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Municipal Corporation of the City of Poona Vs. Dattatraya Nagesh Deodhar - Court Judgment

LegalCrystal Citation
SubjectOther Taxes
CourtMumbai High Court
Decided On
Case Number First Appeal Nos. 323 and 324 of 1961 and Special Civil Application Nos. 979 1175, 1176, 1189, 1221
Judge
Reported in(1962)64BOMLR29
AppellantMunicipal Corporation of the City of Poona
RespondentDattatraya Nagesh Deodhar
DispositionAppeal allowed
Excerpt:
municipal corporation -- when rate-payer entitled to file suit against such corporation--whether suit can be filed by rate-payer merely on ground that municipal body has not followed proper procedure--bombay provincial municipal corporations act (bom. lix of 1949)--bombay municipal boroughs act (bom. xviii of 1925)--poona municipal corporation granting refund of octroi to claimants under rule 11(2) framed under act of 1925, read with rule 62 of schedule to act of 1949--whether such grant of refund legal--applicability of standing order no. 13(1).;a rate-payer will be entitled to bring a suit against a municipal corporation challenging its illegal and ultra vires acts, that is acts which are beyond its powers. a ratepayer will also be entitled to file a suit against a corporation and get.....gokhale, j.1. [his lordship after setting out the facts, proceeded.] mr. gokhale has argued that since the matter was one of considerable importance to the corporation, we should give our decision on both the points raised by him. we shall, therefore, first deal with the question of the alleged breach of the provisions of standing order no. 13(1) and then deal with the question as to the maintainability of the suit.2. in order to examine the rival contentions regarding the refund of octroi and the procedure to be followed in connection with the same, it is necessary to refer to some of the relevant provisions of the bombay provincial municipal corporations act, 1949, to be hereafter referred to as the act. under section 2(42), 'octroi' has been defined as a cess on the entry of goods into.....
Judgment:

Gokhale, J.

1. [His Lordship after setting out the facts, proceeded.] Mr. Gokhale has argued that since the matter was one of considerable importance to the Corporation, we should give our decision on both the points raised by him. We shall, therefore, first deal with the question of the alleged breach of the provisions of Standing Order No. 13(1) and then deal with the question as to the maintainability of the suit.

2. In order to examine the rival contentions regarding the refund of octroi and the procedure to be followed in connection with the same, it is necessary to refer to some of the relevant provisions of the Bombay Provincial Municipal Corporations Act, 1949, to be hereafter referred to as the Act. Under Section 2(42), 'octroi' has been defined as a cess on the entry of goods into the limits of city for consumption, use or sale therein. Chapter XI of the Act deals with the subject of municipal taxation and amongst the several taxes which the Corporation can impose under the Act, under Section 127(2)(a), the Corporation is empowered to levy octroi. Under Section 147 a statutory presumption is raised that until the contrary is proved any goods imported into the city shall be presumed to have been imported for the purposes of consumption, use or sale therein unless such goods are conveyed from the place of import to the place of export by such route, within such time, under such supervision and on payment of such fees therefor as shall be determined by the Standing Orders. Section 149 refers to the procedure to be followed in levying other taxes, and under Section 151, refunds of a municipal tax shall be claimable in the manner and Subject to the conditions prescribed by rules. The Act, therefore, contemplates rules laying down the manner and the conditions under which refunds of a municipal tax shall be made. Chapter XXX of the Act deals with the subject of Rules, By-laws, Regulations and Standing Orders. Section 453 in that Chapter provides that the rules in the Schedule as amended from time to time shall be deemed to be part of the Act. Under Section 454 the Corporation is empowered to add to the Schedule rules not inconsistent with the provisions of the Act (which expression shall in this section be deemed not to include the said Schedule) to provide for any matter dealt with or for any of the purposes specified in the said Schedule; and may, subject to the same limitations, amend, alter or annul any rule in the said Schedule. Under Section 455(1), the power to make, add to, alter or rescind any rule under Section 454, shall be subject to the sanction of the State Government and to the condition of the rules being made after previous publication. Under Sub-section (2) of Section 455, all rules made under Section 454 shall be finally published in the Official Gazette and shall thereupon have effect as if enacted in the Act; and under Sub-section (3), m addition to this, the Corporation may determine in each case what further publication, if any, is required for rules made or proposed to be made. Under Section 456(1), the State Government may at any time require the Corporation to make rules under Section 454 in respect of any purpose or matter specified in Section 457. under Section 457(1), in particular and without prejudice to the generality of the powers conferred by Section 454, rules made thereunder may provide for or regulate (a) the assessment and recovery of municipal taxes; (b) the conditions on which refunds of municipal taxes shall be allowed; and (c) in respect of tax leviable under Sub-section (2) of Section 127, the matters referred to in Sub-section (1) of Section 149. As already indicated, the rules in the Schedule are to be deemed to be part of the Act. Chapter VIII of the Schedule provides for Taxation Rules. Rule 62 provides for refund of octroi or toll on export and is in the following terms:-

