Holding

Assessments of lighting rate made between 24 May 1974 and 31 March 1976 on the basis of the 1964 Adhiniyam were illegal, whereas assessments after 1 April 1976 and the drainage and water taxes are valid.

Summary

The Indore Municipal Corporation issued bills and notices demanding payment of lighting rate and drainage tax based on the annual letting value calculated under the Madhya Pradesh Sthawar Sampatti Kar Adhiniyam, 1964, rather than the method prescribed in Section 138 of the Madhya Pradesh Municipal Corporation Act, 1956. The High Court quashed these demands, and the Corporation appealed. The Supreme Court examined the statutory framework, the effect of bye‑laws, and the timing of their publication, holding that before the relevant bye‑laws became effective the Corporation could rely on its resolutions, but after their commencement assessments must follow the bye‑law provisions. Consequently, the lighting rate assessed between 24 May 1974 and 31 March 1976 was illegal, while assessments after 1 April 1976, the drainage tax, and the water tax (graduated flat rate) were valid. The Court set aside the High Court judgment on the lighting rate, upheld the drainage and water taxes, and dismissed the challenges to the general sanitary cess where the bye‑law option was unavailable.

Issues considered

Whether lighting rate and drainage tax can be assessed on the basis of the annual letting value prepared under the 1964 Adhiniyam instead of the method prescribed in Section 138 of the Madhya Pradesh Municipal Corporation Act, 1956.
Whether the general sanitary cess assessed using the Adhiniyam basis is valid before the corresponding bye‑law was published.
Whether the graduated flat rate (water tax) falls within the ambit of Section 132(1)(d) of the Act.
Effect of the publication of bye‑laws on the legality of tax assessments made prior to their coming into force.
Whether the lighting rate demand for the period 24 May 1974 to 31 March 1976 is illegal.

Legislation cited

Madhya Pradesh Municipal Corporation Act, 1956s. 132, s. 133, s. 143, s. 431
Madhya Pradesh Sthawar Sampatti Kar Adhiniyam, 1964

Subjects

municipal taxlighting ratedrainage taxsanitary cesswater taxgraduated flat ratebye‑lawannual letting valueassessmentMadhya Pradesh Municipal Corporation Act

Judgment

INDORE MUNICIPAL CORPORATION A
V.
!'-- GUJARAT CO-OPERATIVE HOUSING SOCIETY LTD. & ANR.

r NOVEMBER 28, 1991

[K. JAGANNATHA SHETTY AND YOGESHWAR DAYAL, JJ.] B

Madhya Pradesh Municipal Corporation Act, 1956: Sections 132,
133,143, 429 and 431.

'Sanitary Cess', 'Water tax', 'Lighting rate' and 'Drainage tax'-Levy
and collectio~Validity of-'Premises'~cope of C

Madhya Pradesh Sthawar Sampatti Kar Adhiniyam, 1964.

Levy of taxes under M.P.Municipal Corporation Act, 1956-Determina-
tion of annual letting value under the provision of 1964 Adhiniyam-Permis-
sibility of D

Indore Municipal Corporation Drainage Tax (Assessment, Collection
1 and Refund) Bye-law~. 1975-Bye-law No. 4-Scope of

Indore Municipal Lighting Rate (Assessment, Collection and Refund)
E
Bye-laws, 1974-Bye-law No. 4--Scope of

The appellant-Corporation issued a bill dated 26 October, 1971 and
a demand notice dated 14.8.1973 to the respondent demanding paym~nt of·.
lighting rate and drainage tax. In the bill the demand related to lighting
rate and drainage tax for the yearl971-72, while the demand notice related F
to lighting rate and drainage tax in respect of arrears and current dues up
to 31.3.1974. These taxes were levied by the Corporation under section 132
of the Madhya Pradesh Municipal Corporation Act, 1956 but the assess-
ment was made on the basis of annual letting value of the property
calculated under the provision of Madhya Pradesh Sthawar Sampatti Kar

, Adhiniyam, 1964. The assessment was challenged. By an order dated G
2.3.1979 a single judge of the Madhya Pradesh High Court quashed the
demand by holding that the drainage tax and lighting rate was to be
assessed in accordance with the annual letting value determined under
section 138 of the Act and that the assessment with reference to the annual
value determined under the 1964 Adhiniyam was illegal. Against the
decision of the single judge of the High Court, the Indore Municipal Cor- H
poration filed an appeal (C.A.No. 2377 of 1980) in this Court.
11
12 SUPREME COURT REPORTS [1991) SUPP. 3 S. C.R.

