Madhya Pradesh High Court
Indore Nagar Nigam Karmachari ... vs State Of Madhya Pradesh And Ors. on 22 June, 1993
Equivalent citations: AIR1994MP84, 1993(0)MPLJ847, AIR 1994 MADHYA PRADESH 84, (1993) MPLJ 847
JUDGMENT V.S. Kokje, J.
1. This petition and M.P. No. 174/92 were heard together as they involve the same question viz. whether a Municipal Corporation can delegate/convey by auction the right to realise a tax leviable under the M.P. Municipal Corporations Act, 1956 (hereinafter called as the "Corporations Act). This petition has been filed by the Indore Nagar Nigam Karmachari Congress a registered body of the employees of Indore Municipal Corporation. The other petition M.P. No. 174/92 is filed by employees of Municipal Corporation, Ujjan.
2. The petitioners in both these cases contend that the decision of the Respondents, Municipal Corporations, to grant the right of collection of terminal tax on passengers, on the basis of an auction is bound to affect adversely the promotional prospects of their Members, the employees of the aforesaid Corporations. It is contended that under the provisions of the Act and the Rules and Bye-laws made thereunder, a specific procedure for recovery of taxes is provided which cannot be deviated from. The Petitioners have therefore prayed for quashing of notifications inviting tenders for collection of recovery of terminal tax by the aforesaid Municipal Corporations as also the State Government's letter granting permission to adopt such a course for collection of tax.
3. The Respondent Municipal Corporation, on the other hand have come out with a plea that the step has been taken to avoid leakage in collection process of the tax. They have contended that because of rampant corruption amongst the employees charged with the duty of collecting these taxes, the Corporations had been suffering tremendous loss of revenue. There was no other method to check it but to auction the right to realise these taxes. It was also contended that the Corporations will stand to benefit because they will be getting the maximum amount in lieu of taxes because of keen competition amongst the tenderers. The Corporations would not have any hassles in collecting the amount of tax also. According to the Corporations, it was in public interest to allow them to realise maximum amount of money through auction.
4. A Division Bench of this Court in Indore Bhed Bakra Vikreta Sangh v. Municipal Corporation, Indore, 1992 Jab LJ 34 : (AIR 1992 Madh Pra 134) had an occasion to consider validity of auction of right to recover market fees on sell and purchase of cattle and other animals in a market. In that case it was held that all the money received by or on behalf of the Corporation including amounts realised as tax have to be first deposited in the Municipal Fund and then only the amount could be spent on any of the recognised purposes of the Act. The action of the Corporation in auctioning the right to recover market fees was held to be illegal in that case. The Petitioners contend that on the same basis auctioning of right to recover terminal tax on passengers has to be declared illegal. On the other hand Respondents submit that view taken by this Court in Indore Bhed Bakra Vikreta Sangh v. Municipal Corporation, Indore (AIR 1992 Madh Pra 134) (supra), deserves reconsideration.
5. Section 86 of the Corporations Act provides, for creation of Municipal Fund, It reads as under:--
"86. Municipal fund to be sole and to be held in trust.-
There shall be one Municipal Fund and it shall be held by the Corporation in trust for the purposes of this Act, subject to the provision therein contained."
Section 87 of the Corporations Act provides for the money to be credited to the Municipal Fund. Section 87(1) of the Act which is relevant for our purposes reads as under:--
"87. Credit of moneys to Municipal Fund.-
(1) There shall be credited to the Municipal Fund-
(a) all moneys received by or on behalf of the Corporation under the provisions of this Act or of any other law for the time being in force or under any contract;
(b) balance standing to the credit of the Municipality of the city for which the Corporation is constituted;
(c) all proceeds of the disposal of property by, or on behalf of, the Corporation;
(d) all rents accruing from any property of the Corporation;
(e) all moneys raised by any tax levied for the purposes of this Act;
(f) all fees payable and levied under this Act, or any rules or bye-laws made thereunder;
(g) all fines imposed by a court under this Act or any rules or bye-laws made thereunder or under any other Act, the administration of which is entrusted to the Municipal Corporation;
(h) all moneys received by way of compensation or for compounding offences under the provisions of this Act;
(i) all moneys received by, or on behalf of, the Corporation from the Government, public bodies, private bodies or private individuals by way of grant or gift or deposits;
(j) all interests and profits arising from any investment or from any transaction in connection with any money belonging to the Corporation; and
(k) all loans raised by the Corporation."
