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PETITIONER:
ANANT MILLS CO. LTD.
Vs.
RESPONDENT:
STATE OF GUJARAT & ORS.
DATE OF JUDGMENT21/01/1975
BENCH:
ACT:
Constitution of India, 1950, Art. 14--Treating pending cases
as a class different from decided cases, if a permissible
classification.
Constitution of India, 1950, .Art. 14--Duty of the person
challenging a provision of the Act as
discriminatory--Constitutional validity, if could be decided
on the basis of supposed existence of certain facts by
raising a presumption.
Bombay Provincial Municipal Corporations Act (Bombay Act 59
of 1949) as amended by Gujarat Acts No. 8 of 1968 and No. 5
of 1970, Sections 129 and 137--Conservancy tax for different
categories of properties--Tax, it should be related only to
the expense for conservancy service for that particular
category.
of 1949) as amended by Gujarat Act Nos. 8 of 1968 and No. 5
of 1970, proviso to section 129(b)--Corporation to determine
different rates for different classes of
properties--Proviso, if suffers from the vice of excessive
delegation of legislative power.
of 1949) as amended by Gujarat Acts No. 8 of 1968 and No. 5
of 1970, Section 406(2) (e) rule 42 of Taxation--Appeal
against a tax or rateable value--Deposit of amount claimed
condition precedent to entertaining appeal--Appellate judge
empowered to remove undue hardship to appellant--Requirement
of deposit, if nullifies right of appeal--Provision if makes
invidious distinction.
Constitution of India, 1950, Entry 49, List II, Schedule
VII-"Land", if includes underground strata.
HEADNOTE:
The assessment of properties to property tax in Ahmedabad
was made under the Bombay Provincial Municipal Corporations
Act by making entries in the assessment books in accordance
with the procedure prescribed in the Taxation Rules set out
in Chapter VIII of Schedule A of the Corporations Act, A
separate section of the assessment book was prepared by the
Commissioner of the Corporation for each official year in
respect of the assessment of property tax on certain kinds
of properties like textile mills, factories and buildings of
University. These properties were classified as special
properties. There was some increase in the rateable value
fixed by the Commissioner for the year 1964-65 and 1965-66.
The Commissioner also made initial entries in assessment
book in respect of those properties for the year 1966-67. A
number of writ petitions under Art. 32 of the Constitution
were filed in this Court challenging the validity of the
assessments for the years 1964-65 and 1965-66 as well as
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initial entries for the year 1966-67. The Supreme Court in
the judgment New Manek Spinning & Weaving Mills Co. Ltd. &
Ors. v. Municipal Corporation of City of Ahmedabad & Ors.
[1967] 2 S.C.R. 69, allowed the writ petitions and held the
relevant entries in the assessment books to be invalid.
Rules 7(2) and (3) were also held to be invalid on account
of excessive delegation of powers by the legislature. The
taxation on the basis of floor area as adopted by the
Corporation was held to violate Art. 14 of the Constitution.
When the Corporation initiated steps to make fresh
assessment for the years 1964-65, 1965-66 and 1966-67, it
was unable to do so in view of the decision of the High
Court in the case of Ahmedabad Municipality v. Keshavlal 6
G.L.R. 228 wherein it was held that the Corporation had no
power to assess and levy property tax for any official year
after that year had ended. in order to get over this
difficulty, the legislature enacted Gujarat Act 8 of 1968.
New Sec. 152A
221
and new rules 7 and 21B were inserted. When notices were
served on the petitioners to furnish return of the
particulars, the petitioners filed petitions in the High
Court challenging the validity of those notices. Those
petitions were allowed by the High Court as per judgment
dated July 3, 1969 on the ground that the demand for certain
particulars contained in the notices was beyond the scope of
r. 8(1). In the appeal filed by the Corporation against the
judgment dated 3rd July, 1969, the Supreme Court, in its
judgment in Municipal Corpora. lion of the City of
Ahmedabad, etc. v. New Sherock Spg. & Wvg. Co. Ltd. etc.
[1971] 1 S.C.R. 288, held that, as the assessments were not
in accordance with law, the Corporation was not entitled to
retain that amount. The Court also struck down subsection
(3) of s. 152-A which gave power to the Corporation to
refuse to refund the amount illegally collected de-spite the
order of the Court.
For the official year 1967-68 the Corporation determined the
rate of conservancy tax to be 3 per cent and a special rate
of 9 per cent for the large premises like textile mills and
factories. The petitioners preferred appeals against the
order of the Deputy Commissioner determining the amount of
property tax to the Chief Judge of the Court of Small
Causes, Ahmedabad. The Chief Judge was, however, precluded
from hearing those appeals since the amount of tax was not
deposited by the petitioners as required by s. 406 (2) (e)
of the Corporations Act. The petitioners thereafter filed
petitions in the High Court challenging the validity of the
assessments made by the Deputy Municipal Commissioner for
the, official years 1966-67, 1967-68 and 1968-69. Those
writ petitions were allowed by the Gujarat High Court as per
judgment dated October 27, 1969. The ordinance dated
December 23, 1969. was replaced by Gujarat Act No. 5 of 1970
which came into effect from March 31, 1970. This Act
brought about material changes in the Corporations Act.
The High Court held (i) Section 2(IA) Clause (i) is valid so
far as it is applicable to the official year 1969-70 but it
is null and void in so far as it applies to the official
years from the commencement of the Corporations Act uptoand
including the official year 1968-69, on account of
infraction or Art. 14; (ii)Section 406(2) (e) and s. 411
(b) are null and void as being in contraventionof Art.
14; Rule 42 of the Taxation Rules is also ultra vires and
void in so far as it provides that if an appeal is preferred
or entertained against the tax, warrant shall not issue for
the recovery of the amount of tax; and (ii)The Resolutions
passed by the Corporation for the official year 1967-68,
1968-69, 1969-70 and 1970-71 to the extent to which they fix
the rate of conservancy tax at 9 per cent inter alia in
respect of textile mills and factories belonging to the
petitioners are ultra vires the proviso to s. 129(b) and the
rate of conservancy tax applicable in respect of these
textile mills and factories must, therefore, be taken to be
the general rate of 3 per cent. The High Court upheld the
constitutional validity of proviso (e) to s. 2(IA) clause
(ii) and sections 49, 129(b), 406(2)(e) and 411(bb) of the
Act and s. 13(1) and 13 (2) of the Act 5 of 1970.
Civil Appeals Nos. 489 to 513 and 752 to 755 of 1973 have
been filed in this Court by the petitioners before the High
Court against the Judgment of that Court in so far as the
Court had upheld the constitutional validity of the impugned
provisions. Civil Appeals Nos. 643 to 684 of 1973 have been
filed by the Municipal Corporation of the City of Ahmedabad
and others against the above judgment in so far as the High
Court has struck down the impugned provisions and the
Resolutions. Civil Appeals No. 389 to 430 of 1974 have been
filedby the State of Gujarat against the judgment in so
far as the High Court hasstruck down the impugned
provisions. Writ Petitions Nos. 51, 60 to 73, 87 to91.
197, 492 to 503, 533, 534 and 583 of 1972 as also writ
petitions Nos. 1866 to 1877 and 2046 of 1973 which have been
filed by the Aryodaya Sp-. & Wvg. Mills Co. Ltd. and other
parties involve substantially the same question which arises
in appeals, though some of these writ petitions relate to
the subsequent period of 1971-72. Writ Petition No. 74 of
1972 filed by the Ahmedabad Electricity Co. Ltd. involves an
additional point regarding its liability to pay property tax
which ha% been levied on the ground that it occupies land
below the surface for underground cables.
222
Reversing the decision of the High Court,
HELD : (i) As the affidavit filed on behalf of the
respondents discloses that ,the factual position as it
existed before the promulgation of Ordinance 6 of 1969 was
that the provisions of ,he Bombay Rent Act were not taken
into account in determining the rateable value, there would
be no escape from the conclusion that no differential
treatment has been meted out to pending cases in clause (i)
of s. 2(IA). There is a presumption of the constitutional
validity of a statutory provision. In case any party
assails the validity of any provision on the ground that it
is violative of Art. 14 of the Constitution. it is for that
party to make the necessary averments and adduce material to
show discrimination violative of Art 14. No averments were
made in the petitions before the High Court by the
petitioners that the assessments before the coming into
force of Ordinance. 6 of 1969 had been made by taking into
account he rent restriction provisions of the Bombay Rent
Act. It is extremely hazardous to decide the question of
constitutional validity of a provision on the basis of the
supposed existence, of certain facts by raising a
presumption. it is very clear that the High Court has acted
on an incorrect assumption. [236G-237E]
Assessment Committee of the Metropolitan BoRough of Poplar
v. Roberts [1922] 2 A.C. 93, Gulam Ahmed Rogey v. Bombay
Municipality A.I.R. 1951 Bom. 320 and The Corporation of
Calcutta v. Sn. Padma Devi and Ors. [1962] 3 S.C.R. 49,
referred to
(ii)Classification by treating decided cases as belonging
to one category and pending cases as belonging to another
category is reasonable and not per se offensive to Art 14 of
the Constitution. [238H-239A]
Ram Krishna Dalmia v. Shri Justice S. R. Tanadolkar, [1959]
S.C.R. 279, Khandige Shah Bhav v. Agricultural Income-tax
Officer, [1963] 3 S.C.R. 809, Rao Shiv Bahadur Singh v.
State of Vindhya Pradesh [1953] S.C.R. 1188, 1197,
Hathisingh Manufacturing Co. Ltd. v. Union of India [1960] 3
S.C.R. 528 and Jain Bros. and Ors. v. The Union of India &
Ors. [1970] 3 S.C.R. 253. referred to.
(iii)The scheme of the Corporation Act appears to be
that in the case of premises used solely for public purposes
and not intended to be used for purposes of profit or in the
case of premises intended to be used for residential or
charitable or religious purposes in respect of which
conservancy tax is payable ’by the Government, the rate of
conservancy tax should be lower compared to the rate of
general conservancy tax. What is required by s. 129 is that
before determining the rates of conservancy tax for
different categories of properties the Corporation should
find out the total expense it would have to incur for the
various purposes mentioned in clause (b) of that section.
After having ascertained the total expense it would be
permissible to the Corporation to fix different rates of
conservancy tax for various categories of properties. It is
,not essential except in cases mentioned in sub-sections (2)
and (3) of s. 137 that the rate of conservancy tax for a
particular category of properties should be such as would be
related only to the expense for conservancy service for that
particular category of properties. Clause (b) of s. 129
also takes into account the expense required for efficiently
maintaining and repairing the municipal drains and for
finding out the total expenditure for conservancy service.
