Holding

Section 415 does not require the corporation to refer a tax dispute with a local authority to the Government, and the High Court’s direction was erroneous.

Summary

The Jabalpur Municipal Corporation levied property, sanitation, water, electricity and development taxes on buildings within a market (Mandi) administered by the Krishi Upaj Mandi Samiti, which claimed the corporation lacked jurisdiction. The corporation commenced recovery proceedings; the Samiti filed a petition under Article 226 seeking quash of the proceedings. The Madhya Pradesh High Court, relying on an earlier decision under Section 334 of the Municipalities Act, dismissed the recovery suit and directed the corporation to refer the dispute to the State Government under Section 415 of the Municipal Corporation Act. On appeal, the Supreme Court held that Section 415 does not obligate the corporation to refer a tax dispute to the Government, that the provision differs fundamentally from Section 334, and that no rules exist to give effect to Section 415. Consequently, the High Court’s order was set aside and the appeal allowed.

Issues considered

Whether the Krishi Upaj Mandi Samiti qualifies as a 'local authority' under Section 415 of the Madhya Pradesh Municipal Corporation Act, 1956.
Whether Section 415 mandates the corporation to refer a tax dispute with a local authority to the State Government.
Whether the High Court was correct in quashing the recovery proceedings and directing reference under Section 415, in view of Section 334 of the Madhya Pradesh Municipalities Act, 1961.

Legislation cited

Arbitration Act, 1940
Code of Civil Procedure, 1908s. 20
General Clauses Act, 1957s. 2(20)
Madhya Pradesh Krishi Upaj Mandi Adhiniyam, 1973s. 7
Madhya Pradesh Municipal Corporation Act, 1956s. 415
Madhya Pradesh Municipalities Act, 1961s. 334
Madhya Pradesh Municipalities (Regulation of Relations between Councils and other Local Authorities) Rules, 1971s. 2, s. 3, s. 4, s. 5

Subjects

municipal corporationlocal authorityproperty taxSection 415Section 334jurisdictiontax assessmentdispute resolutionSupreme Court

Judgment

A MUNICIPAL CORPORATION, JABALPUR
v.
KRISHI UPAJ MANDI SAMIT! AND ANR.
\..
JANUARY 25, 1990

B [K. JAGANNATHA SHETTY AND T.K. THOMMEN, JJ.]

M.P. Municipal Corporation Act, 1956: Section 415 "Anything
done or intended to be done under the Act"-1nterpretation of-'Local
Authority'-Refusal to pay taxes-Whether obligatory on Corporation '
to refer dispute to Government.
c
M.P. Municipalities Act, 1961: Section 334. Difference between
section 415 of 1956 Act and Section 334of1961 Act explained.

M. P. Krishi Upaj Mandi Adhiniyam, 1973: Section 7 Krishi Upaj )..
D
Mandi Samiti-Whether a local authority.

The appellant-Corporation assessed property tax in respect of
bnildings belonging to the respondent-Market Committee, which
refnsed to pay the same. Proceedings were commenced for recovery of
E the dues. The respondent moved the High Court under Article 226 of J
the Constitution for quashing the recovery proceedings.

The High Court following its earlier decision arising under Sec-
lion 334 of the M.P. Municipalities Act, 1961 allowed the petition,
quashed the recovery proceedings and directed the Corporation to refer
F

~
the dispute to the Government under Section 415 of the M.P. Municipal
Corporation Act, 1956.

Aggrieved by the aforesaid decision, the Corporation, appealed to

~
this court.
G
Allowing the appeal, this Court,

HELD: 1. The assessment of tax or demand of any fees by the
Corporation under the provisions of the M.P. Municipal Corporation ..,
Act, 1956 -could fall within the term "anything done or intended to be
H done under the Act" as provided under Section 415 of the Act. Even
144
MUNICIPAL CORPN. JABALPUR v. MANDI SAMIT! 145

