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PETITIONER: STATE OF U.P.  & ORS.

       Vs.

RESPONDENT: DEVI DAYAL SINGH

DATE OF JUDGMENT:       25/02/2000

BENCH: Ruma Pal, S.N.Phukan

JUDGMENT:

     RUMA PAL, J.

     These  appeals  relate  to  the extent  of  the  State Governments  power  to  levy toll under Section  2  of  the Indian  Tolls  Act,  1851.  Section 2 of the  Act  reads  as follows:

     2.  Power to cause levy of tolls on roads and bridges within   certain   rates,  and    to   appoint   Collectors. Collectors  responsibilities.   - The State Government  may cause such rates of toll as it thinks fit, to be levied upon any  road  or bridge which has been, or shall hereafter  be, made  or repaired at the expense of the Central or any State Government  and may place the collection of such tolls under the  management of such persons as may appear to it  proper, and all persons employed in the management and collection of such  tolls shall be liable to the same responsibilities  as would  belong  to them if employed in the collection of  the land-revenue.

     The  bridge, in question, is the Gai Ghat bridge which was  constructed by the State Government on the river Sarju, District   Bahraich   in  1968-69  at   a  total   cost   of Rs.39,97,000/-.   In  1970,  the bridge was  opened  to  the public.   On 7th February 1985, the State Government  leased out  the right to collect toll tax in respect of the  bridge to one Chhotai Yadav.  In 1988, a writ application was filed by a truck owner, Devi Dayal Singh, challenging the right of the State Government to recover by way of toll under Section 2  of  the Toll Act, 1851 any amount apart from  the  actual cost  of construction of the bridge, viz.  Rs.  39,97,000/-. On  21st February 1990, the Division Bench of the  Allahabad High  Court  allowed the writ application.  The  High  Court held  that the State Government was not entitled to  realise interest  on the amount spent by the State Government in the construction  of  the bridge by way of toll tax unless  that amount  had  been borrowed from any  financial  institution. The High Court found that the bridge had been constructed by the  State Government out of its own funds and that  neither the interest on the expenditure nor the maintenance charges

     could  be  realised under Section 2 of the  Act.   The High  Court  found  that the State  Government  had  already recovered  the original cost of construction and accordingly directed  the appellants not to realise any further toll tax

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in  respect  of  the Gai Ghat bridge.  In arriving  at  this decision,  the High Court relied on two earlier decisions of the Division Bench of the Allahabad High Court, namely, Jiya Lal  and  Others  V.  State of U.P.  and  Others  (AIR  1981 Allah.   72)  and  Lal Bahadur Ram v.  State  of  U.P.   and Others  (AIR  1988  Allah.   146).   The  order  dated  21st February  1990  is  the subject matter of the  first  appeal before  this Court.  The lessee (Chhotai Yadav) who had been granted  the right to collect tax in respect of the  bridge, moved an application for review of the order before the High Court.   The review application was dismissed on 26th  April 1990.   Chhotai  Yadavs challenge to the orders dated  21st February  1990 and 26th April 1990 is the subject matter  of the  second appeal before us.  On the Special Leave Petition being  filed  by  the State Government, this Court,  on  3rd September 1990, stayed the operation of the order dated 14th February  1990 and it is not in dispute that as against  the initial  input  of  Rs.39,97,000/- for construction  of  the bridge,  the  State Government has recovered more than  four times  that amount by way of toll.  The concept of toll is derived  from English jurisprudence.  Shorn of  connotations which  are historically irrelevant in this country, a toll may  be  defined  as a sum of money taken in  respect  of  a benefit  arising  out  of  the temporary use  of  land.   It implies  some  consideration moving to the public either  in the  form  of  a liberty, privilege or  service.   In  other words,  for the valid imposition of a toll, there must be  a corresponding benefit.  [See in this connection Hammerton V. Eart  of Dysart (1916-18 A.C.  57-58) ;  Brecon Markets  Co. V.   Neath  & Brecon Rly Co.  ((1872) 7 CP 555);   Hindustan Vanaspati  Manufacturing  Co.   Ltd.   V.   Muncipal  Board, Ghaziabad  and Others (AIR 1961 Allah.  25(SB)),  Maheshwari Singh  V.   State  of Bihar and Others (AIR 1966  Pat.   462 (DB));  Mohammed Ibrahim v.  State of U.P.  (AIR 1967 Allah. 24);   Kamaljeet Singh & Ors.  V.  Municipal Board,  Pilkhwa (AIR 1987 SC 56)] The public benefit envisaged under Section 2  of the Tolls Act, 1851 is the making or repairing of  any road  or bridge at the expense of the State Government.  For the  advantage obtained by the public by the construction of the  roads and bridges, the State Government is entitled  to re-imburse itself for providing the service.