The High Court was, therefore, in error in striking down the
resolution passed by the Corporation. [242E-F; 244F-H; 245B-
C]
(iv)The "opinion of Corporation" mentioned in clause (b) of
section 129 ,is formed after budget estimates are prepared
in accordance with Ss. 95. 96 and 100 of the Corporations
Act. The entire procedure provides built-insafeguards and
lays down adequate guidelines in the matter of taxation. It
cannot, therefore, be said that the legislature has not
prescribed any guiding principle for the Corporation for
determining the rates of conservancy tax. [245F-G. H-246A]
(v)The bar created by s. 406(2)(e) to the entertainment of
the appeal by a person who has not deposited the amount of
tax due from him and who is not
223
able to show to the appellate judge that the deposit of the
amount would cause him undue hardship arises out of his own
omission and default. A disability or disadvantage arising
out of a party’s own default or omission cannot be taken to
be tantamount to the creation of two classes offensive to
Art. 14 of the Constitution. especially when that disability
or disadvantage operates upon all persons who make the
default or omission. Section 406(2)(e) is constitutionally
valid and, in as much as ’the validity of s. 41 1 (bb) and
r. 42 hinges on the validity of sec. 406(2)(e) all the three
provisions are constitutionally valid, [247D-248C, F-G]
Hannah Cohen, Ex. of Sol. Cohen, Deceased, and David E.
Cohen, Intervener, Petitioners & .Anr.. v. Beneficial Loan
Corporation & Ors. 37 U.S. 539, referred to.
(vi)There can be no doubt that land in entry 49 of List II
would include underground Strata. The word "land" has also
been defined in clause (30) of s. 2 of the Corporations Act
to include land which is being built upon or is built upon
or covered with water, benefits to arise out of land, things
attached to the earth or permanently fastened to anything
attached to the earth or permanently fastened to anything
attached to the earth and rights created by legislative
enactment over any street. This definition is of inclusive
nature and does not exclude from its ambit the underground
strata of the land. The petitioner-company is in occupation
of the land wherein underground supply line is laid. [249E-
F. 25OD-E]
Electric Telegraph Co. v. Salford Overseers, [1855] 11 Ex.
181, 186, Mysore Aldermen and Councillors of the City of
Westminster Ors. v. The Southern Railway Company, The
Railway Assessment Authority and W. H.Smith & Son, Limited &
Ors. 1936 A.C. 511, The Assessment Committee of Holywell
Union & Anr. v. Halkyn District Mines Drainage Col, [1895]
A.C. 117 Rex. v. Chelsea Waterworks Company. 5 B. & Ad. 156
and Reg v. West Miiddlesex Waterworks, 1 E. & E, at p. 720,
referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 752 to
755, 489 to 513, 643 to 684 of 1973 & 389 to 430 of 1974.
From the Judgment and order dated the 4th December, 1972 of
the Gujarat High Court in Spl. Civil Appeals. Nos. 233,
239-241, 339, 488, 1634, 1635 and 1636 of 1971, and
Writ Petitions Nos. 51, 60 to 74, 87 to 91, 157, 492 to 503,
533534 and 583 of 1972 and 1866 to 1877 & 2040 of 1973.
Y.M. Tarkunde (In C. As, Nos. 752, 489, 643, 389 and W.P.
Nos. 51 and 74/72), C. T. Daru and Ravinder Narain, P. C.
Bhartari, K. M. Desai and K. J. John, for the petitioners,
(In all the W.Ps.) and Appellants (In C.As. Nos. 489-513,
752-755/73) and respondent No. 1 (C.As. Nos. 643-47, 650-
654, 658-664, 667-671, 674, 678, 679 and 681-684/73).
F.S. Nariman, Additional Solicitor General of India, S.
B. Vakil and 1. N. Shroff, for appellants (In C.As. Nos.
643-684/73) and for respondent No. 3 (In all the W.Ps.) for
respondents Nos. 2-4 (In C.As. Nos. 489-497) respondent Nos.
1-4 (In C.As. Nos. 498-511) respondent Nos. 2-5 (In C.As.
Nos. 512-513) respondent No. 2-4 (In C.A. No. 752)
respondent Nos. 1-4 (In C.A. Nos. 753-754) respondent Nos.
2-5 (In C.A. No. 755) and for respondent Nos. 1-3 (In C.As.
Nos. 389-430/74).
224
M.C. Bhandare and M. N. Shroff, for the appellants (In
C.As. Nos. 389-430) respondent No. 7. (In C.A. No. 389-497,
512-513) respondent No. 5 (In C.As. Nos. 498-510) respondent
No. 2. (In C.A. Nos. 643-678, 681-684) respondent No. 3 (in
C.As. Nos. 679680) respondent No. 1 (In C.As. Nos. 752-755)
respondent No. 5 (In C.As. Nos. 753) respondent No. 6 (In
C.A. No. 754) and respondent No. 4 (In all the W.Ps.)
C. S. S. Rao, for respondent No. 5 (In C.A. No. 752/73).
R. H. Dhebar and B. V. Desai, for respondent No. 4. (In
C.As. Nos. 417-418/74) and In C.As. No. 656-657 of 1973).
The Judgment of the Court was delivered by
KHANNA, J.-Questions relating to the constitutional validity
of the different provisions of the Bombay Provincial
Municipal Corporations Act (Bombay Act 59 of 1949)
(hereinafter referred to as the Corporations Act) as amended
by Gujarat Acts No. 8 of 1968 and No. 5 of 1970 arise for
determination in these appeals and the connected writ
petitions. The Corporations Act was enacted by the Bombay
legislature in December 1949 for the establishment of
municipal corporations in the cities of Ahmedabad and Poona.
It was applied to Ahmedabad on July 1, 1950.
The assessment of properties to property tax in Ahmedabad
was made under the Corporations Act by making entries in the
assessment books in accordance with the procedure prescribed
in the Taxation Rules set out in Chapter VIII of Schedule A
of the Corporations Act. A separate section of the
assessment book was prepared by the Cornmissioner of. the
Corporation for each official year in respect of the
assessment of property tax on certain kinds of properties
like textile mills, factories and buildings of university.
These properties were classified special properties. The
rateable value of properties included in the Special
Property Section was previously determined on a flat rate
for every 100 sq. ft. of the floor area. In arriving at the
figure of the rateable value, the plants and machinery
situate upon lands and buildings were also taken into
account as provided in clauses (2) and (3) of rule 7 of the
Taxation Rules. There was some increase in the rateable
value fixed by the Commissioner for the years 1964-65 and
1965-66. The Commissioner also made initial entries in
assessment book in respect of those properties for the year
1966-67. A number of writ petitions under article 32 of the
Constitution were filed in this Court challenging the
validity of the assessments for, the years 1964-65 and 1965-
66 as well as the initial entries for the year 1966-67.
Those writ petitions were disposed of by this Court by a
judgment delivered on February 21, 1967 and reported as New
Manek Chok Spinning & Weaving Mills Co. Ltd. & Ors. v.
Municipal Corporation of the City of Ahmedabad & Ors.(1)
This Court allowed the writ petitions and held the relevant
entries in the assessment books to be invalid. It was held
in that case that the State Legislature had no competence
under entry 49 of the State List in the Seventh Schedule to
the Constitution to make a law for taxing plant and
machinery. Rule 7 (2) was held to be beyond the legislative
competence of the State. Rules 7 (2) and
(1) [1967]2 S.C.R. 679.
225
(3) were also held to- be invalid on account of excessive
delegation of powers by the- legislature. Under those
rules. the specification (A. the classes of machinery for
the, purpose of taxation was to be made, by the Commissioner
with the approval of the Corporation irrespective of the
question as to where they were to be found. This Court
found that it depended upon the arbitrary will of the
Commissioner as to what machinery he would specify and what
he would not and that he was the only person who could
examine this question as there,was no right of appeal.
Dealing with the method of levy of tax on the basis of floor
area, this Court observed that it was against the provisions
of the Act and the rules made thereunder and that it had not
been shown that conditions prerequisite for determination of
the annual value on that basis had existed at the relevant
time. The above method of taxation on the basis of floor
area, it was held, was violative of article 14 of the
Constitution as it would in the absence of classification of
factories on any rational basis give rise to inequalities.
Although the Supreme Court directed the Corporation to
prepare fresh assessment lists relating to properties in the
Special Property Section for the official years 1964-65,
1965-66 and 1966-67, the Corporation was unable to do so in
view of the decision of the High Court in the ease of
Ahmedabad Municipality v. Keshavlal(1) wherein it was held
that the Corporation had no power to s and levy property tax
for any official year after that year had ended. The
legislature in order to get over this difficulty enacted
Gujarat Act 8 of 1968 and by this amending Act inserted
inter alia new section 152A in the Corporations, Act. The
new section conferred power on the Corporation to assess or
reassess property taxes if the original assessment was
affected by a decree or order of a court on either of the
grounds on which the Supreme Court had set aside the
assessment for the official years 1964-65, 1965-66 and 1966-
67 in New Manek Chowk Mills case (supra). The amending Act
also substituted new rule 7 for the old rule which contained
the offending clauses (2) and (3). Rule 21B was also in-
serted by the amending Act and the said rule permitted the
Municipal Commissioner to make fresh valuation of properties
after the expiry of the official year if preparation or
completion of the assessment before the expiry of the
official year were or would be affected on account of any
order of a court.. After the amending Act had come into
force, the Corporation initiated proceedings for re-
assessment of lands and buildings of the petitioners to
property tax for the official years 1964-65, 1965-66 and
1966-67. When notices were served on the petitioners to
furnish return of the particulars, the petitioners filed
petitions in the High Court challenging the validity of
those notices. Those petitions were allowed by the High
Court as per judgment dated July 3, 1969 on the ground that
the demand for certain particulars contained in the notices
was beyond the scope of rule 8(1). The contention of the
petitioners in those petitions that no assessment could be
made after the expiry of the official year was repelled and
it was held that the Corporation had the power under section
152A to reassess lands and buildings of the petitioners to
property tax for the official years 1964-65. 1965-66 and
1966-67 notwithstanding the expiration of those
(1) 6 G.L.R. 228.
16-L379SupCI/75
226
years. The High Court also held that the new section did
not stand in the way of the petitioners getting refund of
the property tax already paid.. Appeal was filed in this
Court against the above judgment by the Corporation.
The Ahmedabad Corporation, it may be stated, used to pass a
resolution under section 99 of the Corporations Act
determining the rate at which property tax would be levied
for the particular official year. So far as conservancy tax
was concerned, the rate determined by the Corporation was 3
per cent. A special rate of conservancy tax of 7-1/2 per
cent was, however, fixed by the Corporation for the official
year up to 1966-67 for hotels, clubs, stables, theaters or
cinemas or other large premises including mills and
factories registered under the Factories Act and where fifty
or more workmen were employed ill manufacture for all the
shifts. For the official year 1967-68 the Corporation
determined the rate of conservancy tax to be 3 per cent and
a special rate of 9 per cent for the large premises
mentioned above the rate of general tax for ordinary
property was fixed on a graduated scale but on properties
used by textile mills the rate was uniform at 30 per cent.
