Supreme Court of India
WESTERN COALFIELDS LTD.versusSPECIAL AREA DEVELOPMENT AUTHORITY, KORBA AND ANR.
- Citation
- 1981 INSC 194
- Decided
- 26 November 1981
- Disposal
- Dismissed
- Bench
- Y V CHANDRACHUD
Holding
Section 69(d) confers on the Special Area Development Authority all taxation powers of a municipal corporation or council as they exist at the time of exercise, including subsequent amendments, making the property tax valid and enforceable.
Summary
The Special Area Development Authority (SADA) of Korba, created under the Madhya Pradesh Nagar Tatha Gram Nivesh Adhiniyam, 1973, levied property tax on Western Coalfields Ltd., Bharat Aluminium Co. Ltd. and other government‑owned companies, despite an agreement that SADA would not tax them and claims that the companies' property was exempt under Article 285 of the Constitution. The Supreme Court held that Section 69(d) of the 1973 Act must be read to give SADA the same taxation powers as a municipal corporation or council at the time the power is exercised, and that subsequent amendments to the Municipalities Act and Municipal Corporation Act therefore apply. The Court ruled that the property tax is imposed under the newly inserted sections 127A and 135, which create a tax liability without requiring the procedures of sections 129 and 133, and that the companies, though wholly owned by the Union, are separate legal entities whose property is not exempt. The agreement to forgo taxation was held to be beyond the authority of the SADA chairman and did not bar the levy. Finally, the Court found no conflict between the state’s power to tax and the Union’s Coal Mines Nationalisation Act. The appeals were dismissed with costs.
Issues considered
- The scope and interpretation of Section 69(d) of the Madhya Pradesh Nagar Tatha Gram Nivesh Adhiniyam, 1973 regarding taxation powers of the Special Area Development Authority.
- Whether amendments to the Madhya Pradesh Municipalities Act, 1961 and Municipal Corporation Act, 1956 made after 1973 are incorporated into the authority's powers.
- Whether the procedure prescribed in sections 129 and 133 of the Municipal Acts applies to the property tax imposed under sections 127A and 135.
- Whether property owned by companies wholly owned by the Government of India is exempt from state property tax under Article 285 of the Constitution and the relevant statutory exemptions.
- Whether the 1976 agreement between the companies and SADA waives the authority's power to levy tax.
- Whether the state property tax conflicts with the Coal Mines Nationalisation Act, 1973 and the Mines and Minerals (Regulation and Development) Act, 1957.
Legislation cited
- Coal Mines (Nationalisation) Act, 1973s. 5
- Constitution of Indias. Article 285(1), s. Article 289
- Madhya Pradesh Municipal Corporation Act, 1956s. 132, s. 133, s. 135, s. 136, s. 141
- Madhya Pradesh Municipalities Act, 1961s. 127, s. 127A, s. 129, s. 141, s. 147
- Madhya Pradesh Nagariya Sthawar Sampatti Kar Adhiniyams. 36
- Madhya Pradesh Nagar Tatha Gram Nivesh Adhiniyams. 69(d)
- Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhyadesh, 1976
- Mines and Minerals (Regulation and Development) Act, 1957s. 2
Subjects
property taxmunicipal authorityspecial area development authorityincorporation by referencecorporate personalityArticle 285Coal Mines Nationalisation Acttaxation powerwaiver agreementlegislative competence
Judgment
A
WESTERN COALFIELDS LTD.
v.
SPECIAL AREA DEVELOPMENT AUTHORITY,
KORBA AND ANR. B
November 26, 1981
(Y.V. CHANDRACHUD, C.J. AND D.A. DESAI, J]
Madhya Pradesh Nagar Tatha Gram Nivesh Adhlnlyam (23 of 1973), S 69(d), C
Madhya Pradesh Municipalities Act 1961, S. 127A and Madhya Pradesh Municipal
- Carporation Act 1956, Ss. 135, 136.
Property Tax-Levy of-Whether special Area Development Authority has
all the powers of taxation which a Municipal Corporation or Municipal Council
has-Whether incorporation of earlier Act in a later Act or reference to the powers
conferred by earlier Acts. D
Constitution of India 1950, Act 285(1}, M.P. Municipalities Act 1961, s. 147
Expln. and M.P. Municipal Corporatian Act 19S6, s. 141-Property tax on leased
lands-Land owned by State Government-Taken on lease by Company-Entire
share capital of company subscribed by Central Government-Liability to payment
of property tax-Whether arises.
E
.; Coal Mines Nationalisation Act 1973, s. 5, Mines & Mineral (Regulation and.
Development} Act 1957 s. 2 and M.P. Nagar Tatha Gram Nivesh Adhinlyam 1973,
s. 69( dl-Power conferred on State Legislature to impose proptrty tax whether In
conflict with the power lo regu/a te and develop coal mine conferred by Nationalisa-
- tion Act.
The Madhya Pradesh Municipalities Act, 196! by S. 127 (!) (i) empowered
a municipal council to impose, in the whole or any part of the municipality, "a
tax payable by the owners of houses, buildings or lands situated within the limits
of Municipality with reference to annual letting value of the house, building or
F
land called property tax". The corresponding provision in the Madhya Pradesh
Municipal Corporation Act, 1956 was section 132(1)(a), and it provided that "the
Corporation shall impose a tax payable by the owners of buildings or lands
situated within the city with reference to the gross annual letting value of the G
building or land called the property tax". The procedure for imposition of taxes
was spelt out in section 129 of the Municipalities Act and section 133 of the
Municipal Corporation Act. Section 127 A was ins:rted in the Municipalities
Act for imposition of property tax and provided by sub-clause (I) that as and
from the financial year 1976-77 there shall be charged, levied and paid for each
financial year a tax on the lands or buildings or both situated in a municipality H
at specified rates. Sub-clause (2) exempted properties owned by or vesting in the
Union Government, State Government or the Council from the levy. Similar
2 SUPREME COURT REPORTS (1982] 2 s.c.R.
I\ provisions were inse1ted in sections 135 and 136 of the Municipal Corporation
Act.
Respondent No. I was constituted the Special Area Development Authority
under section 65 of the Madhya Pradesh Nagar Tatha Gram Nivesh Adhiniyam
(23 of 1973). Clauses (c) and (d) of section 69 of the Act conferred upon the
Development Authority powers for the purpose of municipal administration and
(J for the purpose of taxation. These clauses were inserted by Ordinance 26 of
1975 which came into force on February 27, 1976. The Ordinance was replaced
by the Madhya Pradesh Nagar Tatha Gram Nivesh (Sanshodhan) Adhiniyam
1976 (6 of 1976).
I
On June 24, 1976 respondent I entered into an agreement with the appellant
company under wh.ich the company agreed to contribute a sum of rupees 3 lakhs
c annually to the "seed capital" of the Authority in consideration of the Authority
agreeing not to exercise it< power of taxation or of levying any other charges on
the assets and activities of the company. The agreement was to remain in force
for a period of ten years beginning from the calendar year 1976 and the annual
paymen.ts due from 1977 were to be made in January every year. The appellant
company paid the contribution for the year 1976. In the same year the company
was called upon by the Sales Tax authorities to pay "the tax on the entry of
-
D goods" which was introduced by the Madhya Pradesh Sthaniya Kshetra Me Mal
Ke Pravesh Par Kar Adhyadesh 1976 in substitution of octrpi tax. While the
c·ompany wa5 pursuing that matter with the State Government, contending that
it was not liable to pay the entry tax by reason of the agreement, on January 4,
1977 respondent I made a further demand of Rs. 3 lakhs on the company for
contribution for the year 1977 That amount .not having been paid as provided
in the agreement, respondent l terminated the agreement by its letter dated
E February 4, 1977.