     Although   the  Section  has   empowered   the   State Government to levy rates of tolls as it thinks fit, having regard  to the compensatory nature of the levy, the rate  of toll must bear a reasonable relationship to the providing of the  benefit.  No doubt, by virtue of Section 8 of the  Act, the  tolls collected are part of the public revenue and  may be   absorbed  in  the  general   revenue  of   the   State, nevertheless  by  definition  a  toll  cannot  be  used  for otherwise  augmenting  the  States revenue.  The  State  of Uttar      Pradesh        issued       Notification      No. 2174/XXIII-S.N.-II-62/1976  dated 2nd June 1976 in  exercise of the powers conferred under Section 2 read with Section 21 of  the General Clauses Act, 1897.  By the notification,  it was   ordered  that  with  effect   from  the  date  of  the publication  of the notification in the Gazette, toll  shall be  levied  and  chargeable from all persons  in  charge  of vehicles,  using all such permanent bridges notified in that behalf  under the control and management of the State Public Works  Department subject to certain exceptions.  We are not called  upon  to consider the exceptions in this  case.   We are,  for  the  purpose  of these  appeals,  concerned  with paragraph III (a) and (b) of the notification which reads:

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     (III)  (a) The toll on any particular bridge shall be levied  only  for  so  long  as   the  total  cost  of   its construction, including interest on the total expenditure on the  bridge,  expenditure  in  realisation of  toll  and  on maintenance,  has not been realised in full or for a  period of  50  years  from the date of first levy of  toll  on  the bridge whichever is earlier.

     Explanation:   An  amount  equal to 0.5 per  cent  per annum shall be added to the cost of the bridge on account of expenditure on maintenance.

     (b) The rate of interest shall be 10% per annum on the amount  invested  or  to  be   invested  in  future  by  the Government  for  construction of a bridge and the amount  of interest  shall be calculated on the balance after repayment of  the  instalment  of  the loan, if  any,  taken  for  the construction of the bridge.

     In the writ application filed by Devi Dayal Singh, the notification  dated  2nd June 1976 has not been  challenged. An   interpretation  of  the   relevant  paragraph  of   the notification  makes it clear that the intention to levy  the toll  is to financially self-liquidate the construction  and upkeep  of bridges and roads.  The notification thus  allows toll  to  be collected only for a specified period viz.   50 years from the date of first levy or until the total cost of its  construction  is realised, whichever is  earlier.   The total cost of construction has been defined in paragraph III (a)  of  the notification as including (i) interest  on  the total  expenditure  on  the   bridge,  (ii)  expenditure  in realisation  of toll and (iii) maintenance.  No interest  is recoverable on (ii) or (iii).  In terms of the notification, it is also not permissible to recover any amount of interest on  the  interest  chargeable on (i).   However,  the  State Government has, under cover of the notification, levied toll to  recover not only (a) the actual cost of construction but also  (b)  the  expenditure on account  of  stationery,  (c) maintenance,  (d)  interest  on the  cost  of  construction, stationery  expenditure  and  maintenance  as  well  as  (e) interest on the balance remaining after recovery of toll tax in  any  particular year.  In calculating the  balance,  the State  Government  has included the stationery  expenditure, maintenance  and the interest charged on all the items.   In other  words,  the State Government has charged interest  on interest.   Clearly, in terms of the notification, the State Government  could  not  levy toll and  reimburse  itself  on account  of  stationery,  nor could it  charge  interest  on maintenance  and  stationery costs.  While there is also  no provision  in  the  notification for  charging  interest  on interest,  the  State  Government  could  in  terms  of  the notification,  certainly  recover  by way of toll  from  the public, the actual expense of construction, interest on such actual expense and the cost of maintenance.  However, by the judgments under appeal, the right to levy the last two items was  negatived.   The reasons which led to such denial  were based on the Bench decision in Jiya Lal (supra).  Jiya Lals case  laid down the principles for charging toll tax in  the state.   The  subsequent  decision referred to by  the  High Court,   namely,  Lal  Bahadur   Ram  merely  followed   the principles enunciated in Jiya Lal.  The decision in Jiya Lal for  the most part proceeded on certain premises which  were neither   supported  by  authority   nor  any  principle  of interpretation.   Of the four principles deducible from  the judgment  of  Jiya Lal, we are unable to accept three.   The

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first  principle  has  been  stated in paragraph  9  of  the judgment which reads as under:

     The  language  of  Section 2 of the Act  of  1851  is peremptory.    The  collection  of   tolls  under  the  said provision   is  permissible  only  to   meet  the  cost   of construction  of  the bridge or its approach road.   It  can also  be levied to meet any extraordinary repair which it is considered  necessary to carry out in order to maintain  the stability of the bridge or road, as the case may be.

     (emphasis supplied)

     Section  2  of  the  Act   itself  contains  no   such limitation.   Section 2 enables the State Government to levy toll  at  such  rates as it thinks fit.  It is  only  with reference  to the jurisprudential meaning of the word toll that  the  State  Government  must  justify  the  levy  with reference  to  the  benefit conferred on the public  by  the construction  of  the bridge.  Besides, Jiya Lals case  did not  at all consider the contents of the 1976  notification. The  second principle has been enunciated in paragraph 11 of the judgment as:

     Construction  of  roads and bridges is a part of  the welfare  activity of the State.  In order to promote  trade, commerce  and free intercourse, it is incumbent on the State to  construct ,more roads and bridges.  With a view to usher an  era  of  prosperity and well being, this  activity  must continue to be performed by the State.  If a road or bridge, as  the  case may be, is constructed by the State  from  its general  revenues, it is not called upon to pay interest  to anybody.   In making the constructions, the revenues of  the State  are  being legitimately spent in fostering  the  well being  of the people.  There may be cases where in order  to construct  a  bridge  or  a  road,  the  Government  or  its instrumentality  borrows money from a financial  institution and agrees to pay interest thereon.  It is only in such case that   the   interest  paid  by   the  Government   or   its instrumentality  can  be said to be included in the cost  of the construction of the bridge or road.

