Municipal Committee, Hansi vs The State of Haryana and another

H.R. Sodhi, J.—This is a petition by Municipal Committee, Hansi, a second class Municipal Committee (described hereinafter as the Committee) constituted under the Punjab Municipal Act, 1911 (hereinafter called the Municipal Act). It was running a number of primary schools and also a Girls High School all of which received financial aid from that State Government in the erstwhile State of Punjab before its reorganisation under the Punjab Reorganisation Act, 1966. According to an averment in the writ petition, which is not specifically denied by the respondents, Committee did not impose any education cess or tax for financing the schools and the funds raised from various sources were utilised in the cause of education. It appears that the State Government took some policy decision to take over all the aided schools under its own administration by provincialising them with effect from 1st October, 1957, and for this purpose instructions were to all the Deputy Commissioners in the State directing them to ask all the Municipal Committe and other local bodies not to open any new schools. Tution fees etc. to be realised in such schools after that date were required to be credited to Government treasuries. What was heretobefore being done in this regard by an executive fiat was later clothed with the authority of law when an Act known as the Punjab Local Authorities (Aided Schools) Act, 1959 (Act No, XXII of 1959), referred to hereinafter as the Aided Schools Act, was passed. The object of this enactment was to enable the Municipal Committees to part with their movable or immovable properties or to make contributions to Government in regard to schools that were being taken ovar by the State. Section 3(1) of this Act gives an authority to a local body to pass a resolution to transfer the management and control of aided schools to the State Government. The State Government on receipt of such a resolution may direct that the aided schools shall be taken over under its management and control and thereafter all rights and interests, including the right of maintenance, management and control, shall be transferred to and vest in the State Government and the rights and interests of the local authority in respect of such schools shall cease. To ensure that the Municipal Committees did pass resolutions transferring the aided schools to the State Government, power was given u/s 4 to the latter to withdraw the grant-in-aid if no such resolution was passed. This was more or less a coercive provision, intended to pressurise the Municipal Committees. The Municipal Act stood amended in the manner specified in the Schedule appended to the Aided Schools Act. Clause (g) was introduced after clauss (f) of sub-section (1) of section 52, and it reads as under:

(g) seventhly, such sum to be paid annually by the Committee to the State Government by way of contribution as is equivalent to-

(i) the total provision made in the budget for the year 1957-58 under the main head "Education" excluding educational grants and the provision made for ''original works'' relating to schools; and

(ii) a sum representing one per centum of the total income from its own resources for the year 1957-58, in lieu of the deductions made for ''original works'' made under clause (i);

Provided that in respect of the financial year 1957-58, the Committee shall make a payment to the State Government of the sums which have remained unexpended on 31st March, 1958, out of the provisions under the head ''Education'' in the budget of 1957-58-" Section 59 of the Municipal Act was also amended. It is not necessary to state in detail the amendments since the relevant provision of the Aided Schools Act and the resultant amendments in the Municipal Act have been reproduced by their Lordships of the Supreme Court in Municipal Committee, Amritsar and Others Vs. The State of Punjab and Another, In that case, the State Government had taken action u/s 5 of the Aided Schools Act which empowered it to take over the management of the aided schools for a period not exceeding ten years, after giving the local authority a reasonable opportunity of showing cause against the proposed action, if it was satisfied that the local authority had neglected to perform its duties in respect of such schools or it was necessary in public interest to take over the management for the said period, Municipal Committee, Amritsar, moved this Court under Articles 226 and 227 of the Constitution attacking the validity of the Aided Schools Act and the notification issued u/s 5 so far as it was affected by the same. The High Court was of the opinion that where the management, control and property in possession of the aided schools is taken by the Government u/s 3 of the Aided Schools Act with consent of the Municipal Committee, which has parsed a resolution to that affect, It cannot be said that the property is being compulsorily acquired and, as such, the provisions of article 31(2) of the Constitution are not attracted, In respect of cases u/s 5 the view taken by the High Court was that as the management of the property in possession of the schools was being taken over for ten years in public interest, by virtue of the provisions of Article 31-A(1)(b), the contravention of article 31(2) was of no consequence. An appeal by special leave was allowed by the Supreme Court and judgment of the High Court set aside, It has been declared that section 3(2) of the Act and the amendments which would become operative u/s 6 in respect of sections 52(1) and 59 of the Municipal Act are void and unconstitutional. Their Lordships further quashed the orders by which the movable and immovable properties of the Committes had been transferred to the State and such transfers were declared to be wholly void The State Government was prohibited from recovering any contribution in accordance with clause (g) of section 52 of the Municipal Act as also the sun of Rs. 53 lakhs mentioned in the order of the Deputy Commissioner which amount, according to the Government, presumably become due by April 10, 1964.