The powers of the Commissioner under the Taxation Rules were
entrusted to the Deputy Municipal Commissioner by virtue of
an office order issued under section 49(1). The Deputy
Commissioner thereafter determined the rateable value of the
lands and buildings of the petitioners. The petitioners
preferred appeals against the order of the Deputy
Commissioner determining the amount of property tax to the
Chief Judge of the Court of Small Causes Ahmedabad. The
Chief Judge, was, however, precluded from hearing those
appeals since the amount of tax was not deposited by the
petitioners as required by section 406 (2) (e) of the
Corporation Act. The petitioners thereafter filed petitions
in the High Court challenging the validity of the assess-
ments made, by the Deputy Municipal Commissioner for the
official years 1966-67, 1967-68 and 1968-69. Those writ
petitions were allowed by the Gujarat High Court as per
judgment dated October 27, 1969. it was held that section 49
of the Corporation Act did not contemplate delegation of
judicial or quasi-judicial powers by the Municipal
Commissioner under taxation rule 18 and that disposal of
complaints by the Deputy Commissioner was not permissible.
The High Court also declared section 406(2) (e) violative of
article 14. Part of rule 42 which related to distress or
attachment for default in payment of tax was also struck
down on the ground that it could not stand independently of
section 406 (2) (e). The fixation of special rate of 9 per
cent for conservancy tax in respect of large premises
including mills and factories was also held to be illegal
and void.
The official year 1969-70 having in the meantime commenced,
the Municipal Commissioner adopted under taxation rule 21
the entries of the official year 1968-69 as the entries for
the official year 1969-70. Complaints were then filed by
the petitioners against the amount of rateable value entered
in the assessment books. During the pendency of those
complaints, the Governor of Gujrat promulgated Ordinance No.
6 of 1969 on December 23, 1969. The ordinance was replaced
by Gujarat Act No. 5 of 1970 which came into force with
effect from March 31, 1970. The ordinance amended the
definition of rateable
227
value as well as section 49 with retrospective effect. It
also contained ,tam validating provisions. Gujarat Act 5 of
1970 was on the line Ordinance No-. 6 of 1969, except in the
matter of definition of rateable value. A number of
petitions in the meantime were filed to challenge the
validity of the provisions of Ordinance No. 6 of 1969 and
:)se of Act 5 of 1970.
For the official year 1970-71, the valuation was made in
accordance with Gujarat Act 5 of 1970. A number of writ
petitions were A before the Gujarat High Court challenging
the provisions of Gujarat Act 5 of 1970 as well as the
valuation for the year 1970-71.
In the meantime, on April 17, 1970 appeal filed by the
Corporation against judgment dated July 3, 1969 of Gujarat
High Court was ;missed by this Court. The decision of this
Court was given in Municipal Corporation of the City of
Ahmedabad, etc. v. New Shorock vg. & Wvg. Co. Ltd. etc.(1).
It was held by this Court that under conviction 152A before
the Corporation can retain an amount collected property tax,
there must be assessment according to law. As the impugned
assessments were not in accordance with law, the Corporation
was not entitled to retain that amount. This Court also
struck own subsection (3) of section 152A which had been
added by ordinance 6 of 1969 and which gave power to the
Corporation to fuse to refund the amount illegally collected
despite the order of the Court.
It may be stated that the dispute with which we are
concerned in be present appeals and writ petitions relates
to assessment to property x of large premises like textile
mills, and factories. One writ petition dates to an
electricity company.
Before setting out the findings of the High Court and
dealing with the questions which arise for determination in
the appeals and writ petitions before us, we consider it
appropriate to refer to some of the relevant provisions.
Section 127(1) of the Corporations Act requires the
Corporation to impose inter alia property taxes. "Property
taxes" according to section 129, shall comprise- (a) water
tax, (b) conservancy tax, and (c) a general tax. Clause (b)
and the relevant part if clause (c) of that section read as
under :
For the purpose of sub-section (1) of section
127 property taxes shall comprise the
following taxes which shall, subject to the
exceptions, limitations and conditions herein-
after provided, be levied on buildings and
lands in the City
(a)................
(b) a conservancy tax at such percentage of
their rateable value as will in the opinion of
the Corporation suffice to provide for the
collection, removal and disposal, by municipal
agency, of all excrementitious and polluted
matter from privies, urinals and cess-pools
and for efficiently maintaining and repairing
the municipal drains- constructed or used for
the receipition or
(1) [1971] 1 S.C.R. 288.
228
conveyance of such matter, subject however to
the provisos that the minimum amount of such
tax to be levied in respect of any one
separate holding of land or of any one
building or of any one portion of a building
which is let as a separate holding shall be
eight annas per mensem and that the amount of
such tax to be levied in respect of any hotel,
club or other large premises may be specially
fixed under section 137;
(c) a general tax of not less than twelve
per cent. of their rateable value, which may
be levied,- if the Corporation so determines,
on a graduated scale
Provided.............
According to section 99 the Corporation shall, on or before
the twentieth day of February,, after considering the
Standing Committee’s proposals in this behalf,, determine
inter alia subject to limitations an( conditions prescribed
in Chapter XI, the rates at which municipal taxes referred
to in sub-section (1) of section 127 shall be levied in the
next ensuing official year. "Official year" has been
defined in section 2(44) to mean the year commencing on the
first day of April. Section 137 reads as under :
"(1) The Commissioner may, whenever he thinks
fit, fix the conservancy tax to be paid in
respect of any hotel, club, stable or other
large premises at such special rate as shall
be generally approved by the Standing
Committee in this behalf, whether the service
in respect of which such tax is leviable be
performed by human labour or by substituted
means or appliances.
(2)In the case of premises used solely for
public purposes and not used or intended to be
used for purposes of profit or for residential
or charitable or religious purposes in respect
of which the conservancy tax is payable by the
Government the Commissioner shall fix the said
tax at a special rate approved as aforesaid.
(3)In any such case the amount of the
conservancy tax shall be fixed with reference
to the cost or probable cost of the
collection, removal and disposal, by the
agency of municipal conservancy staff, of
excrementitious and polluted matter from the
premises."
Section 150 relates to supplementary taxation. Clause (1)
of section 49 enables a Deputy Municipal Commissioner,
subject to the orders of the Commissioner, to exercise such
of the powers and perform such of the duties of the
Commissioner as the Commissioner shall from time to time
depute to him. Section 406 deals with appeals. According
to clause (1) of section 406, subject to the provisions
hereinafter contained, appeals against any rateable value or
tax fixed or charged under the Act shall be heard and
determined by the Judge. "Judge" has been defined in clause
(29) (as amended by Act 8 of
229
1968) of section 2 to mean in the city of Ahmedabad the
Chief Judge of the Court of Small Causes. Clause (e) of sub
section (2) of section 406 states that no appeal shall be
heard against a tax, or in the case of an appeal made
against a rateable value after a bill for any property tax a
assessed upon such value has been presented to the
appellant, unless the amount claimed from the appellant has
been deposited by him with the Commissioner. Section 411
(as amended by Act 8 of 1968) makes provision for appeal to
the High Court from a decision of the Judge in an appeal in
certain contingencies. Clause (54) of section 2 defines
"rateable value" to mean the value of any building or land
fixed in accordance with the provisions of the Act and the
rules for the purpose of assessment to property taxes.
According to section 453, the rules in the schedule as
amended from time to time shall be deemed to be part of the
Act. Chapter VIII of the schedule contains the Taxation
Rules. According to clause (1) of rule 7, in order to fix
the rateable value of any building or land assessable to a
property-tax there shall be deducted from the amount of the
annual rent for which such land or building might reasonably
be expected to let from year to year a sum equal to ten per
cent of the said annual rent, and the said deduction shall
be in lieu of all allowance for repairs or on any other
account whatever. Clauses (2) and (3) of that rule need not
be set out as they were struck down by this Court in the
case of New Manak Chowk Mills (supra). Rule 9 relates to
the keeping of an assessment book in which shall be entered
inter alia every year the rateable value of buildings and
lands in the city of Ahmedabad determined in accordance with
the provisions of the Act and the rules as also the names of
persons primarily liable for the payment of property taxes,
if any, leviable on each such building or land’ Clause (i)
of rule 42 reads as under
(1) If the person on whom a notice of demand
has been served under rule 41 does not within
fifteen days from such service pay the sum
demanded or shows sufficient cause, for non-
payment of the same to the satisfaction of the
Commissioner and if no appeal is preferred
against the said tax, a,, hereinafter
provided, such sum, with all costs of the
recovery, may be levied under a warrant in
Form H or to the like effect, to be issued by
the Commissioner, by distress and sale of the
movable property of the defaulter or the
attachment and sale of the, immovable
property’ of the defaulter- or, if the
defaulter be the occupier of any premises in
respect of which a property-tax is due, by
distress and sale of any movable property
found on the said premises or. if the, tax be
due in respect of any vehicle, boat or animal
by distress and sale of such vehicle, boat or
animal in whomsoever’.,, ownership, possession
or control, the same may be.’,
We may now set out the material changes brought out in the
Corporations Act by Gujarat Act No. 5 of 1970. Sections 2,
4, 6, 7, 10, 11, 12 and 13 of (2) of the amending Act read
as under :
"2. In the Bombay Provincial Municipal
Corporations Act, 1949 (hereinafter referred
to as ’the principal Act’), in section 2,-
230
(1)before clause (1) the following clause
shall be, and shall be deemed always to have
been, inserted, namely
(1A) ’annual letting value’ means-
(i)in relation to any period prior to 1st
April, 1970, the annual rent for which any
building or land or premises, exclusive of
furniture or machinery contained or situate
therein or thereon, might, if the Bombay
Rents, Hotel and Lodging House Rates Control
Act, 1974 were not in force, reasonably be
expected to let from year to year with refer-
ence to its use :
(ii)in relation to any other period, the
annual rent for which any building or land or
premises, exclusive of furniture or machinery
contained or situate there in or thereon,
might reasonably be expected to let from year
to year with reference to its use;
and shall include all payments made or agreed
to be made to the owner by a person (other
than the owner) occupying the building or land
or premises on account of occupation, taxes,
insurance or other charges incidental thereto
Provided that, for the purpose of sub clause
(ii),-
(a) in respect of any building or land or
premises the standard rent of which has been
fixed under section 11 of the Bombay Rents,
Hotel and Lodging House Rates Control Act,
1.947, the annual rent thereof shall not
exceed the annual amount of the standard rent
so fixed;
(b) in the case of any land of a class not
ordinarily let, the annual rent of which
cannot in the opinion of the Commissioner be
easily estimated, the annual rent shall be
deemed to be six per cent of the estimated
market value of the land at the time of
assessment;
(c) in the case of any building of a class
not ordinarily let, or in the case of any
industrial or other premises of a class not
ordinarily let, or in the case of a class of
such premises the building or buildings in
which are not ordinarily let, if the annual
rent thereof cannot in the opinion of the
Commissioner be easily estimated, the annual
rent shall be deemed to be six per cent of the
total of the estimated market value, at the
time of the assessment, of the land on which
such building or buildings stand or, as the
case may be. of the land which is- comprised
in such premises, and the estimated cost, at
the time of the assessment, of erecting the
building, or as the case may be, the building
or buildings comprised in such premises;’
231
(2)for clause (54), the following shall be,
and shall be deemed always to have been,
substituted, namely
(54)’rateable value’ means the value of any
building or land fixed, whether with reference
to any given premises or otherwise, in
accordance with the provisions of Act and the
rules for the purpose of assessment to
property taxes; 4. In section 49 of the
principal Act, in sub-section (1),-
(1)for the words ’such of the duties of the
Commissioner’ the words ’such of the duties of
the Commissioner, including powers and duties
of a judicial or quasi-judicial nature, shall
be, and shall be deemed always to have been,
substituted;
(2)after the first proviso, the following
further proviso shall be, and shall be deemed
always to have been, added, namely :-
’Provided further that nothing in this sub-
section " be deemed to empower the
Commissioner to issue any order regulation the
exercise of powers or performance of duties of
a judicial or quasi-judicial nature deputed by
him.,
6.In section 129 of the principal Act, to clause (b), the
following proviso shall be, and shall be deemed always to
have been, added, namely :-
’Provided that when determining under section
99 or section 150 the rate at which
conservancy tax shall be levied for any
official year or part of an official year, the
Corporation may determine different rates for
different classes of pro-
7.In section 137 of the principal Act, to subsection (1) the
following proviso shall be added, namely .-
"Provided that if the Corporation shall have
determined for any official year any different
rate of conservancy tax for any class of
properties to which any of the properties
referred to in this sub-section belongs, the
Commissioner shall not, without the previous
approval of the Corporation, fix, for such
official year or part thereof, the conservancy
tax to be paid in respect of any property
belonging to such class for which such
different rate may have been determined by the
Corporation, at any other different rate under
this subsection.’
