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Atmaram Harchandrai Bharvani Vs. the Municipal Corporation of Greater Bombay - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai High Court
Decided On
Case NumberO.C.J. Suit No. 56 of 1966
Judge
Reported in(1978)80BOMLR128
AppellantAtmaram Harchandrai Bharvani
RespondentThe Municipal Corporation of Greater Bombay
DispositionAppeal dismissed
Excerpt:
bombay municipal corporation act (bom. iii of 1888), chap. xii, sections 346, 347, 347a, 347b and 347c - bombay town planning act (bom. xxvii of 1955), sections. 4(1), 12 to 15, 75(1) and 86--constitution of india, article 265--contract act (ix of 1872), sections 65 and 72--doctrine of in para delicto potior est conditio defendant's--suit to recover sum paid to municipal corporation for grant of permission to change of user of plaintiff's plot of land from residential to commercial with increased floor space index.;where a corporation is created by statute, its powers are limited and circumscribed by the statute creating it, and extend no further than is expressly stated therein, or is necessarily and properly required for carrying into effect the purposes of its incorporation.;satibhusan.....tulzapurkar, j.1. his lordship after dealing with points not material to this report, proceeded.2. the first question that has been raised before me is whether agreement dated february 19, 1963, the demand of rs. 5 lacs made by the defendant no. 1 and its officers from the plaintiff and the receipt of rs. 1,50,000 by the municipal corporation from the plaintiff are illegal, unauthorised, ultra vires and beyond the powers of the defendant no. 1 and its officers or not. i have already indicated the rival contentions urged by mr. singhvi and mr. shah on behalf of their respective clients on this question before me and i shall proceed to consider those contentions presently.3. mr. shah appearing for the plaintiff pointed out that there was a fundamental distinction between the capacity of a.....
Judgment:

Tulzapurkar, J.

1. His Lordship after dealing with points not material to this report, proceeded.

2. The first question that has been raised before me is whether agreement dated February 19, 1963, the demand of Rs. 5 lacs made by the defendant No. 1 and its officers from the plaintiff and the receipt of Rs. 1,50,000 by the Municipal Corporation from the plaintiff are illegal, unauthorised, ultra vires and beyond the powers of the defendant No. 1 and its officers or not. I have already indicated the rival contentions urged by Mr. Singhvi and Mr. Shah on behalf of their respective clients on this question before me and I shall proceed to consider those contentions presently.

3. Mr. Shah appearing for the plaintiff pointed out that there was a fundamental distinction between the capacity of a natural person and of an artificial person which had been created by statute or charter. According to him, to a natural person whatever is not expressly forbidden by the law is permitted by the law, in the sense that he has the capacity to do everything save and except things forbidden by law, while in the case of an artificial person contrary is the case, for, after all an artificial person like a statutory Corporation (Bombay Municipal Corporation) is a creature of a statute and as such the Corporation has only those powers that are conferred on it by statute and unless the Bombay Municipal Corporation, which is the creature of a statute, is expressly shown to have been conferred the power to levy a charge or premium for granting change of user or increased F.S.I. it will not have such power and he urged that power to levy a public charge by whatever name-a tax, a rate, a cess, a fee or a public charge by way of premium or indemnity or conversion or composition-must be expressly conferred by statute on the Corporation and such power cannot be read by any implication and he urged that neither in the Bombay Town Planning Act, 1954 nor in the Bombay Municipal Corporation Act, 1888 has any such power been expressly conferred upon the Bombay Municipal Corporation or its officers and therefore the demand of Rs. 5 lacs made by the defendant No. 1 from the plaintiff as well as the receipt of Rs. 1,50,000 by the defendant No. 1 from the plaintiff would be illegal, unauthorised and ultra vires. In support of his contention he relied upon the decision of the Calcutta High Court in Satibhusan Mukherjee v. Corporation of Calcutta A.I.R. [1949] Cal. 20. It was a case dealing with the right of the Municipal Corporation of Calcutta to impose and collect consolidated rates under the provisions of Part IV, chap. X of the Calcutta Municipal Act, 1923 and Mr. Shah has relied upon the following observations which appear in para. 10 of the judgment (p. 24):

.There is a fundamental distinction between the capacity of a natural person and of an artificial person which has been created by Statute or Charter. To a natural person whatever is not expressly forbidden by the law is permitted by the law. He has the capacity to do everything save and except those forbidden by law. In the case of an artificial person-e.g., a corporation, which can be created either by charter or by statute the rule applicable to a natural person is reversed. Whatever is not permitted expressly or by necessary implication by the constituting instrument is prohibited not by any express or implied prohibition of the legislature but by the doctrine of ultra vires.

Reference was also made by Mr. Shah to two more decisions; one of the Madras Court and the other of this Court where a similar view about the powers of a statute Corporation to impose a tax or a fee has been taken. In Municipal Council, Kumbakonam v. Abbahs Sahib I.L.R. (1911) 36 Mad. 113 the Municipal Council had a right to levy and collect fees on slaughtering animals under Section 191 of the Madras District Municipalities Act and the Municipality gave a farming contract to the respondent and when the respondent failed to pay dues under the lease under which the right to collect had been farmed out, the Municipality filed a suit to recover the said dues from the respondent and the Madras High Court held that the Municipality could not recover any amount due to it under such a contract, inasmuch as, farming out, by a municipality, of its right to collect fees on the slaughter of animals, was unauthorised and ultra vires and the contract of lease was beyond the competency of the Municipality and therefore prohibited. A contention was raised that though the District Municipalities Act did not expressly authorise the leasing or farming out of the right to collect slaughtering fees, such a power was granted by implication as a necessary incident to the right of levying fees, but that contention was negatived. The Madras High Court held that the powers of a corporation must be strictly construed and what was not permitted to such a body was forbidden. The Court quoted with approval a passage from Halsbury's Laws of England, 1909 edn., vol. 8, para. 805 to the following effect:

Where a corporation is created by statute, its powers are limited and circumscribed by the statute creating it, and extend no further than is expressly stated therein, or is necessarily and properly required for carrying into effect the purposes of its incorporation. What the statute does not expressly or impliedly authorise is to be taken to be prohibited. If, for instance, the subject-matter of a contract is beyond the scope of the constitution of the corporation, it is ultra-vires, that is, it is beyond the powers of the corporation to make the contract, which is Therefore void ab initio and cannot be ratified.