A In the connected appeal (C.A.No. 2378/80) a writ petition was filed -'t 7
to quash a demand No. 855 dated 8.2.1974 levying general sanitary cess on
the respondent for the period commencing from 1973-74. The general
sanitary cess was levied at the rate of 2 per cent on the annual letting value
of the house property under Section 132(1)(c) of the M.P.Municipal
Corporation Act. In this case also the annual letting ''alue was determined
B in accordance with the provisions of the 1964 Adhiniyam and not in ac-
cordance with the mode prescribed under section 138 of the Act. By an
order dated 2.3.1979 a single judge or the High Court quashed the
demand. Against the decision of the single judge, the Indore Municipal ~
Corporation filed an appeal in this Court.

c The connected petition (SLP (C) No.10376of1981) has been tiled by
a Cloth Market Merchants Association against the judgment of a Division
Bench of the Madhya Pradesh High Court dated 25.7.1981. In the im-
pugned order the learned Division Bench was concerned with the legality
of the demand for drainage tax and lighting rate, general sanitary cess and
the validity of graduated flat rate. The Division Bench held the general
D sanitary cess in force with effect from 24.8.1973, till 31st March 1976 to be
illegal. Consequently, the division bench quashed the demand for general
s~nitary cess. However, it upheld the demand for drainage tax and lighting
rate as well as graduated flat rate. To the extent the division bench
declined the relief, the petitioners have filed the Special Leave Petition
challenging the decision relating to the drainage tax, lighting rate and the
E graduated flat rate.

Disposing the appeals, this Court,

HELD: 1. Property tax is one of the taxes which the Corporation can
impose under Section 132(1)(a) of the Madhya Pradesh Municipal Corpo-
F ration Act, 1956. The imposition of this tax is regulated by sections 135 to
159. The rate of property tax is relatable to annual value which is defined
in section 138.[22-H]

2. The bye-laws are framed under section 427 of the Act, and Section ·
G 431 provides that all bye-laws shall be published in the Gazette. The effect
of these provisions is that_ the bye-laws become part of the Act. Thus the
Corporati~n while providing the system of assessment for various taxes
can propose a basis but after the bye-laws provided the· system ·of assess-
ment; the Corporation has to abide by that system of assessment.[23-B]

H 2.1 The bye-laws in relation to lighting rate came into force on
MUNICIPAL CORPN. v. CO-OPT. HOUSING SOCIETY 13

,..,._ 24.5.1974, general sanitary cess on 9.1.1976 and drainage tax on 12.2.1976. A

r However, before the bye-laws became effective the resolutions of the
Corporation held the field. But if the resolutions come in conflict with the
method of assessment then the resolution with effect from which date the
bye-laws come .into force, will become illegal and ineffective
[17F, 19 C, 23D]
B
3. There is a distinction between general sanitary cess on the one
hand and drainage tax and lighting rate on the other.• [19-B]

3.1 The general sanitary cess was enforced from 1.4.1973 but the
bye-laws in relation thereto were.finally approved and published only on
9.1.1976. The proposal in relation to imp~ition of sanitary cess did not c
give any option to adopt the annual letting value determined under the
Adhiniyam if no annual letting value was determined for the imposition of
property tax under the Act. The resolutions of the Corporation provide
only one method namely to assess it in accoro~mce with the annual letting
value of the property tax provided under the Act. [19A-B, 23-D]
D
-j 3.2 The option, however, was available to the Corporation in relation·
to drainage tax· and lighting rate. The Corporation could in view of the
resolution follow the option of working out these taxes on the basis of
annual letting value prepared under the Adhiniyam. Therefore, so far as
drainage tax is concerned, it could continue on such basis till 12.2.1976 and
so far as the lighting rate is concerned till 24.5.1974. [23-E] E

4. The water rate imposed on houses where there is no water
connection is known as "graduate flat rate". That rate is revised from time
to time and it was last revis~d by the Indore Municipality by a Notification
dated 22nd December, 1940. The graduated flat rate in this Notification is
on the basis ofrental value of the houses. The graduated flat rate at the F
aforesaid revised rate continued to be in force even after the enforcement
of the Act and the Constitution of Indore Municipality as a Corporation
under the Act.[25 C-D]
"" 4.1 The graduated flat rate is covered by the provisions of Section
'"'I'
132(1)(d) of the Madhya Pradesh Municipal Corporation Act, 1956 and G
the water tax is leviable in respect of the premises. It is clear from clause
(d) of sub-section (1) of Section 132 that water tax could be levied in
respect of premises not only where premises are connected by means of
municipal pipes or Government water pots but where. the premises were
situated in a portion of the city in which the Commissioner has given
public notice that the Corporation has arranged to supply water from H
14 SUPREME COURT REPORTS (1991) SUPP. 3 S. C.R.

