Kolkata Municipal Corporation & Ors. vs Hindustan Lever Limited & Ors.

P. MUKERJI, J.

The issues involved in these appeals are about imposition and recovery of drainage development fee by the Kolkata Municipal Corporation

(hereinafter “the appellant Corporationâ€), on sanction of building plans by them. The respondents (hereinafter “the respondent writ

petitioners†and referring to the writ petitioner company only) herein filed a writ application in this court (WP 2332 of 2003) against inter alia the

appellant Corporation seeking quashing of the decision imposing this fee. The respondent writ petitioner also claimed refund of a sum of Rs.22,08,178/-

paid by them in this behalf for the building numbered as E/1, Circular Garden Reach Road, Kolkata- 24.

The learned single Judge in delivering the impugned judgment on 17th November, 2009 felt himself bound by the judgement of a division bench of this

court made on 14th May, 2007 in the case of Asian Leather Limited and Anr. v. Kolkata Municipal Corporation and Ors. reported in 2007 (3) CHN

In that judgement of this court presided over by Mr. Justice Bhaskar Bhattacharya had quashed the circular making this demand and directed

refund of the fee paid by the appellants before that Court.

Following this judgment, by the said impugned judgement dated 17th November, 2009 this court directed refund of the sum of Rs. 22,08,172 by the

appellant Corporation to the respondent petitioner within eight weeks of communication of the order. The Kolkata Municipal Corporation appeals to us

against this judgement.

Now, it is necessary to set out the background. The building plan for the said premises was held up by the appellant Corporation. Their point of view

was, that it could be considered for sanction once the drainage development fees were paid in full. Initially the amount claimed by the respondent

corporation towards drainage development fee was Rs.1,47,21,187/-. On a consideration of the letter of the respondent/writ petitioner dated 20th

February, 2002 the appellant Corporation reduced the demand to Rs.22,08,178/-.

On 30th January, 2003, the appellant Corporation wrote to the respondent/writ petitioner acknowledging receipt of Rs.88,900/- as part payment

towards fee of Rs.22,08,178/-. The latter was asked to pay the balance amount of Rs.21,19,278/-. On 6th February, 2003, the respondent/writ

petitioner replied that without prejudice to “the legality of the drainage charges levied†they were making payment of Rs.21,19,278/in full payment

of the claimed fee “under protestâ€​.

Mr. Ashok Kumar Banerjee learned senior counsel appearing for the appellant Corporation argued that the respondent/writ petioner was always

ready and willing to bear the drainage development fee. Having once agreed to pay the drainage development fee, they could not resile from that

promise and set up the defence of illegality.

We are unable to appreciate this line of argument. If a demand is illegal, it is void ab initio. Even if it is acted upon, it has no consequences. The

respondent was within their rights to pay the sum of Rs.22,08,172/- and get their work done, saying that this amount was being paid without prejudice.

Sometime in 2003, to be more precise on or about 28th November, 2003 the respondent writ petitioner filed the instant writ application in this Court

seeking a declaration that the recovery of drainage fees by the appellant corporation was invalid in law. Furthermore, they claimed refund of the sum

of Rs.22,08,172/- from them.

Now, when this writ came up for hearing before the Hon’ble Mr. Justice Girish Chandra Gupta on 17th November, 2009, his lordship observed

that since the decision of the appellant Corporation imposing the said fee had been quashed in the earlier writ of Asian Leather, there was no

necessity to pass a second quashing order. However, the only contention which seems to have been made before the learned trial Judge by the

appellant Corporation was that a writ was not the appropriate remedy for the respondent/writ petitioner. This contention was repeated before us. They

cited the cases of Dhanyalakshmi Rice Mills etc. Vs. Commisioner of Civil supplies & Anr. reported in AIR 1976 EC 2243(SC) and Vinod Somani

Vs. Calcutta Municipal Corporation & Ors. reported in 2007 (4) CHN 416. Reference was also made to B. D. Gupta Vs. State of Uttar Pradesh

reported in 1991 Supp SCC 1. The learned trial Judge very carefully distinguished all the cases. The case of Dhanyalakshmi Rice Mills was

distinguished on the ground of that it related to administrative charges and not tax. No triable issue was involved in our case. Neither was there any

question of limitation. In Vinod Somani a writ was filed after more than four years of payment of mutation fees. Under the ordinary law its recovery

became barred by the laws of limitation. Such was not the case here In B. D. Gupta Vs. State of Uttar Pradesh reported in 1991 Supp SCC 1, the

Supreme Court held that the Court had a discretion in the matter of directing refund.