In the case of S S Miranda, Ltd. v. State of Bombay (1954) 57 Bom. L.R. 29, the question arose whether Section 19 of the Bombay Abkari Act, 1878 empowered the Government to levy an excise duty upon an excisable article more than once and the division Bench answered the question in favour of the subject. A contention was raised that the Legislature had the competence to impose excise duty at more points than one and that under the notification in question the Government of Bombay had the power to levy excise duty at more points than one. But this contention was negatived and while negativing this contention the division Bench observed thus (p. 38):

It was contended before the learned Judge below that the Legislature has the competence to impose excise duty at more points than one.... Now, that proposition is undoubtedly correct and it is beyond challenge. But what the learned Judge below has overlooked-with very great respect to him-is that we are not concerned in this case with the competency of the Legislature, but with the question as to whether the Legislature being competent it has delegated the power to the State Government to impose excise duty more than once. What Mr. Bhabha wants us to hold is that, if we assume that there is competency in the Legislature, then we must infer that that power has been conferred upon the Government. Now, such an inference would be contrary to all canons of interpretation of a taxing statute. It is elementary-and it need not be repeated-that a taxing statute must always be construed in favour of the subject; and if Government claims any power of taxation, it must satisfy the Court that such a power is clearly conferred upon it by the Legislature. The mere fact that the Legislature was competent to impose a particular type of tax cannot lead to the necessary or inevitable inference that that power was conferred upon the delegated authority. . Now, there is absolutely nothing in Section 19 which justifies any such suggestion about the power of the State Government.

Mr. Shah also invited my attention to Article 265 of the Constitution which provides that no tax shall be levied or collected except by authority of law and he pointed out that the expression 'tax' used in Article 265 was a generic term which included all kinds of levies including fees. He pointed out that in Nagar Mahapalika, Varanasi v. Durga Das : [1968]3SCR374 it has been held by the Supreme Court that there is no generic difference between a tax and a fee; that both are compulsory exaction of money by public authorities, but whereas a tax is imposed for public purposes and is not supported by any consideration of service rendered in return, a fee is levied essentially for services rendered and as such there is an element of quid pro quo between the person who pays the fee and the public authority which imposes it. Relying upon the aforesaid authorities Mr. Shah urged that unless either the Bombay Town Planning Act, 1954 or the Bombay Municipal Corporation Act, 1888 conferred expressly upon the Bombay Municipal Corporation or its officers a power to levy a charge by way of premium or by way of indemnity, conversion or composition charges for granting a change of user and higher F.S.I. the defendant No. 1 or its officers would not be in a position to do so and the demand of Rs. 5 lacs and receipt of part of the amount viz. Rs. 1,50,000 for granting such change of user or increased F.S.I. would be beyond their power and he urged that under neither of the Act such a power had been conferred upon the defendant No. 1 or its officers.

4. There could be no dispute with the proposition that the Bombay Municipal Corporation being a creature of the statute will have only such powers as are conferred upon it by statute and it cannot be further gain-said that whatever is not permitted expressly or by implication by statute would be prohibited by the doctrine of ultra vires. But it is not possible to accept the contention of Mr. Shah that every power must be found to have been expressly conferred by statute on the Corporation before it could exercise such power. Even the observations of the Calcutta High Court in Satibhusan Mukherjee v. Corporation of Calcutta at p. 24 on which reliance has been placed by him clearly show that what would be prohibited for a statutory Corporation would be that which has not been permitted either expressly or by necessary implication. Even in the passage from Halsbury's Laws of England, which has been quoted by the Madras High Court in Municipal Council, Kumbakonam v. Abbahs Sahib, the statement of law is to the effect that where a Corporation is created by statute, its powers are limited and circumscribed by the statute creating it, and extend no further than is expressly stated therein, or is necessarily and properly required for carrying into effect the purposes of its incorporation. In other words, power to do a particular thing may be conferred on the corporation either expressly or by necessary implication. Secondly in Craies on Statute Law cases have been enumerated where express language is regarded as necessary for conferring a power. In seventh edn. of Craies on Statute Law at p. 112 the following statement of law occurs under the heading 'Express Language Necessary In Certain Cases':

Express and unambiguous language appears to be absolutely indispensable in statutes passed for the following purposes: Imposing a tax or charge; Conferring or taking away legal rights, whether public or private; Excepting from the operation of or altering clearly established principles of law; Altering the jurisdiction of courts of law.

At page 111 the following passage occurs under the heading 'Implication where enabling statutes omit some detail':

If a statute is passed for the purpose of enabling something to be done, but omits to mention in terms some detail which is of great importance (if not actually essential) to the proper and effectual performance of the work which the statute has in contemplation, the courts are at liberty to infer that the statute by implication empowers that detail to be carried out.

