*IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 18th February, 2011
+ W.P.(C) 1463/1996
J.S.FURNISHINGS LTD. ..... Petitioner
Through: Mr. Bharat Bhushan Jain, Advocate.
Versus
MCD & ANR ..... Respondents
Through: Ms. Amita Gupta with Mr. Rahat
Bansal, Advocate for MCD.
AND
+ W.P.(C) 4892/1999
THE VAISH CO-OPERATIVE NEW BANK LTD. ..... Petitioner
Through: Mr. Bharat Bhushan Jain, Advocate
Versus
MCD & ORS ..... Respondents
Through: Ms. Amita Gupta with Mr. Rahat
Bansal, Advocate for MCD.
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. Whether reporters of Local papers may
be allowed to see the judgment? YES
2. To be referred to the reporter or not? YES
3. Whether the judgment should be reported YES
in the Digest?
W.P.(C) 1463/1996 & W.P.(C) 4892/1999 Page 1 of 10
RAJIV SAHAI ENDLAW, J.
1. The writ petitions were filed seeking quashing of the orders of the assessment of property tax qua the respective properties of the petitioners including by impugning the Bye Laws, more specifically Bye Laws 2 (1)
(b) (i) & 3 (1) (c) (iii) of the Delhi Municipal Corporation (Determination of Rateable Value) Bye Laws. 1994. Rule D.B. was issued on 24th April, 1997 and 8th September, 1999 respectively. On the applications of the petitioners for interim relief, the petitioners were directed to pay the entire amount of tax in terms of the assessment orders impugned in these petitions, with a further direction that in the event of the petitioners succeeding, the excess amount if any of the tax so paid by the petitioners, shall be refunded to the petitioners; in the order dated 8 th September, 1999 in W.P.(C) No.4892/1999 it was further directed that such refund will be with interest @ 18% per annum.
2. On 7th January, 2010 the counsel for the petitioners stated that the challenge to the Bye Laws did not survive as the Bye Laws had been upheld and the only question remaining to be examined in the writ W.P.(C) 1463/1996 & W.P.(C) 4892/1999 Page 2 of 10 petitions was as to the validity of the assessment orders impugned in each of the petitions. The petitions were accordingly directed to be listed before the Single Judge.
3. However, the respondent MCD vide its Departmental Instruction No.18/2000 dated 31st March, 2000 rendered a clarification owing whereto the orders of assessment challenged in these petitions became liable for rectification and the tax already received by the respondent MCD in pursuance thereto rendered in excess.
4. The counsel for the petitioners on 29th April, 2010 drew attention to the proceedings in W.P.(C) No.1463/1996 before the Lok Adalat held on 12th November, 2005, when the Joint Assessor & Collector of the respondent MCD had admitted that the petitioners had deposited `2,40,000/- in excess with the respondent MCD and that the respondent MCD was willing for refund thereof but was not willing to pay any interest thereon; the petitioner expressed unwillingness to take refund without interest. Though there is no corresponding order in W.P.(C) No.4892/1999 but the counsels for the parties have made joint submissions in the two petitions and have stated that the only question remaining for W.P.(C) 1463/1996 & W.P.(C) 4892/1999 Page 3 of 10 determination is as to whether the respondent MCD is liable to pay any interest on the excess tax received and if so at what rate.
5. The counsel for the petitioners has drawn attention to
(i) order dated 1st December, 2004 in W.P.(C) No.18441/2004 titled MCD v Ramesh Chand Aggarwal where the plea of the MCD that the excess tax received should be allowed to be adjusted in future tax dues was negatived and it was held that payment of tax being a condition precedent for the assessee to avail the right to appeal, if the assessee succeeds, excess tax has to be refunded and cannot be adjusted;
(ii) judgment dated 15th May, 2008 of the Division Bench in LPA No.1750/2005 titled MCD v. Ramesh Chand Aggarwal against the order aforesaid directing refund of excess tax with interest @15% per annum. The Division Bench held that there is no provision in the Delhi Municipal Corporation Act, 1957 permitting adjustment of excess tax towards future payment and the assessee is entitled to refund thereof. It was further held that MCD having enjoyed the amount of excess tax W.P.(C) 1463/1996 & W.P.(C) 4892/1999 Page 4 of 10 which it was not entitled to have, there is no reason why the assessee should be deprived of the benefit of interest which otherwise he was entitled to if he had deposited the said amount in a Bank or invested in the market. It was yet further observed that MCD itself during the relevant time used to charge [email protected] 22% per annum for delayed payment of tax and hence the direction for refund with interest @15% per annum could not be said to be excessive or unreasonable. Reliance was placed on a Division Bench judgment in Ahmedabad Municipal Corporation v. Vireshchand Chandrakant Desai AIR 2002 Gujarat 379 where also the Municipality was held liable for interest @15% per annum on the amount refundable.
6. I may notice that the Supreme Court in Corporation Bank Vs. Saraswati Abharansala (2009) 1 SCC 540 held that it is the duty of the State to act reasonably having regard to the equality clause contained in Article 14 of the Constitution of India and the State is bound to refund the excess tax collected. It was further observed that if it were to be held W.P.(C) 1463/1996 & W.P.(C) 4892/1999 Page 5 of 10 without there being any statutory provision that those who have deposited the amount in time would be put to a disadvantageous position and those who were defaulters would be better placed, the same would give rise to an absurdity. It was held that a writ petition seeking direction for refund of excess tax realized is maintainable.