In our opinion the last case is very important. When the Court feels that directing a claim to another forum would unnecessarily subject a litigant to

long and rigorous procedure and delay in obtaining refund, it could entertain a writ and direct refund of money to be made. The learned Judge very

rightly held that the order of refund may be passed in the writ, otherwise there would be miscarriage of justice. Mr. Banerjee also contended that

since the drainage work had been completed and payment therefor made to the respondent corporation long ago, the respondent appellant should not

be asked to make refund of this amount.

We hold that this is not a good argument. The money was deposited without prejudice by the respondent/writ petitioner in early February, 2003. This

writ was filed in November, 2003, claiming the refund. A valid claim pursued properly cannot be extinguished by the pendency of litigation. It might be

noted that, inter alia, legislation regarding Municipal Corporation is in the domain of the state legislature under entry No.5 of the state list being List II

of the 7th Schedule to the Constitution.

Under entry No.66 the state legislature has the power to levy fees in respect of any of the matters in the state list. Article 243X of the Constitution

provides that the legislature of a state may by law authorise a municipality to levy, collect and appropriate such fees as it may direct. It is absolutely

true that the Kolkata Municipal Corporation Act, 1980, did not provide for any provision under which the impugned demand could be made when this

writ application had been filed on or about 28th November, 2003.

The drainage development fee was received by the appellant Corporation on 5th February, 2003 and 7th February, 2003. In or about 2003 a batch of

writ applications was filed in this Court challenging the circular of the appellant corporation claiming drainage development fee. Since, the instant writ

application was filed in the Court immediately after issuance of the circular demanding the drainage development fee, the respondent/writ petitioner

cannot be blamed for keeping their writ application pending till the outcome of the appeal in the case of Asian Leather and analogous matters on 14th

May, 2007. The instant writ could be heard out by Mr. Justice Gupta in 2009 and judgment delivered on 17th November, 2009. Therefore, it cannot be

said that there was any fault on the part of the respondent/writ petitioner or default on their part so as to deprive them of the benefits granted by the

Asian bench judgment. The learned Judge very correctly held that since the said circular have been declared ultravires earlier by this Court in the

Asian Leather case, there was no need to declare it ultravires again. His lordship directed refund of the drainage development fee deposited by the

respondent/writ petitioner. Under the judgment and order in the Asian Leather case the respondent/writ petitioner became entitled to refund of the

entire fee paid. On 4th May, 2010 the Kolkata Municipal Corporation (Amendment) Act, 2010 was published in the Kolkata Gazette. Section 393 of

the said Act was substituted by a new Section 393 which was in the terms:

“Erection of Building â€" Every person who intends to erect a building shall apply for sanction by giving notice in writing of his intention to the

Municipal Commissioner in such from together with such fees including Drainage Development fee and containing such information as may be

prescribed: Provided that the Corporation may also levy fees under this section with retrospective effect. Mr. Banerjee learned senior advocate

submitted that the amended Section 393 authorised the Corporation to levy fees including drainage development fee with retrospective effect.

According to us, it is quite plain on a reading of the proviso to Section 393 that after the amendment came into force the Corporation had the power to

levy fees covering a past period. The amendment per se did not allow legitimisation of the impugned demand or any earlier demand of the Corporation

for drainage development fee. Now, the question in this case comes down to this: whether after the judgment in Asian leather case the Kolkata

Municipal Corporation could retain the sum of Rs.22,08,178/- paid by the respondent/writ petitioner?

On 1st June, 2010 the Kolkata Municipal Corporation (Amendment) Act, 2010 came into force. On 10th July, 2010 the Mayor-in-Council made

recommendations regarding charging of drainage development fees. On 24th July, 2010 in a meeting the Corporation noted how circular No.8 of 2002-

03 charging drainage development fee had been declared ultravires by this Court. It also noted the dismissal of the Special Leave Petition by the

Supreme Court. Hence the house was of the opinion that Rules and Regulations for proper amendment of the Act needed to be framed. It approved

the recommendation of the Mayor-in-Council dated 10th July, 2010 to reintroduce the drainage development fee and for giving it retrospective effect.

On 17th August, 2010 the Municipal Commissioner issued a circular No.28 of 2011-11 stating that the appellant Corporation would impose drainage

development fees as fixed in the that year’s budget estimate for 2010-2011 in connection with the sanction of a building plan. A circular would

have retrospective effect on and from 10th July, 1999 till the date of the notification for all erection of buildings sanctioned under Section 393 where

the drainage development fees were not paid.