10. In section 406 of the principal Act, in
sub-section (2),-
(1)for the words ’shall be heard’ the words
’shall be entertained’ shall be substituted;
and
(2)the following proviso shall be added
after clause (e), namely :-
’Provided that where in any particular case
the Judge is of opinion that the deposit of
the amount by the appellant
232
will cause undue hardship to him the, Judge
may in his discretion dispense with such
deposit or part thereof, either un-
conditionally or subject to such conditions as
he may deem fit.’
11.in section 411 of the principal Act,
after clause (a), the following clause shall
be inserted, namely :’-
" (b) from any order of the Judge under the
proviso to sub-section (2) of section 406;
and;"
12. In Schedule A to the principal Act, in
Chapter VIII,-
(i)in sub-rule (3) of rule 7, for the words
annual rent for which such building, land or
premises might reasonably be expected to let
from year to year a sum equal to ten per cent
of the said annual rent’ the words ’annual
letting value of such building, land or
premises a sum equal to ten per cent of such
annual letting value’ shall be, and shall be
deemed always to have been substituted; and
(ii)in sub rule (1) of rule 42, for the
words is preferred’ the words ’is preferred or
entertained’ shall be substituted.
13.Notwithstanding anything contained in
any judgment, decree or order of any court or
tribunal or any other authority,-
(1)................
(2)no determination of any special or
different rate, of conservancy tax by a
Municipal Corporation constituted by or under
the principal Act in respect of any hotel,
club, stable, industrial premises or other
large premises in exercise or purported
exercise of its powers under any of the provi-
sions of the principal Act, at any time before
the commencement of the said Ordinance, shall
be deemed to have been invalidly made by
reason of the Corporation having no power to
determine such rate at the time when such
determination was made; and any such
determination shall be deemed to be valid and
shall be deemed always to have been
validly
made under the provisions of the principal Act
as amended by this Act as if this Act had been
in force at the time when such determination
was made; and no such determination of
different or special rate of conservancy tax,
or any entry of tax made in any assessment
book pursuant thereto, or any levy of such tax
or bill or notice of demand or distress or
attachment issued or executed for collection
of such tax, shall be called in question in
any court or before any tribunal or authority
merely on the ground that the Corporation had
no power or authority to determine such
different or special rate of conservancy tax
in respect of any hotel, club, stable,
industrial premises or other large premises or
on any ground Consequential hereto."
233
The High Court after protracted hearing we given to
understand lasted for 21 days besides 4 days for judgment
while partly allowing the petitions filed before it under
article 226 of constitution made the following declaration :
"(i) Section 2 1A) clause (i) is valid so far
as it is applicable to the official year 1969-
70 but it is null and void in so far as it
applies to the official years from The com-
mencement of the Corporations Act upto and
including the official year 1968-69, on
account of infraction of article 14.
(ii) Proviso (c) to section 2(1A) clause (ii)
is not
violativeof article- 14 and is
constitutionally valid.
(iii) Section 49 does not suffer from the
vice of unreasonableness and is
constitutionally valid and so_ also is section
13(1) of Gujarat Act 5 of 1970.
(iv)The proviso to section 129(b) is not
violative of article 14 nor does it suffer
from the vice of excessive delegation of
legislative power.
(v)Section 13(2) of Gujarat Act 5 of 1970
is not violative of article 14 or article
19(1)(f) and cannot be challenged as
constitutionally invalid.
(vi)Section 406(2)(e) and section 411(bb)
are null and void as being in. contravention
of article 14 : Rule 42 of the Taxation Rules
is also ultra vires and void in so far as it
provides that if an appeal is preferred or
entertained against thetax, warrant shall
not issue for the recovery, of the amount of
tax.
(viii) The Resolutions passed by the
Corporation for the official years 1967-68,
1968-69, 1969-70 and 1970-71 to the e
xtent to
which they fix the rate of conservancy tax at
9 per cent inter alia in respect of textile,
mills and factories belonging to the
petitioners are ultra vires the proviso to
section 129(b) and the rate of conservancy tax
applicable in respect of these textile mills
and factories must, therefore be taken to be
the general rate of 3 per cent."
Civil appeals Nos. 489 to 513 and 752 to 755 of 1973 have
been filed in this Court by the petitioners before the High
Court against the judgment of that court in so far as the
court has upheld the constitutional validity of the impugned
provisions. Civil appeals Nos. 643 to 684 of 1973 have been
filed by the Municipal Corporation of the City of Ahmedabad
and others against the above judgment in so far as the High
Court has struck down the impugned provisions and the
Resolutions. Civil appeals No. 389 to 430 of 1974 have been
filed by the State of Gujarat against the judgment in so far
as the High Court has struck down the impugned provisions.
Writ petitions Nos. 51, 60 to 73, 87 to 91, 157, 492 to 503,
533, 534 and 583 of 1972 as also writ petitions Nos. 1866 to
1877 and 2046 of 1973 which have been filed by the Aryodaya
Spg. & Wvg. Mills Co. Ltd. and other parties involve
substantially the same question Which arises in
234
appeals, though some of these writ petitions relate to the
subsequent period-of 1971-72. Writ petition No. 74 of 1972
filed by the Ahmedabad Electricity Co. Ltd. involves an
additional point regarding its liability to pay property tax
which has been levied on the ground that it occupier. land
below the surface for underground cables. This judgment
would dispose of all the appeals and writ petitions.
The first important_question which arises for determination
is whether clause (i) of section 2(1A) is violative of
article 14. According to this clause, "annual letting
value" means in relation to any period prior to 1st April,
1970 the annual rent for which any building or land or
premises, exclusive of furniture or machinery contained or
situate therein or thereon, might, if the Bombay Rents,
Hotel and Lodging House Rates Control Act, 1947 were not in
force, reasonably be expected to let from year to year with
reference to its use. According to the petitioners, the
operation of this clause affected only the assessment
proceedings pending on December 23, 1969 when Ordinance 6 of
1969 (which was subsequently replaced by Act 5 of 1970) came
into force and did not affect the assessments which were
final and completed before that date. The said provision
war, thus said to create an arbitrary and irrational
classification which had no reasonable nexus with the object
of levying the tax. As against the above, the following
four contentions were advanced on behalf of the Corporation
: -
(1) There is no discrimination in the matter
of completed assessments and pending
assessment because the prior law did not
require valuation to be restricted to standard
rent. The impugned provision is merely
declaratory of previous state of law.
(2) There is no discrimination in the matter
of completed assessment,% pending assessments
because as a matter of fact valuation
assessments finalised before December 23, 1972
were in disregard of the provisions of the
Rent Act.
(3) Pending cases constitute a class by
themselves and any law which makes a
distinction between decided cases and pending
cases is not violative of article 14 of the
Constitution as the above distinction is based
upon rational classification.
(4) In any case so far as the year 1969-70
is concerned, there is no discrimination or
violation of article 14.
The High Court rejected the first three contentions urged
can behalf of the Corporation but accepted the fourt
contention. Accordingly, it held that clause (i) of section
2(1A) was valid in so far a,,, it was applicable to the
official year 1969-70, but was null and void in so far as it
applied to the previous years on account of the infraction
of article 14.
Regarding clause (c) of the proviso to sub-clause (2) of
clause (1A) of section 2 of the Act, the High Court held
that it is only if
235
the annual rent having regard to the provisions of the
Bombay Rent Act cannot be easily estimated that the
Commissioner can adopt the basis of the valuation set out in
proviso to clause (c). Mr. Tar under learned counsel for
the petitioners has not pressed the attack on the
constitutional validity of clause (c) because, according to
him, it is not known as to which property would be covered
by that clauses as construed by the High Court.
Likewise, so far as the constitutional validity of section
49 of the Act is concerned, the attack has not been pressed
on behalf of the petitioner-appellants. Mr. Tarkunde has
also pointed out that despite the decision of this Court in
Manek Chowk Spg. & Wvg. Mills case (supra) in making
assessments attempts are being made by the Corporation to
include some structures which constitute plant and machinery
as part of building. The learned counsel, however, concedes
that this would be question of fact depending upon each
case. He accordingly states that his clients would if
necessary agitate the matter in appeal.
It has been argued before us by the Additional Solicitor
General, Mr. Vakil and Mr. Bhandare on behalf of the
Corporation as well as the State Government that the High
Court was in error in holding that clause (i) of section
2(1A) was violative of article 14 in respect of the_years
prior to the official year 1969-70. As against that, Mr.
Tarkunde on behalf of the petitioners (the word
"petitioners" would cover not only the petitioners in this
Court but also those who were the petitioners in the High
Court) has supported the finding of the High Court in this.
respect. Mr. Tarkunde in his own turn has mailed the
finding of the High Court in so far as it has held that
clause (i) of section 2(1A) is not violative of article 14
in respect of the year 1969-70. After hearing the learned
counsel for the parties we find considerable force in the
submission made on behalf of the
Corporation and the State Government.
The first questionwhich arises for consideration in the
above context is whether thereis any discrimination in
relation to the assessments for the periodprior to April
1, 1970 between pending cases and the cases in which
assessment had already been completed. So far as this
aspect is concerned, we find that in the case of Assessment
Committee of the Metropolitan Borough of Poplar.V.
Hobberis(1) the House of Lords held by majority that in
arriving at the valuation for this purposes of the Valuation
(Metropolis) Act, 1969, of a hereditament to which the
Increase of Rent and Mortgage interest (Restriction) Act
1920 applies, the maximum gross value to be assigned to that
hereditament is not limited to the standard rent of the
creditament together with the additions thereto permitted by
the latter Act. It was further held that the above
mentioned Act of 1920 is not to be taken into account in
determining the valuation for rating purposes of the
hereditaments to which it applies. Following the above
decision of the House of Lords a Division Bench of the
Bombay High Court held in the case of Gulam Ahmed Rogay v.
Bombay Municipality(1),
(1) [1922] 2 A.C. 93.
