Rs. 4/- in respect of domestic users and in respect of boarding, lodging, restaurants, hotels, factories and nursing homes at the rate of Rs.8/- per every thousand litres with a minimum of Rs. 25/-. In respect of those consumers who do not have a meter certain other rates were proposed. During the year 1961-62 the Corporation fixed water rate at 25 paise per every thousand litres in respect of domestic consumer and at the rate of 66 paise in respect of non-domestic consumer. The Corporation was supplying water between the years 1961 to 1983 from Unkal Water Works which is wholly owned and maintained by the Corporation with an average drawal of water at 41.04 lakh litres per day. However, Neerasagar Water Works is maintained by the Water Board (considered for the purpose of supply of water other than Bangalore) which supplied 381.09 lakh litres of water per day on a payment of O.18 paise per every thousand litres. When these two sources were not sufficient to meet the growing needs of the residents within the Corporation area it took up the Malaprabha Project in the year 1974-75 and was completed at a cost of Rs. 11.71 crores. The cost having been borne entirely by the Corporation the water from Malaprabha is made available to Dharwad city from 1-4-83 and the Hubii City from 1-10-1983 the average drawal being about 300 1akh litres per day. It is stated by the Corporation that they incur an expenditure of 4.75 lakhs per annum for procurement and distribution of water from the said source. The annual collection from water rate had been at Rs. 48.43 lakhs. Having found the return from this head of activity of Corporation was not even broadly meeting the expenditure thereto, the Corporation took steps to revise the water rates. They proposed revision of water rates by publishing a notification on 6-10-1985 calling for objections from those who are likely to be affected by the enhancement. The said notification was published in the gazette dated 10-10-1985, and in the local newspapers too. The Corporation authorised its Taxation and Finance Committee to look into the objections that were filed by the users and make a report. The Standing Committee not only considered the objections filed by the various persons but also examined orally several persons including some of the petitioners and thereafter submitted a report to the Corporation to accept the original proposal overruling all objections. Subsequently, the Corporation in the general body meeting held on 13-5-86 held a detailed discussion and considered the objections again independently and resolved to fix the water rates. The sanction of the Government was obtained thereafter to the said resolution by orders dated 16-9-1986 and 22-10-1986. The Corporation through its statement of objections placed material before this Court to the effect that the Corporation had worked out the actuals taking into account all factors like cost of production, procurement and supply including through public taps and repayment of loans and interest contribution to sinking fund and also the cost of maintenance of water works. The Corporation has furnished figures in regard to various water tap connections as follows:

(2.) The learned Counsel for the petitioners contended that a perusal of the relevant provisions in relation to levy of water rate would disclose that the levy is compensatory in character and therefore must have a rational nexus to the expenditure incurred in relation to water supplied and the computation of water rate cannot include the cost of capital expenditure. Without disputing the calculations made by the Corporation and the figures furnished by them, it is submitted that it is fallacious to include the cost of construction of water works and therefore it is submitted that the levy is exhorbitant, excessive and arbitrary in character. It is also submitted that due procedure provided under Ss. 104 and 105 of the Karnataka Municipal Corporations Act has not been followed by the Corporation. It is lastly contended that even if water rates levied under S. 103(ix) is deemed to be a tax, the legislature having delegated its essential function of levying tax is unconstitutional and invalid. Elaborating this submission the learned Counsel for the petitioners contended that delegation of levy of tax was impermissible without providing for any maximum rates at which the tax could be levied, water rate being levy pursuant to the delegation of powers. In the absence of a maximum rate being prescribed to levy the tax and discretion having been given to the municipal body, the State Legislature has abdicated its functions and hence S. 103(ix) of the Act is unconstitutional.

(3.) Before I can embark upon the consideration of various contentions advanced by the learned Counsel on either side it is necessary to briefly survey the various provisions of the Act having relevance to the present cases. The Karnataka Municipal Corporations Act has been enacted for the purpose of establishment and regulation of Municipal Corporations in the State of Karnataka. Chapter V thereof deals with the powers and functions of the Corporation. S. 58 enumerates obligatory functions of the Corporation. Among other functions enumerated under S. 58 of the Act sub-section (21) thereof requires the Corporation to carry out construction, acquisition, management and maintenance of water works for sufficient supply of water for public and private purposes. Under Sec. 103 of the Act subject to the control of the Government a Corporation after observing the procedure laid down under S. 104 and with the sanction of the Government, can levy taxes including water rate for water supplied either in the form of a tax or in any other form including charges for such supply fixed in such mode or modes as shall best be adopted in varying circumstances of any class of cases or of an individual case. Section 104 requires the proposal for levy or increase of any tax to be duly notified to the public in the Official Gazette and also any other mode as may be prescribed and provides for objections being filed with the Corporation which may be considered by the Corporation or any of its Committees and requires submission of proposals unless abandoned along with the objections, its opinion and any modification proposed therewith to the Government. When such proposal is submitted to the Government, the Government under S. 105 of the Act may accept the same or modify it without involving any increase in the amount of tax to be imposed subject to such other conditions as may be imposed in regard to the application of the same in any part or area of the Corporation. Chapter XIII of the Act provides for water supply and sewerage and S.187 thereof enjoins the Corporation to construct works for supply of water to the city by providing tanks, reservoirs, machinery, mains, fountains and other conveniences and also to maintain the existing water works and regulate certain other activities in regard to such works. It also empowers under S. 191 of the Act the Corporation to specify by byelaws rates that may be prescribed for all water supplied. In the present case, it is not in dispute that the power exercised to levy water rate falls under S. 103 of the Act and not under Chapter XIII of the Act.