Mr. Ranjan Deb learned senior advocate appearing for respondent/writ petitioner cited a most interesting decision of the Supreme Court, in Katikara

Chintamoni Dora Vs. Guntreddi reported in (1974) 1SCC 567. It says that the legislature cannot reverse a judicial decision, simpliciter because it does

not possess judicial power. However, if the conditions on which a judgment is based is so altered by legislation that the judgment could not have been

rendered in the altered circumstances, then, the Court decision is not binding. He argued that the conditions operating at the time of pronouncement of

the judgment in the Asian Leather had not been so altered by the amendment that the judgment could not be in force. In other words, the tenor of the

amendment was not to give the impugned circular retrospective effect so as to make the judgment in Asian Leather infructuous. In yet another

important decision of the Supreme Court, Madan Mohan Pathak Vs. Union of India & Ors. reported in AIR 1978 SC 803 cited by Mr. Deb, the

apparent object of the Act was to undo the effect of a judgment of this Court but the recital part did not mention this.

The Supreme Court held that when there was nothing express in the Act reversing the judgment of the Calcutta High Court, the Life Insurance

Corporation was bound by it. Referring to Shri Prithvi Cotton Mills Ltd & Anr. Vs. Broach Borough Municipality and Ors. reported in (1969) 2 SCC

283, learned Counsel submitted that to undo the effect of a judgment, a validating Act had to be enacted containing words to this effect

“notwithstanding anything contained in any judgment, decree or order of a Court or tribunal ........ thereunderâ€. There was no validating provision

in the amended Section 393 also said that the circular dated 17th August, 2010 had no application to the respondent/ writ petitioner. It may have

applied to cases, where drainage development fees were not paid on the basis of the Asian Leather judgment. Since the respondent/writ petitioner had

paid the entire drainage fee demanded, under protest and without prejudice in 2003 the circular was not applicable to them.

On behalf of the respondent corporation, the submissions were advanced primarily by Mr. Ashok Banerjee, learned senior advocate. The first

important submission made by Mr. Banerjee was that the decision in the Asian Leather case was per incuriam. It relied on the case Sales Tax

Officer, Banaras & Ors. vs Kanhaiya Lal Mukundlal Saraf reported in AIR 1959 SC 135. However, the ratio of this case was not followed by the

Supreme Court in the later case of Mafatlal Industries Ltd. and Ors. Vs. Union of India & Ors reported in (1997) 5SCC 536, which was not

considered by the division bench of our Court. Mr. Banerjee said that in order to obtain refund of any tax or fee paid, the applicant had to show that he

had not passed on the burden to any third party. This burden had not been discharged by the respondent/writ petitioner. Hence, no order can be made

in favour of this Company.

At the threshold we reject this point. There is no issue between the parties as to whether the respondent/writ petitioner was constructing and

developing the property exclusively for their purposes. In those circumstances this principle of law that the Court should not allow a party to unjustly

enrich himself does not apply to this case. Mr. Banerjee submitted a number of authorities on the right of the legislature to enact retrospective laws.

There cannot be any dispute with the proposition that the legislature enjoys the power to make retrospective laws provided the enactment expressly

and unambiguously states that retrospective effect is being given to the statute or to a part of it.

The amendment, by the Kolkata Municipal Corporation (Amendment) Act, 2010, did not legitimise any past levy or demand. The proviso states that if

at all the corporation wanted to levy drainage development fee it could do so by making the imposition after the date of coming into force of the

Amendment Act, even with retrospective effect.

We do not agree with the submission of Mr. Deb that since the respondent/writ petitiner paid the drainage fees claimed, in 2003, it could not be said

that their bills were unpaid. They had paid it under protest and without prejudice to their rights and contentions. Soon thereafter they filed this writ. It

could not be said that this payment was made to Kolkata Municipal Corporation for appropriation towards their drainage development fee.

Now, if you take a look at Section 393 of the said Act, you will find that drainage development fee may be levied by the corporation. Section 602 of

the said Act empowers the corporation to make regulations not inconsistent with the provisions of the Act or the rules made there under for

discharging its functions under the said Act. Therefore, the corporation could impose the drainage development fee by regulation. It does appear from

the application made by the appellant corporation styled as one for “appropriate orderâ€​ filed on 21st November, 2013 that the Mayor-in-Council on

10th July, 2010 duly made its recommendation for imposition of the drainage development fees including imposition with retrospective effect.