236
That in arriving at the rateable value for purposes of
section 154(1) ,of the City of Bombay ’Municipal Act, 18 8 8
of property to which the Bombay Rents, ’Hotel & ’Lodging
house Rates Control Act, 1947 applies the maximum value to
be assigned to the property is not to’be limited,to the
maximum standard rent of the property together with
additions thereto permitted by the latter Act. Similar
question there-after arose in the case of The Corporation of
Calcutta v. Sm. Padma Debi & ors (2) . This Court in that
case was concerned with the provisions of section 127(a) of
the Calcutta Municipal Act, according to which the annual
rental value of land and the annual value of any building
erected for letting purposes or ordinarily act, shall be
deemed to be the gross annual rent at which the land or
building might at the time of assessment reasonably be
expected to let from year to year, less, in the case of a
building, an allowance of ten per cent for the cost of
repairs and for all other expenses necessary to maintain the
building in a state to command such gross rent. I was held
by this Court that on a fair reading of the above provision
the rental value ,cannot be fixed higher than the standard
rent under the Rent Control Act. It was further held that
the words "gross annual rent at which the land. or building
might at the time of assessment reasonably be expected to
let from year to year" imply that the rent which the land-
lord might realise if the house was let is the basis for
fixing the annual value of the building. The criterion is
the rent realisable by the landlord and not the value of the
holding in the wards of the tenent. The value of the
property to the owner is the stardard in making the
assessment. The Corporation, it was accordingly concluded,
had no power to fix the annual value of the premises higher
than the $tandard rent.
It was argued on behalf of the Corporation before the High
Court that no averment had been made by the petitioners in
the petitions that the assessments which had been completed
before the coming into force of Ordinance 6 of 1969 were
made having regard to the provisions of the Bombay Rent Act
and that in the absence of such averments no case of
discrimination could be said to have been made by the
petitioners. The High Court rejected this contention
because in its opinion it would be reasonable to presume
that the assessments were made keeping in view the rent
restriction provisions of the Bombay Rent Act. We are
unable to agree with the above approach of the High Court.
There is a presumption of the constituticonal validity of a
statutory provision. In case any party ass-ails the
validity of any provision on the ground that it is violative
of article 14 of the Constitution, it is for that party to
make the necessary averments and adduce material to show
discrimination violative of article 14. No averments were
made in the petitions before the High Court by the
petitioners that the .assessments before the coming into
force of Ordinance 6 of 1969 bad been made by taking into
account the rent restriction provisions of the Bombay Rent
Act. Paragraph 2B and some other paragraphs of peti-
(1) AIR 1951 Bombay 320.
(2) [1962] 3 S C R 49.
237
tion No. 233 of 1970 before the High Court, to which our
attention was invited by Mr. Tarkunde, also do not contain
that averment. No material on this factual aspect was in
the circumstances produced either on behalf of the
petitioners or the Corporation. The High Court, as already
observed, decided the matter merely on the basis of a pre-
sumption. It is, in our opinion, extremely hazardous to
decide the question of the constitutional validity of a
provision on the basis of the supposed existence of certain
facts by raising a presumption. The facts about the
supposed existence of which presumption was raised by the
High Court were of such a nature that a definite averment
could have been made in respect of them and concrete
material could have been produced in support of their
existence or non-existence. Presumptions are resorted to
when the matter does not admit of direct proof or when there
is some practical difficulty to produce evidence to prove a
particular fact. When, however, the fact to be established
is of such a nature that direct evidence about its existence
or nonexistence would be available, the proper course is to
have the direct evidence rather than to decide the matter by
resort to presumption. A pronouncement about the
constitutional validity of a statutory provision affects not
only the parties before the Court, but all other parties who
may be affected by the impugned provision. There would,
therefore, be inherent risk in striking down an impugned
provision without having the complete factual data and full
material before the court. It was therefore, in our
opinion, essential for the High Court to ascertain and field
out the correct factual position before recording a finding
that the impugned provision is violative of article 14. The
fact that the High Court acted on an incorrect assumption is
also borne out by the material which has been adduced before
us in the writ petitions filed under article 32 of the
Constitution.
In the affidavit of Jayantilal Maneklal Shah, Assessor and
Collector of the Corporation, filed on behalf of, the
respondents in these petitions, the factual position has
been brought out at length. According to the affidavit,
after the Corporation had been constituted with effect from
July 1, 1950 the Commissioner kept for every official year
an assessment book as contemplated by rule 9 of the Taxation
Rules. The rateable value of lands and buildings in Special
Property Section were first determined by the municipal
valuers on Contractor’s Theory in accordance with the
methods prevailing under the English law of rating. The
owners of lands avoid buildings which were valued on’ Con-
tractor’s Theory filed appeals. During the pendency of the
appeals,. the authorities concerned agreed to refer the
question of determination of the rateable values to the
arbitration of the arbitrators, one appointed by the
Corporation and the other appointed by the taxpayers. On
disagreement between the two arbitrators the matter was
referred in 1953 to Shri H. V. Divetia, a former Judge of.
the High Court of Judicature at Bombay as umpire. Shri
Divetia held that flat rate floor area method which was
being adopted by the Municipal Corporation of the city of
Bombay in similar cases was the proper method. The
municipal authorities consequently adopted that method. The
award of Shri Divetia was effective only till the official
year 1954-55, but its application was extended by agreement
between the parties up to the year 1958-59. The municipal
authorities continued to value the lands;
238
and buildings aforesaid on the flat rate floor area method
for the year 1959-60 and onwards to prevent any dispute
being raised. The affidavit further shows that
notwithstanding decision in Padma Devi’s case (supra) the
Corporation continued as before to value the properties
included in the Special Property Section on the flat rate
floor area method. Both the valuers as well as the persons
liable to pay property taxes were not conscious of any
impact of rent restriction for the purposes of property
taxes. The Collector has denied that in determining the
rateable value the Municipal Commissioner had been taking
into account the standard rent of the building or land of
was following the principle that the rent restricted by law
was the measure of the true rent of the building.
There is no material before us to show that the factual
position is in any way different from that brought out in
the affidavit of the Assessor and Collector of the
Corporation. Mr. Tarkunde has referred to three orders
dated March 22, 1969 of the Deputy Municipal Commissioner
whereby the rateable value as initially fixed was reduced on
complaint filed by the ratepayers It would appear from the
orders that in reducing the rateable value the Deputy
Municipal Commissioner took into account the rental value.
The above three orders, in our opinion, can hardly be of any
help to the petitioners because there is nothing to show
that the Deputy Municipal Commissioner while making those
orders took into account the standard rent and the
restrictions placed on the increase in rent by the Bombay
Rent Act.
Mr. Tarkunde then urges that the material which has been
placed before this Court regarding the factual position was
not before the High Court and as such this Court should not
disturb the finding of the High Court on the constitutional
validity of clause (i) of section 2(1A). We are unable to
accede to this submission. The validity of the above clause
has also been assailed in the writ petitions filed before us
and in deciding those writ petitions, we cannot refuse to
take into account the material which has been placed before
us. As that material discloses that the factual position as
it existed before the promulgation of Ordinance 6 of 1969
was that the provisions of the Bombay Rent Act were not
taken into account in determining the rateable value, there
would be no escape from the conclusion that no differential
treatment has been meted, out to pending cases in clause
(i). It is plain that the impugned provision cannot be held
to be violative of article 14 in the appeals filed against
the judgment of the High Court and constitutionally valid in
the writ petitions. As the High Court decided the matter
without having the full and complete data before it and as
such data is available to us, the contention that we should
not take that data into account, in our opinion, is wholly
untenable. We would, therefore hold that there is no
material on record as might justify the inference that a
differential hostile treatment has been meted out in pending
cases. The very basis of striking down the impugned
provisions on the ground of being violative of article 14
would thus disappear.
Apart from the above.we are of the opinion that
classification by treating decided cases as belonging to one
category and pending cases
239
as belonging to another category is reasonable and not per
se.offensive to article 14.
It is well-establioshed that article 14 forbids class
legislation but does not forbid classification. Permissible
classification must be founded on an intelligible
differentia which distinguishes persons or things that are
grouped together from others left out of the group, and the
differentia must have a rational relation to the object
sought to be achieved by the statute in question. In
permissible classification mathematical nicety and perfect
equality are not required. Similarity, not identity of
treatment, is enough. If there is equality and uniformity
within each group, the law will not be condemned as
discriminative, bought due to some fortuitous circumstances
arising out of a peculiar situation some included in a class
get an advantage over others, so long as they are not
singled out for special treatment. Taxation law is not an
exception to this doctrine. But, in the application of the
principle the courts, in view of the inherent complexity of
fiscal adjustment of diverse elements, permit a larger
discretion to the legislature in the matter of
classification, so long as it adheres to the fundamental
principles underlying the said doctrine. The power of the
legislature to classify is of wide range and flexibility so
that it can adjust its system of taxation in all proper and
reason-able ways (see Ram Krishna Dalmia v. Shri Justice S.
R. Tendolkar(1) and Khandige Shah Bhat v. Agricultural
Income-tax Officer, Kasaragod(2). Keeping the above
principles in view, we find no violation of article 14 in
treating pending cases ;as a class different from decided
cases. It cannot be disputed that so far as the pending
cases covered by clause (i) are concerned, they have been
all treated alike. In the case of Rao Shiv Bahadur Singh v.
State of Madhya Pradesh(") this Court observed :
"But there is no reason why pending
proceedings cannot be treated by the
legislature as a class by themselves having
regard to the exigencies of the situation
which such pendency itself call,, for. ’Mere
can arise no question as to such a saving
provision infringing article 14 so long as no
scope is left for any further discrimination
inter se as between persons affected by such
pending matters."
In Hathising Manufacturing Co. Ltd. v. Union of India(4) the
constitutional validity of section 25FFF of the Industrial
Disputes Act, 1947 was assailed. That section made a
distinction between employers who had closed their
undertakings on or before November 28, 1956 and those who
closed their undertakings after that date. It was urged
that the above provision was. violative of article 14 of the
Constitution. The above contention was rejected and it was
observed
"When Parliament enacts a law imposing a
liability as flowing from certain transactions
prospectively, it evidently makes a
distinction between those transactions which
are covered by the Act and those which are not
covered by the Act, because they were
completed before the date on which
(1) [1959] S.C.R. 279.
(2) [1963] 3 S.C.R. 809.
(3) [1953] S.C.R. 1188. 1197.
(4) [1960] 3 S.C.R. 528.
240
the Act was enacted. This differentiation,
however, does not amount to discrimination
which is liable to be struck down under
article 14. The power of the legislature to
impose civil liability in respect of
transactions completed even before the date on
which. the Act is enacted does not appear to
be restricted. If, as is conceded-and in our
judgment rightly by a statute imposi
ng civil
liability in respect of post enactment
transactions, not discrimination is practiced,
by a statute which imposes liability in
respect of transactions which have taken place
after a date fixed by the statute, but before
its enactment, it cannot be said that
discrimination is practiced."
in the case of fain Bros. & Ors. v. The Union of India &
Ors. (1) it was urged on behalf of the appellants that
clause (g) of section 297(2) of the Income-tax Act, 1961 was
violative of article 14 inasmuch as in the matter of
’imposition of penalty, it discriminated between two sets of
assesses with reference to a particular date, namely, those
whose assessment had been completed before 1st day of April,
1962 and others whose assessment was completed on or after
that date. While upholding the validity of the above
provision, this Court observed
"Now the Act of 1961 came into force on first
April 1962. It repealed the prior Act of
1922. Whenever a prior enactment is repealed
and new provisions are enacted the legislature
invariably lays down under which enactment
pending proceedings shall be continued and
concluded. Section 6 of the General Clauses
Act 1897 deals with the effect of repeal of an
enactment and its provisions apply unless a
different intention appears in the statute.