Almost similar challenge to the validity of the action of the State Government in provincialising the schools run by the Municipal Committee, Hansi, by the erstwhile State of Punjab and calling upon it to make contributions was made in the present writ petition filed on 21st April, 1967. The petition was admitted by the Motion Bench on 25th April, 1967, when Municipal Committee, Amritsar''s, case (supra) was pending before the Supreme Court. It is stated by the Committee that the Government through the Deputy Commissioner pressed it to make payment of the contributions claimed from it towards the up-keep of the schools previously run by it and that in this background when the Committee sent its budget estimates for the year 1960-61 to the Deputy Commissioner, Hissar, for approval, on 21st March, 1960, the latter returned the same or. 10th May, i960, with an observation that under the Education head, adequate provision for contribution towards provincialised schools equivalant to the sum which used to be spent previous to provincialisation should be made. The Committee resisted the demand of the State Government to surrender the management of aided Schools and when the budget was not approved by the Deputy Commissioner, respondent 2, it passed a resolution on 1st July, 1960, to lodge its protest declaring the provincialisaion of the schools without its consent as unconstitutional and illegal.

It equally disputed its liability to make contributions and sent the budget estimates again to the Deputy Commissioner who returned them as having been sanctioned subject to the condition that provision for Rs. 92,000/- instead of Rs. 2,000/- should be made under the head "Education Contribution." The Committee seems to have agreed to pay the sum of Rs. 2,000/- to get the budget passed so that its administration, for which finances were necessary, was not, held up for want of budget sanction though it was initially not agreeing to make any contribution whatsoever. The Committee again in its, meeting on 10th November, 1960, refused to provide in its budget a sum of Rs. 92,000/-and requested the Deputy Commissioner to refer the matter to the Government in case he disagreed with the views of the Committee. This controversy was going on when the Punjab Government by notification No. 4655-Cl(5CI)-61/28477, dated the 10th July, 1961, superseded the Committee u/s 238 of the Municipal Act and appointed a Resident Magistrate as its part-time Administrator. Afterwards, one Shri Dharambir Singh was appointed a whole time Administrator. The Chief Minister of the erstwhile State of composite Punjab wrote a demi-official letter to the Deputy Commissioner, Hissar, asking him that the recalcitrant Committee should be asked to pass the necessary resolution u/s 3 of the Aided Schools Act and that since the Committee had not agreed to make payments, the Administrator should accept the liability for contributions to be made to the Government. The Administrator at one stage was also not agreeing to pay but he was advised to pass an order immediately in the prescribed form. It was in these circumstances that payments with retrospective effect were made and continued to be so made till the year 1967. The total amount deposited in the Hansi Sub-Treasury, as stated in the writ petition, was Rs. 1,95,916 and a balance of Rs. 287,004 is still said to be due from the Committee. It may be mentioned that the Administrator relinquished the charge on 4th June, 1964, and the Committee was again being run by elected representative from that date. A few payments were made to the Government by elected representatives as well but it was done only tentatively and the Committee constituted a Sub-Committee to go into the matter before final decision could be taken. The reliefs prayed for in the present writ petition are :

(1) That Punjab Act No. 22 of 1959 be declared ultra vires of the Constitution,

(2) That movable and immovable property in the shape of schools which was taken over by the Punjab Government be directed to be returned to the Committee so that it can run the schools, management whereof was taken over by the State.

(3) That the respondents are not entitled to recover any contribution annually from the Committee under the impugned Act and the amount so far paid be ordered to be refunded to the Committee as the same was paid under an Act which has been declared void.3. Mr. C.D. Dewan learned counsel appearing on behalf of the State of Haryana. concedes that in view of the Supreme Court judgment in the case of Municipal Committee, Amritsar, the writ petition has to be allowed except so far as the refund of the amount paid as contribution by the Committee is concerned. It has been observed in the said case that Section 6 comes into operation as soon as a local authority has passed a resolution u/s 3 or the State Government has taken over management u/s 5. Then the provisions relating to acquisition of property of the Committee as also of its funds by way of contribution come immediately into operation by virtue of the amendments effected in sections 52(1) and 59 of the Municipal Act. Mr. Dewan further concedes that action in the instant case was taken u/s 3 (2) read with section 6 of the Aided Schools Act.

