Andhra HC (Pre-Telangana)
V.K. Roy vs Commissioner Of M.C.H., Hyderabad And ... on 7 June, 2002
Equivalent citations: 2003(1)ALT236
Author: G. Rohini
Bench: G. Rohini
ORDER Motilal B. Naik, J.
1. Since the issue involved in all these three writ petitions is one and the same, they are being decided by this common order.
2. Petitioners in all these three writ petitions are owners of immovable properties in Hyderabad and Secunderabad and are liable to pay property tax as per the provisions of the Hyderabad Municipal Corporation Act (for short "the Act").
3. Petitioner in W.P.No. 9735 of 1995 was issued a demand notice by the first respondent calling upon the petitioner to pay the property tax for the period commencing from 1-4-1981 to 31-3-1993.Petitioner in W.P.No. 19681 of 1995 was also issued a demand notice seeking to recover property tax for the years from 1979 to 1995; and in so far as the petitioners in W.P.No. 20724 of 1995 are concerned, a demand notice was issued seeking to recover arrears of property tax for the period commencing from 1-4-1982 to 30-9-1992. Writ Petitioners in W.P.Nos. 9735 and 20724 of 1995 have challenged the demand notices before the Chief Judge, City Small Causes Court, Hyderabad by way of filing appeals and the Chief Judge, City Small Causes Court, Hyderabad held that the respondent-Corporation is not entitled to recover property tax for more than three years preceding the date of demand notice and also held that it can recover the tax for such period by filing a civil suit against the writ petitioners. However, despite the judgment of the Civil Court, the respondents have issued notices seeking to recover property tax for the period indicated above, from the respondents.
4. At that stage, petitioners have approached this Court invoking Article 226 of the Constitution of India seeking a declaration that the demand notices issued by the respondents calling upon the petitioners to pay the property tax dues for several years is beyond the jurisdiction and against the law declared by this Court in THE MUNICIPAL CORPORATION OF HYDERABAD THROUGH THE SPECIAL OFFICER, HYDERABAD Vs. CHAMPALAL1 and prayed this Court to issue a direction to the respondents to act in accordance with law and forbear from resorting to any coercive action, for recovery of arrears of tax through the respective impugned notices.
5. On behalf of the writ petitioners, common submissions were advanced by the respective counsel mainly contending that as provided under Section 278 of the Hyderabad Municipal Corporation Act, institution of a suit in a Court of competent jurisdiction, in case of default in payment of property tax, is contemplated and that the respondents without resorting to such a procedure, issued a demand notice seeking recovery of arrears of tax for several years, which is a summary remedy, and that they are proposing to take coercive steps including that of initiation of proceedings under Revenue Recovery Act, which is impermissible. It is submitted that the respondents have no authority to initiate distraint proceedings against these petitioners invoking the jurisdiction under Sections 269 and 270 of the Act in the light of the decision of the Division Bench of this Court cited (1) supra.It is, therefore, submitted that the respondents are bound by the ratio laid down by this Court in the said decision and they are precluded from taking coercive steps against these petitioners. Learned Counsel for the respective parties, therefore, seek to set aside the impugned notices.
6. On behalf of the Municipal Corporation of Hyderabad - respondent in these writ petitions, Sri Ramesh Ranganathan, learned Additional Advocate General though not disputed the ratio laid down by a Division Bench of this Court in the decision cited (1) supra, but however, contended that on account of subsequent amendment brought to Section 238 of the Hyderabad Municipal Corporation Act under Amendment Act No. 3 of 1994 which has come into force with effect from 1-3-1994, the limitation period of three years providing for recovery of property tax has been done away and the Municipal Corporation is entitled to initiate proceedings under Revenue Recovery Act to recover the dues of property tax as if it is arrears of land revenue. Learned Additional Advocate General stated that Article 112 of the Limitation Act is applicable to this case which provides a limitation period of 30 years for the Corporation to recover the arrears of property tax as if it is arrears of land Revenue. It is also submitted that the ratio laid down by a Division Bench of this Court in the decision cited (1) supra no longer holds the field in view of the amendment brought to Section 238 of the Hyderabad Municipal Corporation Act, in the year 1995. According to the learned Additional Advocate General, by virtue of this amendment, a legal fiction is created which means the tax arrears are deemed to be the arrears of land revenue and that the respondents are entitled to recover the same within a period of thirty years from the date when they fall due. It is further submitted that when a legal fiction is created, the provisions of the Act have to be read in conjunction with the legal fiction and the intention of the Legislature has to be gathered in this background and as such, the respondents are justified in seeking to recover the arrears of property tax through the impugned notices. In support of his contentions, learned Additional Advocate General placed reliance on two decisions of the Supreme Court in H.S.R. MURTHY Vs. THE COLLECTOR OF CHITTOR2 and in H.C. SUMAN AND ANOTHERVs. REHABILITATION MINISTRY, EMPLOYEES' COOPERATIVE HOUSE BUILDING SOCIETY LTD., NEW DELHI3.