It is for the legislature to decide from which
date a particular law should come into
operation. It is not disputed that no reason
has been suggested why pending proceedings
cannot be treated by the legislature as a
class for the purpose of Art. 14. The date
first April 1962 which has been selected by
the legislature for the purpose of cls. (f)
and (g) of s. 297 (2) cannot be characterised
as arbitrary or fanciful."
We would, therefore, hold that clause (i) of section 2(1A)
is constitutionally valid and not violative of article 14 in
respect of all the years to which it has been made
applicable. ,
Leamed Additional Solicitor-General and Mr. Vakil on behalf
of the Corporation have assailed the finding of the High
Court in so far as it has held the resolutions passed by the
Corporation for the, four years from 1967-68 to 1970-71
fixing the rate of conservancy tax at 9 per cent in respect
of textile mills, factories and other large premises instead
of the general rate of 3 per cent to be ultra vires the
proviso to section 129(b). We may in this context.set out
the material part of the impugned resolution for the
assessment year 1971-72 taking it to been specimen for the
four years in question
(1) [1970] 3 S.C.R. 253.
241
(c) Conservancy tax at 3% of the rateable
value of the premises liable to tax under
provisions of section 131 of the Act, subject,
however, to the proviso that the minimum amount
to such tax to be levied in respect of any one
separate holding of land or of any one portion
of a building which is let as a separate
holding shall be eight annas per month, and
that the amount of such tax to be levied in
respect of any hotel, club, stable or other
large premises may be specially fixed under
section 137.
(d)As per the provisions of section 137,
hotel, club, stables, theatres or cinemas or
other large premises including mills and
factories registered under the Factories Act,
and where 50 or more workmen are employed in
manufacture in all the shifts, shall be
subject to a conservancy tax at 9% of the
rateable value."
The High Court in striking down the four resolutions in so
far as the rate of conservancy tax in respect of the large
premises had been fixed at 9 per cent instead of 3 per cent,
observed that the power to fix different rates of
conservancy tax for different classes of properties is
limited by the actual cost element and the differential rate
of conservancy tax fixed for a particular class of
properties must be related to the actual cost involved in
supplying conservancy service to that class. The High Court
agreed that large premises could be treated as a class and
given differential treatment in the matter of fixation of
conservancy tax. On the question, however, as to what rate
of conservancy tax should be fixed for large premises, the
High Court. observed that there was nothing in the
affidavits filed on behalf of the Corporation which might
show that the Corporation was guided by the actual cost of
conservancy service supplied to each class.
We may at this stage advert to the scheme of the Corporation
Act in the matter of levy of conservancy tax. Clause (b) of
section 129 states that the rate of conservancy tax shall be
such percentage of rateable value as will in the opinion of
the Corporation suffice to provide the collection, removal
and disposal, by municipal agency, of all excrementitious
and polluted matter from privies, urinals and cesspools and
for efficiently maintaining and repairing the municipal
drains constructed or used for the reception or conveyance
of such matter. It is further provided that the minimum
amount of such tax to be levied in respect of any one
separate holding of land or of any one building or of any
one portion of a building which is let as a separate holding
shall be eight annas per mensem and that the amount of such
tax to be levied in respect of any hotel, club or other
large premises may be specially fixed under section 137.
Sub-section (1) of section 137 provides that the
Commissioner may, whenever he thinks fit, fix the
conservancy tax to be paid in respect of any hotel, club,
stable or other large premises at such special rate as shall
be generally approved by the Standing Committee in this
behalf, whether the service in respect of which such tax is
leviable be performed by human labour or by substituted
means or appliances Subsection (2) of section 137 directs
the Commissioner to fix a special rate of conservancy tax in
the case
17-L379Sup CI/75
242
of premises used solely for public purposes and not used or
intended to be used for purposes of profit or for
residential or charitable or religious purposes in respect
of which the conservancy tax is payable by the Government.
According to sub-section (3) of section 137, in any such
case the conservancy tax shall be, fixed with reference to
the cost or probable cost of the collection, removal and
disposal, by the agency of municipal conservancy staff, of
excrementitious and polluted matter from the premises.
One of the questions which has been agitated before us is as
to whether sub-section (3) of section 137 deals only with
cases mentioned in sub-section (2) or whether it applies to
cases covered both by sub-section (1) as well as sub-section
(2) of section 137. Put differently, the question is as to
what is the significance of the opening words ’In any such
case" in sub-section (3).
After giving the matter our consideration, we are of the
view that sub-section (3) deals only with cases mentioned in
sub-section (2) of section 137 and is not attracted in cases
mentioned in sub-section (1).
Sub-section (3) provides for a concessional rate of
conservancy tax because the amount of such conservancy tax
has to be fixed with reference to the cost or probable cost
of the collection, removal and disposal, by the agency of
municipal conservancy staff, of excrementitious and polluted
matter from the premises. The rate of conservancy
tax .covered by section 137(3) would be lower compared to
the general rate of conservancy tax under clause (b) of
section 129 which would be fixed after taking into account
not only the cost or probable cost referred to in section
137(3) but also the expenses for efficiently maintaining and
repairing the municipal drains constructed or used for the
receiption or conveyance of excrementitious and polluted
matter. The scheme of the Corporations Act appears to be
that in the case of premises used solely for public purposes
and not intended to be used for purposes of profit or in the
case of premises intended to be used for residential or
charitable or religious purposes in respect of which
conservancy tax is payable by the Government, the rate of
conservancy tax should be lower compared to the rate of
general conservancy tax. Sub-section (1) deals with large
premises like hotels, clubs and stables which in the very
nature of things require greater conservancy service, and it
hardly stands to reason that the Legislature would
contemplate the fixing of lower concessional rate of
conservancy tax in the case of such premises. The opening
words of sub-section (3) of section 137, viz. "In any such
case" make it clear that its concessional provisions apply
only to the immediately preceding clause, namely, section
137(2).
Act 5 of 1970 added a proviso to clause (b) of section 129.
According to that proviso, when determining under section 99
or section 150 the rate at which conservancy tax shall be
levied for any official year or part of an official year,
the Corporation may determine different rates for different
classes of properties. A proviso was also added to section
137(1) by the said Act that if the Corporation shall have
determined for any official year any different rate of
conservancy tax for any class of properties to which any of
the properties referred to in
243
this subsection belongs, the Commissioner shall not, without
the previous approval of the Corporation, fix, for such
official year or part thereof, the conservancy tax to be
paid in respect of any property belonging to such class for
which such different rate may have been determined by the
Corporation.
Perusal of the different provisions shows that the rate of
conservancy tax can be fixed under the following three
provisions :
(1)A rate of conservancy tax (which for the sake of
convenience may be described as general rate of conservancy
tax) to be fixed by the Corporation under clause (b) of
section 129. This is, however, subject to the proviso that
it would be open, to the Corporation to determine different
rates for different classes of properties.
(2)A special rate of conservancy tax to be fixed by the
Commissioner in respect of certain large premises under sub-
section (1) of section 137. Such rate shall not without the
previous approval of the Corporation be different from the
rate of conservancy tax for that class of properties in case
the Corporation has determined the rate of conservancy tax
for that class.
(3)A special rate of conservancy tax in respect of
premises mentioned in section 137(2) to be fixed by the
Commissioner.
The following affidavit was filed on behalf of the
Corporation in justification of the higher rate of
conservancy tax of 9 per cent for large premises mentioned
in the resolution :
"I submit that the properties in respect of
which the Corporation has determined the rate
of conservancy tax at 9 per cent are proper-
ties belonging to a class the cost of pro-
viding conservancy services to which is
proportionately higher than corresponding cost
in respect of other properties. I state
that it is not necessary for the purpose of
determining such higher rate that the
Corporation or the Commissioner should
separately work out the expenditure involved
in dealing with these properties. I deny that
there is no valid justification for providing
a higher rate of conservancy tax in respect of
such properties. I submit that it is
competent to the Corporation to take notice of
the higher cost of conservancy services
required to be incurred in respect of these
properties and to form an opinion on general
facts-that the cost of providing conservancy
services to these properties would be higher
and to what extent. I submit that matters of
this type do not demand an arithmetical
accuracy and broad compliance in matters of
this type is sufficient for complia
nce with
law. I submit that according to the estimate
of the Municipal Corporation, to meet the
total expenditure of conservancy services, if
a unit rate of conservancy tax was to be
provided, it was necessary to determine the
rate of conservancy tax at 41 per cent of the
rateable value. The Corporation has, however,
sought to distribute the incidence of con-
servancy tax equitably among all the lands and
buildings, determine the general rate of
conservancy tax at 3 per cent
L379Sup.CI/75
244
and determine a higher rate of conservancy tax
at 9 per cent in respect of industrial
premises and other properties as provided in
the said resolution. I submit that the use of
the premises has a material relation to the
cost of providing conservancy services and to
the maintenance and repairs thereof I submit
that the hotels, clubs, industrial premises
and: other large premises referred to in
section 129(b) as well as in section 137 are
premises which need relatively larger conser-
vancy services."
The question with which we are concerned in the present
cases is whether it is sufficient, as has been argued on
behalf of the Corporation, to find out the total expense to
be incurred for conservancy service and thereafter to fix
different rates for different categories of properties so
that the tax raised is sufficient to meet the total expense,
or whether, as has been held by the High Court, the
different rate of conservancy tax fixed for a particular
class of property under the proviso to clause (b) of section
129 must be related to the actual cost involved in supplying
conservancy service to that class. In other words the
question is whether the Corporation in determining the rates
of conservancy tax has to find out the total expense it
would have to incur for the various purposes mentioned in
section 129(b) in connection with the conservancy service
and ’thereafter to raise that amount by fixing different
rates of conservancy tax for various categories of
properties or whether the Corporation would have to find out
separately the expense required in respect of conservancy
service for each category of property and thereafter to fix
such rate of conservancy tax for a category of property as
would be sufficient to meet the expense on the conservancy
service for that particular category. To put it differently
is the rate of conservancy tax for a class of property to be
determined by taking into account the total expense which
the Corporation has to meet for conservancy service in any
official year or is it to be determined by taking into
account the expense which the Corporation has to meet for
conservancy service for that particular class of property ?