Reading these two passages in Craies on Statute Law it seems to me quite clear that excepting the cases which have been enumerated by Craies in the passage appearing at p. 112 of his book express words are not regarded as absolutely indispensable for conferal of a power. If the statute imposes a tax or a charge or confers or takes away the legal rights or creates an exception from the operation of clearly established principles of law or altering the jurisdiction of Courts of law, then in such cases express language would be necessary. Otherwise as has been indicated in the passage occurring at p. 111 of the book, if a statute is passed for the purpose of enabling something to be done, then conferal of a power to do something to the proper and effectual performance of the work which the statute has in contemplation can be clearly implied by Courts and the Courts are at liberty to infer that the statute confers such powers by implication. These being the relevant principles of interpretation of a statute, it will have to be considered as to whether, in the first place, the premium charged by the defendant No. 1 and its officers to the plaintiff in the instant case is in the nature of imposition of a tax or exaction of payment and secondly whether the Bombay Town Planning Act, 1954 is a statute passed for the purpose of enabling something to be done or is a statute which imposes any tax or a charge in the sense of levying or exacting of payment. On the admitted facts which have emerged from the evidence on record of this case, it seems to me quite clear that the payment of Rs. 5 lacs which was demanded by defendant No. 1 and the Municipal Commissioner from the plaintiff for the purpose of granting change of user and increased F.S.I. to him-whether it be called premium or indemnity, conversion or composition charges-cannot be regarded as any tax, rate, cess or fee by way of levying or exacting any payment from the plaintiff. Under the tentative development plan the plaintiff's plot of land fell in residential zone which has F.S.I.2; the plaintiff wanted to develop his property on the basis of commercial user with an increased F.S.I. 3 and for that purpose he made an application to defendant No. 1 and also made a representation to defendant No. 1 that he should be permitted to change the user from 'residential' to 'commercial' with an increased F.S.I. of 3. That application was obviously under Section 12 of the Bombay Town Planning Act, 1954 and under that section it is provided that on or after the date on which a declaration of intention to prepare a development plan is published under Sub-section (1) of Section 4 in respect of any area, no person shall carry on any development work in any building or in or over any land within the limits of the said area without the permission of the local authority and the expression 'development' has been explained as meaning 'the carrying out of building or other operation in or over or under any land or the making of any material change in the use of any building or other land.' Initially the permission to change the user and to grant higher F.S.I. were refused. After the negotiations were carried on between the parties an agreement was arrived at between them as a result of which permission to change the user from residential to commercial with an increased F.S.I. of 3 was granted by defendant No. 1 and the Municipal Commissioner to the plaintiff on certain terms and conditions which were accepted by the plaintiff. One of the terms was that the plaintiff should pay Rs. 5 lacs by way of premium or indemnity and conversion and composition charges by certain instalments and it was pursuant to this agreement, which was arrived at between the parties, that the payment of Rs. 5 lacs was voluntarily agreed to by the plaintiff and a sum of Rs. 1,50,000 was paid by him to defendant No. 1. In the circumstances it is clear to me that the demand of Rs. 5 lacs for granting change of user and higher F.S.I. to the plaintiff was not by way of any exaction or imposition of any tax or charge from the plaintiff. Secondly the Bombay Town Planning Act, 1954 is an enactment which consolidates and amends the law relating to the town planning and as the preamble of the Act shows, it has been put on the statute book with a view to ensure that town planning schemes are made in a proper manner and their execution is made effective and the responsibility of preparing a development plan and doing all other things necessary in that behalf is placed upon the Municipal Corporation or Municipality as a local authority for the area within its jurisdiction. In other words, the enactment in question has been passed for the purpose of enabling something to be done by the local authority by way of securing planned development of the area within its jurisdiction. Having regard to both these aspects it seems to me clear that the question whether the power to demand premium for granting change of user and higher F.S.I. has been conferred upon the Bombay Municipal Corporation as a local authority will have to be decided by considering whether such power has been conferred upon defendant No. 1 or its officers even by necessary implication or not. In other words, the decisions relied upon by Mr. Shah for the purpose of contending that express words are necessary in the relevant enactment to confer such power upon defendant No. 1 or its officers would be inapplicable to the facts of the case.

5. Mr. Singhvi for the defendants has relied upon certain provisions of the Bombay Town Planning Act, 1954 as well as on certain provisions of the Bombay Municipal Corporation Act, 1888 for contending that the Bombay Municipal Corporation and its officers had the requisite power in the first instance to impose terms and conditions while granting the change of user and increased F.S.I. to a plot-holder in respect of a plot falling within the area of the development plan and secondly such power to impose the terms and conditions included the power to demand the premium in that behalf. He relied upon a group of Sections 12 to 15 of the Bombay Town Planning Act, 1954 and upon another group of Sections 346, 347, 347A, 347B and 347C contained in chap. XII, dealing with the building regulations, of the Bombay Municipal Corporation Act, 1888. I shall first deal with Sections 12 to 15 of the Bombay Town Planning Act, 1954.

6. Under Section 12 restrictions on development work after publication of declaration of intention under Section 4(1) of the Town Planning Act have been imposed and it is provided that on or after the date on which a declaration of intention to prepare a development plan is published under Section 4(1) in respect of any area, no person shall carry on any development work in any building or in or over any land within the limits of the said area without the permission of the local authority which shall be contained in a commencement certificate granted by the local authority in the form prescribed. Under the Explanation to that section the expression 'development' has been defined to include carrying out of building or other operation in or over or under any land as well as the making of any material change in the use of any building or other land. In other words, after the local authority has made a declaration of its intention to prepare a development plan no development activity of any kind in any building or over any area or over any land is possible without permission of the local authority and that such permission could be given by the local authority in the form of commencement certificate. Under Section 13(1) power or discretion has been conferred upon the local authority either to grant or refuse such permission. If the local authority therefore can either grant or refuse the permission outright, it certainly will have power to grant it on terms and conditions or it could grant permission after the applicant has complied with certain requisitions which might be imposed. Provisions of Sections 12 and 13(1), therefore, clearly suggest that the Bombay Municipal Corporation which is the local authority had and will have the power to impose terms and conditions while granting permission sought by the plot-holder to develop his property. This position has been made quite clear by Sub-section (5) of Section 13. Sub-section (3) runs thus:

Subject to the provisions of Sections 14 and 15, no compensation shall be payable for the refusal of or the insertion or imposition of conditions in the commencement certificate.