In those circumstances, the intention of the appellant Corporation to undo the effects of the Asian leather judgment is explicit in their resolution of 24th

July, 2010. The circular dated 17th August, 2010 levying drainage fee with effect from 10th July, 1999 followed the mandate of the resolution.

Therefore, to equally this case with Katikara Chintamoni Dora Vs. Guntreddi reported in (1974) 1SCC 567 and Madan Mohan Pathak Vs. Union of

India & Ors. reported in AIR 1978 SC 803 is plainly wrong. In these cases, the Supreme Court held that there was no express intention manifest by

the legislature to undo the judgment in question. In this case, such an intention is manifest.

Therefore, we do not find any infirmity in the amendment to Section 393 of the Kolkata Municipal Corporation Act, 1980 or framing of the 2010

Rules. Rs. 22,08,178 was paid by the respondent/ petitioner to the appellant as drainage development fee without prejudice in February 2003.There is

also no doubt that by virtue of the Kolkata Municipal Corporation (Amendment

Act, 2010) which came into effect on 1st June, 2010 the Municipal Commissioner was vested with the power to impose drainage development fees

with retrospective effect. He did this by his circular dated 17th August, 2010. There is no dispute that the amount payable by the respondent writ

petitioner to the appellant was Rs. 22,08,178. The amendment act does not specify that this amount could be recovered by the appellant from any

money of the assesee in its hands. Therefore, to straightaway appropriate money on the basis of this amendment was not in order. In our view the

Corporation was required to take steps for recovery of the money by appropriate procedure. Hence the appellant corporation has to take the

appropriate measures to realise/recover or appropriate Rs. 22,08,178/within three months from the date or refund the said amount. The appeal is

allowed to the above extent. The writ application is disposed of.

APO No. 78 of 2011

The facts of this case, are more or less identical with the case of Hindustan Lever Ltd. & Ors. (APO NO.344 of 2009), except that the drainage

development fees paid on 28th March, 2003 by the respondent AGW Realtors (P) Ltd. & Ors., was Rs.39,14,498/- for premises No.56, Raja S. C.

Mullick Road, Kolkata â€" 700032.

Following the judgment of Asian Leather delivered on 14th May, 2007 declaring circular No.8 of 2002-03 as ultravires the Kolkata Municipal Act,

1980 and the Constitution of India, this Court held that retention of money by the appellant corporation would result in unjust enrichment. An additional

point which had been raised in this case was that the respondent/writ petitioner being a developer had passed on this fee paid, to the purchasers of the

flats subsequently raised on the property. This Court by its impugned judgment and order dated 14th September, 2010 held that there was no such

evidence of the incidents of drainage development fee being passed on to the customers of the respondent/writ petitioner. It directed refund of the said

fee paid together with interest at the highest prevailing rate of fixed deposit paid by the nationalised banks from the date of acceptance of fees till the

date of repayment by the corporation.

Although this appeal was listed together with the Hindustan Lever Ltd. & Ors. and appeared in the list for days, none appeared for the respondents at

any stage. The appellant regurgitated all the points they had taken in the other appeal Hindustan Lever appeal. Additionally, the decision in the case of

Mafatlal was cited to drive home the argument that the incidence of property tax had been passed on to the purchaser of the flats, by the respondent.

They should not be granted refund as that would result in their unjust enrichment.

We need not answer the later question because we have held in the judgment in Hindustan Lever Ltd. & Ors. (APO NO.344 of 2009) that the

appellant corporation had amended Section 393 of the Kolkata Municipal Corporation, 1980 giving them power to levy any kind of fee relating to

erection of a building with retrospective effect. The amendment specifically mentioned drainage development fee. Further to this, the appellant

Corporation made a regulation, after obtaining the approval from the State Government, the Mayor-in-Council etc. on 10th July, 2010 charging

drainage development fee with retrospective effect from 10th July, 1999 till date.

The rate for payment drainage development fee would be in relation to the rate prescribed as on the date of sanction of the plan. Presumably on that

basis the respondent paid drainage development fee. We have already held that this fee was validly imposed in the other appeal concerning Hindustan

Lever Corporation & Ors. For the self-same reasons we uphold the amended Section 393 of the said Act along with the said regulation. We confirm

that the appellant corporation is entitled to appropriate the development fee amounting to Rs.39,14,498/- paid by the respondent, following the

procedure referred to in the other appeal (APO 344 of 2009). The appeal is accordingly allowed. The writ application is disposed of. Certified

photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities.