KADI MUNICIPALITY Vs. NEW CHHOTALAL MILLS COMPANY LTD

JUDGEMENT

(1.) These three appeals involve common questions of law and the facts in all the three appeals are also similar barring difference only in the period in respect of which octroi duty has been claimed by the Kadi Municipality (herein after referred to as the Municipality) and paid by the New Chhotalal Mills Company Ltd (herein after referred to as the Company) and the amount of such octroi duty and it would therefore be sufficient if only the facts of the first appeal are set out in full and a mere reference to the period and the amount of octroi duty is made in so far as the second and third appeals are concerned. The history of the facts relevant for the purpose of these appeals dates back to 24th June 1933 when the Company purchased a Textile Mill from the Liquidator of the Laxmi Cotton Mills Company Limited at a public auction held by the District Judge, Mehsana. The Textile Mill was situate in Kadi comprised within the territories of the former State of Baorda. After purchasing the Textile Mill the Company started running it from June 1934. It appears that around this time the Company mad an application in the Baroda Government for exemption from certain taxes and duties and the Baroda Government by a Tharav dated 16th April 1935 granted those exemptions to the Company. We shall have occasion to examine the true nature and character of this Tharav a little later but it is sufficient to state for the present that one of the exemptions granted by the Tharav was - and that is the exemption with which we are primarily concerned in these appeals - from octroi duty leviable by Municipality in respect of goods which might be brought with in the mill premises by the Company. The exemption was not a total exemption but was a partial one in that octroi duty was exempted only to the extent to which it exceeded Rs.300/-. The period for which the exemption was twenty years. It appears that at the date when the Tharav was passed, the mill premises were not within the limits of the Municipality and there was accordingly no octroi payable by the Company in respect of goods which might be brought by it within the mill premises. On 11th February 1937, however, a notification was issued by the appropriate authority under the B Class Municipalities Act, being Act 32 of Samvat 1983, by which the Municipality was governed extending the limits of the Municipality so as to include within these limits the land on which the mill was situate. The mill premises having been brought with in the limits of the Municipality, the Company became liable to pay octroi duty to the brought by it within the mill premises. In view, however, of the exemption granted to the Company, the liability of the Company to pay octroi duty to the Municipality was limited to Rs.300/- per year and the Company accordingly did not pay any amount exceeding Rs.300/- per year as and by way of octroi duty to the Municipality. In 1939 the B Class Municipalities Act, being Act, No. 32 of Samvat 1983 was repealed and substituted by the B Municipalities Act, being Act No.14 of 1949, but the exemption granted to the Company continued an the Company continued to any not more than Rs. 300/- in respect of octroi duty to the Municipality. This state of affairs continued right up to 1st May 1949 when the Ruler of Baroda State ceded full a exclusive authority, jurisdiction and powers for and in relation to the governance of the Baroda State to the Government of India under a merger agreement entered into between him and the Government of India. The territories of the Baroda State were thereafter governed by the Government of Bombay in virtue of the power delegated to it by the Central Government under S. 3 (2) of the Extra-Provincial Jurisdiction Act, 1947, until the passing of the States Merger (Governors' Provinces) Order, 1949, by which the territories of the Province of Bombay. During this period also and even thereafter the exemption from octroi duty in excess of Rs. 300/-per year continued to be enjoyed by the Company until 22nd October 1952 when the Government of Bombay by an order of that date professedly made under S.74-A of the Bombay District Municipal Act, 1901, purported to cancel the exemption. This order was communicated to the President of the Municipality and the Municipality thereupon served a notice on the Company requiring the Company to pay octroi duty of Rs. 715-13-3 for the period from 22nd October 1952 to 31st October 1952 on the footing that the exemption was no longer available to the Company. The Company paid the amount under protest and after giving the requisite notice to the Municipality filed Suit No. 14 of 1953 in the Court of the Civil Judge, Junior Division, Kadi, for recovering that amount together with interest. The Company also claimed a declaration that the Municipality was not entitled to recover any amount over and above Rs.300 per years as and by way of octroi duty from the Company so long as the Tharav existed and an injunction restraining the Municipality from levying or collecting as and by way of octroi duty any amount over and above Rs.300/- per year. The suit was resisted by the Municipality which contended that on the cession of sovereignty by the Ruler of Baroda State to the Government of India, the Tharav came to an end and the Company was, therefore, not entitled to any exemption from octroi duty from and after the date of such cession. The Municipality also contended that in any event the amount of octroi duty having been collected pursuant to the order dated 22nd October 1952 passed by the Government of Bombay, the Company was not entitled to any relief until the said order was set aside and the said order could not be set aside unless the Government of Bombay was made a party to the suit. The argument was that since the Government of Bombay was not made a party to the suit, the suit was liable to be dismissed. Now before we proceed to state what happened in the suit, it is necessary to point out that presumably realising that the order dated 22nd October 1952 was not a valid order, the Government of Bombay cancelled the same and issued a new order dated 14th July 1953 withdrawing the exemption granted under the Tharav. This order was not purported to be issued under S. 74A of the Bombay District Municipal Act, 1901, or under any other specific provision of that Act. Having regard to this order it was contended on behalf of the Municipality, that in any event the exemption granted under the Tharav stood withdrawn by reason of this order and that the Company was, therefore, not entitled to any exemption at any rate from and after 14th July 1953.