r~fusal of the Corporation to consider the objections against assessment A
and recovery of tax or fees could also be considered as "anything done
or intended to be done under the Act". But section 415 does not provide
that the Corporation has to move the Government when the local au-
thority has refused to pay the tax or fees levied and demanded. [148G-
H; 149A]
B
2. The structnre of section 415 of the M.P. Municipal Corpora-
tion Act, 1956 is different from section 334 of the M.P. Municipalities
Act, 1961. Section 415 speaks of dispute between .the C<irporation and
local authority as regards anything doue or to be doue under the Act.
And such a dispute shall be referred to the Government for decision.
Section 334 refers to a dispute on a matter in which the Municipal
Council-and local authority are jointly interested and it states that such C
dispute shall be referred to the State Government for decision. Section
334 does not refer to the dispute as regards "anything done or to be
done under the Act." Section 415 does not speak of any dispute in which
the Corporation and the local authority are jointly interested. There are
no rules framed for operation of section 415 while under section 334 the D
State Government has framed Rules. In view of these differences the
.view taken by the High Court that the Corporation must take steps to
resolve the dispute cannot be justified. It has apparently no support
either from the terms of section· 415, or from any rules framed for the
purpose. Therefore, the recovery proceedings should not have been
quashed by the High Court. And the Corporation should not have been
directed to refer the dispute to the Government under section 415 of the
E
M. P. Municipal Corporation Act, 1956. [ISOF -H; 15 IA]
Jawahar Krishi Upaj Mandhi Samiti Gadarwara & Anr. v . .Munic-
ipal Committee Gadarwara & Anr. Misc. -Petition No. 994 of 1981
decided by the M.P. High Court on 5.5.1983, distinguished.
F
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 480
of 1986.

From the Judgment and Order dated 10.7.85 of the Madhya
Pradesh High Court in Misc. Petition No. 1235 of 1984.

D.N. Mukherjee and Ranjan Mukherjee for the Appellant.

S.S. Khanduja, Yashpal Dingra and Baldev Kishan for the
Respondents.

The Judgment of the Court was delivered by H
146 SUPREME COURT REPORTS [1990] 1 S.C.R.

A K. JAGANNATHA SHETTY, J. This appeal by leave from a
judgment of the M.P. High Court concerns the scope of Section 415 of
the M.P. Municipal Corporation Act, 1956 ('the Act' for short).

The circumstances can be shortly stated.

B Within the Jabalpur Municipal Corporation limits, there is a
'Mandi' established under the M.P. Krishi Upaj Mandi Adhiniyam,
1973 ('Adhiniyam') covering an area of 55 acres. It is enclosed by high
boundary wall and is under the control and jurisdiction of the Krishi
Upaj Mandi Samithi or otherwise called the Market Committee.
Under Section 7 of the Adhiniyam, the market Committee is a body
corporate with power to provide facilities for regulation of buying and
c selling of agricultural produce and establishment of proper administra-
tion of the market. Section 7(3) of the Adhiniyam provides that
••
notwithstanding anything contained in any enactment for the time
being in force, every market committee shall for all purposes, be
deemed to be a 'local authority'. Inside the Mandi, the market com-
D mittee appears to have constructed office buildings, shop complexes,
godowns, market yards, shades and other buildings. The Jabalpur
Municipal Corporation assessed property tax in respect of the build-
ings within the Mandi area and also demanded safai tax, water tax,
electricity charges, development charges for the years 1980-81to1983-
84. The market committee has refused to pay the same and claimed
E that the corporation has no jurisdiction to levy and collect such taxes
or charges. The Corporation did not agree with that claim and initiated
proceedings to recover the dues. Challenging the action taken, the
Market Committee moved the High Court under Article 226 of the
Constitution for quashing the recovery proceedings. The High Court
following an earlier decision arising under Section 334 of the M.P.
F Municipalities Act, 1961, allowed the petition and quashed recovery
proceedings. The High Court also directed the Corporation to take
steps in accordance with Section 415 of the Act for resolving the dis- (
)
pute with the market committee. The order of the High Court reads as
follows:

G "Section 415 of the M.P. Municipal Corporation Act, 1956
provides for adjudication of disputes between the Corpora-
tion and local authorities by the State Government on a
reference made to it for this purpose. The corresponding
provision in the M.P. Municipalities Act, 1961 is Section
334. In a similar situation, where recovery proceedings had
H been commenced against a Krishi Upaj Mandi Samiti, like
MUNICIPAL CORPN. ·~ABALPUR v. MANDI SAMIT! [SHETIY, J.) 147

the petitioner, by the Municipal Council, Oadarwara, a A
Division Bench in Misc. Petition No. 994 of 1981 (Jawahar
Krishi Upaj Mandi Samiti, Gadarwara and another)
decided on 5.6.1983 quashed the recovery prt<:eedings and
directed the Municipal Council to take steps under section
334 of the M.P.. Municipalities Act, 1961 for adjudication
of the dispute between itself and the Krishi Upaj Mandi B
Samiti. Since section 415 of the M.P. Municipal Corpora-
tion Act, 1956 is in pari materia with section 334 of the
M. P. Municipalities Act, 1961 that decision has to be
followed.

Consequently, this petition is allowed. The pending
recovery proceedings against the petitioner are quashed
c
and the respondent Municipal Corporation, Jabalpur is
directed to take steps in accordance with section 415 of the
M.P. Municipal Corporation Act, 1956 for resolving its dis-
pute with the petitioner. The parties shall bear their own
costs." D

In this appeal, the Municipal Corporation, Jabalpur has chal-
lenged the validity of the above order.

Before us, the core of the argu~ent of learned counsel for the
appellant is that the Market Committee is not a local authority either E
under the Municipal Corporation Act, or under the M.P. General
Clauses Act, 1957. It has been declared to be a local authority only for
purposes of the Adhiniyam and that declaration could not be relevant
for the purpose of Section 415 of the Act. The Market Committee
unless it falls within the definition of,'local authority' under the M.P.
General Clauses Act, 1957, the dispute under Section 415 of the Act F
could not be referred to the Government. Counsel also referred to us
the various provisions of the Act which confer power on the Corpora-
tion to levy and collect taxes and charges.

Indisputably, the respondent is not a local authority as defined
under M.P. General Clauses Act, 1957. Section 2(20) of the-said Act G
defines 'local authority' to mean "a municipal corporation, municipa-
lity, local board, Janapad Sabha, village panchayat, or other authority
T legally entitled to, or entrusted by the Government with the control of
management of a municipal or local fund." Counsel for the responde!!t
however, strongly relied upon Section.7(3) of the Adhiniyam which
provides that the Market Committee shall be deemed to be a local H
148 SUPREME COURT REPORTS [1990] 1 S.C.R.

authority notwithstanding anything contained in any other enactment.
A
It seems to us that it is not necessary to express any opinion on
this controversy and even if we assume in favour of the respondent that
it is a local authority without deciding, the recovery proceedings could
not have been quashed by the High Court. And the Corporation could
B not have been directed to refer the dispute to the Government under
Section 415 of the Act.

Section 415 of the Act reads:

"Disputes between Corporation and local authorities:
c If any dispute arises between the Corporation and any local
authority as regards anything done or to be done under this
Act, it shall be referred to the Government for decision
and such decision may include an order as to costs of any
enquiry ordered by the Government, and shall be final.
D
Provided that it shall be competent to the Corpora-
tion and the local authority to agree in writing that any such
dispute shall, instead of being referred to the Government
for decision, be referred to the decision of an arbitrator or
arbitrators appointed under the Arbitration Act, 1940, or
E to a civil court under Section 20 of th~ Code of Civil Proce-
dure, 1908."

The Section is clear and provides that the disputes arising bet-
ween the Corporation and local authority as regards anything done or
to be done under the Act, shall be referred to the Government for
-r-
F decision. It shall be competent also to the Corporation and local
authority to agree in writing that any such dispute shall, instead of
being referred to the Government be referred to the decision of an
arbitrator under the Arbitration Act or to a civil court under Section
20 of the Code of Civil Procedure. The assessment of tax or demand of
any fees by the Corporation under the provisions of the Act could fall
G within the term "anything done or intended to be done under the Act"
as provided under Section 415. Even refusal of the Corporation to
consider the objections against assessment and recovery of tax or fees
could also be considered as "anything done or intended to be done
under the Act". The question however, is whether it would be obli-
gatory for the Corporation in the event of the local authority refusing
H to pay taxes or fees to approach the Government or refer the dispute
MUNICIPAL CORPN. JABALPUR v. MANDI SAMIT! [SHE.TTY, J.] 149

to the Government for decision? The answer to the question should be A
in the negative. Section 415 does not provide that the Corporation has
to move the Government when the local authority has refused to pay
the tax or fees levied and demanded. There are also no rules framed by
the Government regulating the exercise of power under the Section
and at any rate our atte~tion has been drawn to no· statutory rules
framed under the section. B

The High Court however, has followed its earlier decision arising
under Section 334 of the Municipaiities Act. There the dispute arose
between the Gadarwara Municipal Council and Mandi Samiti
Gadarwara as to the authority of the former to collect takes· and
charges from the latter. The Mandi Samithi was an authority
constituted like the present Market Committee under Section 7 of the C
Adhiniyam and functioning within the Municipal limits. It challenged
the . recovery proceedings initiated by the Municipal Council and
moved the High Court for appropriate relief under Article 226 of the
Constitution. The High Court quashed the recovery proceedings and
directed the Municipal Council to approach the Government under D
Section 334 of the Municipalities Act to resolve the dispute. This deci-
sion, we think, overlooks the plain terms of Section 334 and even
otherwise it is not relevant for operation of Section 415 of the Act.

Section 334 of the M.P. Municipality Act, 1961 reads:
E
"Dispute between Council and other local body:

(1) In the event of any dispute arising between a Council
and any other local authority established under any State
Act on a matter in which they are jointly interested, such
dispute shall be referred to the State Government, whose F
decision shall be final."

Under this Section the State Government has framed rules called
"Madhya Pradesh Municipalities (Regulation of Relations between
Councils and other local Authorities) Rules, 1971". Rules 2 and 3 are
in these terms: G

"Rule 2. Whenever a Council and any other authority are
jointly interested in any matter, such matter shall be settled
amicably between them and where they do not come ro a
mutual agreement, the matter shall be referred to the
Collector. H
150 SUPREME COURT REPORTS (1990] 1 S.C.R.

A Rule 3. The Collector shall then arrange a joint meeting of
the Council and Local Authority and manage to bring
about an amicable settlement."

The rules thus provide that the dispute in which the Council and
local authority are jointly "interested in any matter, but not possible to
B
settle the dispute mutually, the matter shall be referred to the Col-
lector. The Collector shall try to bring about an amicable settlement by
arranging a joint meeting of both the authorities. Rules 4 and 5 are
also relevant in this context and may be read: ...
"Rule 4. If the talk for amicable settlement fails, the Col-
c lector shall persuade the Council and the local authority to
agree in writing to refer the matter to an arbitrator or
arbitrators appointed under the Arbitration Act, 1940 and
if they agree, the matter shall be referred to such arbitrator
or arbitrators, as the case may be.
D
Rule 5. When the Council and local authority do not agree
to refer the matter to arbitration the Collector shall refer
the matter to the State Government with his comments on
it and the decision of the State Government shall be final."

Under Rule 5, it would be for the Collector to refer the matter to
E the Government with his comments, and not for the Municipal Council
to approach the Government.

By comparing the provisions of Section 415 of the Act with Sec-
tion 334 of Municipalities Act, it will be seen that the structure of the
former is different from. the latter ..Section 415 speaks of dispute bet-
f ween the Corporation and local authority as regards anything done or
to be done under the Act. And such a dispute shall be referred to the
Government for decision. Section- 334 refers to a dispute on a matter in
which the Municipal Council and local authority are jointly interested
and it states _that such diSpute shall be referred to the State Govern-
ment for decision. Section 334 does not refer to the dispute as regards
G "anything done or to be done under the Act." Section 415 does not
speak of any dispute in which the Corporation and the local authority
are jointly intere_sted. Secondly, there are no rules framed for opera-
tion of Section 415 of the Act. In view of _these differences the view
taken by the High Court. That the Corporation must take steps to
resolve the dispute cannot be justified. It has apparently no support
H
MUNICIPAL CORPN. JABALPUR v. MANDI .SAMITI [SHETIY, J.] 151

either from the terms of Section 415 or from any rules framed for the
purpose. A

In the result, we allow the appeal and reverse the judgment of
the High Court.

ln the circumstances of the case, there will be no order as to B
costs.

T.N.A. Appeal allowed.

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