62. Subject to the standing orders, not less than ninety per cent, of the octroi paid on any goods shall be refunded if such goods are exported beyond the limits of the City within six months of payment: ,

Provided that- ,

(a) an application for refund shall be made within one week of the date of exportation;

(b) the amount due for refund shall not be less than five rupees;

(c) in the case of goods which have broken bulk, prior intimation has been given to* the officer specified in this behalf in the standing orders and the place or places of storage have been reported to him from time to time.

It is common ground that no Standing Orders have been made as contemplated in proviso (c) of the rule. But the argument urged on behalf of the plaintiff, which was accepted by the trial Court, was that this rule itself, which is a part of the Act, refers to its being 'subject to the standing orders', and it is contended that when goods which are admittedly imported for consumption,' use or sale and they are thereafter exported within a period of six months, the procedure to be followed by the Corporation is the procedure as contemplated' under Standing Order No. 13(1), It is also contended by Mr. Gadgil that the term 'importer' is defined in Standing Order No. 2(10) as meaning the person who is actually conveying the goods or articles into the Octroi Cordon or Octroi Limits and shall also include the person within the Octroi Limits or Octroi Cordon of the Corporation on whose behalf the said goods or articles are being so conveyed. Mr. Gadgil, therefore, argues that this definition would include the term 'claimant' as defined under the old rules and, therefore, in, view of Standing Order No. 13(1), the old rule allowing a claimant to apply-for and get refund must be deemed to have been abrogated. That, in substance,-is the contention of Mr. Gadgil in support of the decision of the trial Court It is no doubt true that under Section 151, so far as refunds of municipal tax are concerned, they are to be claimable in the manner and subject to the conditions: prescribed by rules. But Mr. Gadgil contends that since Rule 62 itself is to be, (subject to the Standing Orders, the Corporation cannot entertain applications; for refund in violation of the provisions of Standing Order No. 13(1).

3. As against that, it is the case of the Corporation that in making refunds of octroi under the provisions of Rule 62, the old rules framed under the Bombay-Municipal Boroughs Act, 1925, will continue to apply in so far as they are not-inconsistent with any other provisions of the present Act. In support of this contention, reliance is placed on the transitory provisions contained in Appendix IV of the Act. Paragraph 5 of these transitory provisions, so far as is relevant, states that

Save as expressly provided by the provisions of this Appendix or by a notification issued under paragraph 22 or order made under paragraph 23,-

(a) any appointment, notification, notice, tax, order, scheme, licence, permission, rule, 'bye-law, or form made, issued, imposed or granted under the Bombay District Municipal Act, 1901, or the Bombay Municipal Boroughs Act, 1925, or any other law in force in any local area constituted to be a City immediately before the appointed day shall, in so far as. it is not inconsistent with the provisions of this Act, continue in force until it is superseded by any appointment, notification, notice, tax, order, scheme, licence, permission, rule,' 'bye-law, or form made, issued, imposed or granted under this Act or any other law as. aforesaid as the case may be;...

