MUNICIPAL COUNCIL, KUMBAKONAM, A CORPORATION CONSTITUTEDUNDER THE DISTRICT MUNICIPALITIES ACT V OF 1920 REPRESENTED BY ITS CHAIRMAN Vs. RALLI BROTHERS

JUDGEMENT

(1.) The appellant is the Municipal Council of Kumbakonam represented by its Chairman, and the appeal is against a decree granted by our learned brother Waller, J., to the respondents, Messrs. Ralli Brothers. This firm is engaged in the export of groundnut and possesses godowns within the Kumbakonam Municipality where after purchase and before shipment groundnut is stored. The plaint recites that for a period of 22 years godowns within the Municipality have been used for this purpose without any interference, but that in or about July, 1926, a demand was made for a sum of Rs. 100 as licence fee in respect of the premises for the year 1926-27. The plaintiffs paid the fee under protest and similarly paid the fee for the ensuing year, 1927-28, upon a demand made on the 12 April, 1927. The suit was brought for a declaration that the plaintiff firm was not liable to pay such a charge because it was unreasonable and excessive and fixed in an arbitrary manner, and for a refund of the sums paid. The contention thus is that the levy was ultra vires, a contention accepted by the learned Judge in granting the decree appealed against. Since this question of the extent of the powers of a Municipality to levy licence fees under the District Municipalities Act, Madras Act V of 1920, affects both the merits of the claim and the jurisdiction of the Civil Court to entertain it, I propose to reverse the usual order and deal first with the merits.

(2.) Before discussing the facts, it will be of assistance to consider the circumstances of a closely similar case Corporation of Madras V/s. Spencer & Co., Ltd., Madras (1929) I.L.R. 52 M. 764 : 57 M.L.J. 71. It arose under the Madras City Municipal Act (IV of 1919) but the same principles were involved as must apply here. Messrs. Spencer & Company had a number of places within the city for storing spirits, and such places were required under the Act to be licensed. The licence fee had been Rs. 25 up to December, 1925, when a resolution was carried raising the licence fee to Rs. 150, and again in March, 1926, this fee was enhanced to Rs. 200 in respect of each and every place in which spirits were stored. Messrs. Spencer & Co. sued to recover the amounts paid by them under protest and obtained a decree. The learned Judges, Phillips and Reilly, JJ., who heard the appeal from that decree, point out in the first place the difference between a tax and a licence fee, which are severally provided for in different parts of the Act. They drew the inference that it was not the intention of the Act that fees for licences should subserve the ordinary purposes of taxation. A corollary to that was that the Council had not the power to fix any arbitrary fee which it chose and accordingly a line must exist between what is a reasonable licence fee and a licence fee which is unreasonable and in substance, although not in form, a tax. Reference was made to Kruse V/s. Johnson (1898) 2 Q.B. 91, where the question arose as to the validity of a bye-law made by a County Council with regard to the playing of musical instruments. It was objected that the bye-law was ultra vires on the ground that it was unreasonable and therefore bad. Lord Russel, C.J., asking in what sense the word "unreasonable" as applied to bye-laws should be understood, replies to his question thus: If, for instance, they were found to be partial and unequal in their operation as between different classes; if they were manifestly unjust; if they disclosed bad faith; if they involved such oppressive or gratuitous interference with the rights of those subject to them as could find no justification in the minds of reasonable men. and he adds that in such circumstances the Court might well say, "Parliament never intended to give authority to make such rules; they were unreasonable and ultra vires-" In the Madras City case the learned Judges go on to consider the circumstanced in which the licence fee was twice enhanced and find that this action originated in a refusal of the Government to allow the Corporation to utilise the abkari revenue arising within the City. The fee was not raised with reference to the expense of collection or regulation, and the result of the enhancement was to impose on persons who stored liquor a very unfair burden as compared with other taxpayers in the City. Some comparison was instituted between the magnitude of this fee and fees charged in respect of licensing such places as stables, dairies and premises for storing skins and explosives, all of which were much lower.

(3.) Whether a fee is or is not unreasonable must of course be decided upon the special circumstances of each case, but I have dealt at some length with this other case because as will be seen it bears a close resemblance to the present one. Another case upon much the same lines is Municipal Corporation of Rangoon v. Sooratee Bara. Bazaar Co., Ltd. (1927) I.L.R. 5 Rang. 212, where the question related to the reasonableness of a bye-law imposing a licence fee of Rs. 10 for every 100 square feet of the floor area of private markets within the Rangoon Municipality. The question of the Corporation's powers, it was held, had to be decided by what must be deemed the intention of the Legislature and the intention seemed to be merely to give power to charge a fee which would save the Corporation from being out of pocket by reason of the duties and liabilities imposed upon it by the Act in the supervision and regulation of private markets. Since the rate at which the fee was leviable did not conform to this test it was held to be unreasonable.