(2.) The learned trial Judge before whom the suit came to be tried took the view that the exemption granted under the Tharav continued to be in force, even after the merger of Baroda State and that the order dated 14th July 1953 in so far as it purported to withdraw that exemption was invalid and that the Company was, therefore, entitled to exemption from payment of octroi duty in excess of Rs. 300/- per year for a period of twenty years, as provided in the Tharav. The learned trial Judge also held that the period of twenty years was liable to be computed from the date of the Tharav and not from the date when the notification bringing the mill premises within the limits of the Municipality came into force. The learned trial Judge negatived the contention of the Municipality that the Government of Bombay was a necessary party to the suit and held that it was open to the Company to attack the validity of the order dated 22nd October 1952 without making the Government of Bombay a party to the suit when that order was sought to be set up by the Municipality as an answer to the claim of the Company. The learned trial Judge accordingly decreed the suit but limited the declaration and injunction to the period of twenty years from the date of the Tharav. The Municipality being aggrieved by this decree preferred an appeal before the District Court, but the appeal was unsuccessful and the decree of the learned trial Judge was confirmed by the Extra Assistant Judge who heard the appeal. The Municipality thereupon preferred a Second Appeal in this Court. The Second Appeal came up for hearing before Shelat, J., as he then was. The learned Judge agreed with the conclusions reached by the learned Assistant Judge with only this difference that in his view the period of twenty years was liable to be computed from the date of the notification extending the limits of the Municipality and not from the date of the Tharav. The learned Judge accordingly confirmed the decree with this modification that the period of twenty years should be computed from 11th February 1937 and not from the date of the Tharav. It may also be mentioned, though that is not material for the purpose of these appeals, that the learned Judge altered the rate of interest on the amount of the decree from six per cent to four per cent. The Municipality thereupon applied for leave under Clause 15 of the Letters Patent and on leave being granted preferred Letters Patent Appeal No. 8 of 1961 in this Court.

(3.) Letters Patent Appeal No.9 of 1961 arose out of a similar suit filed by the Company against the Municipality on 15th January 1953. The refund of octroi duty claimed in that suit was of Rs. 3,164-7.0,being the amount claimed by the Municipality and paid by the Company under protest, for the period of 3rd December 1952 to 30th December 1952. Letters Patent Appeal No. 10 of 1961, arose out of a third suit filed by the Company against the Municipality on 4th February 1954 and in the suit the Company claimed refund of Rs. 9,128-4-6, being the amount of octroi duty claimed by the Municipality and paid by the Company under protest, for the period 3rd August 1953 to 1st January 1954. There was an additional point taken by the Municipality in this third suit and that point was that, at the date of the suit, the Municipality had been superseded under Section 179(1) of the Bombay District Municipal Act, 1901, and no suit for refund could, therefore, lie against the Municipality. This point was negatived by the learned trial Judge but was accepted by the learned Assistant Judge with the result that a Second Appeal had to be preferred by the Company. Shelat J., negatived the validity of this point and took the view that the suit for refund was maintainable against the Municipality, and in this view of the matter, he declared the suit. Letters Patent Appeal No.10 of 1961 is directed against that decree passed by the learned Judge.