It is not necessary for the purposes of this appeal to deal with the other provisions of this paragraph. Now, this transitory provision shows that any rule-made under the Bombay Municipal Boroughs Act, 1925, in so far as it is not inconsistent with the provisions of the Act shall continue in force until it is. superseded by any rule made under the Act. Mr. Gokhale contends that by virtue of this transitory provision it would be competent for the Corporation to make refunds in respect of claims made under Rule 62 in accordance with the relevant provisions of Rule 11 of the old rules. Rule 11(2) of these old rules deals with the subject of refund on exported goods, and under Clause (ii) of Rule 11(2), in order that a refund should be made the goods have to be-exported within twelve months next after the date of their import. It is not disputed that this period of twelve mouths would now be curtailed in view of the express provisions of Rule 62, under which refund is claimable if the goods are exported beyond the limits of the city within six months of payment of octroi. Clause (iv) of the old Rule 11(2) lays down the condition that the claimant has to produce a duly receipted import bill and an export certificate relating to such goods; and Rule 2(g) defines 'a claimant' as one who produces the duly receipted import bill and the corresponding export certificate. It is the case of the Corporation that in spite of the Standing Order No. 13(1), the Corporation would be entitled to entertain applications at the instance of the claimants, as denned under the old rules. It is not disputed that the Standing Orders have to be made in accordance with the provisions of Section 466 of the Act; and under Section 466(1)(A)(e}, the Commissioner may make Standing Orders consistent with the provisions of the Act and the rules and by-laws prescribing the manner in which refunds of octroi shall be claimed or made and the conditions under which agents shall be recognised for obtaining refunds of octroi. Standing Order No. 13(1) refers to the manner in which refund is to he paid and runs as follows:-

13.(1) 'The amount of refund may be paid either to the importer or to the person holding a Power of Attorney duly executed in accordance with law and authorising the said person to receive the refund from the Corporation by the Importer, if the said Importer or the said person holding the Power of Attorney attends the office of the Corporation on any Working day during office hours. However, the Importer or the person holding the Power of Attorney will be bound to take necessary steps to get himself identified to the satisfaction of the Municipal Employee entrusted with the duty of making the refund;