7. In view of these submissions, the point for consideration is whether the Municipal Corporation of Hyderabad is entitled to recover arrears of property tax by way of distraint after the expiry of three years from the date when the tax becomes due?
8. In order to appreciate these contentions, it is necessary to extract the amended provisions under Section 238 of the Hyderabad Municipal Corporation Act, which reads as under :
238. Property tax, a first charge on property and movables :- The property tax on buildings and lands shall, subject to the prior payment of the land revenue, if any, due to the Government thereon, be a first charge upon the said buildings or land and upon the movable property, if any, found within or upon such buildings or lands and belonging to the person liable to such tax.
Provided that all the taxes and dues to the Corporation including the property tax payable to the Corporation shall be liable to be recovered as if they were arrears of land revenue."
9. Section 264 of the Act enables the Corporation to determine property tax and provides the mode of payment. Section 268 of the Act provides for issuance of a notice of demand and it reads thus :
268. Notice of demand :- (1) If the amount of tax for which any bill has been served as aforesaid is not paid into the Municipal Office within fifteen days from the service thereof the Commissioner may cause to be served upon the person liable for the payment of the same a notice of demand in the form of Schedule K, or to the like effect.
(2) For every notice of demand which the Commissioner causes to serve on any person under this section, a fee of such amount not exceeding one rupee shall in each as be fixed by the Commissioner, shall be payable by the said person and shall be included in the costs of recovery."
10. Section 269 of the Act enables the Corporation to initiate distress proceedings in case of failure to comply with the demand notice. Likewise, Section 270 enables the Corporation to issue a warrant of distress and sale of the goods and chattels of the defaulter for recovery of property tax.
11. Section 278 of the Act is one such provision which lays down the procedure to be adopted by the Corporation in case of default in payment of arrears of taxes, which reads thus :
278. Defaulter may be sued for arrears if necessary :- Instead of proceedings against a defaulter by distress and sale as hereinbefore provided, or after a defaulter shall have been so proceeded against unsuccessfully or with only partial success any sum due or the balance of any sum due, as the case may be, by such defaulter, on account of a property tax or of tax on vehicles and animals may be recovered from him by a suit in any Court of competent jurisdiction.
This provision enables the Corporation to seek recovery of the unpaid property tax by instituting a suit in a competent Court. Since the Legislature has not provided any specific period for initiating proceedings for recovery of arrears of tax, the Corporation shall be entitled to fall back on Article 113 of the Limitation Act which provides three years limitation period from the date of right to sue accrues for filing any suit for which no period of limitation is prescribed elsewhere in the Schedule of the Limitation Act. According to Section 278 of the Act, if the Corporation has unsuccessfully proceeded against a defaulter or only succeeded partially in recovering property tax, it can file a suit in a competent civil Court under Section 278 of the Act, but however, subject to the limitation of three years as provided under Section 113 of the Limitation Act.
The provisions under Section 278, 268, 269 and 270 of the Hyderabad Municipal Corporation Act fell for consideration before a Division Bench of this Court in the decision cited (1) supra and the Division Bench while examining the said provisions in the light of Article 113 of the Limitation Act, held at para-8 of the said decision thus:
"The Municipal Corporation is not given the power to recover taxes by attaching and/or selling the immovable property of the defaulter. It has been given the power only to proceed against the movables found in the premises in respect of which taxes are due, or of the defaulter, wherever they are found. The said remedy is in the nature of a summary remedy for prompt collection of taxes. It may be that, in some cases, the said remedy may not be effective, or it may not be practicable to adopt that method, and in such a case, the corporation can adopt the normal and ordinary channel of a suit in a Civil Court. In such a suit it can seek to enforce the statutory charge against the immovable property in which case, the period of limitation would be twelve years; while, if it chooses to file a suit merely for recovery of taxes, it would be bound by the three years rule contained in Article 113 of the Limitation Act, 1963. If the contention of the Municipal Corporation that the provisions of the Limitation Act do not apply to destraint proceedings is accepted, a situation would arise where the Corporation would be entitled to recover taxes under Section 269 and Section 270 of the Act without any period of limitation, while in case it approaches the Civil Court it would be bound by the periods of limitation, referred to above. Even after, say 20 years or even 30 years, the Corporation would be entitled to recover taxes under Section 269 and Section 270 of the Act, while its remedies by way of suit are barred by law. It cannot be gainsaid that the remedy of suit provided by Section 278 of the Act is substantive remedy while the mode of recovery provided in Sections 269 and 270 is summary in nature. The substantive and summary remedy should be read consistent with each other, and if so read, it becomes clear that the said summary remedy is available only for recovery of taxes for three years from the date when the tax becomes due."