In view of the concession of Mr. Dewan which, in my opinion, is rightly made, this writ petition has to be allowed with similar directions as given by the Supreme Court in the case of Municipal Committee, Amritsar1, namely, that orders of the State Government transferring the movable and immovable property of the Municipal Committee, Hansi, pertaining to the schools the management of which has been taken over by the State Government shall stand quashed and the respondents restrained from recovering any further contribution under the Aided Schools Act.

The sole question that survives for consideration is whether the State of Haryana which is the successor-in-interest of the State of Punjab after the reorganisation under the Punjab Reorganisation Act, 1966, be directed to refund the amount already received by it by way of contribution. Mr. Dewan has strenuously urged that the claim of the petitioner is barred by time and that at any rate it is not a fit case where an order with regard to the refund be made. After hearing the learned counsel for the parties, I am afraid I cannot accept the contention of Mr. Dewan and must order refund of the amount as well. It is true, as observed by their Lordships of the Supreme Court in State of Madhya Pradesh Vs. Bhailal Bhai and Others, , "that special remedy provided in Article 223 is not intended to supersede completely the modes of obtaining relief by an action in a civil Court or to deny defences legitimately open in such actions". Some guiding principles have been state in this case with regard to issue of writs or directions for the refund of an amount paid under a mistake of fact or law. It is necessary to quote below in extenso a few of these observations made in thus context :

Whether repayment should be ordered in the exercise of this discretion will depend in each case on its own facts and circumstances. It is not easy nor is it desirable to lay down any rule for universal application. It may, however, be stated us a general rule that if there has been unreasonable delay the Court ought not ordinarily to lend its aid to a party by this extraordinary remedy of mandamus. Again, where even if there is no such delay the Government or the statutory authority against whom the consequential relief is prayed for raises a prima facie triable issue as regards the availability of such relief on the merits on the grounds like limitation the Court should ordinarily refuse to issue the writ of mandamus for such payment. In both these kinds of cases it will be sound use of discretion to leave the party to seek his remedy by the ordinary mode of action in a civil court and to refuse to exercise in his favour the extraordinary remedy under Article 226 of the Constitution.

The circumstances of their present cast leave no room for doubt that payment was made by the Administrator, during the period of supersession of the Committee under pressure of the State Government and the belief that he was bound to make payments because of the demand having been made under the Aided Schools Act. It was only on 12th September, 1969, that the Supreme Court declared in the case of Municipil Committee Amritsar (supra), that the properties movable or immovable of the Municipal Committee could not be taken under the Aided Schools Act with the necessary consequence that the demand for payment of contributions was illegal. The Committee before its supersession was from the very beginning not agreeing to make the payments and the stand taken by it consistently was that all demand in this behalf were illegal and unconstitutional. The Committee came back to power in June, 1964, and the 1st two payments, one in the sum of Rs. 8.000/-and the other for an amount of Rs. 353/-, were made on 19th August, 1964 and 27th January, 1965, respectively. Thereafter no amount was paid. I must hold as contended by Mr. Gupta, learned counsel for the petitioner Committee that all these payments were made under a mistake of law which mistake was really speaking discovered only when law was declared by the Supreme Court in the case of Municipal Committee, Amritsa'', and section 3 2) of the Aided Schools Act and the amendments which became operative u/s 6 of the same Act in respect of sections 52(1) and 59 of the Municipal Act were declared void and unconstitutional, and transfer of the property made under the Aided Schools Act held to be wholly void and ineffective giving a right to the Committee to recover back the contribution. Even if a suit were to be instituted for the recovery of the amount paid under a mistake of law within the meaning of section 72 of the Indian Contract Act, it will be within limitation as the sine qua non for reckoning the period of limitation is the date when the mistake is discovered. My attention has, in this connection, been invited by the learned counsel to The Sales Tax Officer, Banaras and Others Vs. Kanhaiya Lal Mukundlal Saraf, wherein it has been observed that section 72 of the Indian Contract Act comprises both mistakes of law and fact. It was a case of an assessee paying sales-tax and the State utilising the same. The levy of the tax was afterwards declared to be ultra vires and the assessee then moved the High Court of Allahabad under Article 226 of the Constitution for a writ of certiorari for quashing the assessment orders and for a writ of mandamus requiring the State Government to refund the amount of tax illegally recovered by it. The High Court came to the conclusion that section 72 of the Indian Contract Act applied to such a case and the State Government must refund the moneys unlawfully received by it as tax since such amounts must be deemed to have been paid under a mistake of law. Appeal by the State to the Supreme Court failed and it was observed by their Lordships, affirming the decision of the High Court that "there is no warrant for ascribing any limited meaning to the word ''mistake'' as has been used therein and it is wide enough to cover not only a mistake of fact but also a mistake of law". It was contended before their Lordships that the assessee was barred from recovering the amount on the principle of estoppel but this contention was repelled. In Sales Tax Officer, Banaras and Others Vs. Kanhaiya Lal Mukundlal Saraf, , both the parties were held to be labouring under a mistake of law and one party was not to blame more than the other. In the case before us, no question of estoppel can possibly arise as no representation was made by the Committee which could be said to have been accepted and acted upon by the State Government. On the other hand, it was the State Government which coerced the Administrator to make payments under an Act which was unconstitutional.