After giving the matter our consideration, we are of the
view that what is required by section 129 is that before
determining the rates of conservancy Tax for different
categories of properties the Corporation should find out the
total expense it would have to incur for the various
purposes mentioned in clause (b) of that section. After
having ascertained the total expense it would be permissible
to the Corporation to fix different rates of conservancy tax
for various categories of properties. It is not essential,
except in cases mentioned in sub-sections (2) and (3) of
section 137 that the rate of conservancy tax for a
particular category of properties should be such as would be
related only to the expense for conservancy service for that
particular category of properties. According to the proviso
which has been added to clause (b) of section 129 of the
Corporations Act by Act 5 of 1970, when determining under
section 99 or section 150 the rate at which conservancy tax
shall be levied for any official year or part of an official
year, the Corporation may determine different rates for
different classes of properties. There is nothing in the
above proviso which makes it obligatory
245
for the Corporation to take into account separately the cost
of conservancy service for each class of property for which
conservancy tax is fixed. Apart from the fact that there is
no statutory obligation for the Corporation to have separate
estimates of the costs of conservancy service for various
classes of properties referred to in the above proviso with
a view to allocate the cost amongst different classes of
properties, it would not even be feasible to do so for there
would not be separate municipal drains for different classes
of properties. As already mentioned clause (b), of section
129 also takes into account the expense required for
efficiently maintaining and repairing the municipal drains
for finding, out the total expenditure for conservancy
service. The High Court, in our-opinion, was in error in
striking down the resolutions passed by the Corporation for
the official years 1967-68, 1968-69, 1969-70 and 1970-71 to
the extent to which they fixed the rate of conservancy tax
at 9 per cent in respect of textile mills and factories
because of the absence of sufficient data to show as to what
would be the cost of conservancy service for that particular
category of properties. The affidavit filed on behalf of
the Corporation, extract from which has been reproduced
above, shows that the rates of conservancy tax for the
different category of properties have been fixed after
taking into account the total expense for the conservancy
service. It is not possible to insist upon arithmetical
accuracy in such matters. A broad and general estimate of
the cost of conservancy service and the tax receipts. after
taking into account the relevant factors would satisfy the
requirement of law.
We are unable to accede to the submission of Mr. Tarkunde
that in view of the construction which we are placing upon
the proviso to section 129(b), the proviso would be
violative of article 14 of the Constitution on account of
excessive delegation of legislative power. As already
mentioned, the Corporation must keep in view the total ex-
pense it would have to incur for the conservancy service
before fixing the various rates of conservancy tax. The
different rates of conservancy tax have thus to be related
to the total cost of conservancy service to be borne by the
Corporation. The "opinion of the Corporation" mentioned in
clause (b) of section 129 is formed after budget estimates
are prepared in accordance with sections 95, 96 and 100 of
the Corporations Act. According to the above provisions the
Commissioner is to make a statement of proposals as to the
taxation which would in his opinion be necessary or
expedient to impose under the provisions of the Act in the
Annual Budget estimate of the next official year. The
Standing Committee then considers the estimates and
proposals of the Commissioner, and after having obtained
from the Commissioner further details and information as
they think fit, the Committee frames the budget estimates.
The budget estimates contain proposals of rates and extents
of municipal taxes. The budget estimates are then printed
and the printed copies are sent to each municipal
councillor. The budget estimates are thereafter laid before
the Corporation which then considers the same. In
considering the budget estimates the Corporation is entitled
to refer them back to the Standing Committee for further
consideration or to adopt them us they stand or subject to
alterations. The entire procedure provides built-in
safeguards and lays down adequate guidelines in the matter
of taxation. It therefore cannot be said
246
that the legislature has not prescribed any guiding
principle for the Corporation for determining the rates of
conservancy tax. We agree with the High Court that the
proviso to clause (b) of section 129 does not suffer from
the vice of excessive delegation of legislative power.
Mr. Bhandare on behalf of the State of Gujarat has assailed
the finding of the High Court that section 406 (2) (e) and
section 411 (bb) are violative of article 14 and that rule
42 of the Taxation Rules is void in so far as it has
provided that if an appeal is preferred or entertained
against the tax, warrant shall not be issued for the
recovery of the amount of tax. The High Court in
striking down section 406(2)(e) and section 411(bb)
relied upon its earlier judgment dated October 27, 1969
which had been given before the addition of the proviso to
section 406(2) (e) of by Act 5 of 1970. According to- the
earlier judgment, clause (e) of sub-section (2) of section
406 classified the appellant filing appeals against tax and
rateable value into two clauses : (1) those who deposited
the amount of tax assessed by the Commissioner. and (2)
those who did not. It was held that the above
classification had no rational nexus with ’the object of the
provision for appeal and that there was no reasonable
justification for giving a right of appeal to one class and
denying it to the other. After referring to the
observations in the earlier judgment, the, High Court
expressed the opinion in the judgment under appeal that the
addition of the proviso to section 406(2) (e) by Act 5 of
1970 did not make any material difference as far as the
constitutional validity of the above provision was
concerned. According to the High Court, the proviso merely
carves out an exception from the main provision in section
406 (2) (e) and limits the applicability of the- main provi-
sion to appellants who can deposit the amount of tax without
undue hardship. The result, in the opinion of the High
Court, was that the discrimination between the appellants
who deposited the amount of tax and the appellant who did
not, Which is the necessary consequence of the condition
requiring deposit of the amount of tax, still persists,
though it is now limited to the class of appellants who can
deposit the amount of tax without undue hardship.
After bearing the learned counsel for the parties, we are
unable to subscribe to the view taken by the High Court.
Section 406 (2) (e) as amended states that no appeal against
a rateable value or tax fixed or charged under the Act shall
be entertained by the Judge in the case of an appeal against
a tax or in the case of an appeal made against a rateable
value after a bill for any property tax assessed upon such
value has been presented to the appellant unless the amount
claimed from the appellant has been deposited by him with
the Commissioner. According to-the proviso to the above
clause. where in any particular case the Judge is of opinion
that the deposit of the amount by the appellant will cause
undue hardship to him, the Judge may in his discretion
dispense with such deposit or part thereof, either
unconditionally or subject to such conditions as he may deem
fit. The object of the above provision apparently is to
ensure the
247
deposit of the amount claimed from an appellant in case he,
seeks to file an appeal against a tax or against a rateable
value after a bill for any property tax assessed upon such
value has been presented to him. power at the same time is
given to the appellate judge to relieve the appellant from
the rigour on the above provision in case the judge is of
the opinion that it would cause undue hardship to the
appellant. The requirement about the deposit of the amount
claimed as a condition precedent to the entertainment of an
appeal which. seeks to engage the imposition or the quantum
of that tax, in our opinion, has not the effect of
nullifying the right of appeal, especially when we keep in
view the fact that discretion is vested in the appellate
judge to dispense with the compliance of the above
requirement. All that the, statutory provision seeks to do
is to regulate the exercise of the, right of appeal. The
object of the above provision is to keep in balance the
right of appeal, which is conferred upon a person who is
aggrieved with the demand of tax made from him, and the
right of the Corporation to speedy recovery of the tax. The
impugned provision accordingly confers a right of appeal and
at the same time prevents the delay in the payment of the
tax. We find ourselves unable to accede to the argument that
the impugned provision has the effect of creating a
discrimination as is offensive to the principle of equality
enshrined in article 14 of the Constitution. it is
significant that the right of appeal is conferred upon all
persons who are aggrieved against the determination of tax
or rateable value. The bar created by section 406(2)(e) to
the entertainment of the appeal by a person who has not
deposited the amount of tax due from him and who is not able
to show to the appellate judge that the deposit of the
amount would cause him undue hardship arises out of his
own commission and default. The above provision, in our
opinion, has not the effect of making invidious distinction
or creating two classes with the object of meting out
differential treatment to them; it only spells out the
consequences flowing from the omission and default of a
person who despite the fact that the deposit of the amount
found due from him-would cause him no hardship, declines of
his own volition to deposit that amount. The right of appeal
is the creature of a statute. Without a statutory provision
creating such a right the aggrieved is not entitled to file
an appeal. We fail to understand as to why the legislature
while granting the right of appeal cannot impose conditions
for the exercise of such right. In the absence of any
special reasons there appears to be no legal or
constitutional impediment to the imposition of such
conditions. It is permissible, for example. to prescribe a
condition in criminal cases that unless a convicted person
is released on bail, he must surrender to custody before his
appeal against the sentence of imprisonment would be
entertained. Likewise, it is permissible to enact a law that
no appeal shall lie against an order relating to an
assessment of tax unless the tax had been paid. Such a
provision was on the statute book- in section 30 of the
Indian Income-tax Act, 1922. The proviso to that section
provided that " . . . . . no appeal shall lie against an
order under sub-section (1) of section 46 unless the tax had
been paid".
248
the same is not abused by a recalcitrant party and there is
no difficulty in the enforcement of the order appealed
against in case the appeal is ultimately dismissed. It is
open to the legislature to impose an accompanying liability
upon a party upon whom a legal right is conferred or to
prescribe conditions for the exercise of the right. Any
requirement for the discharge of that liability or the
fulfillment of that condition in case the party concerned
seeks to avail of the said right is a valid piece of
legislation, and we can discern no contravention of article
14 in it. A disability or disadvantage arising out of a
party’s own default or omission cannot be taken to be
tantamount to the creation of two classes offensive to
article 14 of the Constitution, especially when that
disability or disadvantage operates upon all persons who
make the default or omission.
Observations in the case of Hannach Cohen, Exrx. of Sol
Cohen, Deceased. and David E. Cohen, Intervener, Petitioners
& Anr. vs.Ben Industrial Loan Corporation & Ors. (1) lend
some support to the view we have taken. Headnote 10 which
is based upon the observations in the body of the judgment
reads as under :-
"10. A State statute which requires that in a
stockholder’s derivative action a plaintiff
who owns less than 5 per cent of the defendant
corporation’s outstanding shares, or shares
having marked value not exceeding $ 50,000,
give security for the reasonable expenses,
including counsel fees, incurred by the
corporation and by other parties defendant,
and which makes the plaintiff liable for such
expenses if he does not make good his claims,
and subjects the amount of security to
increase if the progress of the litigation
reveals that it is inadequate or to decrease
if it is proved to be excessive, does not
violate the contract clause, or the due
process clause, or the equal protection clause
of the Federal Constitution."
SO far as the constitutional validity of section 411(bb) and
rule 42 is concerned, it is the common case of the parties
that it hinges upon the validity of section 406(2) (e) and
that in case we uphold the validity of the last mentioned
provision, the validity of the other two provisions would
have to be upheld. We accordingly uphold the constitutional
validity of all the three provisions.
The Ahmedabad Electricity Co. Ltd. petitioner in writ
petition No. 74 of 1972 is a licensee under the Indian
Electricity Act, 1910. It has laid underground supply lines
under most of the roads and public streets in the city of
Ahmedabad. The Corporation has in that connection assessed
property tax and made the petitioner-company liable to pay
that tax on the ground that the underground supply lines
occupy space below the surface and that the said space
constitutes ’and. Section 12 of the Indian Electricity Act
confers a right upon a licensee to open and break up the
soil and pavement of any street, railway or tramway for
laying down and placing electric supply lines
(1) 337 U.S. 539.