12. Thus, the emerging scenario from the above discussion of the Division Bench of this Court, it is clear that though distress proceedings are provided in the Act, but recourse to such proceedings would not be initiated as a matter of routine but can only be resorted to for recovery of taxes for the preceding three years from the date when the tax becomes due and in cases where the period is more than three years, proceedings for recovery of such tax can be initiated in terms of Section 278 of the Act, by filing a suit in a competent Court of law.
13. On behalf of the respondent-Corporation, though a plea has been taken by the learned Additional Advocate General that by virtue of the amendment brought to Section 238 of the Act, a legal fiction is created and the Corporation is entitled to recover the tax dues including property tax as if it is arrears of land revenue and the limitation for such recovery is thirty years from the date on which such tax fell due, We do not think, this submission could be sustainable in the light of the decision of the Supreme Court in STATE OF KERALA AND OTHERSVs. V.R. KALLIYANIKUTTY AND ANOTHER4. In the said decision, the Supreme Court was examining the provisions of Sections 69(2), 70 and 71, in particular, of the the Kerala Revenue Recovery Act, 1968 in the light of a common question of law raised before it as to whether a debt which is barred by the law of limitation can be recovered by resorting to recovery proceedings under the Kerala Revenue Recovery Act, 1968. At this stage, it would be appropriate to narrate a few facts in the said decision. Section 71 of the Kerala Revenue Recovery Act, 1968 empowered the Government, in public interest, to declare that the provisions of the said Act shall be applicable to the recovery of amounts due from any person or class of persons to any specified institution or any class or classes of institutions and thereupon all the provisions of this Act shall be applicable to such recovery. In exercise of the said powers, the State Government has issued two different notifications making the provisions of the Act applicable to the recovery of the amounts due from any person to any bank on account of any loan advanced to such person by that bank for agriculture or agricultural purposes and also to recovery of amounts due from any person or class of persons to the Kerala Financial Corporation, in public interest, for speedy recovery of loans given by a bank for agricultural purposes as well as for speedy recovery of loans given by the Kerala Financial Corporation. The overall scheme of the Act, therefore, is to provide for speedy recovery, not merely of public revenue but also of certain other kinds of loans which are required to be recovered speedily in public interest. When a question arose as to whether a debt which is barred by the law of limitation can be recovered by resorting to recovery proceedings under the Kerala Revenue Recovery Act, 1968, the matter went to the Kerala High Court and a Division Bench of the Kerala High Court held that in the absence of any provision in the said Act creating a substantive right to recover time-barred debts, the said Act which provides for summary recovery cannot be taken recourse to once the period prescribed for recovery under the Limitation Act, 1963 had expired. The said judgment of the Division Bench was subsequently followed by a subsequent Division Bench in its judgment dated 29-1-1988. However, a Full Bench of the Kerala High Court by judgment dated 10-4-1996 overruled the two Division Bench Decisions of the Kerala High Court, against which the matter went up to the Supreme Court. In this background, the Supreme Court on examining the said provisions in the light of the submissions advanced before it held thus:
"The overall scheme of the Act is to provide for speedy recovery, not merely of public revenue but also of certain other kinds of loans which are required to be recovered speedily in public interest. Agricultural loans and loans by the State Financial Corporation are also loans given in public interest for the purpose of economic advancement of the people of the State, to help them in agricultural operations or establishment of industries. For this reason, the Kerala Revenue Recovery Act has been made applicable to such loans so that there can be a speedy recovery of such loans and the amounts can be utilized for similar objects again. Therefore, instead of filing a suit (or an application or petition under any special Act), obtaining a decree and executing it, the bank or the financial institution can now recover the claim under the Kerala Revenue Recovery Act. Since this Act does not create any new right, the person claiming recovery cannot claim recovery of amounts which are not legally recoverable nor can a defence of limitation available to a debtor in a suit or other legal proceedings be taken away under the provisions of the Kerala Revenue Recovery Act."
14. The Supreme Court further held thus:
"An amount 'due' normally refers to an amount which the creditor has a right to recover. Wharton in Law Lexicon defines 'due' as anything owing; that which one contracts to pay another. There is no reference in this definition as well as in the definition in Black's Law Dictionary, 6th Edition, page 499 to a time-barred debt. In every case the exact meaning of the word 'due' will depend upon the context in which that word appears."