A municipal or Government pots by means of providing water connection or
public stand-pots, fountains or by any other means.(25, !"-G]
4.2 But so far as the Act is concerned, water rate is leviable to the
premises without distinction to the nature of the premises or their user.
[ 26-A]

B 4.3 The premises is a very wide word and includes buildings of all
types whether residential, commercial or factory etc. etc. Merely because
the premises are godowns, it cannot be urged that the water rate or
graduated flat rate could not be imposed.[26-B] >
5. The bill regarding lighting rate is held to be partly illegal and
C unenforceable for the period from 24.5.1974 to 31.3.1976 as basis of
assessment was contrary to the relevant Indore Municipal Lighting Rate
(Assessment, Collection & Refund) Bye-laws, 1974. But the demand for
lighting rate after 1.4.1976 is valid and to that extent, is confirmed.
[ 26D-E]
D CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2377-78 of
1980 etc. etc. t-

From the Judgment and order dated 2.3.79 of the Madhya Pradesh High
Court in Misc. Petition No. 781 of 1974.

B.Sen, Sunil Gupta, D.N.Mishra, S.K.Gambhir and Vivek Gambhir for
E
the Appellants.

L.N.Gupta, S.R.Phodnis, Sunil Gupta and D.N.Mishra the Respondents.

The Judgment of the Court was delivt?red by

F YOGESHW AR DAY AL, J. This order will dispose of C.A.2377 and
2379of1980 and S.L.P.(C) 10376of1981. C.As. 2377 and 2378of1980 have
been filed against two separate judgments of the learned Single Judge of the
Madhya Pradesh High Court dated 2.3.1979 by the Indore Municipal Corpo-
ration.

G The impugned order in C.A.2377 of 1980 was passed in Civil Miscella-
neous Petition No. 781of1974 filed by Gujarati Co-operative Housing Society
Ltd. and Another v. The Indore Municipal Corporation and Others and the
impugned order in C.A.2378 of 1980 was passed in Miscellaneous Petition
No.253of1974 filed by the Madhya Pradesh Awas SamasyaNivaran Sanstha
and another v. The Indore Municipal Corporation and other. ·
H
MUNIOPAL CORPN. v. CO-OPT. HOUSING SOCIETY [YOGESHW AR DAYAL, J.] 15

The S.L.P.(C)No. 10376 of 1981 has been filed by M/s M.T. Cloth A
Market Merchants Association against the Indore Municipal Corporation and
others against the judgment of a division bench of the High Court dated
25.7.1981 in Miscellaneous Petition No. 172of1980. The division bench in the
impugned judgment approved the decision of the Single Judge which is subject
matter of C.A. 2378 of 1980 but dissented from the decision of the same
learned Single Judge, which is the subject matter of C.A.2377 of 1980. B

Heard. Special Leave granted.

In C.A.2377 of 1980 the order impugned, on behalf of the respondents
in the writ petition, was a bill dated 26th October, 1971 (filed as annexure-J to
the writ petition) and a demand notice dated 14.8.1973 (filed as annexure-M c
to the writ petition) by which a demand for payment of lighting rate and
drainage tax had been made by Indore Municipal Corporation from petitioner
No. 2, Gaya Prasad Sahu in the writ petition in respect of house No. 25,
Mohalla Vallabh Nagar, Indore for the period commencing from 1971-72. In
the aforesaid bill dated 26th October, 1971 the demand related to lightning rate
and drainage tax for the year 1971-72 (see page 30 of the paper book) and D
demand notice dated 14.8.1973 inter alia related to lightning rate and drainage
tax in respect of arrears and current dues up to 31.3.1974 (see page 36-37 of
the paper book). These taxes have been levied under Section 132 of the
Madhya Prndesh Municipal Corporation Act, 1956 (hereinafter referred to as
the Act). The learned Single Judge quashed the demand on the ground that the
basis of the demand were illegal. The demand for lightning rate and drainage E
tax had been made on the basis of annual letting value of the writ petitioners'
property calculated in accordance with the annual letting values prepared by
the State Government under the provisions of Madhya Pradesh Sthawar
Sampatti Kar Adhiniyam, 1964 (hereinafter referred to as the Adhiniyam) and
not in accordance with the mode prescribed in Section 138 of the Act even
F
though those taxes have been imposed under Section 132 of the Act. It was held
that the drainage tax and lightning rate under the Act is to be assessed in
accordance with the annual letting value determined under Section 138 of the
An and that the assessment of the said rate and tax with reference to the annual
value determined under the Adhiniyam was illegal and consequently the bill
served on the writ petitioner w'lS liable to be quashed. On this ground the ·G
aforesaid demands made in annexurc-J &M (as filed in the writ petition) was
quashed by the learned Single Judge. On the same basis the impugned order
dated 2.3.1979 in C.A.No. 2378, was passed by the learned Single Judge where
the writ petition was filed to quash a demand No. 855 dated 8.2.1974
(annexure-H to the writ petition) in relation to general sanitary cess made by
the Indore Municipal Corporation from the writ petitioner No. 2, Lax.man Das H
16 SUPREME COURT REPORTS [1991) SUPP. 3 S. C.R. ~
A in respect of House No. 121, Mahatma Gandhi Road, Indore for the period
commencing from 1973-74. The general sanitary cess had been levied at the
rate of 2 per cent on the annual letting value of the house property under
Section 132(l)(c) of the Act which enabled the Corporation to impose general
sanitary cess for the construction and maintenance of public latrines for the
removal and disposal of refuse. The annual letting value of the house property
B was the base for calculation of the cess from the property owner and in this ~ase
also the annual letting value on the basis of which the demand was made was
in accordance with the provisions of the Adhiniyam and not in accordance with
the mode prescribed under Section 138 of the Act even though the cess had
been imposed under Section 132(l)(c) of the Act.