By a notice issued under section 65 of the Madhya Pradesh Nagar Tatba
Gram Nivesh Adbiniyam 'Act of 1973' on February 21, 1977 and by another
notice issued under section 164(3) of the Madhya Pradesh Municipalities Act
1961 on April 15, 1977, the Chief Executive Officer of respondent 1 called upon
F
the company· to pay a sum of about Rs. 13 lakhs by way of property tax for the
year 1976-77. On July 16, 1977 the company was called upon to pay a further
sum ol about Rs. 13 lakhs as property tax for the year 1977-78. -
The company disputed its liability to pay on the ground that no tax was
Jcviable on its property since the company was owned wholly by the Government
of India and that respondent I was estopped from levying the property tax by
reason of the agreement of 1976. Having failed to pursuade respondent I to
accept its point of view, and also having failed in the High Court the appellant-
G company came to this Court in appeal.
In the appeals to this Court it was contended : (!) that respondent I can
exercise only such powers to levy property tax as the Municipal Corporation or
the Municipal Council had under the Madhya Pradesh Municipal Corporation
H Act, I 956 or the Madhya Pradesh Municipalities Act, 1961 as these Acts stood
on February 27, 1976, when clause ( d) was inserteil in section 69 of the Act of
J97J. Scciiou l Z7 A and section 135 which create and I evy the charge of property
W. COALFiELDS V. DEVELOPMENT AUTHORiTY
lax having been inserted in the Municipalities Act and the Municipal Corporation A
Act respectively with effect from April 1, 1976 i.e. subsequent to the insertion of
clause (d) in section 69 of the Act of 1973, Respondent 1 was incompetent to
exercise the powers of the Municipality or the Municipal Corporation under
section 127 A of the Municipal Corporation Act or section 136 of the Municipal
Corporation Act; (2) that respondent 1 cannot impose the property tax without
following the procedure prescribed by section 129 of the Municipalities Act and
section 133 of the Municipal Corporation Act; (3) that Article 285(1) of the B
Constitution envisages that the property of the Union shall save in so far as
Parliament may by law otherwise provide be exempt from all taxes imposed by
a State or by any authority within a State. Section 127 A(2) of the Madhya
Pradesh Municioalities Act and section 136 of the Madhya Pradesh Municipal
Corporation Act also provide that the property tax shall not be leviable, on
"buildings and lands owned by or vesting in the Union Government". The
appellant companies being wholly owned by the Government of India, the lands
and buildings owned by the companies cannot be subjected to property tax;
c
- (4) that the lands having been taken on lease for a period of 30 years by the
appellant companies, it is the State Government and not the appellant companies
who can be called upon to pay the tax; and (5) that Parliament enacted the Coal
Mines Nationalisation Act, 1973 for acquisition of coal mines and utilisation of
coal resources to subserve the common good. The lands and buildings on which
respondent 1 had imposed the property tax are used for the purposes of and are D
covered by coal mines. ·The taxing power of the State legislature comes in
conflict with the power and function of the Union to regulate and develop the
mines as envisaged by the Nationalisation Act, and is an impediment since it
substantially increased the cost of the developmental activities.
Dismissing the appeals, E
HELD: (i} Section 69(d) of the Act of 1973 must be read to mean that
respondent 1 shall have-all the powers of taxation· which a Municipal Corporation
or a Municipal Council has at the time when respondent 1 seeks to exercise
those powers. (14 A]
- (ii) The Act of 1973 does not provide for any independent power of
taxation or any machinery of its own for exercising the power of taxation. It
rests content by referring to the provisions contained in the two Municipal Acts.
F
The three Acts are supplemental, from which it must follow that amendments
made to the earlier Acts after the en~ctment of section 69(d) shall have to be read
into that section. Without recourse to such a construction the power of taxation
conferred by ,that section will become ineffectual. (14 B-C]
G
(iii) A reading of the referenec to the two earlier Municipal Acls as a
reference to those Acts as they stand at the time when the power of taxation is
sought to be exercised by respondent I will not cause repugnancy betwee~ the
_... two earlier Acts on one hand·and the Act of 1973 on the other, nor will it cause
any confusion in the practical application of the earlier Acts, because the Act of H
1973 does not contain any ind~pendent provision "' machinery for exercising the;
power of taxation. (14 DJ - ·
4 SUPREME coi.JkT REPORTS (J 982) 2 s.c.k.
A (iv) If an earlier legislation is incorporated into a later legislation, the
provisions of earlier law which are incorporated into the later law become a
part and parcel of the later law. Therefore, ramendments made in the earlier
law after the date of incorporation cannot by their own force, be read into the
later law. That is because the legislature, cannot be assumed to intend to bind
itself to all future amendments or modifications which may be made in the
earlier law. [12 D·El
8
( v) Where a statute is incorporated by reference into a second statute,
the repeal of the first statute by a third does not affect the second. Likewise,
where certain provisi;;ns from an existing Act have been incorporated into a
subsequent Act, no addition to the former Act, which is not expressly made appli·
cable to the subsequent Act, can be deemed to be incorporated in it.' [ 12G· 13A]
c (vi) The broad principle that where a subsequent Act incorporates pro·
visions of a previous Act then the borrowed provisions become an integral and
independent part of the subsequent Act and are totally unaffected by any repeal
or amendment in the previous Act, is subject to four exceptions, one of which is
that the principle will not apply to cases "where the subsequent Act and the
previous Act are supplemental to each other". [13 DJ
D
Secretary of State for India in Council v. Hindustan Co-operative Insurance
Society, Limited, 58 Indian Appeals, 259, Clarke v. Bradlaugh, [1881] 8 Q.B.D. 63
69; Collector of Customs, Madras v. Nathe/la Samathu Chetty & Anr., [1962) 3
S.C.R. 786 and State of Madhya Pradesh v. M. V. Narasimhan, [1976] 1 SCR 6,
referred to.
In the instant case, subsequent amendments made to the Municipal Corpora·
E tion Act and the Municipalities Act will also apply to the power of taxation pro·
vided for in section 69(d) of the Act of 1973. The Act of 1973 did not
by section 69(d), incorporate in its true signification any particular
provision of the two earlier Acts. It provided that, for the purpose of taxation,
the Special Area Development Authority shall have the powers whicl\ a Municipal
Corporation or a M'.10icipal Council has under the Madhya Pradesh Municipal
Corporation Act, 1956 or the Madhya Pradesh Municipalities Act, 1961. The
F case, therefore, is not one of incorporation but of mere reference to the powers
conferred by the earlier Acts. [13 E·F]
2(i) Section 127A of the Municipalities Act and section 135 of the
-
Municipal Corporation Act create by their own force, the liability to be brought
to property tax and the right to levy that tax. Nothing further is required to be
done by the Municipality or the Municipal Corporation in order to impose the
property tax. The procedure preliminary to the imposition of other taxes which
G is prescribed by sections 129 and 133 of the two Acts, can have no application
to the imposition of the property tax. [14 F-15 A]
(ii) The property tax is imposed by respondent 1 under section 127A of the
Municipalities Act and section 135 of the Municipal Corporation Act. It is not
H imposed under section 127 of the former Act or section 132 of the latter Act.