Now, it is the contention of Mr. Gokhale that since this Standing Order not only prescribes the manner in which refunds of octroi are to be paid but also mentions the persons to whom the payment is to be made, it is not a valid Standing Order to that extent by reason of the provisions of Section 466. Alternatively, Mr. Gokhale contends that the old rule which enables the Corporation to make a refund to a claimant, who produced the duly receipted import bill and the corresponding export certificate is not inconsistent with the provisions of Standing Order No. 13(1) and, therefore, the procedure under the old rule, in so far as it is not inconsistent with Rule 62., can also be followed by the Corporation. In our judgment, the provisions of the old rule which enabled the Corporation to make a refund to a claimant can be reconciled with the provisions of the Standing Order 13(1) and there is, in substance, no conflict between the two. If that be so, the action of the Corporation in following the old rule in so far as it is not inconsistent with Rule 62, is neither illegal nor unjustified. The argument of Mr. Gadgil that the definition of the term 'importer' under Standing Order No. 2(10) would also include the person who is a claimant as defined under the old rule and, therefore, the old rule must be taken to have been abrogated by Standing Order No. 13(1) does not appear to us to be sound. As already indicated, 'a claimant' has been defined under the old rule as one who produces the duly receipted import bill and the corresponding-export certificate; and, in our opinion, the term 'importer' as defined in Standing Order No. 2(10) would not include a claimant as defined under the old rule. Mr. Gokhale has stated, and that position is not seriously disputed, that the old procedure which has been followed by the Corporation for several years has enabled the Corporation to dispose of applications for refund expeditiously; and it does not appear to have been the intention of the framers of the Standing Orders that the old procedure should be superseded. Mr. Gokhale has conceded that if the application for refund is made by the importer but not as a claimant, or by a person holding a power of attorney duly executed by the importer, then the Corporation will have undoubtedly to follow the procedure as contemplated under Standing Order No. 13(1). In our judgment, therefore, the trial Court was in error in recording its finding that, the Corporation was acting illegally in following the procedure prescribed under old Rule 11(2), which enabled, the Corporation to make refunds to claimants who produced the duly receipted import bill and the corresponding export certificate. It is well settled that when two constructions are possible, that construction which harmonises and reconciles two apparently conflicting provisions should be accepted. In view of the position taken by the Corporation in this Court, we are satisfied that there has been no illegality committed by the Corporation in following the procedure so far followed by the Corporation in dealing with applications for refund of octroi made by claimants, which would be governed by old Rule 11(2) read with Rule 62 and not by Standing Order 13(1), It appears that the view that we are taking would also be found to be justified in view of the events which led to the sanctioning of the Standing Orders. It appears that some time in 1952, the Commissioner of the Corporation raised the question of rescinding certain rules, including Rule 62 of Chapter VIII, of the Schedule as also the framing of Standing Orders regarding octroi. On October 22, 1952, the Commissioner of the Corporation appears to have placed before the Corporation for consideration a new set of octroi rules, which are at exh. 58, and the letter of the Commissioner forwarding these rules is at exh. 57. The preamble to these proposed rules shows that it was found necessary to rescind certain rates including Rule 62 in so far as they related to octroi, and along with the proposal to rescind certain rules a new set of rules was proposed to be made in pursuance of the power vested in the Corporation under Section 457(1) read with Section 454 of the Act. Those rules were not sanctioned by the Corporation. Those rules were, however, published in the Official Gazette on August 6, 1953, (exh. 60), objections were received and it appears that in 1956 the Commissioner of the Corporation, acting in his capacity as the Corporation, as the elected members had resigned, passed a resolution, being Resolution No. 69 on April 5, .1956, sanctioning the proposed octroi rules, with certain modifications in the original rules. This resolution is at exh. 63. It appears that thereafter the Commissioner forwarded these rules so passed by himself as the Corporation to Government for sanction, by letter dated August 7, 1956 (exh. 64).

4. This action of the Commissioner, it appears, was rendered necessary by the fact that suits were filed against the Corporation challenging the legality of its action in imposing octroi on goods in transit. Two suits appear to have been filed against the Corporation claiming refund of 10 per cent, of the amount of octroi, which the Corporation used to retain in making refunds of octroi on goods in transit. One of these suits was filed by 'Walchandnagar Industries and the other was a suit filed by the present plaintiff who had claimed refund as a claimant under the old rules. Both the suits were dismissed by the trial Court on the ground that the action of the Corporation in retaining 10 per cent. of the amount of deposit on goods in transit was not ultra vires of the Corporation. The Walchandnagar Industries as well as plaintiff went in appeal against this decision. The appellate Court allowed the appeal of Walchand nagar Industries, holding that the imposition of tax on refund and retention of 10 per cent, of deposit was not within the competence of the Corporation, That is why the suit of Walchandnagar Industries was decreed. There does not appear to have been any appeal by the Corporation against that decision. So far as the appeal filed by the plaintiff was concerned, the appellate Court held that the imposition of tax on refund was ultra vires, but it held that as it was not the plaintiff, who had paid the amounts of deposits in respect of which he had brought the suit, although he was a claimant, he had no right in law to maintain the suit in respect of the 10 per cent, of octroi duty. That is why plaintiff's appeal was dismissed. Plaintiff then filed a Second Appeal and that was heard by a Bench consisting of Mr. Justice S. T. Desai and Mr. Justice Datar, and that case is reported in Dattatraya v. Poona City Mun'pal Corporation (1959) 62 Bom.L.R. 71. This Court held that under the Act a Municipal Corporation could not impose a tax on goods in transit or of the nature of a tax on refunds and such a tax would be ultra vires the powers of the Corporation and illegal and ineffective and the Corporation would be bound to refund any amount recovered by it in enforcement of that tax. The Corporation had also resisted the appeal of the present plaintiff in that case on the ground that he had no right to claim the refund as he was a claimant and had not himself made the deposit. That contention was, however, not accepted by this Court and it was held that under the statutory rules prevailing, an obligation was cast on the Municipality to refund the amount of octroi duty collected in case of goods in transit to the 'claimant' and that the rules did not recognise the owner of the goods as such in the matter of refunds, and that it was only the claimant who had under the statutory rules the legal right to claim refund on fulfilment of the specified conditions and that the Municipality would get a full discharge of its liability on refunding the amount to the claimant. It has to be mentioned, however, that the Second Appeal which was disposed of in this way by this Court arose out of a suit of 1951 and the question of the applicability of the. Standing Orders was not before this Court in the said Second Appeal.

5. To pursue the history in connection with the proposed octroi rules and the Standing Orders, it appears that the Government replied to the Commissioner's letter of August 7, 1956, (exh. 64), by letter dated November 21, 1956, (exh. 65), and in that letter it was stated that Government did not think it desirable to initiate any proposals for further taxation so long as the Corporation was in charge of the Municipal Commissioner and that the proposed octroi rules of the Corporation should be considered only after elected members of the Corporation applied their mind to the proposed rules. Thereafter, it appears that the Commissioner again wrote a letter to the Government on November 22, 1957, (exh. 66), requesting Government to accord their sanction to the proposed octroi rules which were passed by him by Resolution No. 69 dated April 5, 1956. But that letter, it appears from the evidence of the Assessor and Collector given on behalf of the Corporation in the present suit, is still under consideration of Government. In the case of the present Standing Orders, however, in October 1952 the Commissioner had framed certain Standing Orders and they were approved, by the Standing Committee on December 15, 1952, by Resolution No. 457 (see exits. 69 and 70). Nothing was done regarding these Standing Orders, however, till February 1956 when the Commissioner passed an emergency resolution (exh. 71) dated February 1, 1956, under Clause (c) of Sub-section (3) of Section 67 of the Act and forwarded the said Standing Orders to Government for sanction by his letter (exh. 72) dated February 2, 1956, and sanction of the Government was accorded to these Standing Orders on March 14, 1956. The position therefore appears to be that though the Standing Orders have been sanctioned by Government since 1956, changes in the rules which contemplated the rescinding of Rule 62 itself have not been approved by Government and the matter is still pending consideration by them.

6. It is argued by Mr. Gokhale that these facts in connection with the non-sanction of the proposed rules and the sanction accorded to the Standing Orders would indicate how the Corporation is justified in following the old rules in disposing of applications for refund of octroi under Rule 62 of the Schedule to the Act. It is contended that when the Commissioner proposed the new rules for refund and also the Standing Orders, what was intended was to rescind Rule 62 and the Standing Orders could never have been intended to apply to applications entertained by the Corporation under Rule 62, which yet continues to be in force. There is undoubtedly some force in this argument. As we have already indicated, the dispute in these appeals is really as to the applicability of Standing Order No. 13(1) and that, in our judgment, it is possible to construe, as being consistent with the old Rule 11(2) with regard to applications for refund of octroi in case of goods which are exported and to which Rule 62 would apply. The Corporation is applying that rule, subject to necessary changes in accordance with the provisions of Rule 62 itself, and there is no dispute as to this position. 'We, therefore, hold that the Corporation cannot be held responsible for any illegality in dealing with applications for refund governed by Rule 62 in accordance with the provisions of the old Rule 11(2) read, with and as modified by Rule 62.

