http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

CASE NO.: Appeal (civil) 7791  of  1997

PETITIONER: B. KRISHNA BHAT

       Vs.

RESPONDENT: STATE OF KARNATAKA & ANR.

DATE OF JUDGMENT:       30/03/2001

BENCH: S.P. Bharucha, N. Santosh Hegde & Y.K. Sabharwal

JUDGMENT:

L...I...T.......T.......T.......T.......T.......T.......T..J SANTOSH HEGDE, J.

   The   appellant   before  us   along  with  some   other petitioners  had filed Writ Petition Nos.4394-4410/88 before the  High Court of Karnataka at Bangalore contending,  inter alia, that the Bangalore Development Authority (the BDA) had no  sanction  under Section 29 of the Bangalore  Development Authority  Act,  (for short the BDA Act) to levy any  tax, cess  or  fee on the owners of lands and buildings  situated outside  the  corporation  limits  of  the  Bangalore   City Corporation.  They had also contended that Section 29 of the Act  was unconstitutional, ultra vires and void.  A  learned Single  Judge  who  heard  the   said  writ  petition  after examining  the various provisions of the Act as well as  the Bangalore  Municipal Corporation Act, 1949 (the  Corporation Act)  came  to the conclusion that under the BDA Act,  there was  no inherent power to assess, impose and recover  taxes, cess and fees other than the betterment tax.  The court also held that the power to levy and recover taxes, cess and fees has  to be expressly conferred on the BDA by the BDA Act and such  power  cannot  be presumed by  mere  implication.   It further  held  that there was no material on record to  hold that  the BDA has been rendering any service to the  members of  the public who own lands and/or buildings which  service should  correspond  to  taxes,  cess  and  fees  recoverable because  such  tax is service related.  The said finding  of the  learned  Single  Judge  came  to  be  affirmed  by  the appellate  Bench  in Writ Appeal Nos.223-39/92.   After  the said  judgment  of  the  Division Bench,  an  Ordinance  was promulgated  which  later became an Act of  the  Legislature whereby  the  principal  BDA Act came to be amended  by  the Bangalore  Development Authority (Amendment) Act, 1993.   By this  Amending  Act,  Sections  28- A, 28-B  and  28-C  were incorporated  in the said Act.  By these amendments, the BDA was  statutorily entrusted with the obligation of  providing certain  civic amenities specified in Section 28A of the Act and  in  Section 28B, the BDA was specifically empowered  to levy  and collect property tax in the same manner and at the same  rate  as was provided in the Corporation  Act.   Under Section 28C, the BDA was given the status of a local body to collect the cess payable under the various Acts specified in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

the said Section and Section 7 of the Amending Act validated all  the  collection made by the BDA which was  declared  as without authority of law by the earlier judgment of the High Court.

   The  Amending Act was challenged again by the  appellant in  a  writ  petition on the ground that  the  Amending  Act suffered  from the vice of excessive delegation and was also arbitrary  and violative of Article 14 of the  Constitution. It  was also argued that the Amending Act not having removed the  vice  pointed out by the High Court, it was beyond  the legislative  power to validate an invalid collection of tax. The  said  challenge being negatived by the High Court,  the appellant is before us in this appeal.

   Before us, the appellant contends that the delegation of power  to the BDA is bad because the BDA is only a statutory body  and  not  being an elected body, could not  have  been entrusted  with any taxing power.  For this proposition  the appellant  strongly  placed reliance on a judgment  of  this Court  in  Municipal Corporation of Delhi v.  Birla  Cotton, Spinning  and  Weaving  Mills, Delhi & Anr.  (1968  (3)  SCR 251).   In  the said judgment the majority, while  upholding the validity of the delegated legislation and negativing the contention  of  excessive delegation, among  other  factors, found  that  delegation to an elected body was in  itself  a safe  way of delegation because an elected body  responsible to  the  people  including  those who pay  taxes  would  act responsibly  in  the exercise of the said  delegated  power. But  this Court in that case nowhere held that delegation of a  taxing power to a non-elected body would suffer from  the vice  of  excessive delegation.  Therefore, the argument  of the  appellant  grounded  solely on the ratio laid  down  in Birla Cotton Mills case (supra) should fail.

   In  re  the  Delhi  Laws Act,  1912,  The  Ajmer-Merwara (Extension  of Laws) Act, 1947 and The Part C States  (Laws) Act,  1950  (1951 SCR 747 at 750), the main  requirement  of delegation  of legislative power was explained by  Patanjali Sastri, J.  as follows :

   It  is  now  established beyond doubt that  the  Indian Legislature,  when  acting within the limits  circumscribing its  legislative power, has and was intended to have plenary powers  of  legislation as large and of the same  nature  as those of the British Parliament itself and no constitutional limitation  on  the  delegation of legislative  power  to  a subordinate  unit is to be found in the Indian Councils Act, 1861,  or  the  Government  of   India  Act,  1935,  or  the Constitution  of 1950.  It is therefore as competent for the Indian  Legislature  to  make a law  delegating  legislative power,  both quantitatively and qualitatively, as it is  for the British Parliament to do so, provided it acts within the circumscribed   limits   (ii)   Delegation  of   legislative authority   is  different  from  the   creation  of  a   new legislative  power.  In the former, the delegating body does not  efface itself but retains its legislative power  intact and  merely elects to exercise such power through an  agency or  instrumentality of its choice.  In the latter, there  is no  delegation of power to subordinate units but a grant  of power  to  an independent and co-ordinate body to make  laws operative  of  their own force.  For the first,  no  express provision  authorising  delegation  is   required.   In  the absence  of  a  constitutional inhibitation,  delegation  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

legislative  power, however extensive, could be made so long as  the  delegating body retains its own  legislative  power intact.   For  the  second,  however,  a  positive  enabling provision in the constitutional document is required.  (iii) The  maxim delegatus non protest delegare is not part of the constitutional  law  of India and has no more force  than  a political  precept  to be acted upon by legislatures in  the discharge  of their function of making laws, and the  courts cannot  strike down an Act of Parliament as unconstitutional merely  because Parliament decides in a particular  instance to  entrust its legislative power to another in whom it  has confidence  or,  in  other  words, to  exercise  such  power through  its  appointed instrumentality,  however  repugnant such entrustment may be to the democratic process.  What may be  regarded as politically undesirable is  constitutionally competent.  (iv) however wide a meaning may be attributed to the expression restrictions and modification, it would not affect the constitutionality of the delegating statute.

   The  abovesaid  observations of this Court in  the  said Delhi  Laws’ case (supra) have been consistently followed by this  Court  in  all  the later cases.   Applying  the  said principles  to the facts of this case, we must hold that the delegation  in  question has been made to a  statutory  body which  is entrusted with the duty of development of the City of Bangalore and the areas adjacent thereto.  The process of development  is  statutorily  controlled  and  in  the  said process  certain developmental activities under Sections  29 and 30 of forming lay out, maintaining roads, bridges, sewer etc.   are  also contemplated.  Therefore, the BDA  as  such cannot  be  treated as a stranger for the purpose  of  being delegated  the  authority to levy property tax  in  property which is situated within its jurisdiction.  These levies and collections  are not left to the arbitrary wisdom/discretion of the delegated authority but are governed by the procedure to  be  adopted under the Corporation Act which  itself  has provided  an  elaborate machinery for determining such  levy and  collection  thereof.   Therefore,  by  no  stretch   of imagination  can  it  be contended that this  delegation  is either  beyond  the scope of the legislative power or is  in excess  of the same.  It cannot also be argued that the said delegation is unguided or arbitrary.

   Another  limb of the appellants argument in challenging the  Amending  Act  is  that  the  Legislature  has  blindly incorporated the machinery provisions of the Corporation Act under Section 109, for the purpose of levying and collecting the  tax  which,  according to the appellant,  is  arbitrary inasmuch  as the tax collected by the Corporation was to  be utilised for large number of functions enumerated in Section 59  of  the  Corporation Act while the amount  so  collected under  the  BDA Act is to be utilised for limited  functions specified  under Section 28A of the Amending Act.  We do not find any force in this argument also.  It is true that under Section  59  of  the  Corporation Act,  the  Corporation  is obligated  to  perform  as many as  23  functions  specified therein  while under Section 28A of the BDA Act, the BDA has to  perform  only  3 or 4 functions.  But on behalf  of  the respondents, it is pointed out to us that a complete reading of  the BDA Act shows that the BDA also has to perform  many other  functions  which are similar to those  enumerated  in Section  59  of  the  Corporation Act.  That  apart,  it  is pointed  out that under the Corporation Act the  Corporation

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

is empowered to collect other revenues also apart from those enumerated  in Section 109 of the Corporation Act while  the BDA  can  collect  only that tax which it is  authorised  to collect  under Section 28B of the Act, hence there can be no comparison  of the collection of the BDA and its expenditure with  that  of  the Corporations revenue  and  expenditure. Therefore, we are in agreement with the respondents and hold that  the authorisation of collection of property tax by the BDA  based  on the procedure laid in the Corporation Act  is neither  arbitrary nor in excess of the power of delegation. Therefore, the challenge to this Section should also fail.

   The  next  argument  of the appellant is  in  regard  to Section 7 of the Amending Act whereby the past collection of property  tax  made  by  the BDA which was  declared  to  be without  authority of law by the High Court is sought to  be validated.   In  support  of this contention  the  appellant submits  that  in the previous writ petition the High  Court not only found that there was lack of statutory authority to collect  the  property tax but also held that such  property tax  can be collected only if the BDA provided certain civic amenities  which the High Court on facts had found that  the BDA  was  not providing.  Hence, it is argued that the  said finding of the High Court having become final for the period prior  to  the date of the Amending Act, such collection  of tax could not have been validated.  Relevant part of Section 7 of the Amending Act reads thus :

   Notwithstanding  anything  contained in  any  judgment, decree or order of any Court, Tribunal or other authority to the  contrary, levy, assessment or collection of any tax  on land  or  building  or on both and levy  and  collection  of cesses on such tax on land or building made or purporting to have  been  made  and  any action or  thing  taken  or  done (including  any  notice or orders issued or assessment  made and  all proceedings held and any levy and collection of tax or cess or amount purported to have been collected by way of tax  or  cesses)  in relation to such  levy,  assessment  or collection  under the principal Act before the twenty fourth day  of July, 1992 shall be and shall be deemed to be  valid and  effective as if such levy, assessment or collection  or action  or  thing,  had been made, taken or done  under  the principal Act as amended by this Act and accordingly .---

   It  is  seen from the said Section in the  Amending  Act that  the  collection which was held to be invalid  and  was directed to be refunded under the High Court judgment in the previous  proceeding  was  sought to  be  validated  without indicating  how  the  Legislature has remedied the  want  of services  pointed  out  by the High Court.  In  the  earlier case,  the  High  Court had held that in the  principal  Act there  was  no specific provision to levy taxes  similar  to those  leviable under the Corporation Act.  It also came  to the  conclusion  that  any such tax even if it  were  to  be levied  by  the  BDA with the sanction of  the  Legislature, could  be levied only if the BDA performed certain functions mentioned  in the said judgment.  The Court further came  to the  conclusion  that such functions not being performed  by the  BDA,  collection of tax, apart from being  unauthorised for  want of statutory sanction, is also bad because the BDA did  not  render  any service in lieu  of  such  collection. Therefore,  it  is seen that by the said judgment  the  High Court  had  held that the collection of tax by the  BDA  was service-related.   In other words, such power of levy can be vested  in the BDA only if the BDA renders certain  services

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

to  the  subscribers to such tax and it is in  this  context that  the  High Court gave a specific finding that  no  such services  had  been rendered.  This finding not having  been challenged  by the BDA had become final.  Therefore, so  far as  collections  made prior to the coming into force of  the Amending   Act  being  a   collection  without  any  service rendered,  the  same  cannot  be   validated  even  by   the introduction  of Section 7 of the Amending Act.  The finding of  the  High Court in regard to want of services could  not have  been  either  ignored or reversed by  the  Legislature while  validating  the earlier collection because it has  no such power to reverse the finding of a court.  This Court in a catena of cases has laid down that when a Legislature sets out  to  validate a tax declared by a court to be  illegally collected,  it  is  not sufficient for  the  Legislature  to merely  declare that the decision of the court shall not  be binding  because that would amount to reversing the decision rendered  by  a  court in exercise of judicial  power  which authority  the  Legislature does not possess.  It is also  a settled  principle in law that when invalidity of collection of  levy is pointed out by the court based on  non-existence of   certain  necessary  facts,  it  is  not  open  to   the Legislature  to merely controvert that finding of the  court and validate such collection by proceeding on the basis that such finding of the court is incorrect.  In the case of Shri Prithvi  Cotton  Mills  Ltd.   & Anr.   v.   Broach  Borough Municipality  & Ors.  (1970 (1) SCR 388 at 392) this is what a Constitution Bench of this Court had held :

   When  a legislature sets out to validate a tax declared by a court to be illegally collected under an ineffective or an  invalid law, the cause for ineffectiveness or invalidity must  be removed before validation can be said to take place effectively.   The  most important condition, of course,  is that  the  legislature must possess the power to impose  the tax,  for,  if  it  does not, the action  must  ever  remain ineffective and illegal.  Granted legislative competence, it is not sufficient to declare merely that the decision of the Court shall not bind for that is tantamount to reversing the decision in exercise of judicial power which the legislature does  not  possess  or exercise.  A  courts  decision  must always  bind unless the conditions on which it is based  are so  fundamentally  altered that the decision could not  have been  given  in  the altered circumstances.   Ordinarily,  a court  holds a tax to be invalidly imposed because the power to  tax  is wanting or the statute or the rules or both  are invalid  or  do  not sufficiently create  the  jurisdiction. Validation  of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed  and  are  in  fact removed and the  tax  thus  made legal.

   This  above  ratio laid down in the said case  has  been consistently  followed by this Court in all subsequent cases where  this  question  arose for  consideration.   See  M/s. Hindustan  Gum & Chemicals Ltd.  v.  State of Haryana & Ors. (1985 (Supp.) 2 SCR 630).

   Applying the said principles to the facts of the present case, it is seen that the invalidity pointed out by the High Court  about  the lack of services rendered at the  relevant point  of  time  is an invalidity which was not  capable  of being  removed to justify the levy of tax by an Amending Act and  the  Legislature  could not have  either  ignored  this finding  of  fact by the High Court or overruled  the  same.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

Therefore,  in our opinion, in respect of the tax  collected for  the period before the date of the Amendment there could have  been  no  validation of such collection.   Hence,  the Amending  Act  so  far  as it validates  the  collection  of property  tax  by the BDA, cannot be sustained for a  period prior to the date of the Amending Act.

   We however make it clear that in this appeal we have not decided  the  nature of levy under Section 28B after it  was introduced  by  the Amending Act as to whether it is  a  tax simpliciter  requiring no service at all or whether it is  a tax in the nature of a fee requiring services as held by the learned  Single  Judge in the earlier round  of  litigation. Our examination of the validity of the Amending Act has been confined  only  to  the arguments addressed before  us.   In regard to the validation of the past collection, our finding is  based  on  the finding given by the High  Court  in  the earlier judgment which has become final and as a consequence of  such  finding  the  validation  of  such  collection  is impermissible.   Therefore, Section 7 of the Amending Act so far  as it validates collection of property tax made by  the BDA  prior  to  the introduction of Section 28B  has  to  be declared as invalid and beyond the legislative power.

   This  declaration of ours in regard to the illegality of the  validation  of the property tax collected prior to  the Amendment, however, does not apply to the collection made by the  BDA of the cesses required to be collected by it  under Section  28C of the Act.  The collection contemplated  under Section  28C is not a levy under the BDA Act.  It is a  levy imposed  under  the Acts mentioned in that Section,  namely, the  Karnataka  Compulsory  Primary   Education  Act,  1961; Karnataka Health Cess Act, 1962;  Karnataka Public Libraries Act,  1965;   and the Karnataka Prohibition of Beggary  Act, 1975.   The  cess in question is not for the benefit of  the BDA  but the same is collected by the BDA only as an  agent. It  is  for this purpose that under Section 28A the BDA  was deemed  to be a local authority so that it could collect the cess  under the said respective Acts.  These collections  as an  agent  do not suffer from want of legislative  sanction. The  only  lacking part was that under the  respective  Acts referred  to hereinabove, the said collection could be  made by  a  local  authority only, which the BDA  was  not  until Section  28C  was  introduced.  This lacuna was  removed  by introduction  of  Section  28C and the BDA has been  made  a deemed  local authority for the purpose of such  collection. Therefore,  once the BDA has been declared as a deemed local authority  with retrospective effect, we find no  difficulty in  accepting  the validity of this collection.  Hence,  the validity  of  Section 28C has to be upheld and  consequently all  the cesses collected by the BDA under the Acts referred to  under  Section  28C  have  to  be  declared  as  validly collected.

   For  the reasons stated above, we uphold the validity of Sections  28B  and  28C  of  the BDA  Act  which  are  under challenge  while  we declare that that part of Section 7  of the  Amending Act which validates the collection of property tax  by the BDA before the introduction of Sections 28A  and 28B  as invalid;  consequently the said collection is liable to  be  refunded  as  directed  by  the  court  in   earlier proceedings.   Accordingly, this appeal is partly allowed to the extent indicated hereinabove.  No costs.

   J.  (S.P.  Bharucha)

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

   J.  (N.  Santosh Hegde)

   J.  (Y K Sabharwal)

   March 30, 2001