C In the impugned order passed by the division bench, which is the subject
matter of the S.L.P. (C); No. 10376 of 1981 the learned division bench was
· concerned with the legality of the demand for drainage tax and lighting rate,
general sanitary cess and the validity of graduated flat rate. The division bench
found the general sanitary cess in force w.e.f. 24.8.1973 till 31st March, 1976
to be illegal. Consequently, the division bench quashed the demand for general
D sanitary cess. The division bench, however, upheld the demand for drainage
tax and lightning rate as well as graduated flat rate. Consequently, the division
bench partly allowed the writ petition.

To the extent the division bench declined the relief, the petitioners have
filed the Special leave Petition. The petitioners in this Special Leave Petition
E have challenged the decision relating to drainage tax, lighting rate and
graduated flat rate and have relied upon the decision of learned Single Bench
which is the subject matter of C.A.2377 of 1980.

For appreciating the points involved in the cases it will be necessary to
refer to the relevant provisions of the· Act and the bye-laws framed under the
F Act and the provisions of the Adhiniyam. · ·

We will first notice the factual position about the various bye-laws anq
the resolution passed by the Municipal Corporation in relation to these taxes
and the cess. The draft bye-laws for the general sanitary cess are called "the
G Indore Municipal Corporation General Sanitary Cess (assessment, collection
and refund) Bye-laws, 1973 (hereinafter referred to as the Draft General
Sanitary Cess Bye-laws, 1973). They appear at pages 115 to 119 of the paper
book of the S.L.P. The final bye-laws in relation to general sanitary cess,
however, came to be published in the prescribed manner only on 9th Janu-
ary, 1976. The General sanitary cess had been 'introduced by the Iridore
H Municipal Corporation w.e.f. 1.4.1973. The relevant bye-law for assessment of
MUNICJPAL CORPN. v. CO-OPT. HOUSING SOCIETY !YOGESHWAR DAYAL, J.] 17

"' general sanitary cess is bye-law No. 4. The assessment u~der these bye-laws A
~-
\ is to be made on the basis of the annual letting value of any building or land
at the rate of 2 per cent prepared in accordance with the·provisions of section
1~8 of the Act. The DraftGeneral Sanitary Cess Bye-laws 1973 appear at pages
115 to 119 of the paper book of the S.L.P. but the final bye-laws as published
in the Gazette on 9.1.1976 are not part of the paper book.
B
The proposed bye-laws in relation ,to drainage tax are at pages 97 to 99
• but the final bye-laws in relation to drainage tax were not filed with the appear
i book. The draft bye-laws were called "Indore Municipal Corporation Draft
Drainage Tax (Assessment, Collection, Refund) Bye-laws 1973 (hereinafter
referred to as the Draft Drainage Tax Bye-laws, 1973). But the final bye-laws
in relation to drainage tax came to be published only on 12.2.1976 from which c
date they became enforceable and as translated are called "Indore Municipal
Corporation Drainage Tax (Assessment, Collection an.d Refund) Bye-laws,
1975 (hereinafter referred to as the Drainage Bye-laws 1975): Bye-law No.4
thereof contemplates that the assessment of drainage tax on the annual letting
value of any building or land at the rate of Rs. 1.50 per cent or such rate as may
-i
from tim~ to time be fixed by the Corporation in accordance with the D
' provisions of Section 138 of the Act and the assessment shall be done in the
_. manner laid down for assessment of property tax in Sections 139 to 159 of the
Act. The drainage tax was, however, levied by the Corporation w.e.f. 1.4.1971.