249
and other works. Although the roads and public streets
under which the petitioner-company has laid down underground
supply lines vest in the, Corporation under section 202 of
the Corporation Act, the liability to pay property tax in
respect of the space in which supply lines are laid is
sought to be fastened upon the petitioner-company in view of
the provisions of section 139(1) of the Corporations Act.
According to section 139(1), subject to the provisions of
sub-section (2), with which we are not concerned, property
taxes assessed upon any premises shall be primarily leviable
if the premises are held immediately from the Government or
from the Corporation, from the actual occupier thereof. The
word "premises" as defined in section 2(46) includes land.
The case of the Corporation as set out in the affidavit of
Shri Narendra R. Desai, Town Development Officer of the
Corporation is that only such area of the land as is
occupied by the under,ground supply lines that is valued for
the purposes of assessing property taxes. It is stated that
for the purpose of laying supply lines, the petitioner digs
trenches and lays down bricks to serve as bedding for the
supply’ lines. The petitioner-company, it is urged,
occupies by means of the supply lines that area of land
which is occupied by the bedding prepared for laying down
the supply lines.
Mr. Tarkunde on behalf of the petitioner-company has urged
that under entry 49 of the State List in the Seventh
Schedule to the Constitution, the State Legislature is
empowered to enact a law relating to taxes on lands and
buildings. It is submitted that the State Legislature has
no competence under the above entry to enact a law for levy-
ing tax in respect of the area occupied by the underground
supply lines. The word "land", according to the learned
counsel, denotes the surface of the land and not the
underground strata. We are unable to accede to the above
submission. Entry 49 of List II contemplates a levy of tax
on lands and buildings or both as units. Such tax ’is
directly imposed on lands and buildings and bears a definite
relation to it. Section 129 makes provision for the levy of
property tax on buildings and lands. Section 139 merely
specifies the persons who would be primarily responsible for
the payment of that tax. The ’word "land" includes not only
the face of the earth, but everything under or over it. and
has in its legal signification an indefinite extent upward
and downward, giving rise to the maxim, Cujus eat solumejus
est usque ad coelum (see p. 263 72 Corpus Juris Secondum).
According to Broom’s Legal Maxims. 10th ed., P. 259, not
only has land in its legal signification an indefinite
extent upwards, but in law it extends also downwards. so
that whatever is in a direct line between the surface and
the centre of the earth by-the common law belongs to the
owner of the surface (not merely the surface, but all the
land down to the centre of the earth and up to the heavens)
and hence the word "land" which is nomen generalissimum,
includes, not only the face of the earth, but everything
under it or over it.
In Rade on Rating, 11th ed.. it is stated on page 14
"By far the largest number of persons rated
are as ’occupiers of land or houses’. The
word ’land’ as used in the
250
statute, must be understood in the widest
possible sense it includes not only the
surface of the earth. but everything under it,
or over it. In Electric Telegraph Co. v.
Salford Overseers(1). Pollock, C. B. said
’There is no distinction between the occupying
land, by passing through a fixed point of
space in the air to another fixed point, or by
passing in the same manner through land or
water. Land extends upwards as well as
downward.
In the case of Mayor, Aldermen and Councillors of the City
of Westminster & Ors. v. The Southern Railway Company, the
Railway Assessment Authority and W. H. Smith & Son, Limited
& Ors.(2) Lord Russel of Killowen observed
"Subject to special enactments, people are
rated as occupiers of land, land being
understood as including not only the space of
the earth but all strata above or below."
There can, therefore, be no doubt that land in entry 49, of
List It would include the underground strata.
It may be stated that the word "land" has also been defined
in clause (30) of section 2 of the Corporations Act to
include land which is being built upon or is built upon or
covered with water. benefits to arise out of land. things
attached to the earth or Dermanently fastened to anything
attached to the earth and rights created by legislative
enactment over the street. The definition is of inclusive
nature and does not exclude from its ambit the underground
strata of the land.
It has been argued by Mr. Tarkunde that the right to lay
down supply lines under section 12 of the Indian Electricity
Act is in the nature of a statutory licence and is not a
right in land. Hence the right does not constitute land
within entry 49 and is not taxable by the State
legislature.’ This submission is wholly misconceived because
what is taxed under the Corporation Act is land. Section
139, as already mentioned earlier, merely fastens the
liability and states that the person primarily liable to pay
that tax would be the actual occupier. It is not the case
of the Corporation that the right of the petitionercompany
of laying and placing electric supply lines constitutes land
and as such the petioner-company is liable to pay property
tax. On the contrary, the liability is sought to be
fastened on the petitionercompany because of the company
being in occupation of the land wherein electric supply
lines have been laid and placed. Section 52 of the Indian
Easement Act, 1882, to which reference ha,; been made on
behalf of the petitioner-company. merely defines "license"
and has no bearing on the question with which we are
concerned.
It cannot, in our opinion, be doubted that the petitioner-
company is in occupation of the land wherein underground
supply line is laid.
(1) (1855) 11 Ex. 181, at p. 186,
(2) [1936] A.C. 511.
251
In England also a similar view was taken. We may refer in
this context to the case of The Assessment Committee of the
Holywell Union & Anr. v. The Halkyn District Mines Drainage
Co.(1) The Headnote of this case which was decided by the
House of Lords, reads as under :
"Land may be occupied for the purpose of and
in connection with the enjoyment of an
easement in such a manner as to make the
person so occupying rateable to the relief of
the poor. , Such a person may be rateable,
though his occupation is exclusive only for
certain purposes, and though the owner of the
soil has reserved to himself rights of
possession subordinate to the paramount right
granted to the other. The test of rateability
is not whether the rights granted are
corporeal or incorporeal, but whether there is
an occupation-which is a question of fact.
Where in pursuance of a statute the owner of
land granted to a drainage company the
exclusive right of drainage through a tunnel
and water-course in his land, with the right
of placing works in the tunnel and water-
course, and of making other tunnels in
connection therewith, reserving to himself
mineral and other rights :-
Held, reversing the decision of the Court of
Appeal, that the statute and grant gave the
company not merely an easement but possession
of the tunnels and water-course, that the
right reserved to the owner were subordinate
to the rights granted to the company, and that
the company were de facto in occupation of the
tunnels and water-course and rateable
to the
poor in respect thereof."
"Along the tunnel for a considerable distance
the company have placed iron tubbing; in parts
they have placed brick arches, it seems to me
that in these parts they occupy land precisely
in the same sense as a water company does by
its pipes or a tramway company by its rails,
or a telephone company by the supports for its
wires."
It was further observed :
"The question whether a person is an occupier
or not within the rating law is a question of
fact, and does not depend upon legal title.
The person legally possessed may not occupy.
On the other hand, a person may be occupier
either with or without the consent of the
owner."
Lord Herschell also relied upon the case of Rex v. Chelsea
Waterworks romnany (2) wherein a water comnany to whom the
Crown granted the right to lay down its pipes was held by
the Court of King’s
(1) [1895] A.C. 117.
(2) 5 D. & Ad. 156,
252
Bench to be occupier of land and liable to be rated. Lord
Macnaghteo in the above case observed
"Now, putting aside for a moment the
reservations contained in the deed of grant,
can there be, any doubt as to the position of
the company for rating purposes as regards
their authorized works ? The numerous cases
relating to gas companies, water companies,
and tramways, place the matter beyond
question."
Lord Davey observed in the above case
"My Lords, I agree with the learned judges in
the Court of Appeal that the drainage company
are not owners of the soil of the tunnels of
water-course. But that does not seem to me
conclusive on the question of their
rateability in respect of their occupation.
The right of the company may be an easement or
incorporeal right; but the assessment may be
of such a character as requires the occupation
of land for its exercise, and confers upon the
company a right to occupy land during its
continuance. According to a long course of
authority, the occupation of land under such
circumstances is sufficient for rating
purposes, though unaccompanied by ownership of
any portion of the soil. The law was thus
stated by Wightman J. in Reg. v. West
Middlesex Waterworks(1) : In this case’, says
the learned Judge, ’the first question is
whether the company are rateable for their
mains, which are laid under the surface of the
highway, without any freehold or leasehold
interest in the soil thereof being vested in
the company. We think they are. These mains
are fixed capital vested in land. The company
is in possession, of the mains burred in the
soil, and so is de facto in possession of that
space in the soil which the mains fill, for a
purpose beneficial to itself, The decisions
are uniform in holding gas companies to be
rateable in respect of their mains, although
the occupation of such mains may be de facto
merely, and without any legal or equitable
estate in the land where the mains lie, by
force of some statute."
Nothing cogent has been argued before us as may induce us to
take a view different from that we have arrived at and which
is also in accord with the view of the House of Lords. We
would, therefore, hold that the petitioner-company is in
occupation of the underground strata of the land through
which their electric supply lines had been laid.
It has been argued by Mr. Tarkunde that even if the
petitioner electricity company may be held to be actual
occupier of the underground space on which its supply line
has been laid the petitioner company does not hold the said
space from the Corporation. It is urged that the
petitioner-company is in occupation of that space under a
statute and not from the Corporation. In order to hold that
space from the Corporation, it was essential, according to
the learned counsel.
(1) I F,. & P. at P. 720,
253
that there should have been some agreement between the
petitioner company and the Corporation or that the
Corporation should have given its consent for that purpose.
We are unable to accede to the above submission.Clause (a)
of section 139(1) of the Corporations Act fastens the
liability for payment of property tax on the actual occupier
of the premises held immediately from the Government or from
the Corporation. In order to attract the liability under
the above clause, it is not essential that there should have
been an agreement between the actual occupier and the
Government or the Corporation for the holding of the
premises or that the holding must be with the consent of the
Government or the Corporation. The liability would accrue
even if the premises vesting in the Government or the
Corporation are occupied in pursuance of a statutory
provision. The words "held immediately from the Government
or from the Corporation signify only the party in whom the
premises vest which are held by the actual occupier thereof.
Contention has also been advanced by Mr. Tarkunde regarding
the quantum of tax levied on and the extent of the land
alleged to have been occupied by the petitioner-company for
the underground supply lines. This is essentially a
question of fact and would have to be agitated before the
authorities concerned, including the appellate authority.
As a result of the above, we dismiss writ petitions Nos. 51,
60 to 74, 87 to 91 157, 492 to 503, 533, 534 and 583 of 1972
as also writ petitions Nos. 1866 to 1877 and 2046 of 1973
with costs. One hearing fee. We also dismiss civil appeals
Nos. 489 to 513 and 752 to 755 of 1973. We accept civil
appeals Nos. 643 to 684 of 1973 and civil appeals Nos. 389
to 430 of 1974 and set aside the judgment of the High Court
in so far as it has struck down section 2(lA) (i), section
406 (2) (e), section 411 (bb) and rule 42 of the Taxation
Rules in Schedule A to the Corporations Act. We also set
aside the judgment of the High Court to the extent it has
struck down resolutions passed by the Corporation for
official years 1967-68, 1968-69, 1969-70 and 1970-71 fixing
the rate of conservancy tax at 9 per cent in respect of
textile mills and factories. ’The writ petitions which were
filed in the High Court by the respondents concerned are
dismissed. The appellants shall be entitled to their costs
in these two sets of appeals. One hearing fee.
V. M. K.
2-423SupCI/75
254

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