MUNICIPAL CORPORATION OF DELHI V. BIRLA COTTON, SPINNING AND WEAVING MILLS, DELHI& ANR [1968] INSC 48 (23 February 1968)
23/02/1968 WANCHOO, K.N. (CJ) WANCHOO, K.N. (CJ) HIDAYATULLAH, M.
SHAH, J.C.
SIKRI, S.M.
RAMASWAMI, V.
SHELAT, J.M.
VAIDYIALINGAM, C.A.
CITATION: 1968 AIR 1232 1968 SCR (3) 251
CITATOR INFO :
F 1970 SC1589 (7) RF 1971 SC2100 (20) RF 1973 SC1374 (11) RF 1973 SC1461 (22M,450,464,566) R 1974 SC1660 (10,16,17,35,49) R 1975 SC1007 (14) RF 1978 SC1457 (6) RF 1979 SC 321 (21,22) RF 1979 SC1475 (17,21) RF 1981 SC 951 (3) RF 1982 SC1126 (9) R 1986 SC 515 (71) R 1990 SC 560 (13)
ACT:
Delhi Municipal Corporation Act 66 of 1957 ss. 113 and 150 Power to Corporation under ss. 113(2) and 150 to levy optional taxes subject to Central Government's approval-if excessive delegation and therefore ultra vires.
Delhi Municipal Corporation (Validation of Electricity Tax) Act 35 of 1966-Whether effectively validated levy of tax between July 1, 1959 and March 31, 1966.
Constitution of India, Art. 77-Central Government's sanction signed by Deputy Secretary without the words "By order of the President" or similar words-Whether deficiency made up by subsequent affidavit stating approval given by ministerIf Deputy Minister assigned certain work can give effective approval-or whether matter must go to Cabinet Minister also.
HEADNOTE:
On February 9, 1959, the appellant Corporation passed a resolution under section 150(1) of the Delhi Municipal Corporation Act 66 of 1957 for the levy of certain taxes including a tax on the consumption or sale of electricity.
Under s. 150(2) the Central Government sanctioned the tax with effect from July 1, 1959 and also modified the rates of tax. The Corporation resolved on June 24, 1959 under s.
150(3) to determine the rates sanctioned by the Central Government as the rates at which the tax would be leviable for the year 1959-60. The respondent challenged the levy of the tax by a writ petition which was allowed in appeal and it was held, inter alia, that the Central Government could not modify the rate,, but only withhold or grant sanction.
Parliament then passed Act 35 of 1966 to validate the levy of the electricity tax from July 1, 1959 to March 31, 1966.
On February 17, 1965, the Corporation passed another resolution under s. 150(1) providing for the maximum rates for the levy of tax on electricity and after obtaining the Central Government"s sanction, passed a second resolution on December 27, 1965, tinder s. 150(3) fixing the maximum rates as the actual rates. The respondents filed two writ petitions challenging the levy of tax by the resolutions of February 17, and December 27, 1965, and the vires of the Validation Act. The High Court allowed the petitions holding that though the Validation Act validated the levy and collection of tax from July 1, 1959 to March 31, 1960 it did not do so for the period from April 11, 1960 to March 31, 1966. it also held that section 150 suffered from the vice of excessive delegation of legislative power and was therefore ultra vires. The respondent appealed to this Court.
HELD : (i) (By the Full Court) : The Validation Act 35 of 1966 validly levies and imposes tax on consumption or sale of electricity till March 31, 1966.
(Per Wanchoo, C. J. and Shelat, J.) : The High Court was in error in holding that levy and collection of the tax was not validated for the 252 period from April 1, 1960 to March 31, 1966 and that the Validation Act merely validated the fixation of the rate of tax for that period. When section 2(1) lays down that the rates deducible from the resolution of June 24, 1959 shall be the actual rates of tax for the entire period from July 1, 1959 to March 31, 1966 it must be understood to sanction the levy and collection of tax at the rates fixed. This is implicit in the word ..actual" which governs the words "rates of the tax". Even if there was some doubt in the matter from the words of s. 2(1), that doubt is resolved by the words of s. 2(2), which lays down that "all taxes on the consumption or sale of electricity levied or collected or purporting to have been levied or collected in pursuance of the resolution referred to in subsection (1) shall, for all purposes, be deemed to be, and to have always been validly levied or connected." This clearly shows that the validation "as not merely of the rate of tax but of levy and collection also for the entire period from July 1, 1959 to March 31, 1966. A reading of s. 2(1) and s. 2(2) together shows that Parliament not only validated what was done but also itself imposed the rates deducible from the resolution of June 24.
1959 and authorised the levy and collection thereof for the entire period from July 1, 1959 to March 31, 1966 notwithstanding anything contained in any judgment, decree or order of any court to the contrary. 1276 H-278 B] (ii) (Per Wanchoo, C.J. and Shelat, J.) : On a consideration of the various provisions of the Act, it must be held that the power conferred by section 150 of the Act on the Corporation is not unguided and cannot be said to amount to excessive delegation. Although the delegation made in relation to the optional taxes under ss. 113(2) and 150 is wide, there are sufficient guidelines, limits, controls or safeguards provided by the legislature in view of the following : (a) The delegation has been made to an, elected body responsible to the people including those who pay the taxes; this is an important check on the elected Councillors acting unreasonably and fixing unreasonable rates of taxation; (b) the limit to which the Corporation can tax is circumscribed by the need to finance the functions,' obligatory or optional, which it has to or may undertake to perform, under the Act. It will not be open to the Corporation by the use of taxing power to collect more than it needs for the functions it performs; though the mere fact that specific purposes and functions are set out in an impugned Act may not be conclusive it is one of the factors which should be taken into account along with other relevant factors; (c) budget estimates have to be adopted each year as laid down in section 109 of the Act; (d) under section 150(2), the maximum rates fixed by the Corporation have to be submitted to the Central Government for its sanction;
though therefore the legislature may not have provided that the rates of tax shall be submitted to it for approval, the fact that they have to be submitted to Government for approval and the Government in its turn is responsible to the legislature is a factor which has to be taken into account when considering whether the delegation by section 150 of the Act is excessive or not. [275 B; 271 D; 272 D; H;
273 E] Furthermore, should the Corporation fix rates which are unreasonable it would always be open to the Courts to strike down such import. Kruse Johnson, [1898] 2 Q.B.D. 91;
referred to. [274 E] Under certain circumstances fixation of rates of taxation can also be delegated to subordinate authorities with proper guidance and subject to safeguards and limitations.
Pandit Banarsi Das Bhanot v. The State of Madhya Pradesh, [1959] S,C.R. 427; considered.
253 There is a clear distinction between delegation of power to fix the rate of a tax like sales tax to the State Government and delegation of fixing rates of certain taxes for purposes of local taxation. The needs of the State are unlimited and the purposes for which the State exists are also unlimited.
On the other hand, in the case of a municipality, however large may be the amount required by it for its purposes, it cannot be limited, for the amount that a municipality can spend is limited by the purposes for which it is created.
[268 D-G] (Per Hidayatullah and Ramaswami, JJ.) : While the provisions which have been characterised as safeguards (where found necessary) are desirable, the proper test to apply is not the existence of safeguards but whether the legislative will to impose the tax is adequately expressed so as to bind those who have to pay the tax. This requires an examination of the policy and provisions of the Act with a view to determining whether the legislative will is fully expressed to invest the Municipal Corporation with the power to levy the tax subject, of course, to a proper procedure being evolved. [280 D, E] The doctrine that Parliament cannot delegate its powers must be understood in a limited way. It only means that the legislature must not efface itself but must give the legislative sanction to the imposition of the tax and must keep the control in its own hands. There is no specific provision in the Constitution which says that the Parliament cannot delegate to certain specified instrumentalities the power to effectuate its own will. The question always is whether the legislative will has been exercised or not.
Once it is established that the legislature itself has willed that a particular thing be done and has merely left the execution of it to a chosen instrumentality (provided that it has not parted with its control there can be no question of excessive delegation. If the delegate acts contrary to the wishes of the legislature, the legislature can undo what the delegate has done. Even the courts may be asked to intervene when the delegate exceeds its powers and functions. The observations and theories in American cases cannot be applied in our country without reflection. Even in America the doctrine is much watered down especially when it is a question of investing municipalities with power of such taxation. In the present case, in addition to prescribing the mode, The legislature has kept a check by making Government, answerable to itself, the supervising authority. This is no,, a safeguard. but is indicative of the exercise of the legislative will by the legislature itself. The details of the tax are to be considered by the supervising authority and if the tax is no' what the legislature intended should be imposed, the tax cannot be imposed. [287 E-G] As local bodies are intended to carry on local selfgovernment, the power of taxation is a necessary adjunct to their other powers. They function under the supervision of the Government. This supervision is considered necessary because Municipal Councillors as a rule are unwilling to lax in a manner likely to affect themselves. To insist that the legislature should provide for every matter connected with municipal taxation would make municipalities mere tax collecting departments of Government and not self-governing bodies which they are intended to be. [288 E, F] (Per Sikri, J.) :. Parliament has full power to delegat legislative authority to subordinate bodies. This power flows from Act. 246 of the Constitution. The, word exclusive" in that Article means exclusive of any other legislature and not exclusive of subordinate body. There is, however, one restriction in this respect and that is also contained in Art. 246. Parliament must pass a law in respect of an item or items of the relevant legislative list. Negatively, this means that Parliament cannot abdicate its functions. This was the Position under the various Government of India 254 Acts, and the Constitution has made no difference in this respect.[ 1309 H-3 I 0 B] In any event however, in the, present case there is adequate guide, or policy, in the expression "purposes of the Act" in s. 113. The Act has pointed out the objectives or theresults to be achieved, and taxation can be levied only for the purpose of achieving the objectives or the results.
This is sufficient guidance especially to a self-governing body like the Delhi Municipal Corporation. It is not necessary to rely on the safeguards to sustain the delegation under s. 113(2) and s. 150. [310 G] (PerShah and Vaidialingam, JJ. dissenting) : Section 150(1) of the Act 66 of 1957 is void as permitting excessive delegation of legislative authority to the Corporation.
Authority to legislate in respect of powers of local bodies may encompass authority to confer power upon the local bodies to tax within certain specific fields in the appropriate list. But the power conferred by the legislative entry cannot override the constitutional limitations against abdication of legislative authority.
The expression "power" therefore does not include authority to delegate the essential legislative function without disclosing principles, policy, or standard guiding the local bodies in the exercise of the Dower. [302 C-D] The vice of delegation lies not in its capacity for abuse, but in its delegation beyond permissible limits and contrary to the constitutional scheme. Undoubtedly delegation of the authority to legislate is always subject to the rule that action of the delegate which amounts to unreasonable exercise of the powers will be invalid. But that does not alter the true character of the rule against excessive delegation of legislative authority. It cannot be said that this rule may be departed from on the ground that the delegate is hedged in by controls or restrictions which will prevent it from abusing its authority. Safeguards against abuse do not alter the character of unauthorised delegation of legislative power. They cannot be a substitute for the guidance which the constitutional scheme requires that the Parliament must give to a delegate. As the validity of the constitutional protection cannot be judged in the light of what the character. capacity or the special aptitude of the, delegate may be, it cannot also be adjudged in the light of the provisions made against abuse of power.
In the present case the Act leaves it to the, Corporation by resolution to define the maximum limits of tax to be levied, the class or classes of persons, or description or descriptions of articles and properties to be taxed, the system of assessment to be adopted and the exemptions, if any, to granted. The Act discloses by express enactment no standard, no principle and no policy laid down by the Parliament to guide the Corporation in levying and collecting the optional taxes. By providing in sub-section (2) of s. 150 that the resolution will come into force on or from the date as may be specified in the order of sanction of the Central Government, an overriding authority is conferred upon the Union Executive, but that is not substitute for, guidance. [303 C-E] The Corporation is competent to levy tax only "for the, purposes of the Act", and for no other purpose, and by providing expressly what is implicit in a statute relating to municipal taxation no guidance is furnished to the Corporation in the exercise of the power delegated. It cannot be held that because the delegate is a local authority which "needs" large funds, depending upon diverse and changing circumstances, the power conferred upon the Corporation to adjust the tax to its varying needs may be regarded as an adequate guide. The circumstance that the affairs of 255 the Corporation are administered by the elected representatives responsible the people is wholly irrelevant in determining whether the rule against excessive delegation may be departed from. If that exception be true, the Parliament may justifiably delegate its power to enact laws to other bodies merely by the expedient of constituting those bodies from among the representatives of the people.
Case law reviewed.
(iii) (PerWanchoo C.J. and Shelat, J.) : There wits no force in the contention that the sanction of the Central Government given under section 150(2) was not in accordance with the Constitution as it was given by a Deputy Secretary to the Government who had no authority to do 8o. Although the words "by the orders of the Central Government" or " by ,.he order of the President" were not used above the signature of the Deputy Secretary and the authentication therefore was not quite in accordance With the provisions of Art. 77 of the Constitution, that deficiency had been made up by the affidavit filed on behalf of the Central Government in which it was stated that the resolution was approved by the then Deputy Home Minister and the Minister in the Ministry of Home Affairs to whom the work relating to the Corporation was assigned by the Home Minister.
Furthermore, it is not necessary where business has been assigned by a Cabinet Minister to a Minister or a Deputy Minister that the matter should be put before the Cabinet Minister also after the Minister or the Deputy Minister has approved of it in accordance with the assignment made in his favour. [275 E-276 D]
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1857 and 1858 of 1967.
Appeals from the judgment and order dated October 9, 1967 of the Delhi High Court in Civil Writ No. 105 of 1967, and Writ Petition No. 564-D of 1966 respectively.
C. K. Daphtary Attorney-General, H. R. Gokhale, D. D.
Chawla and K. Rajendra Chaudhuri, for the appellant (in both .,he appeals).
A. K. Sen, B. Parthasarthy, J. B.Dadachanji and Ravinder forrespondent No. 1 (in both the appeals).
R. N. Sachthey for respondent No. 2 (in both the appeals).
M. K. Nambiyair, D. R. Thadani, Dalip K. Kapur, Bhuvanesh Kumari, J. B. Dadachanji and Ravinder Narain, for intervener No. 1.
N. A. Palkhivala, J. B. Dadachanji, and Ravinder Narain, for interveners Nos. 2, 5 and 6.
Purshottam Trikaindas and I. N. Shroff, for intervener No.
3.
S. T. Desai and 1. N. Shroff, for intervener No. 4.
The Judgment of WANCHOO, C.J. and SHELAT, J. was delivered by WANCHOO, C.J., HIDAYATULLAH, J. delivered a separate Judgment on behalf of himself and RAMASWAMI, J., SIKRI, J.
delivered a separate Judgment. SHAH, J. delivered a dissenting opinion on behalf of himself and VAIDIALINGAM, J.
256 Wanchoo, C.J. These two appeals on certificates granted by the High Court of Delhi raise common questions relating to the constitutionality of delegation of 'taxing powers to municipal corporations and the effect of the Validation Act, passed by Parliament, in connection with tax on the consumption or sale of electricity levied by the Municipal Corporation of Delhi (hereinafter referred to as the Corporation) from July 1, 1959 to March 31, 1966. The facts are not in dispute and may be briefly narrated. On February 9, 1959, the Corporation passed a resolution purporting to be under sub-section (1) of s. 150 of the Delhi Municipal Corporation Act, No. 66 of 1957. (hereinafter referred to as this Act) for levy of three taxes, including a tax on the consumption or sale of electricity. Section 113 of the Act which confers powers on the Corporation to impose taxes has divided them into two kinds, namely, obligatory taxes, which the Corporation must impose [s. 113(1), and optional taxes which the Corporation may impose section 113(2)1Further s.
150(1) of the Act provides that maximum rate of tax to be levied in the case of optional taxes will be specified by resolution of the Corporation. After the maximum rate has thus been specified, the resolution has to be submitted to the Central Government for sanction under s. 150(2), and if sanctioned by Government, the rate comes into force on and from such date as may be specified in the, Order of sanction. Under subsection (3) of s. 150 the Corporation then passes another resolution determining the actual rates at which the tax is levied and the tax comes into force on the first day of the quarter of the year next following the date on which such second resolution is passed. The Corporation forwarded the resolution dated February 9, 1959 which was somewhat defective inasmuch as it did not specify the maximum rates, but merely the rates, which were to be enforced for the ensuing year, to Government for sanction.
On June 20, 1959, the Central Government sanctioned the tax on consumption or sale of electricity with effect from July 1, 1959. In giving the sanction the Central Government modified the rates. On June 23, 1959, the Standing Committee took the Government sanction into consideration and recommended to the Corporation that rates of tax as sanctioned by Government be determined under sub-s. (3) of s. 150 as the actual rates at which the tax would be leviable for the year 1959-60. On June 24, 1959, the Corporation resolved that the recommendations of the Standing Committee regarding tax on consumption or sale of electricity be approved. Then followed demands by the Corporation on the basis of the imposition of tax from July 1, 1959.
When the tax was demanded from the respondent, it filed a writ petition in the High Court challenging the levy of the tax. This writ petition was dismissed by a learned Single Judge. The 257 respondent then went in appeal, and the appeal court allowed the appeal holding inter alia (i) that the Central Government could not modify the rates specified in the resolution under s. 150 (1) but could only either withhold sanction thereto or sanction them, and (ii) that the liability to pay tax could not commence earlier than April 1, 1960 in view of the provisions contained in s. 109(2) read with s. 150(4) of the Act.
On December 3, 1966, Parliament passed the Delhi Municipal Corporation (Validation of Electricity Tax) Act, No. 35 of 1966 (hereinafter referred to as the Validation Act). By this Act, it purported to validate the levy of electricity tax from July 1, 1959 to March 31, 1966 (both days inclusive). In view of the Validation Act, fresh demands were made by the Corporation on the respondent.
On February 17, 1965, the Corporation passed another resolution in pursuance of s. 150(1) and this time provided maximum rates for the levy of tax on consumption or sale of electricity. These rates were higher than the rates fixed by the resolution of February 9, 1959. This resolution was submitted to Government and was sanctioned on December 8, 1965. Thereafter the Corporation passed the second resolution under s. 150(3) of the Act resolving that the maximum rates should be adopted as the actual rates for the levy of tax. This resolution was passed on December 27, 1965. Then followed two writ petitions by the respondent.
By the first writ petition it challenged the levy of tax by resolutions of February 17 and December 27, 1965, and by the second writ petition the appellant challenged the vires of the Validation Act.
We may now refer to the grounds of the challenge. So far s the Validation Act is concerned, it is contended that the Validation Act has failed in its object inasmuch as it did not provide for the levy of tax and merely validated the rates fixed by the resolution of June 24, 1959. Other grounds were also stressed in this connection but it is unnecessary to refer to them as they have not been pressed before us. As to the attack on the resolutions dated February 17, 1965 and December 27, 1965, the main contention is that S. 150 is unconstitutional inasmuch as it suffers from the vice of excessive delegation of legislative power and is therefore ultra vires and no tax could be levied by the Corporation there under. There are some other minor points raised in this connection to which we shall refer later.
The High Court held, so far as the Validation Act is concerned, that though it validated the levy and collection of tax from July 1, 1959 to March 31, 1960, it failed to validate the levy and collection from April 1, 1960 to March 31, 1966 on 258 the ground that there was no levy of tax for this latter period, even though the rates were specified in the Validation Act. On the question of excessive delegation, the High Court held that s. 150 suffered from the vice of excessive delegation of legislative power and was therefore ultra vires. In consequence, the two writ petitions succeeded except as to the period from July 1, 1959 to March 31, 1960. The Corporation then applied for and obtained certificates and that is how the matter has come up before us.
Before we deal with the main question that has been argued before 'us, namely, whether s. 150 of the Act suffers from the vice of excessive delegation, we may briefly refer to certain provisions of the Act which are material for our purposes. Section of the Act creates a Corporation from such date as the Central Government may by notification in the official gazette, appoint and this Corporation is charged with the municipal government of Delhi and is to be, known as the Municipal Corporation of Delhi. Section 7 of the Act provides that the persons entitled to vote at elections of councillors shall be the persons registered by virtue of the provisions of the Constitution and the Representation of the People Act, No. 43 of 1950, as voters at elections to the House of the People. It will be seen therefore that the Councillors of the Corporation are elected by universal adult suffrage. The total number of councillors is 80 and to these are added 6 eldermen, and they together form the Corporation. Section 42 lays down certain obligatory functions of the Corporation. It is not necessary to refer to them in detail; it is enough to say that the main obligatory functions of the Corporations are the supply of Water for public and private purposes, the construction, maintenance and cleansing of drains and drainage works and of public latrines, the scavenging, removal and disposal of filth, the construction or purchase, maintenance, extension, management and conduct of (i) any undertaking for the generation or supply and distribution of electricity to the public, and (ii) any undertaking for providing road transport services by mechanically propelled vehicles, the establishment and maintenance of hospitals, dispensaries and maternity and child welfare centers and carrying out of other measures necessary for public medical relief, the construction and maintenance of municipal markets and slaughter houses and regulation thereof, the construction, maintenance,, alteration and improvements of public streets, brides, culverts, causeways and the like, the lighting, watering and cleansing of public streets and other public places, the establishment, maintenance of, and aid to, schools for primary education and the maintenance of a fire-brigade and the protection of life and property in case of fire.