It is, therefore, not necessary to follow the procedure prescribed by sections 129
and 133 of the respective Acts. [15 B·C]
W. COALFiELOS v. DEVELOPMENT AUTHORITY
3. Even though the entire share capital of the appellant companies has A
been subscribed by the Government of India, it cannot be predicated that the
companies themselves are owned by the Government of India. The companies,
which ar: incorporated under the Companies Act, have a corporate personality
of their own, distinct from that of the Government of India. The lands and
buildings, are vested in and owned by the companies; the Government of India
only owns the share capital. [16 A-Bl
8
Rustom Cavasjee Cooper v. Union of India, [1970] 3 S.C.R. 530, 555, Heavy
Engineering Mazdoor Union v. The State of Bihar, [1969] 3 S.C.R. 995, Andhra
Pradesh State Road Transport Corporation v. The Income-tax Officer & Anr.
[1964] 7 S.C.R. 17 & Tamlin v. Hansaford [1950] K.B. 18 referred to.
4. The Explanation to section 147 of the Municipalities Act says that the
property tax has to be paid by the owner of the land or building and that a G
tenant of land or building or both, who holds the same under a lease for an
- agreed period, shall be deemed to be the owner thereof. Section 141(1) of the
Municipal Corporation Act provides that the property tax shall be paid primarily
by the owner. By sub-section (2) of section 141, the property tax levied on the
owner can also be recovered from the occupier of the land or the building.[180-E]
5(i) The power conferred by the State Legislature on Special Area D
Development Authorities to impose the property tax on lands and buildings is
not in conflict with the power conferred by the Coal Mines Nationalisation Act
on the Union Government to regulate and develop coal mines so as to ensure
rational and scientific utilisation of coal resources. [21 G]
(ii) The paramount purpose behind the declaration contained in section 2
of the Mines and Minerals (Regulation and Development) Act, 1957 is not in E
any manner defeated by the legitimate exercise of taxing power under section
69(d) of the Act of 1973. [21 H·22A]
H.R.S. Murthy v. Collector of Chitoor and Another, [1964] 6 S.C.R. 666,
State of Haryana & Anr. v. Chanan Mal [1976] 3 SCR 688 and The lshwari Khetan
---
Sugar Mills (P) Ltd. v. The State of Uttar Pradesh & Ors. (1980] 3 SCR 331
referred to. F
Baijnath Kedia v. State of Bihar & Ors. [1970] 2 S.C.R. 100, distinguished.
... CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1025-26 of
1978.
G
Appeals by special leave from the judgment order dated the
15th April, 1978 of the Madhya Pradesh High Court in Misc.
Petition Nos. 61 and 62/78 respectively.
With H
Civil Appeal No. 213 of 1979
SUPREME COURT REi>Okts t19821 2 s.c.tt.
A Appeal by special leave from the judgment and order dated
the I 5th April. 1978 of the Madhya Pradesh High Court in Misc.
Petition o. 555 of 1977.
L. N. Sinha, Attorney General, R. B. Dotar and Miss A.
Subhashini for the Appellants.
B
Y. S. Dharamodhikori, N. M. Ghatate and S. V. Deshpande
for the Respondent.
Y. S. Chitale, Suresh Sethi and S. K. Bhattacharya for the
applicant intervener Municipal Corpn. of Delhi.
c Alto/ Ahmed for the applicant intervener J & K State Agro.
Industrial Corpn. Ltd.
S. K. Gambhir for the applicant.intervener State of M.P.
The Judgment of the Court was delivered by
-
D
CHANDRACHUD, C.J. These appeals by special leave involve
the question of the I egality of the demand for Property-tax made by
respondent I on the appellant Companies. Civil Appeal No. 213
of 1979 filed by the Bharat Aluminium Company Ltd. arises out of
Misc. Petition No. 555 of 1977 filed by it in the High Court of
Madhya Pradesh under Article 226 of the Constitution. Respondent
E
l is the Special Area Development Authority, Korba, District
Bilaspur, M.P., respondent 2 is its Chairman and respondent 3 is the
State of Madhya Pradesh. Since the three appeals raise similar ques-
tions, we will refer to the facts of Civil Appeal No. 213 of 1979 only.
Civil Appeals Nos. 1025 and 1026 of 1978 are by Western Coalfields
F Ltd.
The appellant, Bharat Aluminium Company Ltd., is a Govern-
ment Company incorporated under the Companies Act, 1956, the
entire share capital being owned by the Government of India.
Respondent" l, the Special Area Development Authority for the
Korba Special Area, is constituted under section 65 of the Madhya
G Pradesh Nagar Tatha Gram Nivesh Adhiniyam (23 of 1973), referred
to hereinafter as 'the Act of 1973'. That Act was passed by the
Madhya Pradesh Legislature in order "to make provision for plan-
ning and development and use of land; to make better provision for
the preparation of development plans aQd zoning plans with a view
1:1
to ensuring that town planning schemes are made in a proper
manner and their execution is made effective; to constitute Town
w. COALFIELDS v. DEVELOPMENT AUTHORITY (Chundrachud, C.J.) 7
and Couniry Planning Authority for proper implementation of town A
and country development plan; to provide for the development and
administration of special areas through Special Area Development
Authority; to make provision for the c?mpulsory acquisition of land
required for the purpose of the development plans and for purposes
connected with the matters aforesaid". Chapter VIII of the Act,
consisting of sections 64 to 71, is entitled "Special Areas". Section R
64 .empowers the State Government to declare any area as a special
area by issuing a notification. - Section 55 provides that for every
Special Area there shall be a Special Area Development Authority
consisting of a Chairman and such other members as the Govern-
ment may' determine from time to time. The Chairman 'and the
c
-
members of the Development Authority are appointed by the
Government. Section 68, which prescribes the functions of the
Development Authority, lays down by clauses (v) and (vi) that the
Development Authority shall make provision for the municipal
services and municipal management of the Special Area. Section 69,
by clauses (c) and (d}, confers upon the Development Authority
powers for the purpose of municipal administration and for the D
purpose of taxation. These two clauses of section 69 and clauses
(v) and (vi) of section 68 were inserted in their present shape by
Ordinance 26 of 1975 which came into force on February 27, 1976.
The Ordinance was replaced by the Madhya Pradesh Nagar Tatha
Gram Nivesh (Sanshodhan) Adhiniyam, 1976 (6 of 1976).