In other words, while clarifying the position that no compensation shall be payable for the refusal of the commencement certificate or for the insertion or imposition of conditions in such certificate, Sub-section (3) implies that while granting the commencement certificate the terms and conditions could be imposed. Section 14 again clearly confers the power on the part of the local authority to grant permission for change of user of land, for, that section provides that the power to grant necessary permission for a change of user of land shall include the power to grant permission for the retention on land of any building or work constructed or carried out thereon before the date of the publication of the declaration of intention to prepare a development plan or for the continuance of any use of land instituted before that date. Section 15 provides that where permission for change of user of land is refused or is granted subject to the conditions and if the owner of the land claims that his land has become incapable of reasonable beneficial use in its existing state or that the land cannot be rendered capable of reasonable beneficial use by carrying out the conditions of the permission, he may within the time and in the manner prescribed by regulations made by the local authority, serve on the local authority a notice called purchase notice requiring the local authority to purchase his interest in the land. These provisions, in my view, clearly confer power upon the local authority to impose terms and conditions while granting permission to the owner of a land when he wants to undertake development activity on his land and that the terms and conditions could be imposed while allowing a change of user of the land.

7. Mr. Shah for the plaintiff invited my attention to the proviso to Sub-section (1) of Section 13 which is to the effect that,

Provided that such certificate may be granted subject to such general or special conditions as the State Government may by order made in this behalf direct.

Relying upon this proviso he urged that while granting permission in the form of commencement certificate the local authority could only impose such general or special conditions as the State Government may have directed by an order passed in that behalf. To strengthen his argument reliance was placed by him on the article 'the' appearing in the expression 'subject to the conditions' occurring in the commencement portion of Sub-section (1) of Section 15 and he urged that the article 'the' in that expression 'subject to the conditions' in Section 15(1) showed that the conditions which could be imposed by a local authority while disposing of an application by the owner of a land were those which were indicated by the Government in its order contemplated by the proviso to Sub-section (0) of Section 13. In other words, Mr. Shah's contention has been that no term or condition could be imposed by the local authority while disposing of an application for permission on the part of the owner of a land other than those which have been indicated by the State Government in its order. It is not possible to accept this contention of Mr. Shah for more than one reason. It is true that the proviso indicates that the commencement certificate could be granted by the local authority subject to general or special conditions as the State Government may by an order made in that behalf direct. But that, in my view, is an additional provision made in Section 13 enabling or entitling the State Government to indicate by an order either general or special conditions which the local authority shall have to impose while granting the permission in the form of commencement certificate. The proviso contains an enabling provision which confers power upon the State Government to direct that general or special conditions indicated by it in its order shall be imposed by the local authority while granting the commencement certificate and if any such general or special conditions are indicated by the State Government in its order, the local authority shall have to incorporate such general or special conditions in the commencement certificate. But that is far from saying that the local authority has the power to impose only those general or special conditions as have been indicated by the State Government in its order. The application for permission to undertake development work is to be made to the local authority and it is the local authority which has power either to refuse or to grant the permission in the form of commencement certificate. In the power which is conferred upon the local authority either to refuse the permission or to grant the permission in the form of commencement certificate is implied the power to grant permission subject to terms and conditions and that position is made amply clear by Sub-section (3) of Section 13 as well as by Section 14 of the Act which in terms speak of power to grant permission for change of user of the land. It is true that an article 'the' has been used in the expression 'subject to the conditions' occurring in Sub-section (1) of Section 15 but that is not decisive of the matter. In my view, therefore, Sections 12 to 15 of the Bombay Town Planning Act, 1954 clearly confer power upon the local authority to impose terms and conditions upon the owner of a land while granting the necessary permission enabling the owner to undertake any development work on his plot of land, once a declaration of intention to prepare a development plan is published under Section 4(1) of the Act and such power includes the power to impose conditions while granting the change of user. The next question is as to whether the power to impose the terms and conditions while granting the permission for a change of user on any land under Sections 12, 13 and 14 of the Bombay Town Planning Act, 1954 would include the power to impose a particular term or condition relating to payment of money by the applicant for the permission. It was urged by Mr. Shah that even if the Court were to hold that under Sections 12, 13 and 14 the local authority has been conferred a power to impose the terms and conditions while granting a change of user to any owner of the land who desires to undertake development work of his plot, none of these Sections indicate that while granting such change of user the local authority has been empowered to make a demand of premium from the owner of the land and such power to demand premium cannot be read in these provisions. It is not possible to accept this submission of Mr. Shah. In the first place, there is no qualification or limitation imposed upon the power of the local authority in regard to the nature of the terms and conditions which it could impose upon the owner of the land while granting the change of user. Under the power conferred upon the local authority it is clear that it could impose any type at terms or conditions and that would include a term for the payment. Secondly it cannot be disputed that the Municipal Corporation as a local authority may be required to incur additional or heavy expenditure by reason of change of user that is to be granted, inasmuch as, additional or extra amenities, facilities or services any thereby be required to be rendered and therefore the aspect of recovery of part of the expenditure by charging the premium is a germane aspect. Thirdly a power to impose a term with regard to payment will have to be read in these provisions by necessary implication, inasmuch as it would be necessary and incidental to the carrying out of the purposes and objects of the Act i.e. for the effectual performance of the work which the enactment has in contemplation.I am, therefore, clearly of the view that by reason of the provisions contained in Sections 12, 13 and 14 of the Bombay Town Planning Act, 1954 the defendant No. 1 and the Municipal Commissioner under Section 86 of the said Act had the power to impose terms and conditions including the term with regard to payment of premium while granting the permission for change of user and higher F.S.I. to the plaintiff pursuant to letter dated August 16, 1960 and subsequent representations. The question whether as a matter of policy the Corporation should or should not charge any premium to plot-holder for granting permission for such change of user is a different matter; in the context of the issue raised before me I am only concerned with the aspect of existence of power on the part of the Corporation and as stated earlier, in my view, the Corporation has the requisite power. In view of the aforesaid conclusion reached by me on the provisions of Sections 12 to 14 contained in the Bombay Town Planning Act, 1954, it is unnecessary for me to go into the question as to whether the provisions contained in Sections 346, 347A, 347B and 347C of the Bombay Municipal Corporation Act, 1888 on which reliance has been placed by Mr. Singhvi also confer the power upon the Bombay Municipal Corporation and its Commissioner to impose the terms and conditions of the type in this case while granting the change of user and higher F.S.I.