     (emphasis supplied)

     Apart  from  the  observations being contrary  to  the express  language  of  the 1976 notification issued  by  the State  Government, the limitation on the power of the  State Government to recoup fully the investment made overlooks the power  conferred  on the State Government generally to  levy toll  as  a  means of revenue collection under  Article  246 Entry  59 of List II, Schedule VII of the Constitution.  The notification  in  terms  allows toll to be levied so  as  to recover  the cost of construction including interest on  the total  expenditure of the bridge.  No distinction has been drawn   between  expenditure  incurred   out  of  the  State Governments  own  revenue  and   expenditure  incurred   by borrowing  money  from  financial institutions  and  others. Paragraph  III (b), although unhappily drafted, also  allows the Government to recover interest on all amounts invested in  the construction of the bridge.  It, however,  clarifies that  if the investment is made with borrowed money and  the borrowed  money  is repayable in instalments, then  interest shall  be  charged only on the balance of the  borrowed  sum after  repayment  of the instalment of the loan.  The  third

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principle  enunciated  in  Jiya  Lals   case  is  found  in paragraph  12 of the judgment:  The collection of tolls has necessarily to be entrusted to a separate staff and the cost incurred  in  employing  such staff is a  legitimate  charge which should be taken into account in working out the actual amount  realised  by  the  Government towards  the  cost  of construction."

     There  can be no quarrel with this proposition  except that  in  the case before us, no recovery was sought  to  be made  under  this head as the collection of tolls  has  been leased  out  to  a private agency.  The cost  of  stationery which the State Government has included is not shown to fall within  the  definition  of   the  phrase,  expenditure  in realisation  of  toll in paragraph III (a) of the  Section. The fourth and final principle enunciated in Jiya Lals case has been set out in paragraph 13 of the judgment:  There is a  real  distinction  between  the   cost  incurred  in  the maintenance  and the repair of a structure.  The maintenance of  a  structure  is  a routine activity  which  has  to  be distinguished  from  its repairs.  Maintenance  means  to preserve  or  to keep in good condition. The object of  the maintenance  of  a structure is to prevent its falling  into decay.   On the other hand, the word repair indicates  the restoration  to  a good and sound condition of  a  structure which  has been decayed or damaged.  Section 2 of the Act of 1851  permits the levy of toll only if the road or bridge is repaired.   It does not contemplate of a levy of toll merely on the ground of its maintenance.  We are, therefore, of the opinion  that  the  amount  spent towards the  cost  of  the construction  of a bridge will not include any sum which had been  spent in its maintenance.  No toll is chargeable under Sec.   2 of the Act of 1851 to meet the expenses incurred in the maintenance.

     (emphasis added)

     As already noted, Section 2 of the Act does not in any way  restrict the discretion of the State Government to levy toll.   It only sets out the pre-conditions when toll may be levied.   Neither of the pre-conditions set the limit on the amount of toll which may be recovered.  The only restriction is latent in the word toll itself.  The maintenance of the bridge  in a good condition is certainly a benefit the  cost of  which may validly be recovered by the levy of toll.   We are also of the view that the distinction sought to be drawn between  maintenance  and  repair  in  the  context   of construction  is  virtually  without  any  difference.   For maintaining  a  bridge  one would have to keep  it  in  good repair  and  by  repairing a bridge it is  also  maintained. Finally,  and  in  any  event, the cost  of  maintenance  is expressly recoverable under the 1976 Notification, which, as already  noted,  was not the subject matter of challenge  at any  stage  of these proceedings.  We have been informed  by learned  counsel appearing on behalf of the appellants  that during  the  pendency of these appeals the State  Government has  stopped  collecting any toll tax in respect of the  Gai Ghat bridge.  Even if that be so, it is necessary to resolve the  issues  raised, albeit to operate prospectively, as  it would  not do to allow the principles enunciated in Jiya Lal to  continue  to hold the field.  In the  circumstances,  we dispose  of the appeals by setting aside the impugned orders of  the  High Court but at the same time declaring that  the State Government may not hereafter take into account for the purpose  of  levying  any  toll under  the  notification  in

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respect  of  a road or bridge constructed by it,  stationery cost  (unless incurred in realisation of the toll), interest on  stationery  cost  and maintenance, and interest  on  the interest  payable  on  account  of  the  actual  expenditure incurred  in the construction of the road or bridge.   There will be no order as to costs.

     ..J.  (S.P.  BHARUCHA)