· The bye-laws in relation to lighting rate were published by a Notification
'1~ dated 18th April,1974 in the Madhya Pradesh GilZetty dated 24th May, 1974 E
and came into effect from date of publication. They are called "Indore ==-··
Municipal Lightning Rate (Assessment, Collection and Refund) Bye-laws
"' 1974. The releyant bye~law for assessment of lightning rate is bye-law No. 4
~ which prescribes that the assessment of lighting rate will be on the basis of de-
termination of annual letting value for assessment of property tax in accor-
dance with the _Act - F

The position thus bOils down to this that. the bye-laws in relation to
_J.
lightning rate came into force on 24.5.1974, general sanitary cess on 9.1.1976
-
~~
·-""'( and drainage tax on 12.2.1976.
G
It appears that before the aforesaid bye-laws were made effective in
relation to drainage taxthe resolution No. 925 dated 10th march, 1970 was
passed by the Corporation proposing to levy drainage tax at a particular rate on
a particular baSis. This resolution was passed at a special meeting of the
Corporation under sub-section (2) of Section 132 of the Act and the proposal ,
was mace effective by the order oftheAdministratorNo.491dated26.10.19701' H
' ' - '
MUNICIPAL.CORPN. 11. CO-OPT. HOUSiNG SOCIETY [YOGESHWAR DAYAL, J.J 19

~ the Administrator for imposition of these truC:es as well as the rate of ~uch taxes A
and also the basis being the annual letting value as determined by the
Corporation of the State Government for imposition of property tax from time
to time._ The general sanitary cess were enforced from 1.4."i973 but the bye-
laws in relation thereto werefinally approved and published only on 9.1.1976.
The proposal in relation to imposition of sanitary cess did not' give any option
to adopt ihe annual letting value determined under the Adhiniyam if no annual B
letting value was determined for the imposition of property tax under the Act.
There is thus a distinction between general sanitary cess on the one hand and
drainage tax and lightning rate on the other. The basis for computing these
taxes is given in the byt'.~laws but the bye-laws become' effective only on their
publication in the Gazette. Thus before the bye-laws Qecame effective the -
resolutions of the Corporation/Administrator held the field. - ·c
We may now examine the provisions of the Act and the Adhiniyam of
· 1964. As we have noticed earlier that for sometime the properties within the
Corporation and the Municipalities areas were subjected to property tax by two
authorities namefythe~llnicipal Corporation and the State Government si-
multaneously but the power of the Municipalities was taken away iii view of D
enactinent of Section 36 of the Adhiniyam. The power of the Corporation was
restored only w.e.f. 1.4.1976. The property tax w~ the main tax which was
being recovered by the Municipal Corporation and the Mµnicipalitics and for
collection of prope~y tax the Municipalities and the Corporations were prepar-
ing annual letting value of the properties. .But when the power of the Munici-
, palities and the Corporation wiis taken away -in view of Section 36 of the E
Adhiniyam, the Corporation was not maintaining any list of annual letting
value determined under the Act. , -

Section 132 of the Madhya Pradesh Municipal Corporation Act, 1956
enumerates the taxes which can be imposed by a Municipal Corporation. The -F
Section, in so far as relevant for purposes of this case, reads as follows:

"Sec. 132. Taxes to be imposed under this Act.

·(a) a tax payable by the owners 9f buildings lailds situated within the
city with reference to the gross annualletting value of the building - G
or land called the property tax; -

xxx xxx xxx

(c) a general sanitary cess for the constructlon and maintenance of
public latrines and for removal and disposal of refuse; H
20 SUPREME COURT REPORTS [1991] SUPP. 3 S. C.R.

A (d) a water rate;

provided that the water tax shall be levied only in respect of the
premises~

(a) to which the private water-supply is furnished from, or which
B. arc connected by means of commm:1ication pipes with any Munici-
pal or Government water works; or

(b) which are situated in a portion of the city in which the Commis-
sioner has given the public notice' that the Coij>oration has ar-
ranged to supply water from Municipal .and Government water-
c works by means of private water connections or'jmblic.stand-pots,
fountains or by any other means. ·

- (2) In addition to the taxes mentioned in sub-section (1) the Corpora-
tion, may; for the purposes of this Act, impose any of the following
taxes, namely : ·
D
xxx xxx ·xxx

(e) a lighting rate where the lighting of public streets, places and
buildings is undertaken by the Corporation :

E xxx xxx .xxx

(g) a dtainage tiix, where a syst~~ o(drafn~ge has been intro-
duced; · -

xxx xxx . xxx
.F
(3) Subject to the provisions of Article 277 of the Constitution of
India any tax which immediately before the commencement of the
Madhya Pradesh Municipal Corporation Law (Extension) Act,
1960 (13 of 1960) was being lawfully levied by the Corporation
G may, notwithstanding that such tax is not specifie4 in sub-section
(1) or (2), continue to be levi~d by the Corporation.