E
Section 69(d) of the Act of 1973 reads thus :
"69. Powers : The Special Area Development Autho-
rity shall
- . (d) ·for the purpose of taxation have the powers which
·is n1unicipal corporation or a municipal council has, as the
case may be, under the Madhya Pradesh Municipal Cor-
poration Art, 19.J6 (No. 23 of 1956} or the Madhya Pra-
F
... desh Municipalities Act, 1%1 (No. 37 of 1961),
(a} where the municipal corporation of municipal
council existed in such area prior to its designation as G
special area under section 64, according to the munici-
pal law by which such special area was governed, and
(b) where no municipal corporation or municipal
council existed in such area prior to its designation as
H
special area under section 64, according to such of the
aforesaid Acts as the State Government may direct."
8 SUPREME coullT REPORTS ( 1982] 2 S.C.)l.
A Clauses (a) and (b) above are sub-clauses of clause (d). (They
should better have not been so numbered alphabetically since the
main clauses themselves are similarly numbered).
Since there was no Municipal Corporation or Municipal
Council in the Korba Special Area prior to the constitution of t~e
B Development Authority, the Government was required under sub-
clause (b) above to direct whether the Madhya Pradesh Municipal
Corporation Act, 1956, or the Madhya Pradesh Municipalities
Act, 1961, shall apply to the Korba Special Area for the purposes
of clauses (v) and (vi) of section 68 and clauses (c) and (d) of sec-
tion 69. Such a direction was first issued by Notification dated
c January 28, 1976 published in the Government Gazette, dated
February 27, 1976 . by which the Development Authority, Korba,
was directed to exercise the powers and perform the functions of a
Class I Municipality constituted under the Madhya Pradesh Munici-
pality Act, 1961. This Notification became effective from February
27, 1976 from which date Ordinance No. 26 of 1975 was made effec-
0 tive. By another Notification, dated March 15, 1977, published in
Government Gazette, dated July 15, 1977, the Development Autho-
rity, Korba, was directed under the aforesaid clauses of sections 68
and 69 to exercise the powers and perform the functions under the
Madhya Pradesh Municipal Corporation Act, 1956.
E Section 127(l)(i) of the Madhya Pradesh Municipalities Act,
1961 empowers a municipal council to impose, in the whole or any
part of the municipality, "a tax payable by the owners of houses,
buildings or lands situated within the limits of Municipality with
reference to annual letting value of the house, buildmg or land
F
called property tax". The corresponding provision in the Madhya
Pradesh Municipal Corporation Act, 1956 is section 132 (l)(a). It
says that "the Corporation shall impose a tax payable by the owners
of buildings or lands situated within the city with reference to the
-
gross annual letting value of the building or land called the property
tax". The procedure for imposition of taxes is contained in section
129 of the Municipalities Act and section 133 of the Municipal
G Corporation Act.
In 1964, the Madhya Pradesh State Legislature had enacted
the Madhya Pradesh Nagariya Sthawar Sampatti Kar Adhiniyam,
which was made applicable to the whole State, including the urban
areas. By section 36 of the aforesaid Adhiniyam, local authorities
H
were prohibited from recovering the property tax from November
24, 1910.
w. COALFIELDS v. DEVELOPMENT AUTHORITY (Ch.andrachud, c. J.) 9
Towards the beginning of 1976, the Government decided to A
abolish octroi tax and to impose in its place a 'tax on the entry of
goods'. To compensate the municipal councils and the municipal
corporations for the loss arising from the abolition of the octroi tax,
the Government decided to confer powers on these bodies for
levying property tax. For conferring powers to levy tax on the
entry of goods ia place of octroi tax, the Madhya Pradesh Sthaniya B
Kshetra Me Mal Ke Pravesh Par Kar Adhyadesh, 1976 (6 of 1976)
was promulgated. For conferring powers to levy property tax,
Ordinance No. 4 of 1976 was promulgated. Both of these Ordi-
nances were published in the Madhya Pradesh Gazette, dated April
30, 1976 from which date they came into force. Ordinance No. 4
of 1976 inserted certain provisions in the Municipalities Act and the c
Municipal Corporation Act. This Ordinance was replaced by Act
No. 50 of 1976. By section 1(2) of that Act, the provisions inserted
in the Municipalities Act and the Municipal Corporation Act, with
which we are concerned, were deemed to have come into force with
effect from April l, 1976. Section 127A which was inserted in the
Mnnicipalities Act for imposition of property tax reads as follows, D
in so far as relevant :
"127A. (I) Notwithstanding anything contained in this
chapter, as and from the financial year 1976-77, there shall
be charged, levied and paid for each financial year a tax on
the lands or buildings or both situate in a municipality E
other than class IV municipality at the rate specified in the
table below :
(i) where the annual letting 6 per centum
- (ii)
value exceeds Rs. 1,800
but does not exceed
Rs. 6,000.
x x x x x
of the annual
letting value.
x x
F
\.
(iii) x x x x x x x
(iv) x x x x x x x
(v)
G
where the annual letting 20 per centum
value exceeds of the annual
Rs. 24,000 letting value
(2) The property tax levied under sub-section (I) shall
not be leviable in respect of the following properties,
H
namely:
i6 siJi>R.ili.iJJ coiJRt Rili>oRts (1982] 2 s c R.
A (a) building and lands owned by or vesting in
(i) the Union Government;
(ii) the State Government;
(iii) the Council."
B
· Similar provisions were inserted in sections 135 and 136 of the
Municipal Corporation Act.
On June 24, 1976, respondent 1 (the Special Area Development
Authority, Korba) entered into an agreement with the appellant
c Company under which the Company agreed to contribute a sum of
Rupees three lakhs annually to the "seed capital" of the Authority
in consideration of the Authority agreeing not to exercise its power
of taxation or of levying any other charges on the assets and acti-
vities of the Compapy under the Act of 1973 as amended from time
to time or under any other Act or notification. The agreement was
D to remain in force for a period of ten years beginning from the
calendar year 1976 and the annual payments due from 1977 were
to be made in January every year. The appellant Company paid the
contribution for the year 1976 as agreed. In the same year, the
Company was called upon by the Sales Tax authorities to pay the
tax on entry of goods which was introduced in substitution of the
E octroi tax. While the Company was pursuing that matter with the
State Government, contending that it was not liable to pay the entry
tax by reason of the aforesaid agreement, on January 4, 1977 res-
pondent 1 made a further demand of Rs. 3 lakhs on the Company
for contribution for the year 1977. That amount not having been
F
paid as provided in the agreement, respondent 1 terminated the
agreement by its letter dated February 4, 1977. The Company sent
a cheque for Rs. 3 lakhs to respondent 1 on April, 28, 1977.
-
By a notice issued under section 65 of the Act of 1973 on
February 21, 1977 and by another notice issued under section 164(3)
of the Madhya Pradesh Municipalities Act 1961 on April 15, 1977,
G the Chief Executive Officer of respondent 1 called upon the Company
to pay a sum of Rs. 13,22, 160 by way of property tax for the year
J976-77. By a letter dated May 21, 1977 respondent 1 reduced the
demand by Rs. 3 lakhs being the amount paid by the Company by
way of contribution for the year 1977, under the agreement of 1976.