6. Clauses (e) and (0 of Sub-section (1) of Section 87 make it clear that all the moneys raised by any tax and all fees payable and leviable under the Act have to be credited to the 'Municipal Fund'. It was contended on behalf of the Respondents that expenses of collection of tax have to be deducted from the gross amount of tax collected and, therefore, if the right to collect the tax is auctioned, what is realised from the contractor is the net amount of tax which of course, has to be credited to the 'Municipal Fund'. The argument cannot be accepted. Firstly, there is nothing in the plain language used in the Act which would permit such an interpretation. In the context of the provision all the moneys raised by any tax and all fees payable and leviable under the Act have to be the gross amount realised as tax or fees and cannot mean the amount which remains after deduc tion of expenses. Under the scheme of the Act expenses incurred in realising the tax will be covered by the provisions of Section 88 of the Act which prescribes for the application of the 'Municipal Fund'. The relevant provision reads as under:--
"88. Application from Municipal fund.---
All the moneys from time to time credited to the Municipal fund shall be applied in the following order of preference-
Firstly, in making due provisions for the payment of all loans payable by the corporation under the provisions of Chapter IX.
Secondly, in discharge of all liabilities imposed on the Corporation by Section 3.
Thirdly, in payment of all sums charges and costs necessary for the purposes specified in Sections 66 and 67 and for otherwise carrying this Act into effect, or of which the payment shall be duly or directly sanctioned under any of the provisions of this Act inclusive of-
(a) to (d).....
(e) all expenses and costs incurred by the Corporation or by any Municipal Officer on behalf of the Corporation in the exercise of any power conferred or the discharge of any duty imposed on it or them by this Act, including moneys which the Corporation is required or empowered to pay by way of compensation."
It cannot therefore be said that under the scheme of Sections 86, 87 and 88 of the Corporations Act auctioning of a right to realise a tax is permissible.
7. The argument that the deposit of entire amount realised from the contractor who obtains the contract to collect a municipal tax at an auction to the credit of the 'Municipal Fund' is sufficient compliance with the provisions of Section 87 of the Corporation Act is fallacious. It is obvious that bidders at an auction give bids keeping in view a margin of profit for themselves apart from the expenses they will have to incur in collecting the tax. It is also obvious that every paisa collected from the public as municipal tax is received as the amount of tax and the proportion of expenses incurred in realising the tax to the total tax collected cannot be known before hand. At the end of the period of contract, the contractor is either left with a profit or with a loss. In case he makes profit, which normally is expected of him, the contractor keeps to himself a sizable amount of money collected as municipal tax from the public. This is clearly violative of Section 87 of the Act which enjoins that all the moneys raised by any tax must be credited to the 'Municipal Fund'. The scheme of the Act does not permit the Corporation to wash its hands off by selling by auction the right to recover tax to the highest bidder. We are therefore of the opinion that the view taken in Indore Bhed Bakra Vikreta Sangh's case (AIR 1992 Madh Pra 134) (supra) is correct.
8. Section 132 of the Corporation Act permits the Corporation to impose a terminal tax on passengers. Sub-section (4) of Section 132 provides that imposition of any tax under the section shall be subject to the provisions of the Act and of any other enactment for the time being in force. Sub-section (5) of Section 132 provides that the Municipal taxes shall be assessed and levied in accordance with the provisions of the Act and the rules and the bye-laws made thereunder. Section 134 of the Corporations Act provides for the procedure for recovery of taxes. It reads as under:--
"134. Recovery of taxes. -- A municipal tax may be recovered by one or more of the following processes or in accordance with the (bye-laws) made for the purposes:
(1) by presenting a bill;
(2) by serving a written notice of demand;
(3) by distraint and sale of movable property of the person concerned;
(4) by attachment and sale of his immov able property;
(5) in the case of octroi and toll, by the attachment and sale of goods and vehicles; (6) in the case of property tax, by the attachment of rent due in respect of the property."
9. Chapter XII of the Corporations Act provides for recovery of Corporation's claim. Section 173 provides that when any amount declared by or under the provisions of the Act to be recoverable in the manner provided in the Chapter or payable on account of any tax imposed within the limits of the city becomes due, the Commissioner shall cause to be presented to any person liable for the payment thereof a bill have also been prescribed by Sub-section (2) of Section 173 of the Corporations Act. Section 174 provides that when the bill is not paid a demand notice is to be issued. If within 30 days of the service of the demand notice the sum demanded is not paid or cause is not shown to the satisfaction of the Commissioner or an appeal is not preferred, the Commissioner may issue a warrant under Section 175 for distress and sale of the movable property of the defaulter or for attachment and sale of the immovable property belonging to him. Section 177 of the Corporations Act empowers the Officer charged with the execution of the warrant of distress issued under Section 175 to break open any door or window of a building in order to levy the distress. Section 178 of the Corporations Act provides for the procedure for execution of the warrant issued under Section 175 of the Corporations Act. The procedure includes distress of immovable property and attachment of immovable property. Under Section 179 the property so seized could be disposed of. Section 184 of the Corporations Act provides for an appeal against a notice of demand under Section 174. Section 186 of the Corporations Act provides that for every sum paid on account of any tax under the Act a receipt shall be tendered by the person receiving the payments stating the sum and on account of which it has been paid.