(4) The imposition of any tax under this section shall be subject to the
provisions of the Act and of any othei enactment for the time being
in force ..
H
MUNICIPAL CORPN. v. CO-OPT. HOUSING SOCIETY [YOGESHW AR DAY AI~).] 21

(5) The Municipal taxes shall be assessed and levied in accordance A
with thy provisions of this Act and the rules and bye-laws made
thereunder :

(6) The Government may, by notification in the Gazette, prescribe
such maximum and minimum limits with respect to the amount or
' to the rate or both as may be specified in such notification within B ·
which the Corporation may impose taxes mentioned in sub-sec-
tions (1) and (2).

A perusal of the section quoted above would show that the taxes
mentioned in sub-section (1) are obligatory. In other words, the Corporation
must impose these taxes. General sanitary tax and water rate fall under this c
category. The taxes mentioned in sub-section (2) are not obligatory but they
can also be imposed by the Corporation; lighting rate and drainage tax come
under this cla5s. Apart from the taxes which can be imposed under sub-sections
(1) and (2), the Corporation can continue to levy any tax not mentioned therein
which immediately before the commencement of the M.P.Municipal Corpora-
tion Law (Extension) Act, 1960 was being lawfully levied by the Corporation. D
The taxes as provided in sub-section (5) arc to be assessed and levied in
accordance with the provisions of the Act and the rules land bye-laws made
thereunder. Sub-section (6) authorities the Government to prescribe maximum
and minimum limits of the taxes.

, 3. The procedure for imposition of taxes is contained in section 133 E
which reads as follows :

Sec: 133 Procedure for imposing tax -

(l) The Corporation may at a special meeting bring forward ·a F
resolution to propose the imposition of any tax under section 132
defining the class of persons or description of property proposed to
be taxed~ the amount or rate of tax to be imposed and the system
of assessment to be adopted.

Provided that no such resolution shall be passed by the Corporation G
for the imposition of any tax corning under clause (o) of sub-
section (2) of section 132 unless the Government shall have first
given their approval to the selection of the tax by the Corporation:
'
(2) Such resolution shall be published in the Gazette and in such ·
other manner as may be prescribed by bye-laws. Any perso1i I I
22 SUPREME. COURT ~EPORTS . [1991] ·SUPP. 3. S. C. R.

A residing· within the city and objecting lO. the proposed tax may,
within thirty 9ays from the publication of the resolution in the
Gazette, submit his objection in writing to the Corporation and the
Corporation shall at a special meeting talce his objection into con-
sideration. \
B (2-A) If the Corporation decides to amend its proposals or any of
· them it shall publish amended proposals, along :with ·a notice
indicating that they are iri modification of those previously pul>-
lished for objections.

(2-B). Ariy objections which may J:>e received to .the ainended
.c , proposals within thirty days shall be dealt with in the manner
prescribed in sub-section (2cA).

(2-C) Tile Corporation ·sha}l publish . its final·. proposals in •the.
Gazette., and the tax shall then come. into force on such date as lllay ·
be specified iii that notification. .
D
(3) A notification of the imposition of a tax under this section
. shall ~ conclusiv.e evidence that the. i.ax has j)een impos~d
in accordance with the provisions of this Act · · · .·

(4) Nothing contained in this section shall apply .to. tax men-
E tioned in clause (a) of sub-section (1) of se~tion .132 which
shall be charged and levied in accordance with s~tio~ 135."

Briefly stated, the first step is Pl;l.ssing of a resolution .defining the class
of persons, description of property proposed to be taxed, the amounts or rate
of tax to be imposed and. tl1e system of ass~ssment. to be adopted. The resolution
F is published in the Government. Gazette for inviting' objecti0ns. Objections
filed within thirty days are cof!sidered by the Corporation. The Corporation
then publishes its final propos~s and the tax· comes into, force on the date as·
may be specified in the notification. The notification of the imposition of tax
is conclusive evidence that the tax has b~en .imposed in accordance with the A

G provisions of the Act.

, Property tax is one of the taxes which the. Corporation can impose (sec
section 132 (l)(a)). The imposition of this tax is regulated by sections 135 to
159. The rate of property tax is relatable to annual value which is defined in
· section 138. The preparation of assessment list is covered by seetions 143 to
H 153. It is als9 clear from the provisions of section 133 thai the Coryoration may
MUNICIPAL CORPN. v. CO-OPT. HOUSING SOCIETY [YOGESHWAR DAYAL, J.] 23

by special meeting bring forward resolutions about the system of assessment A
to be adopted.