7. The counsel for the respondent MCD has contended that the present writ petition is not maintainable and the challenge to the assessment order was to be made by way of an appeal. Attention is also invited to the assessment order, the application for rectification and the order on rectification to show that the assessment at the contemporaneous time was in order.
8. As far as W.P.(C) No.4892/1999, wherein it was expressly directed as aforesaid that in the event of petition succeeding, the petitioners shall be entitled to refund of excess amount with interest @18% per annum, is concerned, the respondent MCD is bound by the said order dated 8 th September, 1999 of the Division Bench and the same cannot be reviewed by this Bench and the respondent MCD is bound to comply with the same. W.P.(C) 1463/1996 & W.P.(C) 4892/1999 Page 6 of 10
9. However in W.P.(C) No.1463/1996, there is no mention of refund with interest. However the same would not imply that the Court has declined interest in this case. Rather the question of interest did not fall for adjudication at that stage and is to be now adjudicated.
10. The liability of the respondent MCD for payment of interest on excess amount received stands concluded by the judgment aforesaid of the Division Bench in Ramesh Chand Aggarwal (supra). The only question is as to what should be the rate of interest. At first blush, I am attracted to direct the rate of interest @18% per annum as directed in W.P.(C) No.4892/1999 or @15% per annum as directed in Ramesh Chand Aggarwal. However neither of them can be said to be precedents in as much as neither generally decide as to what should be the rate of interest payable by MCD while refunding excess tax received.
11. What however emerges from the dicta of the Division Bench is that the assessee is entitled to interest at the rate which he would have earned if had invested the said amount in a Bank or in the market.
12. The rate of interest payable by Banks on fixed deposits or prevalent in the open market fluctuates with time. While the rates of interest were W.P.(C) 1463/1996 & W.P.(C) 4892/1999 Page 7 of 10 considerably high earlier, at the time when provision for 18% per annum vide order aforesaid in W.P.(C) No.4892/1999 was made, thereafter have considerably fallen and the prevalent rate of interest on fixed deposits is in the region of 10% to 11% per annum. Of course the interest payable on company deposits and in the open market is higher but the same is fraught with uncertainties and risks. The rate at which the Courts have been awarding interest have also been varying. The Supreme Court in Krishna Bhagya Jala Nigam Ltd. Vs. G. Harischandra Reddy (2007) 2 SCC 720 even while exercising limited jurisdiction of interference with arbitral award, interfered with the rate of interest on the ground of the falling rates and reduced the interest awarded by the Arbitral Tribunals from 18% to 9% per annum. As recently as in Rampur Fertiliser Ltd. Vs. Vigyan Chemicals Industries (2009) 12 SCC 324 the Supreme Court concluded the prevalent rate of interest as 9% per annum. The Supreme Court in Corporation Bank (supra) directed refund of excess tax with interest @ 10% per annum within four months and whereafter, it was to carry interest @ 15% per annum.
13. Considering all the said factors, in my view the equities between the W.P.(C) 1463/1996 & W.P.(C) 4892/1999 Page 8 of 10 parties would be balanced by directing payment of interest at the flat rate of 10% per annum for the entire period for which the respondent MCD has enjoyed the excess monies.
14. The next question which arises, is as to from which date the said interest is payable. Though the petitions were filed in the years 1996 & 1999 respectively and no order setting aside the assessment orders challenged therein has been made till now but the admitted position as aforesaid is that upon issuance of the Departmental Instructions dated 31st March, 2000 aforesaid, the respondent MCD ought to have rectified the assessments challenged in these petitions and refunded the excess tax received to the petitioners. The respondent MCD however failed to do so. It was for the first time in the Lok Adalat on 12 th November, 2005 and i.e. after nearly 5 years that the offer for refund was made. Even though the petitioners refused to take the refund without interest, the respondent MCD ought to have tendered its cheque in refund of the excess amount to the petitioners to atleast stop the meter of interest from running. The respondent MCD however did not do so and continued to enjoy the excess monies. The meter for interest would continue to run thereafter also. In W.P.(C) 1463/1996 & W.P.(C) 4892/1999 Page 9 of 10 these circumstances, the respondent MCD is held liable for payment of interest w.e.f. 1st April, 2000.
15. The writ petitions accordingly succeed to the aforesaid extent. The respondent MCD is directed to within six weeks of today refund to the petitioners the excess amounts received towards House Tax together with interest i) @10% per annum in W.P.(C) No.1463/1996 and ii) @ 18% per annum in W.P.(C) No.4892/1999, from 1st April, 2000 till the date of refund. Upon failure of the respondent MCD to comply with the order, the respondent MCD and its officials besides other remedies of the petitioners shall be liable for future interest i.e. after the expiry of six weeks herefrom @15% per annum.
No order as to costs.
RAJIV SAHAI ENDLAW (JUDGE) FEBRUARY 18, 2011 pp ..
W.P.(C) 1463/1996 & W.P.(C) 4892/1999 Page 10 of 10