8. During the course of his arguments Mr. Shah also contended that if defendant No. 1 or its Commissioner lacked statutory power to impose the terms and conditions while granting the change of user and higher F.S.I. and further lacked the power to impose a term with regard to payment while granting such higher F.S.I. the Corporation or its Commissioner could not by resorting to the method of entering into an agreement with the plaintiff impose upon the plaintiff a term of payment of premium while granting change of user and higher F.S.I. This argument was based on the assumption that defendant No. 1 or its Commissioner has no statutory power to impose the terms and conditions including a term of payment of premium while granting the change of user and higher F.S.I. But as stated above, I have already come to the conclusion that on a proper reading of Sections 12, 13 and 14 of the Bombay Town Planning Act, the defendant No. 1 and its Commissioner did possess the requisite statutory power or/and authority to impose a condition about the payment of premium upon the plaintiff while granting the change of user and higher F.S.I. to him in respect of his plot in question and therefore this contention of Mr. Shah will have no substance. Even otherwise, the condition imposed would fall within the provisions contained in Section 75(1) of the Bombay Town Planning Act, 1954. Section 75 deals with the power of local authority to make agreements in respect of any matter which is to be provided for in a town planning scheme and it runs as follows:

75 (1) A local authority shall be competent to make any agreement with any person in respect of any matter which is to be provided for in a town planning scheme subject to the power of the State Government to modify or disallow such agreement and unless it is otherwise expressly provided therein, such agreement shall take effect on and after the day on which the town planning scheme comes into force.

(2) Such agreement shall not in any way affect the duties of the Town Planning Officer as described in Chapter V or the rights of third parties but it shall be binding on the parties to the agreement notwithstanding any decision that may be passed by the Town Planning Officer:

Provided that if the agreement is modified by Government, either party shall have the option of avoiding it if it so elects.

Sub-section (1) of Section 75 provides for two different and distinct things and the first part thereof clearly provides that in respect of any matter which is to be provided in a town planning scheme subject to the power of the State Government to modify or disallow such agreement a local authority shall be competent to make any agreement with any person. It is not disputed that matters connected with the change of user of a plot as originally indicated in the development plan and F.S.I. are matters which are to be provided for in a town planning scheme and that being so, with regard to these matters, the defendant No 1 as a local authority could enter in to any agreement with the plaintiff who was the plot-holder of the land in question. Therefore, entering into agreement dated February 19, 1963 in regard to the terms and conditions on which the change of user in respect of the plot in question and increased F.S.I. was allowed to the plaintiff was perfectly within the competence of the local authority. 1, therefore, hold that agreement dated February 19, 1963, the demand of. Rs. 5 lacs for granting the change of user and higher F.S.I. to the plaintiff and the receipt of Rs. 1,5.0,000 by defendant No. 1 from the plaintiff were neither illegal nor unauthorised nor ultra vires nor beyond the powers of the defendant No. 1. If this first substantial issue is answered against the plaintiff, his suit for refund must fail.

9. Assuming I am wrong on the finding on the first issue and assuming that agreement dated February 19, 1963 is illegal or void and the receipt of Rs. 1,50,000 by defendant No. 1 from the plaintiff is equally illegal or void either because entering into the agreement as well as the receipt are regarded as beyond the statutory powers of the defendant No. 1 and the Municipal Commissioner or for any of the reasons mentioned by the plaintiff the question is whether the plaintiff is in pari delicto or not and whether he having taken advantage and received benefit under such illegal or void agreement can maintain this suit for refund of the sum of Rs. 1,50,000. (In this behalf the contention of Mr. Singhvi has been that if the agreement dated February 19, 1963 is for any reason regarded as illegal or void, either for the reason that the same is beyond the powers of defendant No. 1 or for the reason that it is entered under mistake of law or that the object or consideration thereof is unlawful or opposed to the public policy, the plaintiff on his own showing is a privy or a party to such illegal or void agreement and therefore is in pari delicto; he has further contended that the plaintiff has taken the advantage of such illegal agreement by having constructed his building on the basis of commercial user with increased F.S.I. of 3 and therefore he cannot maintain this suit for refund of the amount paid under the agreement. He has pointed out that the plaintiff's suit clearly falls within the principle expressed in maxim 'in pari delicto potior est conditio defendant's'. In support of his contention he relied upon the following passage appearing at p. 356 of Anson's Law of Contract, twenty-third edn., under the heading 'Recovery of Money or Property transferred under an Illegal Contract':

It is scarcely surprising that the Courts will refuse to enforce an illegal agreement at the suit of a person who is himself implicated in the illegality. But it is also a rule of English law that money or property transferred by such a person cannot be recovered. In the colourful words of Wilmot C.J. 'All writers upon our law agree in this, no polluted hand shall touch the pure fountains of justice. Whoever is a party to an unlawful contract, if he hath once paid the money stipulated to be paid in pursuance thereof, he shall mot have the help of a court to fetch it back again'.

This principle is expressed in the maxim 'in pari delicto potior est conditio defendant's'. Mr. Singhvi further pointed out that there are exceptional cases in which a man will be relieved of the consequences of an illegal contract into which he has entered-cases to which the maxim will not apply and according to Anson, these cases fall into three classes: (a) where the illegal purpose has not yet been carried into effect before it is sought to recover the money paid or goods delivered in furtherance of it; (b) where the plaintiff is not in pari delicto with the defendant; and (c) where the plaintiff does not have to rely on the illegality to make out his claim. He contended that the plaintiff's suit in this case does not fall into any of the exceptional classes of cases just mentioned. He pointed out that this is not a case of executory contract but a case where the Bombay Municipal Corporation has performed its part of the contract fully by allowing the plaintiff the change of user and higher F.S.I. sought by him and the plaintiff has actually built a construction on the basis of commercial user with an increased F.S.I. of 3 and so far as the plaintiff is concerned, he has paid only Rs. 1,50,000 to defendant No. 1 out of the agreed amount of Rs. 5 lacs and it is merely an obligation on the part of the plaintiff to pay the balance of Rs. 3,50,000; that has not been performed. In other words, the illegal purpose, if at all the purpose of the agreement is illegal, has been carried into effect. He further pointed out that it is the plaintiff's own case that the agreement and the payment thereunder are beyond the statutory powers of defendant No. 1-Corporation and therefore the same is illegal. Admittedly the plaintiff is a privy or a party to such illegal agreement and therefore he is in pari delicto with defendant No. 1. Moreover, he has pointed out that the plaintiff has to rely upon the illegality of the contract-either the contract is beyond the statutory powers of defendant No. 1 or that the same is under mistake of law or the consideration or object thereof is unlawful or opposed to the public policy and that the plaintiff has to rely upon this illegality to make out his claim for refund of the amount, He, therefore, urged that having regard to this position and particularly having regard to the fact that the plaintiff has irretrievably obtained the advantage of the (illegal agreement, he cannot be permitted to claim refund of the amount paid by him under such agreement and his suit must fail. In support of his aforesaid contention he pointed out that the maxim in pari delicto potior est conditio defendant's has been accepted, approved and applied by the Indian Courts to cases arising in this country and in that behalf he relied upon three decisions reported in Sita Ram v. Radha Bai : [1968]1SCR805 , Gauri Shanker v. Chandari Girja Prasad : AIR1967All262 and Calcutta National Bank v. Rangaroon Tea Co : AIR1967Cal294 . In the first mentioned case the Supreme Court has observed that the principle that the Courts will refuse to enforce an illegal agreement at the instance of a person who is himself a party to an illegality or fraud is expressed in the maxim 'in pari delicto potior esi conditio defendant's'. But there are exceptional cases in which a man will be relieved of the consequences of an illegal contract into which he has entered and the Court went on to indicate those exceptional classes of cases by reference to the relevant passage occurring in Anson's Law of Contract referred to above. It has further gone on to state that where the parties are not in pari delicto, the less guilty party may be able to recover money paid, or property transferred, under the contract, and while dealing with this class of exceptional cases the Supreme Court has pointed out that this possibility may arise in three situations: First, the contract may be of a kind made illegal by statute in the interests of a particular class of persons of whom the plaintiff is one; secondly, the plaintiff must have been induced to enter into the contract by fraud or strong pressure and thirdly, a person who is under a fiduciary duty to the plaintiff will not be allowed to retain property, or to refuse to account for moneys received, on the ground that the property or the moneys have come into his hands as the proceeds of an illegal transaction. Mr. Singhvi pointed out that in the instant case the plaintiff cannot be regarded as any less guilty party, that the contract is not of a kind made illegal by statute in the interest of a particular class of persons of whom the plaintiff is one, that the plaintiff has not been induced to enter into the contract by fraud or strong pressure and that the defendant No. 1 Corporation which has received the money is not under any fiduciary duty to the plaintiff and therefore none of the three situations contemplated by the Supreme Court apply to the instant case. In the second case Gauri Shanker v. Chandari Girja Prasad a lessor had received a premium under a contract of lease pursuant to which he had delivered possession of land to the lessee and had thus performed his part of the agreement. Under Section 90 of the U.P. Tenancy Act realisation of any premium or Nazrana was prohibited and therefore the original contract under which the sum of Rs. 950 was paid by the lessee to the lessor was an illegal contract and the payment was also illegal. The Allahabad High Court took the view that the plaintiff (lessee) having made an illegal payment against the express provision of law could not take the assistance of the Court for realising that amount back. In other words, the maxim in pari delicto potior est conditio defendant's was applied. It may be stated that the claim for refund of the premium paid was also put forward under1 Section 65 of the Contract Act, but even that was negatived on the ground that under Section 65 of the Contract Act the party who obtained advantage under the contract was bound to refund the same. In the case before the Court the defendant after taking Rs. 950 under the contract had given possession of the land to the plaintiff and conferred tenancy rights upon him and therefore the Court held that the defendant could be said to have given an equivalent of that amount which he received and having given the equivalent to the plaintiff it could not be said that the defendant had obtained any advantage over the plaintiff. In the third case-Calcutta National Bank v. Rangaroon Tea Co. the Calcutta High Court has held that when a contract is entered into for making purchases prohibited by statute, no party can invoke the aid of a Court to have such a contract carried into effect, as law will not tolerate any party to violate any moral or legal duties. It has further taken the view that if money is advanced for a purpose which is either opposed to morals or law, in furtherance of an illegal transaction, such advance is not recoverable. But the law allows locus poenitentiae and so, before a fraud or an illegal purpose is carried out, the money may be recovered from the person to whom it was advanced. But the Court will not render any assistance in the recovery of money if there is even a part performance of the illegal contract, and no relief can be given when a case is based on illegality. Relying upon these authorities Mr. Singhvi contended that the plaintiff must be regarded as being in pari delicto with defendant No. 1 when he entered into this illegal or void contract and since he is required to rely upon illegality to claim back the amount paid thereunder, no Court could give assistance to him and the plaintiff should be held to be barred by the principle expressed in the maxim in pari delicto potior est conditio defendant's. I find considerable substance in this contention of Mr. Singhvi.

10. Mr. Shah for the plaintiff has, however, raised a two-fold contention. In the first place, he has contended that the payment of Rs. 1,50,000 cannot be regarded as having been made in pursuance of or under the agreement dated February 19, 1963. In the alternative he has contended that even if it were assumed for the purpose of argument that the payment of Rs. 1,50,000 has been made in pursuance of or under the agreement in question, it is only that part of the agreement which pertains to the grant of change of user and increased F.S.I. and the demand for the premium therefor is illegal as being beyond the powers of defendant No. 1 or its Commissioner or as being unlawful or opposed to the public policy, but the payment of Rs. 1,50,000 by the plaintiff to defendant No. 1 cannot be regarded as illegal. It is not possible to accept either of these contentions. In the first place, the evidence on record clearly shows that the amount of Rs. 1,50,000 was paid by the plaintiff to defendant No. 1 under and in pursuance of agreement dated February 19, 1963. The documentary evidence, particularly the forwarding letter dated February 6, 1963 along with which the cheque was sent by the plaintiff, as well as the plaintiff's oral evidence clearly show that the payment was made by the plaintiff to defendant No. 1 in pursuance of the agreement that was arrived at between the parties in the meeting that was held either on January 31, 1963 or on February 1, 1963, the terms of which were reduced to writing on February 19, 1963. It is, therefore, impossible to accept Mr. Shah's contention that the payment was not made by the plaintiff under or in pursuance of the agreement in question. Secondly, the illegality, if any, attaches to the entire agreement and to every part thereof. In substance, the agreement in question is that for a consideration which was charged by defendant No. 1 to the plaintiff and which the plaintiff agreed to pay to defendant No. 1, permission for a change of user from residential to commercial with an increased F.S.I. of 3 was granted to the plaintiff of which the plaintiff has admittedly taken advantage. Even the payment of Rs. 1,50,000 being part of the total premium charged by defendant No. 1 to the plaintiff was for the purpose of obtaining permission for the change of user and increased F.S.I. Therefore, it is not possible to accept the contention of Mr. Shah that merely the granting of permission for a change of user and increased F.S.I. and the demand of the premium of Rs. 5 lacs by defendant No. 1 from the plaintiff is tainted with illegality and not the part payment of Rs. 1,50,000 made by the plaintiff to defendant No. 1. On his own showing the plaintiff's case is that the entire agreement, which consists of granting of permission for a consideration and the payment of part consideration by the plaintiff to defendant No. 1 thereunder is illegal as being beyond the powers of defendant No. 1 or the consideration and the object of the entire agreement in question is unlawful or opposed to the public policy and therefore the agreement in question is void under Section 23 of the Contract Act. It is, therefore, clear that the payment of Rs. 1,50,000 made by the plaintiff under the agreement in question will have to be regarded as payment made by him to defendant No. 1 under an illegal agreement and since the plaintiff is required to rely upon such illegality of the agreement for the purpose of basing his claim for refund of the amount of Rs. 1,50,000 the maxim in pan delicto would apply to the facts of the case. Mr. Shah next contended that the principle expressed in the maxim in pari delicto has not been universally applied by the Courts in this country and the Calcutta High Court in Pranballav v. Tulsibala Dassi : AIR1958Cal713 after a review of all Indian and English decisions has taken the view that the doctrine that the Court does not grant relief to a person who is in pari delicto or in particeps criminals has been extended beyond its rational and legitimate limits. He has pointed out that in that particular case where the owner of a house and let out the property to the defendant for the immoral purpose of running a brothel the Court held that the executors and trustees of the will of the owner could sue to eject the defendant on the basis that the transfer was void and the Court granted the relief sought by the executors and the trustees. It must be pointed out that the Calcutta High Court took the case out of the purview of the maxim in pari delicto principally on the ground that the plaintiffs before the Court were the executors and trustees of the will of the owner so appointed by the Court to administer the estate of the deceased owner and that the executors and trustees were not in pari delicto or in particeps criminals unlike the original owner. Some of the English decisions in which the maxim has been applied were also distinguished on the ground that those cases were cases of contract and not of transfers of immoveable property and the decision has also been rested on the ground that the reasons of public policy which imposed a ban on the plaintiff in pari delicto or in particeps criminals were themselves a ground in that case to remove the ban, because the Court should choose lesser evil, as enforcing the ban would have amounted to perpetuating a greater evil. It must, however, be pointed out that in spite of this decision in 1958 the Calcutta High Court applied the maxim in a later decision reported in Calcutta National Bank v. Rangaroon Tea Co., after approving the two division Bench judgments of the Andhra Pradesh High Court. Moreover, it may be pointed out that in Jiwanjirao Scindia v. Muzammil : (1957)59BOMLR1011 this Court has adopted a somewhat different approach in a situation similar to the one that arose in the Calcutta case on which Shah has relied and Mr. Justice S.T. Desai has taken the view that the owner of any property can invoke the aid of Court for recovery of his property from another person who is not in lawful possession of it, so long as he is able to rest his cause of action on his own title and is not compelled to rely as part of his cause of action on any contract or transaction which is illegal or immoral. The following statement of law in Chitty on Contracts twentieth edn., was set out and relied upon by the plaintiff's, counsel (p. 471):