7. That takes us to the consideration of the other point, raised on behalf of the Corporation as to the maintainability of the present suit. In the written statement, unfortunately, the question of maintainability of the suit was raised in a somewhat limited manner. It was stated in para. 12 of the written statement, that the plaintiff:' was not entitled to file the suit, and that if he had any grievance it was necessary for him to seek relief from the Government of Bombay under Sections 448 and 451 of the Act. In para. 13 it was stated that the suit of the nature and for a declaration that the plaintiff seeks is not maintainable according to law. Under Section 448(1) of the Act, if it shall at any time appear to the State Government Upon complaint or otherwise that default has been made in the performance of any duty imposed on any of the municipal authorities by or under the Act or by or under any enactment for the time being in force, the State Government may, if satisfied after due inquiry that the alleged default has been made, make an order prescribing a period for the performance of that duty. And under Section 451(1), if the State Government is of opinion that the execution of any resolution or order of the Corporation or of any other municipal authority or officer subordinate thereto or the doing of any act which is about to be done or is being done by or on behalf of the Corporation is in contravention of or in excess of the powers conferred by the Act or of any other law for the time being in force or is likely to lead to a breach of the peace or to cause injury or annoyance to the public or to any class or body of persons, the State Government may, by order in writing, suspend the execution of such resolution or order, or prohibit the doing of any such act. We fail to see how plaintiff's suit can be held to be not maintainable by virtue of these provisions, and Mr. Goldiale has fairly conceded that ho would not be able to justify the stand taken in the written statement on the basis of these two sections. But Mr. Gokhale contends that the suit as framed by the plaintiff for the relief of' declaration and injunction is not maintainable at the instance of the plaintiff who haw no personal interest in the manner in which refund of octroi is being made by the Corporation. It is not disputed that plaintiff is a rate-payer. But that, by itself would riot enable him to bring such a suit unless he is able to show that, lie has some interest in the manner in which applications for refund of octroi under Rule 62 are being dealt with. It is not his contention that what the Corporation is doing is ultra vires of its powers under the Act. There is an allegation in the plaint that some persons in the Poona city were obtaining refund of lakhs of rupees since March 1956 by setting at nought the rules of the Corporation pertaining to refund, in collusion with responsible officers in the Octroi, Audit and Legal Departments of the Corporation. There is not a title of evidence in support of this allegation, plaintiff himself having scrupulously avoided to step into the witness-box. Though there is an allegation of misuse of public funds, there is no evidence in support of the allegation either, and Mr. Gadgil has fairly, and in our opinion rightly, conceded that he cannot support that allegation by anything on the record. The legal position in this matter seems to be fairly summed up in Halsbury's Laws of England, Third edn., Vol. 21, para. 777, at page 371 :-.A public body incorporated by statute is a corporation for those purposes only for which it has been established, and whatever it does beyond the scope of such purposes is ultra vires and void, and may be restrained by injunction, provided that a plaintiff, except in an action brought by the Attorney-General, establishes an interest in preventing the defendant from doing what is in fact, or may well be called, a violation of its contract with the legislature. The Court will not, however, interfere, so long as public bodies keep strictly within the limits of their powers and duties entrusted to them by the legislature, act in good faith and reasonably, and exercise a judicial discretion properly.

There have been cases in this Court also on this point, to which a reference was made before us. In Shepherd v. The Trustees of the Port of Bombay (1870) T.L.R. 1 Bom. 132, the plaintiff, who was a contractor, sought an injunction to restrain, the Trustees of the Port of Bombay from publishing two resolutions alleged to reflect injuriously on his character and reputation, on the ground that it was not within the powers conferred on the Trustees by Bombay Act I of 1873 to discuss or pass resolutions affecting his character, and that the publication of such resolutions was calculated to injuriously affect him in his commercial relations with the Government, and it was held by this Court that the injunction could not be granted. The following observations of Green J. in this case would be relevant (p. 142) :-.There can, I think, be no doubt that, if the Port Trustees or any other corporation or public company in Bombay were to do or attempt to do any act in excess of their powers, as contained in the charter or legislative act from which they derive their being, and such act would be injurious to the rights of property of an individual, such individual would, on general principles, have a right to the protection of this Court by injunction or other appropriate relief. In none of the cases, however, that I have been able to find, has the protection of a Court of Equity, by way of injunction, in case of an assumption by an incorporated body of powers beyond those conferred upon it, been granted at the suit of an individual, except where such individual has been damaged by such excess of power in respect of his rights of ownership, or rights of commodity or easement, which for this purpose are treated as analogous to rights of ownership strictly so called.

In Vaman v. Municipality of Sholapur I.L.R (1897) 22 Bom. 646 three tax-payers of Sholapur city sued for an injunction to restrain the Municipality of Sholapur from expending any sum out of the municipal, funds on the purchase of musical instruments for a band, which they had resolved to establish; and it was the contention of the plaintiffs that this was not one of the purposes for which the municipality was authorised by law to spend municipal funds. It was held by this Court in Second Appeal that a suit will lie at the instance of individual tax-payers for an injunction restraining a municipality from misapplying its funds. Mr. Gadgil has very strongly relied on the judgment of Mr. Justice Tyabji in this case, which, according to him, has been followed by later decisions of this Court. In this connection, he invited our attention to the case of Ramchandra v. Bombay Municipal Corporation : (1958)60BOMLR1256 and the observations of Mr. Justice K. T. Desai expressing approval of the view of Mr. Justice Tayabji in the case of Vaman v. Municipality of Sholapur that it was clearly settled that any individual member of a corporation may file a suit for the purpose of restraining the corporation from doing any act which may be illegal or ultra vires of the corporation. Mr. Gadgil contends that though the judgment of Mr. Justice K. T. Desai was reversed by the Court of Appeal in Bombay Municipal Corp. v. Ramchandra : (1959)61BOMLR1129 that would not affect the observations of Mr. Justice K. T. Desai regarding the view of Mr. Justice Tayabji. But the facts in the case of Vaman v. Municipality of Sholapur are clearly distinguishable from the facts of the present case. In the Sholapur case, there was an allegation of misapplication of municipal funds and it was found as a fact by the trial Court that the Municipality was not authorised to expend municipal funds in the manner proposed by purchase of musical instruments for the establishment of a band; an injunction was, therefore, granted by the trial Court as claimed by the plaintiffs-taxpayers. On appeal, the District Judge held that the plaintiffs were not entitled to sue in their individual capacity without proof of special damage and, therefore, he dismissed the plaintiffs' suit. Against that decision the plaintiffs came in Second Appeal to this Court and this Court held that the suit would be competent at the instance of individual taxpayers for an injunction restraining the municipality from misapplying its funds. On that view, the decree of the appellate Court was reversed and the matter was remanded to that Court for decision on the real point at issue, viz., as to the legality of the expenditure which the municipality proposed to make.

8. In Bombay Municipality v. Govind Laxman (1948) 51 Bom. L.R. 190, one of the questions which arose for consideration was as to the maintainability of a petition under Section 45 of the Specific Relief Act when a rate-prayer and a voter of the Bombay Municipal Corporation applied to this Court for a mandatory injunction restraining the Bombay Municipal Corporation against entering into contracts as per tenders submitted by the Hindustan Construction Co. Ltd. in connection with the Vaitarna-cum-Tansa scheme. A preliminary objection was raised on behalf of the Bombay Municipal Corporation that the petitioner was not a person whose property, franchise or personal right would be injured by the for bearing from concluding and executing the contracts complained of in the petition or the inviting of fresh and proper tenders by the Bombay Municipal Corporation and his petition was, therefore, not maintainable. That objection was overruled by Mr. Justice Bhagwati, who also held on merits that the acceptance of the tenders submitted by the Hindustan Construction Co. Ltd. on the part of the Bombay Municipal Corporation was unauthorised and unwarranted by the relevant provisions of the City of Bombay Municipal Act of 1888 and, therefore, the petitioner was held entitled to the reliefs sought by him. The matter was taken to the Court of Appeal, which, after a review of the authorities, held that a rate-payer who has contributed to the rates is a person injured in his property, within the meaning of Section 45 if the rates are misapplied or utilised contrary to the provisions of the law by the Municipal Corporation, though on merits the petitioner was held not entitled to succeed and the appeal was allowed and the petition was dismissed.

9. Our attention was also invited to the case of Paralch v. Rudra [1941] Nag. 206, where Mr. Justice Niyogi was dealing with a case wherein a suit was filed for permanent injunction restraining the Municipal Corporation, Nagpur, from building a house on a plot of land situated in the Civil Station at Nagpur, on the ground that the Municipal Committee had given sanction to build a house on the said plot, of land to one P. N. Rudra beyond its powers; and the Nagpur High Court held that, the suit was not competent, following the principle laid down in the two Bombay cases, via., Shepherd v. The Trustees of the Port of Bombay and Vaman v. Municipality of Sholapur; and it was held that the plaintiff must prove some special damage or injury occasioned to him by reason, of the permission to build granted by the Committee. We may, however, observe that the facts of this Nagpur case fire distinguishable from the facts of the present case.

10. On these authorities it seems clear to us that a rate-payer would be entitled to bring a suit against a Municipal Corporation challenging its illegal and id'ra vires acts, that is acts which are beyond its power. A rate-payer would also be entitled to file a suit against a Corporation and get an injunction restraining its action if it is established that it is acting in a way so as to result in misapplication or misuse of municipal funds. But the Court will, not interfere at the instance of a rate-payer merely on the score that the procedure followed by a Municipal body in certain matters is not proper, if its action falls strictly within the limits of its powers and duties and it has acted in good faith. 'While the interests of the rate-payers are entitled to be safeguarded against misuse or misapplication of public funds and acts which are illegal and ultra vires, care must also be taken to see that the day to day administration of a public body is not allowed to be hampered by a rate-payer inspired by a sense of misguided public spirit or worse by ulterior motives of his own.

11. In the present case, beyond certain vague allegations in the plaint, there is no evidence at all that any Municipal funds have been misapplied or misused or the Corporation has acted beyond its powers. The plaintiff has not examined himself to substantiate those allegations. Besides, as we have already held, the action of the Corporation in dealing with applications for refund of octroi on goods which are exported outside the limits of Poona City within a period six; months, as contemplated under Rule 62, in accordance with the procedure under the old Rule 11(2), does not appear to be in any manner illegal, much less beyond its powers. On the contrary, it was stated on behalf of the Corporation, and not seriously disputed, that by following the procedure which it is doing in dealing with applications for refund of octroi falling under Rule 62, the Corporation is able to dispose of these applications in a more expeditions manner. If that be so, in our judgment, the suit of the plaintiff for the declaration and injunction sought by him against the Corporation must also fail on the ground that it is not maintainable.

12. The result is that on both the grounds we must allow First Appeal No. 324 of 1961 filed by the Corporation. Mr. Gokhale argued that now that we are allowing the appeal of the Corporation, we should pass an order awarding compensatory costs in favour of the Corporation against the plaintiff, on the ground that wild allegations against the officers in the Octroi, Audit and Legal Departments of the Corporation have been made, and allegations about misapplication of funds have been also made in the notice as well as in the plaint and to substantiate which allegations the plaintiff has not even cared to step into the witness-box. We would have been inclined to take a strict view of the matter, had not Mr. Gadgil very fairly and unequivocally stated before us that his client is unconditionally withdrawing those allegations. No claim for compensatory costs was made in the written statement and there is no prayer to that effect even in the memorandum of appeal filed by the Corporation. In these circumstances and in view of the unconditional withdrawal of the allegations, we do not think that we should accede to Mr. Gokhale's request to pass art order awarding compensatory costs against the plaintiff. First Appeal No. 324 of 1961 will accordingly to allowed and the decree of the trial Court dated August 13, 1960, will be set aside and plaintiff's suit will be dismissed with costs throughout, including the costs of this appeal in two sets, which the plaintiff will have to pay to the defendant-Corporation.


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