H On July 16, 1977 the Company was called upon to pay a further
sum of Rs. 13,65,673.50 as property tax for the year 1977-78.
w. COALFIELDS v. DEVELOPMENT AUTHORITY (Chandrachud, c. J.) 1 I
The appellant Company disputed its liability to pay the afore- A
said amounts on the grounds, principally, that no tax was leviable
on its property since the Company was owned wholly by the
Government of India and that respondent 1 was estopped from
levying the property tax by reason of the agreement of 1976. Having
failed to persuade respondent 1 to accept its point of view, the
Company filed o Writ Petition in the Madhya Pradesh High Court
asking that the demands be quashed. Civil Appeal No. 213 of 1979
by special leave is directed against the dismissal of the Writ Petition.
In the other two appeals (Nos. 1025 and 1026 of 1978), the
appellant, Western Coalfields Ltd., is also a hundred per cent under-
taking of the Government of India. That Company has been called c
upon by respondent I to pay property tax for the years 1976-77 and
- 1977-78 in the sum of Rs. 3,71,461 for each year. The Writ Petitions
(61 and 62 of 1978) filed by it were dismissed by the High Court,
following the judgment delivered in the Writ Petition filed by the
Bharat Aluminium Company Ltd.
D
Civil Misc. Petitions Nos. 13211 of 1979 and 3767 of 1980 are
for intervention by the Jammu and Kashmir State Agro Industries
Corporation Ltd. and the Delhi Municipal Corporation respectively.
The Delhi High Court has held in L.P.A. 105 of 1979 that the
Delhi Municipal Corporation has the power to levy property-tax on
the property of the Jammu and Kashmir State Agro Industries E
Corporation Ltd., whose share capital is owned by the State of
Jammu and Kashmir and the Union of India in the proportion of
51 % and 49% respectively. In Special Leave Petition No. 10688 of
1979 filed against the judgment, the question raised is whether the
property of a public corporation owned wholly by the State Govern-
ment and the Union Government is exempt from taxes by reason F
of articles 285 and 289 of the Constitution. We have allowed both
the parties to intervene in these appeals.
The learned Attorney General, who appears on behalf of the
appellants, has raised four or five principal points, any one of which,
if accepted, will result in the success of these appeals. However, c;
we are unable to accept any of these.
The first contention of the learned Attorney General is that
respondent 1 can exercise only such powers to levy property tax as
the Municipal Corporation or the Muncipal Council had under the H
Madhya Pradesh Municipalities Corporation Act, 1956, or the
Madhya Pradesh Municipalities Act, 1961, as these Acts stood on,
\
12 SUPRllMB COURT RBPORTS (1982) 2 s.c.R
A February 27, 1976, when clause (d) was inserted in its present form
in section 69 of the Act of 1973. It is urged that the provisions con·
ferring powers of taxation under the aforesaid two Acts must be
taken to have been incorporated in section 69(d) of the Act of 1973
and any subsequent change in those provisions by amendment of the
two Acts cannot be availed of by respondent I. Section 127A and
8 section 135 which, by their own force, create and levy the charge of
property tax were inserted in the Municipalities Act and the Munici-
pal Corporation Act respectively with effect from April 1, 1976,
that is, subsequent to the insertion of clause (d) in section 69 of the
Act of 1973. Relying on this, it is argued that respondent 1 was
incompetent to exercise the powers of the Municipality or the
c Municipal Corporation under section 127A of the Municipalities
Act or section 135 of the Municipal Corporation Act.
The answer to this contention will depend mainly upon whether
the provisions of the Municipalities Act and the Municipal Corpora-
--
tion Act were incorporated into the Act of 1973 by its section 69(d).
D It is well· settled that if an earlier legislation is incorporated into a
later legislation, the provisions of earlier law which are incorporated
into the later law become a part and parcel of the later law. There-
fore, amendments made in the earlier law after the date of incor·
poration cannot, by their own force, be read into the later law.
That is because the legislature, which adopts by incorporation the
E existing provisions of another Jaw, cannot be assumed to intend to
bind itself to all future amendments or modifications which may be
made in the earlier law. In other words, the incorporating Act does
nothmg more than borrow certain provisions of an existing Act and
instead of setting out, verbatim, those provisions in its own creation,
refers to them as a matter of convenience in the mode of drafting.
F (See Secretary of State for India in Council v. Hindustan Co-operative
Insurance Society Limited;(1) Craies on Statute Law, 7th Edition,
pages 360-361.) •
The principle, broadly, is that where a statute is incorporated
by reference into a second statute, the repeal of the first statute by
G a third does not affect the second (see Clarke v. Bradlaugh).(2) Like·
wise, logically, where certain provisions from an existing Act have
been incorporated into a subsequent Act, no addition to the former
Act, which is not expressly made applicable to the subsequcmt Act,
(I) 58 Indian Appeals 259.
(2) [1881] 8 Q.B.D. 63, 69,
W. COALFIELDS v. DEVELOPMENT AUTHORITY (Chandrachud, c. J.) 13
can be deemed to be incorporated in it. (see Secretary of State for A
India in Council v. Hindus than Cooperative Insurance Society Ltd).
(supra) But these rules are not absolute and inflexible. In the case last
cited, the Privy Council qualified its statement of the law by saying
that the principle, that an amendment of the first law which is not
expressly made applicable to the subsequent incorporating Act
cannot be deemed to be incorporated into the second Act, applies B
"if it is possible for the subsequent Act to function effectually
without the addition" (page 267). Besides, as held by a Constitution
Bench of this Court in the Collector of Customs, Madras v. Nathe/la
Samathu Chetty & Anr.(1) the decision of the Privy Council could
not be extended too far so as to cover every case in which the
provisions of another statute are adopted by absorption (see page c
- 837). Finally, in State of Madhya Pradesh v. M. V. Narasimhan(2)
this Court held, after an examination of the relevant decisions, that
the broad principle that where a subsequent Act incorporates pro-
visions of a previous Act then the borrowed provisions become an
integral and independent part of the subsequent Act and are totally
unaffected by any repeal or amendment in the previous Act, is n
subject to four exceptions, one of which is that the principle will
not apply to cases "where the subsequent Act and the previous Act
are supplemental to each other".
Applying these principles, we are of the opm1on that in the
instant case, subsequent amendments made to the Municipal Cor- E
poration Act and the Municipalities Act will also apply to the power
of taxation provided for in section 69(d) of the Act of 1973. The
Act of 1973 did not, by section 69(d), incorporate in its true signi-
fication any particular provision of the two earlier Acts. It provide>
- that, for the purpose of taxation, the Special Area Development
Authority shall have the powers which a Municipal Corporation or
a Municipal Council has under the Madhya Pradesh Municipal
Corporation Act, 1956 or the Madhya Pradesh Municipalities Act,
F
1961. The case therefore is not one of incorporation but of mere
reference to the powers conferred by the earlier Acts. As observed
in Nathe/la Sampathu Chetty, there is a distinction between a mere
reference to or a citation of one statute in another and an incor-
G
poration which in effect means the bodily lifting of the provisions
of one enactment and making them part of another, so much so
that the repeal of the former leaves the latter wholly untouched.
H
(1) [1962] 3 S.C.R. 786.
(2) (1976] 1 S.C.R, 6,
14 SUi'REME COURT REPORTS [J982J 2 S.C.R.
A Section 69(d) of the Act of 1973 must accordingly be read to mean
that respondent 1 shall have all the powers of taxation which a
Municipal Corporation or a Municipal Council has for the time
being, that is to say, at the time when respondent 1 seeks to exercise
those powers.