.For instance, the owner of a house let to a prostitute could no doubt recover possession by ejectment at the end of the term, though he might be precluded from recovering rent, if he knew the purpose to which it was intended to put the premises.

Mr. Justice S.T. Desai has observed as follows (p. 1014):

But no authority seems necessary for the proposition that the owner of any property can on general principle invoke the aid of the Court for the recovery of the same from another not in lawful possession of it so long as he is able to rest his cause of action on his own title and is not compelled to rely as part of his cause of action on any contract or transaction which is illegal or immoral or otherwise opposed to the doctrine of public policy. It is |n cases of the latter categories that the Court acts on the principle underlying the maxim Ex turpi causa non oritur actio and refuses to lend its aid to support obligations or rights said to have arisen between the parties to such dealings.

11. Having regard to the above discussion I am clearly of the view that the principle underlying the maxim in pari delicto potior est conditio defendant's is clearly applicable to the facts of the case and the plaintiff cannot maintain this suit for claiming a refund of Rs. 1,50,000 paid by him to defendant No. 1, especially when he has enjoyed the benefit under such agreement.

12. Mr. Shah then contended that the plaintiff would be entitled to claim refund of the sum of Rs. 1,50,000 from defendant No. 1 either under Section 65 or Section 72 of the Contract Act. In my view, neither of the sections is applicable to the facts of the case and no relief can be granted to the plaintiff under either of the sections. Section 65 runs as follows:

65. When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it.

It is well settled that this section contains the principle of restitution after the benefit has been received and the agreement is later discovered to be void and that the basis of the section is the doctrine of restitution in integrum. In A.R.G.K. & Co. v. M. Seetharamayya A.I.R. [1958] A.P. 427 it has been held that unless a Court can, having regard to the circumstances of the case, restore the parties to their original position, Section 65 would not be applicable. In this case admittedly the benefit of the change of user and higher F.S I. has already been completely exploited by the plaintiff and it is not possible for him to either restore back or surrender the benefits which he is enjoying. It is thus clear that no relief under Section 65 could be granted to the plaintiff. Section 72 runs as follows:

A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.

It was pointed out by Mr. Shah that the mistake spoken of by the section would include a mistake of law and therefore the defendants to whom Rs. 1,50,000 have been paid by mistake of law will have to repay the same to the plaintiff. In the first place, I have already come to the conclusion that there was no mistake of law under which the payment of Rs. 1,50,000 could be said to have been made by the plaintiff to the defendants. In view of my finding that defendant No. 1 had the requisite power to demand the premium for the grant of a change of user and higher F.S.I. there would be no question of any payment having been made by the plaintiff to the defendants under any mistake of law. Secondly the case cannot come under Section 72 because the money was not paid by mistake but it was paid as the money rightly payable under the contract as it stood. Assuming that the contract was entered into on a mistaken assumption that defendant No. 1 had the requisite power to demand the premium, the mistake could be said to have occurred at the time of formation of the contract. Once the contract had come into existence, there was no mistake made so far as the payment was concerned. I am fortified in taking this view of Section 72 of the Contract Act having regard to the decision of the Madras High Court in Lakshmanprasad v. Achutan Nair : AIR1955Mad662 . On both the grounds, therefore, Section 72 would not cover the present case.

13. The defendants have also raised the plea of estoppel by contending that since the plaintiff has received the benefit under the said agreement, he is estopped from challenging the validity of the said agreement or from claiming back the amount of Rs. 1,50,000 paid thereunder. But I find that no proper plea of estoppel has been raised by the defendants in their written-statement. It has not been clarified as to what representations were made by the plaintiff to defendant No. 1 on the basis of which the defendants had acted and had altered their position to their prejudice. In the absence of proper averments and case made out in support of the plea I do not think that the defendants are entitled to succeed on that issue of estoppel.

14. Since I have come to the conclusion that defendant No. 1 and its Commissioner had the powers to enter into the agreement in question and to impose a condition pertaining to the payment of premium, there would be no question of the agreement or payment of Rs. 1,50,000 having been brought about by exercise of undue influence on the part of the defendants over the plaintiff. Similarly, for the same reason, there is no question of the agreement in question and the payment of Rs. 1,50,000 having been brought about by any misrepresentation on the part of the defendants. The plea that the agreement in question was executed by the plaintiff and the payment was made under mistake of law must also fail. There is also no question of the agreement in question and the receipt of money thereunder amounting to trafficking by way of sale of decisions on the part of defendant No. 1 or its officers. I, therefore, answer the issues as follows:

15. Issue No. 1: In the affirmative on the first part and negative on the second part.

,, No. 2: In the negative.

,, No. 3: -do-

,, No. 4: -do-

,, No. 5: -do-

,, No. 6: -do-

,, No. 7: -do-

,, No. 8: -do-

,, No. 9: -do-

,, No. 10: -do-

,, No. 11: Suit deserves to be dismissed.

16. In the result, the plaintiff's suit is dismissed with costs.


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