The bye-laws are framed under section427 of the Ac.t and Section.431
provides that all bye-laws shall be published in the Gazette. The effect of these
provisions is that the bye-laws become part of the Act Thus the Corporation
while providing the system of assessment for various taxes can propose a basis B
but after the bye-laws provided the system of assessment, the Corporation has
. to abide by that system of assessment.

So far as the drainage t:aX is concerned, there were no bye~laws till 12.2.
1976. The resolutions of the Corporation could thus hold the field by providing
a method of assessment till 12.2.1976. Similarly, the resolution in relation to c
general-sanitary cess could also hold the field till the publication of bye~laws
in relation thereto on 9.1.1976 and similarly for lighting rate till the publication
of bye-laws in relatiori thereto on 24.5.1974. But the resolutions if they come
in conflict with the method of assessment then the resolution w.e.f. from which
date the bye-laws come into force, will become illegal and ineffective.
D
· So far as the general sanitary cess is concerned, the resolutions of the
Corporation provide only one method namely to assess it in accordance with
the annual letting value of the property tax· provided under the Act. The option,
however, was available to ·the Corporation in relation to drainage tax and
lighting rate. The Corporation could in view of the resolution follow the option
of Working out these taxes Ort the basis of annual Jetting value prepared under E
the Adhiniyam. Therefore, so (ar as drainage tax is concerned, it could continue ·
such basis till 12.2.1976 and as far as the· lighting rate is concerned till
24.5.1974. After 24.5.1974; in relation to lighting rate, determination of it on·
the basis of annual letting value prepared under the Adhiniyam will become
bad. Therefore, dealing with the matter further we may notice another change
F
which was brought about w.e.f. 1.4.1976. With effect from 1.4J976 section
143 was added to the Act which provides as under : -

Section. 143. Assessment of annual value and duration of assess-
ment
G
(1) The annual value of any land or building situate within the city
as determined under the Madhya Pradesh Nagariya Sthawar Sam-
patti Kar Adhiniyam, 1964 (No. 14 of 1964) or the rules made ·
thereunder, and in force for the purpose of that Act immediately
before the 1st day·of April; 1976 shallbe deemed to be the annual
value for the assessment of property tax on such land ot building · H
24 SUPREME COURT REPORTS [1991] SUPP. j s. C .. R:
A under this Act. until such time as the Commissioner makes a fresh
valuation and determines annual value under this Act of the land
and buildings therein and the annual value .of such land or build-
ings shall remain unchanged for a period of one year and may be
revised thereafter by the Commissioner at the termination of suc- I

r
L~_
cessive period of .one year.·
B
(2) The Commissioner may, instead of making a new assessment
every year, adopt the existing assessment, with such alteration as
_he thinks fit, as the assessments for each new year, giving to . .. ;-
~
persons affected by such alterations the same notice of the altered
valuation and assessment as would have been .required if a new \
c asses.sment had been prepared. ··

(3) The Commissioner shall arrange for a survey for the purpose of
assessment of each part of the city at least once in five yeais save
for the omission, with the previous consent of the Standing
Committee, of any small areas which might be more conveniently
D . re-assessed in a s_ubsequent year." - .
,~

By its very wording Section 143 is prospective and it m~es that the
annual value of the building as under the Adhiniyam to be deemed to be the
annual value for the assessment of property tax or land or building under the
. Act Until such time as . the. Commissioner makes a fresh valuation and
E prepares annual value specifically under the Act and sub-section (2) thereof
gives power to the Commissioner to adopt the existing value of such land after
following the procedure. The effect of enactment of Section 143 of the Act.
w.e.f.1.4.1976 is that from such date the Cori>oration could legitimately adopt
the annual value prepared under the Adhiniyam as the basis for determination
: of the aforesaid three taxes. · ·
F
Until a new list is prep~ed, the annual value so adopted by Section 143 ·
is deemed to be the annual value under the Act. The annual value so enforced
ior the .purpose of assessment of property tax under the Act cciulci also be use.:.
for assessment of drainage tax, lighting rate and general sanitary cess.
G
We have already mentioned earlier that so far as drainage tax and lighting
rate are concerned, their assessment could be.made by the Corporation on the
basis of the annual value fixed under the Adhiniyam in view cif the resolutions
passed by the Corporation and the orders made by the Administrator till the
bye-laws came into effect in relation thereto and in vi~ of Sectioi:i 143 there
H is again no difficulty in assessing general sanitary cess on the basis of annual
value adopted by Section 143 for the period from 1st April, 1976 onwards.
MUNICIPAL CORPN. v. CO-OPT. HOUSING SOCIETY [YOGESHW AR DAYAL, J.] 25