The next submission of Mr. Dewan that the period of limitation for recovery of the amount will be three years from the payment of each instalment is wholly without substance. No doubt, Article 56 of the Indin Limitation Act, 19 8 (Act IX of 1908), which provided a period of limitation for relief on the ground of mistake making the date on which the mistake becomes known to the plaintiff as terminus a quo has been omitted in the new Limitation Act, 1963, and there is no specific article dealing with such a relief, but such a case will fall under the residuary article 113, which is in the following terms :

''''Description of suit

Period of limitation

Time from which period begins to run

Any suit for which no period of limitation is provided elsewhere in this Schedule,

Three years

When the right to sue accrues.

The starting point of limitation under this article is when the right to sue accrues, and in case of a relief based on mistake the right to sue must be held to have accrued only on the date when such a mistake is discovered, whether it be a mistake of fact or of law This position of law is further made clear by section 17(1) of the Limitation Act, 1963, clause (c) whereof provides that where a suit is for relief from the consequences of a mistake, the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake or could, with reasonable diligence, have discovered it. How can it possibly be said that at any time before the law was declared by their Lordships of the Supreme Court, the petitioner could have, with reasonable diligence, discovered the mistake when we find that the High Court had taken a different view and it was only the Supreme Court which for the first time declared section 3(2) of the Aided Schools Act and the amendments u/s 6 of the same Act in respect of sections 52(1) and 59 of the Municipal Act to be void and unconstitutional. When discovery of the mistake is sine qua non for computing the period of limitation, reference to the time of payment of amount becomes wholly immaterial, and what is to be seen is when the mistake was discovered or could have with reasonable diligence been discovered Moreover, the State in its return has not pleaded that any triable issue of limitation arises, and as a matter of fact beyond saying that the payment made raises a legal issue, nothing more is said in the return.

Mr. Dewan has drawn my attention to the observations of their Lordships in Bhailal Bhai''s case and submitted that power to grant relief under Article 226 of the Constitution in the matter of ordering refund of the mount by issuing a writ of mandamus being discretionary should not, in the circumstances of the present case, be exercised. It is argued that the petitioner was guilty of delay in approaching the High Court and that is also one of the relevant considerations. I am afraid, this argument is misconceived Payments did, of course, continue to be made till 27th January, 1965. but mostly during the period the Committee was under suspension. After the Committee was again revived, the demands of the State Government were not met though they were being pursued till filing of the writ petition on 21st April, 1967. The last demand made was for the year 1966-67 in the sum of Rs. 47,469/-. A comparative statement about the year-wise amount demanded by the State Government and that paid on behalf of the Committee is given in para 22 of the writ petition and the same has not been controverted. It appears that when the Committee found itself helpless and in a difficulty in meeting the demands of the State Government, it moved this Court under Article 226 of the Constitution. In such a situation, it cannot be said that the petitioner was guilty of any laches in approaching this Court.

The last argument of Mr. Dewan is that in Bhailal Bhai''s case it was a tax paid under a void Act that was directed to be refunded, whereas the present is a case of contribution. To my mind, it makes no difference whether the amount paid is a tax or styled as a contribution, when we find that the payment was, in fact, made under an executive pressure sought to be supported by an authority of law which was unconstitutional It will be denial of justice to the Committee if it is driven to file a suit for the refund of the amount when no complicated issues of fact are involved nor any triable issue raised by the State in its return.

For the reasons stated above, I am firmly of the view that it is a fit case where in the exercise of judicial discretion vested in this Court under Article 226 of the Constitution, a writ of mandamus should issue to the State Government to refund the amount illegally received by it as contribution under the Aided Schools Act.

In the result, the writ petition is allowed as indicated above with no order as to costs.