15. While dealing with the provisions of the Kerala Revenue Recovery Act, 1968, the Supreme Court held thus:
"It is not true that the statute of limitation merely bars the remedy without touching the right and therefore, the right to recover the loan would remain even though the remedy by way of a suit would be time barred. There is no question in the present case of any payment voluntarily made by a debtor being adjusted by his creditor against a time-barred debt. The provisions in the present case are statutory provisions for coercive recovery of 'amounts due'. Although the necessity of filing a suit by creditor is avoided, the extent of the claim which is legally recoverable is not thereby enlarged. Under Section 70(2) of the Kerala Revenue Recovery Act, the right of a debtor to file a suit for refund is expressly preserved. Instead of the bank or the financial institution filing a suit which is defended by the debtor, the creditor first recovers and then defends his recovery in a suit filed by the debtor. The rights of the parties are not thereby enlarged. The process of recovery is different. An Act must expressly provide for such enlargement of claims which are legally recoverable, before it can be interpreted as extending to the recovery of those amounts which have ceased to be legally recoverable on the date when recovery proceedings are undertaken."
16. Finally, the Supreme Court held thus :
"In view of the above interpretation of Section 71 it is not necessary to consider whether by making a requisition under Section 69(2) a creditor sets in motion a process of recovery which is a judicial process which would attract the law of limitation. There is a clear provision for adjudication under Section 70(3) of the said Act. The right under Section 70(3) is not affected by Section 72. Section 72 does not cover the right of a person making a payment under protest to institute a suit which is expressly provided for under Section 70 sub-section (3). Looking to the scheme of recovery and refund under Sections 70 and 71 'amounts due' under Section 71 are those amounts which the creditor could have recovered had he filed a suit.
In the premises under Section 71 of the Kerala Revenue Recovery Act claims which are time-barred on the date when a requisition is issued under Section 69(2) of the said Act are not 'amounts due' under Section 71 and cannot be recovered under the said Act."
17. Applying the above test, if we look at the provisions of the Hyderabad Municipal Corporation Act, the Corporation has to fall back on the procedure contemplated under Section 278 of the Act by filing a suit in a competent Court. When no time limit is prescribed by the Legislature for filing a suit, for recovery of amounts due which is a substantive remedy, Article 113 of the Limitation Act, 1963 governs the field providing three years limitation period for initiating proceedings to recover the amount due from the date when the right to sue accrues. If the contention of the Municipal Corporation, that by legal fiction, the Corporation, in the light of the amended provision to Section 238 is entitled to recover the property tax as arrears of land revenue under the Revenue Recovery Act, within 30 years in terms of Article 112 of the Limitation Act is accepted, it would be like placing the summary remedy on a higher pedestal than the substantive remedy, which is not the intention of the Legislature. Needless to mention, as held by a Division Bench of this Court in the decision cited (1) supra, taking recourse to distraint proceedings is only a summary remedy to recover the arrears of tax and it cannot take precedence over substantive remedy. As held by the Supreme Court in STATE OF KERALA'S CASE (3 supra), there is no enlargement of time for recovery of certain dues beyond the time stipulated under Article 113 of the Limitation Act, unless the Act expressly provide for enlargement of time to recover claims which are legally recoverable. Therefore, the theory of legal fiction propounded by the learned Additional Advocate General appearing on behalf of the respondents cannot be accepted. The decisions cited by the learned Additional Advocate General have no bearing on the facts of the case in the light of the decision of the Supreme Court cited (3) supra.
18. Having regard to our discussion in the foregoing paragraphs and in the light of the ratio laid down by the Supreme Court in the decision cited (3) supra, we hold that the respondents are not entitled to recover arrears of property tax by way of distraint after the expiry of three years from the date when the tax becomes due. If the respondents so choose to recover such tax, it is open to them to take recourse to the provisions contemplated under Section 278 of the Hyderabad Municipal Corporation Act.
19. It is seen that in Writ Petition Nos. 9735 and 20724 of 1995, property tax was sought to be recovered from the petitioners from the periods 1-4-1981 to 31-3-1993 and 1-4-1982 to 30-9-1992 respectively. The petitioners, however, carried the matter before the Chief Judge, City Small Causes Court, Hyderabad by filing appeals seeking to declare the demand to be valid only for a period preceding three years to the demand notice. The Chief Judge, City Small Causes Court, Hyderabad, accepted the contentions of these petitioners and declared that the Municipal Corporation is not entitled to collect property tax for more than three years preceding the date of demand notice by way of summary procedure i.e., by issuing distress warrant.We agree with the findings of the Chief Judge, City Small Causes Court, Hyderabad to the extent indicated above. We set aside the impugned demand notices pertaining to the period not covered under decision rendered by the Chief Judge, City Small Causes Court, Hyderabad.
20. Insofar as W.P.No. 19681 of 1995 is concerned, tax was sought to be recovered for the years 1979 to 1995. Since we have declared that the respondents are not entitled to recover tax for more than three years preceding the demand notice, we also set aside the impugned notice in this Writ Petition to the extent indicated above. However, if the respondents choose to recover such tax beyond three years period, they can do so by taking recourse to the provisions under Section 278 of the Act, however, according to law.
21. The Writ Petitions are accordingly allowed in the above terms. No costs.