10. The aforesaid provisions clearly show that an auction of the right to collect tax was never visualised or intended by the Legislature. If an auction is permitted and the recovery is effected by a contractor and his agents, against any arbitrary recovery the person from whom such recovery is effected becomes remediless. If the recovery is by a Municipal Officer or a servant, the person who complains against illegal recovery has regular remedies under the Corporations Act. when the recovery is by an outsider the safeguard against high-handedness and illegal and excessive recovery is completely broken down. In practice, contractor's word as to the amount due from a particular person towards the tax shall be final. Because of the contract the Municipal Authorities even if approached with the complaints would be utterly helpless in the matter. In practice, the contractor not armed with statutory powers of recovery of tax, is bound to use muscle power to effect recovery according to his own decision as to the liability of the person to pay the tax as also its quantum. The legislature cannot be said to have intended this when it has taken care to make copious provisions regulating the imposition, levy and collection of tax. The selling of the right to collect tax by auction --therefore, runs counter to the scheme of the Act.
11. There is one more important factor involved in the matter. Recovery of tax is a sovereign function. Can such a function be transferred to private individuals or private bodies? If on the ground that the normal machinery created by the statute permits diversion and syphoning of amounts realisable towards taxes transfer or delegation of sovereign functions like recovery of tax is permitted, it will play a havoc with the entire administration. Right to collect income-tax, wealth tax, excise duties and custom duties can then be auctioned. The Government may realise the maximum amount towards these taxes but at what cost? The contractors who take up the job would obviously not be armed with the statutory powers and duties with which the Government Officers and servants charged with the duty to recover taxes armed. The recovery of taxes would then be effected through extra constitutional and extra-legal methods. The contractors will have to keep a private army to effect recoveries from 'defaulting or 'erring' tax payers. The tax payers will, at least in practice, have no right to complain against the forced recoveries and assessments anywhere and the entire safeguards provided by the statute in the form of objections and appeals etc. would be of no use to the tax-payers. Such a state of affairs will not be in consonance with the concept of Rule of Law. In fact it would be the very negation of the Rule of Law. Moreover, the Municipal employees charged with the work of recovery of taxes form part of a service bound by internal discipline. Any high handedness on their part can be remedied by the superiors in service if necessary by using disciplinary powers against erring employees. Being Public Servants, such employees are amenable to statutory control of authorities under various enactments enacted for Prevention of Corruption and abuse of power. If the recovery of tax is made through contractors, the position would become nebulous and at least in practice no action would be possible against the contractor or his agents and servants.
12. Professor H. W. R. Wade in his famous book on Administrative Law 5th Edition at page 319 has observed as follows:--
"An element which is essential to the lawful exercise of power is that it should be exercised by the authority upon whom it is conferred, and by no one else. The principles is strictly applied, even where it causes administrative inconenience, except in cases where it may reasonably be inferred that the power was intended to be delegable. Normally, the Courts are rigorous in requiring the power to be exercised by the precise person or body stated in the statute, and in condemning as ultra vires action taken by agents, subcommittees or delegates, however expressly authorised by the authority endowed with the power."
Again at Page 329 of the same book the learned author has observed as follows:--
"Closely akin to delegation, and scarcely distinguishable from it in some cases, is any arrangement by which a power conferred upon one authority is in substance exercised by another. The proper authority may share its power with some one else, or may allow some one else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by Parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void. So strict are the courts in applying this principle that they condemn some administrative arrangements which must seem quite natural and proper to those who make them. In this class might be included the case of the cinema licensing authority which, by requiring films to be approved by the British Board of Film Censors, was held to have surrendered its power of control into unauthorised hands."
13. The case in hand is clearly a case not of delegation but actually of surrender and abdication of statutory functions by the Municipal Corporations to the contractors who are totally strangers to the scheme of imposition, levy and recovery of municipal taxes under the Corporations Act.
For the aforesaid reasons we hold that the action of the Municipal Corporation in auctioning the right to recover a Municipal Tax is ultra vires the Corporations Act, illegal and void. We therefore allow this petition, quash the decision of the Municipal Corporations concerned to sell or lease out the right to recover Municipal Tax by auction. We also quash the permission granted by the State Government to the Municipal Corporations to sell the right of recovery of tax through auction. In the circumstances of the case there shall be no order as to costs. Security refunded.