B The Act of 1973 does not provide for any independent power
of taxation o,r any machinery of its own for exercising the power of
taxation. It rests content by pointing its linger to the provisions
contained in the two Municipal Acts. The three Acts are therefore
supplemental, from which it must follow that amendments made to
the earlier Acts after the enactment of section 69( d) shall have to
c be read into that section. Without recourse to such a construction,
the power of taxation conferred by that section will become ineffec-
tual. A reading of the reference to the two earlier Municipal Acts
as a reference to those Acts as they stand at the time when th.e
power of taxation is sought to be exercised by respondent 1, will
not, possibly, cause repugnancy between the two earlier ~cts on one
D hand and the Act of 1973 on the other, nor indeed will it cause any
confusion in the practical application of the earlier Acts, because
the Act of 1973 does not contain any independent provJSJon or
machinery for exercising the power of taxation. The first conten-
tion of the Attorney General must therefore fail.
E The second contention is that assuming that section I 27 A of
the Municipalities Act or section 135 of the Municipal Corporation
Act, which were introduced by an amendment made after the enact-
ment of section 69(d), can be invoked for levying the property tax,
respondent I cannot impose that tax without following the procedure
-
prescribed by sections 129 and 133 of the aforesaid Acts, respecti-
F vely. This contention is devoid of substance. Sections 127A and
135 create, by their own force, the liability to be brought to pro-
perty tax and the right to levy that tax. They provide :
Notwithstanding anything contained in this chapter, as
and from the financial year 1976-77, there shall be charged,
levied and paid for each financial year a tax on the lands ,,
G
or buildings or both ...... at the rate specified in the table
below :" •
Nothing further is requ.ired to be done by the Municipality or the
Municipal Corporation in order to impose the property tax and
H therefore the procedure preliminary to the imposition of other taxes
which is prescribed by [sections 129 and 133 of the two Acts, can
w. COALFIELDS v. DEVELOPMENT AUTHORITY (Chandrachud, c. J.) [5
have no application to the imposition of the property tax. Apart A
from this the position is put beyond doubt by the language of
sections 129 and 133 of two Acts. Section 129 of the Madhya
Pradesh Municipalities Act prescribes the procedure for
"the imposition of any tax under section 127". Similarly sec-
tion 133 of the Madhya Pradesh Municipal Corporation Act
prescribes the procedure for ''the imposition of any tax under B
section 132". The property tax is imposed by respondent 1 under
section 127A of the Municipalities Act and section 135 of the
Municipal Corporation Act. It is not imposed under section 127
of the former Act or section 132 of the latter Act. It is therefore
not necessary to follow the procedure prescribed by sections 129
c
- and 133 of the respective Acts. This position is made clear, out of
abundant caution, by clause (4) of section 133 of the Municipal
Corporation Act, which provides that nothing contained in section
133 shall apply to the tax mentioned in clause (a) of sub-section (!)
of ·section 132, which shall be charged and levied in accordance
with section 135. Section 132( l)(a) refers to property tax.
0
The learned Attorney General contends that the taxing autho-
rity must all the same apply its mind to the question whether it
wants to bring to tax the land or the building or both. It is not
possible to accept this submission because sections 127A and 135 of
the two Acts in question leave no such choice open to the taxing
authority. The obligation which the statute places upon it is to
impose tax on lands where there are lands only and they can be
taxed, on buildings where buildings alone can be brought to tax and
on both lands and buildings where lands are built upon and both
- can be brought to tax. This is not, as said by the Attorney General
rationalising the taxing power. What we have said is the plain
meaning of the taxing provision. F
The third contention of the Attorney General flows from the
provisions of article 285(1) of the Constitution which says that the
property of the Union shall, save in so far as Parliament may by
law otherwise provide, be exempt from all taxes imposed by a State
or by any authority within a State. Section 127 A(2) of the Madhya
G
Pradesh Municipalities Act and section 136 of the Madhya Pradesh
Municipal Corporation Act also provide that the property tax shall
not be: leviable, inter alia, on "buildings and lands owned by or
vesting in the Union Government". Relying on these provisions,
H
it is contended by the Attorney General that since the appellant
companies are wholly owned by the Government of India, the lands
16 SUPREME COURT REPORTS (1982) 2 S.C.R.
A and buildings owned by the companies cannot be subjected to
property tax. The short answer to this contention is that even
though the entire share capital of the appellant companies has been
subscribed by the Government of India, it cannot be predicated that
the companies themselves are owned by the Government of India.
The companies, which are incorporated under the Companies Act,
8 have a corporate personality of their own, distinct from that of the
Government of India. The lands and buildings are vested in and
owned by the companies : the Government of India only owns the
share capital. In Rustom Cavasjee Cooper v. Union of India(1) (The
Banks Nationalisation case) it was held :
G "A company registered under the Companies Act is a
legal person, separate and distinct from its individual
members. Property of the Company is not the property
of the shareholders. A shareholder has merely an ·interest
in the Company arising under its Articles of Association,
measured by a sum of money for the purpose of liability,
D and by a share in the profit."
In Heavy Engineering Mazdoor Union v. The State of Bihar &
Ors., (2J the Heavy Engineering Corporation Limited was incorporat-
ed under the Companies Act and its entire share capital was contri-
E buted by the Central Government. It was therefore a Government
Company under section 617 of the Companies Act. On the question
as to whether the Corporation carried on an industry under the
authority of the Central Government within the meaning of section
2(a) of the Industrial Disputes Act, 1947, it was held by this Court
F
that an incorporated company has a separate existence and the law
recognises it as a juristic person, separate and distinct from its
members. The mere fact that the entire share capital of the res-
pondent company was contributed by the Central Government and
-
the fact that all its shares were held by the President and certain
officers of the Central Government did not make any difference to
that position.
G
The decision of this Court Jn the Andhra Pradesh State Road
Transport Corporation v. The Income-tax Officer & Anr.( 3) puts the
matter beyond all doubt. In that case, the Andhra Pradesh Road
"
--- --------
(I) [1970] 3 SCR 530. 555.
(2) [1969) 3 SCR 995.
(3) [1964) 7 SCR 17.
\\r. COALFiELDS v. DEVELOPMENT AUritORITY (Chandrachud, c. J.) 17
Transport Corporation claimed exemption from taxation. under A
article 289 of the Constitution by which, the property and income
of. a State is exempt from union taxation. This Court, while reject-
ing the Corporation's claim, held that though it was wholly con·
trolled by the State Government it had a separate entity and its
income was not the income of the State Government. Gajendra-
gadkar, C.J., while speaking for the Court, referred to the judgment B
of Lord Denning in Tamlin v. Hansaford(1) in which the learned
Judge observed :
"In the eye of the law, · the corporation is its own ..
master and is answerable as fully as any other person or.
corporation. It is not the Crown and has none' o( the
- immunities or privileges of the Crown. Its servants are no't
civil servants, and its property is not Crown property. It
is as much bound by Acts .of Parliament as any other
subject of the King. It is, of. course, a public authority
and its purposes, no doubt, are public purposes, but it is
.. not a government department nor do its powers fall within D
the province of government".