We may now deal with the decision of the division bench in relation to·· A
the imposition of water rate known as "graduated flat rate"_ the tax ·known by
this name is in reality water rate imposed by the Corporation. The Corporation
supplies water in the corporation limits. The Corporation was earlier a Munici-
pality governed by the Indore Municipal Act (Act No.4 of 1909). Section 21 {x)
of this Act authorised the Municipality to impose water rate (where water is
supplied by. the Municipality). The water rate was imposed under the B
provisions of .the Indore Municipal Act. There were separate rates for houses
in which water connection was taken with meters or without meters and ·
different rates for those houses where no water connection· was at all taken.The
water rate for houses where no water connection was taken imposed on the
theory that the house owners must be taking water from some public tap or
stand pot or fountain provided by the Municipality. The water rate imposed on
houses where there is no wa.ter connection is known as ''graduated flat rate"
That rate is revised from time tO time. It was last revised by the Indore
Municipality by a Notification dated 22nd December, 1940. The graduated flat
rate in this Notification is on the basis of rental value of the houses. The
graduated flat rate at the aforesaid revised rate continued to be in force even
after the enforcement.of the Act and the Constitution of Indore Municipality D'
as a Corporation under this Act. The challenge before the High Court to the as-
sessment of graduated flat rate was with thnevision of graduated flat rate by
the Administrator's order dated 18th May 1973 passed under Section 162 of the '
Act· The petitioners had filed 'objections to the bill in relation to graduated flat
rate (annexure-S to the S.L.P.) which was sent under postal certificate.
E
It may be noticed that the graduated flat rate is now related to the area:
of the building and not to the rental value. The argument before the High Court
was that it was not open to the Corporation to exercise the power or revision .
of tax under section 162(2) as this was not a tax covered under sub-section (1)
or (2) of Section 132 ·or the Act. It was admitted before the High Court that
F·
before a notification for revising the rate was issued the sanction of the
Government had been obtained. However, it is clear that the graduated flat rate
is covered by the provisions of Section 132(1)(d) and the water tax is leviable
in respect of the premises. It is clear from clause (d) of sub-section (1) of
Section 132 that water tax could be levied in respect of premises not only where
premises are connected by means of municipal pipes or Government water pots G
but where the premises were situated in a portion of the city in which the
Commissioner has given public notice that the Corporation has arranged to
supply water from municipal or Government pots by means of providing water
connection or public stand-pots, fountains or by any other means. No objection
was raised before the Commissioner, Municipal Corporation of Indore that for
godowns no water rate could be charged and that they were not subject to water H
26 SUPREME COURT REPORTS (1991) SUPP. 3 S. C.R.

A . rate for the purposes of Indore Municipal Act. ·But so far as the Act is
concerned, .water rate is leviable lo the premises without distinction lo the "°'·
nature of th.e premises or their user.

Before us an argument was put forward that since the premises arc made
godowns no water supply is provided. We are afraid that what clause (d) of sub-
B section (1) of Section 132 talks aboutis not in relation lo any house, building
or godowns but refers to expression "premises". The premises is _a very wide
word and includes building~ of all types whether residential, commercial or
factory etc. etc. Merely because the premises are godowns, it cannot be urged
that the water rate or graduated flat rate could not be imposed. We are also of
the view that it is not fair again to permit the petitioner to urge that the water
C rate is not applicable to the premises in dispute as no such objection was also
taken. either in the objection petition before the Commissioner referred to
earlier, or in the writ petition before the High Court nor in the Special Leave
Petition.

The result of the above discussion is that C.A. 2378 ofl980 and Civil
D Appealarising out of S.L.P. (C) No. 10376 of 1981 i.n relation to drainage tax,
general sanitary cess and water rate are dismissed. However, in relation to the
bill regarding lighting ~ate impugned in the judgment of the division bench, it
is held to be partly illegal and unenforceable for the period from 24.5.1974 to
. 31.3. 1976 as basis of assessment was contrary to th~ relevant Indore Municipal
Lighting Rate (Assessment, Collection & Refund) Bye-laws, 1974. But the
E demand for lighting rate after 1.4.1976 is valid and to that extent, in relation
to lighting rate, the impugned order of the division bench is confirmed to the
aforesaid extent. In regard to C.A.2377 of 1980 where the bill dated 26th
October, 1971 and the demand notice dated 14th August, 1973 in relation to
lighting rate and drainage tax are only challenged, the impugned judgment of
F the High Court is set aside and the appeal is allowed. Parties are, however, left
to bear their own costs.

T.N.A. Appeals disposed of.