In Pennington's Company Law,' 4th Edition, pages 50-51, it is stated
ibat there are only two decided cases where the court has disregarded
the separate legal entity of a company and that was done because the
i.
company was formed or used to facilitate the evasion of legal obli- E
.. gations. The learned author, after referring to English and American
decisions, has summed up the; position in the words of an American
Judge, Sanborn, J. to the effect that as a general rule, a corporation
will be looked upon as a legal . entity and an exception can be ·~ade
"when the notion of legal entity is used to defeat public con.v~nience;
justify wrong, protect fraud, or defend crime'', in which case, "the F
law will regard the corporation as an association of persons". · In
cases such as those before us, there is no scope for applying tlie
doctrine of lifting the veil in order to have regard to the realities
of the sitµation. The appellant companies were incorporated under
the Companies Act for a . lawful purpose. Their property is their
own and .it vests in them. Under section 5(1) of the Coal Mines G
(Nationalisation) Act, 26 of 1973, which applies in the instant case,
the right title and interest of a nationalised coal mine vest, by
direction of the Central Government, in the Government company.
If the lands and building on which respondent 1 has imposed the
H
(1) [1950) KB 18.
18 SIJPilEMil cObRT REPORts (1982] ~ s.c.i.
A property tax cannot be regarded as the property of the Central
Government for several other purposes like attachment and sate,
there is no reason why, for taxing purposes, the property can be
treated as belonging to that Government as distinct from the
company which has a juristic personality.
B The learned Attorney General resisted the taxation on the
lands by contending that they belong to the Madhya Pradesh State
Government and were taken on lease for a period of 30 years by
the appellant companies. It is urged that if at all the lands can be
subjected to property tax, it is the State Government and not the
appellant companies who can be called upon to pay that tax. This
c contention does not appear to have been taken before the assessing
authority. No documents seem to have been filed before it to bear
out facts which are sought to be placed before us nor indeed have we
evidence before us to show that the lands belong to the State
Government. The appellants may, if so advised, raise this particular
point in future assessments. We would, however, like to draw
D attention to the Explanation to section 147 of the Madhya Pradesh
Municipalities Act which says that though the property tax has to
be paid by the owner of the land or building, as the case may be,
for the purposes of that section a tenant of land or building or both,
who holds the same under a lease for an agreed period with a con-
venant for its renewal thereafter, shall be deemed to be the o~ner ..•
E thereof. Section 141(1) of the Madhya Pradesh Municipal Corpora-
tion Act provides that the property tax shall be paid primarily by
the owner. By sub-section (2) of section 141, the property tax
levied on the owner can also be recovered from the occupier of the
land or the building. These provisions shall have to be borne in
mind by the appellants before any attempt is made before the
F assessing authority to transfer or avoid the impost of the property
tax.
Finally, the learned Attorney General raised a contention of
fundamental importance which was not raised in the High Court.
The lands and buildings on which respondent I has imposed tne
G property tax are used for the purposes of and are covered by coal
inines. Basing himself on that consideration the Attorney General
argues:
.>-
(I) By virtue of the declaration contained in section 2 of
H Mines and Minerals (Development and Regulation)
Act, 1957, the legislative field covered by Entry 23,
1
w. COALFIELDS v. DEVELOPMENT AUTHORITY (Chandrachud, c. J.) 19
List II passed on the Parliament by virtue of Entry 54, A
List I.
(2) The Parliament enacted the Coal Mines Nationalisation
Act, 1973 for acquisition of coal mines with a view to
reorganising and reconstructing such coal mines so as
B
to ensure the rational, coordinated and scientific
development and utilisation of coal resources as best
to subserve the common good.
(3) Under section 5 of the Nationalisation Act, the acquir-
ed properties were vested in a Government Company
in order to carry out more conveniently the object of
c.
that Act, and for that purpose, the properties were
- freed from all encumbrances by section 6 of the Act.
(4) The taxing power of the State legislature must be
construed as limited in its scope so as not to come in
conflict with the power and function of the Union to 0
regulate and develop the mines _as envisaged by the
Nationalisation Act.
(5) The impugned tax is manifestly an impediment in the
discharge of the aforesaid function since it substantially
E
increases the cost of the developmental activities. The
tax is not in the nature of a fee.
Apart from the fact that there is no data before us showing
that the property tax constitutes an impediment in the achievement
- of the goals of the Coal Mines Nationalisation Act, the provisions
of the M.P. Act of 1973, under which Special Areas and Special
Area Development Authorities are constituted afford an effective
F
answer to the Attorney General's contention. Entry 23 of List II
relates to "Regulation of mines and mineral development subject
to the provisions of List I with respect to regulation and develop-
ment under the control of the Union". Entry 54 of List I relates G
to "Regulation of mines and mineral development to the extent to
which such regulation and development under the control of the
Union is declared by Parliament by law to be expedient in the public
interest". It is true that on account of the declaration contained in
section 2 of the Mines and Minerals (Development and Regulation) H
Act, 1957, the legislative field covered by Entry 23 of List II will
pass on io f!lr!iament by virtµe of Entry 54, List I, ~ut in or<,ler tQ
20 SUPREME COURT REPORTS [ 1982] 2 s.c.R.
A judge whether, on that account, the State legislature loses its compe-
tence to pass the Act of 1973, it is necessary to have regard to the
object and purpose of that Act and to the relevant provisions thereof,
under which Special Area Development Authorities are given the
power to tax lands and buildings within their jurisdiction. We have
set out the objects of the Act at the commencement of this judgment.
one of which is to provide for the development and administration
of Special Areas through Special Area Development Authorities,
Section 64 of the Act of 1973, which provides for the constitution
of the special areas, lays down by sub-section (4) that : Notwith-
standing anything contained in the Madhya Pradesh Municipal
Corporation Act, 1956, the Madhya Pradesh Municipalities Act,
c 1961, or the Madhya Pradesh Panchaya ts Act, 1962, the Municipal
Corporation, Municipal ·Council, Notified Area Committee or a
Panchayat, as the case may be, shall, in relation to the special area
and as from the date the Special Area Development Authority
undertakes the functions under clause (v) or clause (vi) of section 68
cease to exercise the powers and perform the function and duties
D which the Special Area Development Authority is competent to
exercise and perform under the Act of 1973. Section 68 defines
the functions of the Special Area Development Authority, one of
which, as prescribed by clause (v), is to provide the mun)cipal
services as specified in sections 123 and 124 of the Madhya Pradesh
Municipalities Act, 1961. Section 69, which defines the powers of
E the Authority, shows that those powers are· conferred, inter alia,
for the purpose of municipal administration. Surely; the functions,
powers and duties of Municipalities do not become an occupied
field by reason of .the declaration contained in section 2 of the
Mines and Minerals (Development and Regulation) Act, 1957 .
.Though, therefore, on account of that decldration, the legislative
F :field covered by Entry 23, List II may pass on to the Parliament by
virtue of Entry 54, List I, the competence of the State Government
to enact laws for municipal administration will remain unaffected
by that declaration. ,,_
G Entry 5 of List II relates to "Local Government, that is to
say, the constitution and powers of municipal corporations and
other local authorities for the purpose of local self-Government".
It is in pursuance of this power that the State Legislature enacted
the Act of 1973. The power to impose tax on lands and buildings
H is derived by the State Legislature from Entry 49 of List II : "Taxes
'on lands and buildings". The power of the municipalities to levy
tax on lands and buildings has been conferred by the State Legis-
w. COALFIELDS v. DEVELOPMENT AUTHORITY (Chandrachud, c. J.) 21
lature on the Special Area Development Authorities. Those authori - A
ties have the power to levy that tax in order effectively to discharge
the municipal functions which are passed on to them. Entry 54 of '
List I does not contemplate the taking over of municipal functions.
Shri Dharmadhikari, who appears on behalf of the respon-
dents, has drawn our attention to the judgment of a Constitution B
Bench of this Court in H.R.S. Murthy v. Collector of Chittoor and
Another,(1) which provides a complete answer to the Attorney
General's contention. In that case, under the terms of a minin'g
lease, the lessee worked the mines and bound himself to pay a dead
rent if he used the leased land for the extraction of iron ore and to
pay surface rent in respect of the surface area occupied or used by
him. Demands were made upon the lessee ·for successive years for
- the payment of land cess under sections 78 and 79 of the Madras
District Boards Act, 1920. Those demands were challenged by the
lessee on the ground, inter alia, that the provision imposing the land
cess quoad royalty under the mining leases must be beld to have
been repealed by the Central Act viz~ the Mines and Minerals (Regu.. D
lation and Development) Act, 1948, and the Mines and Minerals
(Regulation and Development) Act, 1957. This contention was
repelled by this Court by holding that sections , 78 and 79 of the
Madras District Boards Act had nothing to do with the development
of mines and minerals or their regulation. The proceeds of the
land cess were required to be credited to the District fund which had E
to be used for everything necessary .for or conducive to th~ safety,
health, convenience or education of the inhabitants or the amenities of
local area concerned. It was further held by the Court that the land
cess was not a tax on mineral rights but was in truth and slibstan~e
- a "tax on lands" within the meaning of Entry 49 of the State List.
The reasoning adopted in this . decision shows that it is not correct
to say that the property tax provided for in the Act of 1973 is oeyond
F
the legislative competence of the State Legislature; that tax has
nothing to do with the development of mines. Th~ power conferred
by the State Legislature on Special Area Development Authorities
to impose the property tax on lands and buildings is therefo~e not
in conflict with the power conferred by the Coal Mines Nationalisa-
tion Act on the Union Government to regulate and develop the Coal
mines so as to ensure rational and scientific utilisation' of coal
resources .. The param'ount purpose behi~d the declarati~n ~ontained
in section 2 of the Mines and Minerals (Regulation and Develop-
'H
t'·.
(I) [1964] 6 SCR 666,
22 [1982) 2 s.c.It
SUPREME COURT REPORTS
I
A ment) Act, 1957 is not in any manner defeated by the legitimate
e)(erci~e of ta11iog power under section 69(d) of the Act of 1973.
The decision of this Court in Baijnath Kedia v. State of Bihar
& Or s.,(1) on which the learned Attorney General relies, is disting-
uishable. In that case, the Bihar Government demanded dead rent,
8 royalty 'and surface rent from the appellant contrary to the terms.
of his lease on the strength of the amended section 10(2) of the
B.i.har Land Reforms Act, 1950, and the amended Rule 20 of the
Bihar Rules This Court held that the pith and substance of the
amended section 10(2) fell within Entry 23 although it incidentally
touched land and that, therefore, the amendment was subject to the
c overriding power of Parliament as declared in section 15 of the
Mines and Minerals (Regulation and Development) Act, 1957. By
the aforesaid declaration and the enactment of section 15, the whole
of the field relating to minor minerals had come within the juris-
diction of Parliament and no scope was left for the enactment of
-
. the second proviso to section JO of the Bihar Land Reforms Act ..
D The second sub-rule added to Rule 20 was held to be without juris-
diction for the same reason.
That the declaration in section 2 of the Mines and Minerals
(Regulation and Development) Act, 1957 does not result in invali-
dation of every State legislation relating to mines and minerals is
E demonstrated effectively by the decision in State of Haryana & Anr.
v. Chanan Mal.(2) The Haryana State Legislature passed the
Haryana Minerals (Vesting of Rights) Act, 1973, under which two
.•
notifications were issued for acquisition of right to saltpetre, a minor
mineral, and for auctioning certain saltpetre bearing areas. It was
held by this Court that the Haryana Act was not in any way repug-
F nant to the provisions : of the Act of 1957 made by Parliament and
that the ownership rights could be validly acquired by the State.
Government under the State Act.
The decision of a Constitution Bench of this Court in The
/shwari Khetan Sugar Mills (P) Ltd. v. The State of Uttar Pradesh
G & ·Qrs.,(3) is even more to the point. In that case, 12 sugar under-
takings stood transferred to and were vested in a Government under·
taking under the U.P. Sugar Undertakings (Acquisition) Ordinance,
1971, which later became an Act. It was contended on behalf of
H (I) [1970] 2 SCR 100.
(2) [1976] 3 SCR 688.
(3) [1980] 3 SCR 33\.
)
.w. OOALFiELDS v. bEVELOf>MENT AUTHoRiTY (Chandrachud, c. J.) 2~
the sugar undertakings that since sugar is a declared industry under A
the Industries (Development and Regulation) Act, 1951, Parliament
alone was competent to pass a law on the subject and the State
Legislature had no competence to pass the impugned Act by reason
of Entry 52, List I read with Entry 24, List II. The majority,
speaking through one of us, Desai J., held that the legislative power
of the State under Entry 24, List II, was eroded only to the extent B
·to which control was assumed by the Union Government pursuant
to the declaration made by the Parliament in respect of a declared
industry and that the field occupied by such enactment was the
measure of the erosion of the legislative competence of the State
legislature. Since the Central Act was primarily concerned with the
development and regulation of declared industries and not with the c
--- ownership of industrial undertakings, it was held that the State
legislature had the competence to enact the impugned law. Justice
Pathak and Justice Koshal, who gave a separate judgment concurring
with the conclusion of the majority, preferred to rest their decision
on the circumstance that the impugned legislation fell within Entry
42, List lll-'Acquisition and requisition of property'-and was D
therefore within the competence of the State Legislature.
These are the main points argued by the learned Attorney
General on behalf of the appellant Companies. In the High Court,
an additional point was taken, based upon the agreement dated
June 24, 1976, which was entered into between the appellant Com- E
panies and respondent I. It was contended in the High Court that
respondent I had waived its power of taxation by that agreement
and, therefore, the imposition of property tax was invalid. The
- High Court has given weighty reasons for rejecting that argument
and we endorse those reasons. We adopt, particularly, the reason-
ing of the High Court that in the meeting of January 29, 1976, res-
pondent I had decided to give up its right to impose the Octroi tax
only. The Chairman of respondent I, therefore, acted beyond
F
the scope of his authority in entering into the agreement with the
appellant Companies, under which respondent I bound itself not to
impose any tax whatsoever.
G
For these reasons the appeals fail and are dismissed with costs.
N.V.K. Appeals dismissed.
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "property tax"Sign in to search