259 Section 43 provides for optional functions of the Corporation which it may in its discretion provide and a large number of such functions are enumerated therein. Some of these optional functions are : the establishment and maintenance of, and aid to, libraries, museums, art galleries, botanical of zoological collections, the providing of music or other entertainments in public places or places of public resort and the establishment of theatres and cinemas, the construction and maintenance of (i) rest houses, (ii) poor houses, (iii) infirmaries, (iv) children's homes, (v) houses for the deaf and dumb and for disabled and handicapped children, (vi) shelters for destitute and disabled persons, and (vii) asylums for persons of unsound mind, the Organisation or management of chemical or bacteriological laboratories for the examination or analysis of water, food, and drugs for the detection of diseases or research connected with public health or medical relief; the provision for relief to destitute and disabled persons; the establishment and maintenance of veterinary hospitals; the Organisation, construction, maintenance and management of swimming pools, public wash houses, bathing places and other institutions designed for the improvement of public health;
the organisation and management of farms and dairies within or without Delhi for the supply, distribution and processing, of milk and milk products for the benefit of the residents of Delhi; the Organisation and management of cottage industries, handicraft centers and sales emporia;
the provision for unfiltered water supply; the improvement of Delhi in accordance with improvement schemes approved by the Corporation; and the provisions of housing accommodation for the inhabitants of any area or for any class of inhabitants.
These duties, both obligatory and optional, which have been placed on the Corporation require large funds and for that purpose the Corporation has been given the power to levy taxes under S. 113 of the Act. Section 113 consists of two subsections; 'the first sub-section provides for obligatory taxes and they are six in number. These six taxes have been dealt with in detail in sections 114 to 149. It is not necessary to refer to these, sections except 'lo say generally that in most cases the Act has fixed G a maximum for the obligatory taxes except in the case of water tax, scavenging tax and fire tax, the rates of which have to be fixed at a reasonable amount by the Corporation. Then comes s. 150, which deals with optional taxes and with which we are particularly concerned. If reads thus :
"(1) The Corporation may, at a meeting, pass a resolution for the levy of any of the taxes specified in sub-section (2) of section 113, defining the maximum rate of the tax to be levied, the class or classes of 260 persons or the description or descriptions of articles and properties to be taxed, the system of assessment to be, adopted and the exemptions, if any, to be granted.
(2) Any resolution passed under subsection (1) shall be submitted to the Central Government for its sanction, and if sanctioned by that Government, shall come into force on and from such date as may be specified in the order of sanction.
(3) After a resolution has come into force under subsection (2), the Corporation may, subject to the maximum rate, pass a second resolution determining the actual rates at which the tax shall be leviable; and the tax shall come into force on the first day of the quarter of the year next following the date on which such second resolution is passed._ (4) After a tax has been levied in accordance with the fore going provisions of this section, the provisions of sub-section (2) of section 109, shall apply in relation to such tax as they apply in relation to any tax imposed under sub-section (1) of section 113." It will be, seen that sub-section (1) of s. 150 leaves it to the Corporation, at a meeting, to pass a resolution for the levy of any of the optional taxes by prescribing the maximum rate. The Corporation is also given the power to fix the class or classes of persons or the description or descriptions of articles and properties to be taxed, for this purpose. It has also the power to lay down the system of assessment and exemptions, if any, to be granted. The contention of the respondent is that s. 150 (1) delegates completely unguided power to the Corporation in the matter of optional taxes and suffer from the vice of excessive delegation and is unconstitutional.
We may also refer to certain other sections which deal with revenue and expenditure of the Corporation. Section 99 deals with the constitution of the municipal fund, in which all moneys of the Corporation go. Section 109 provides for adoption of budget estimates. It lays down that the Corporation shall on or before the 31st day of March of every year adopt for the ensuing year four budget estimates, namely, (i) budget estimates (general), (ii) budget estimate (electric supply), (iii) budget estimated (transport) and (iv) budget estimate (water supply and sewage disposal).
Section 109(2) lays down that on or before the 15th day of February of each year, the Corporation shall determine the rates at which various municipal taxes, rates and cesses shall be levied in the next following year. Section 102 inter alia provides that no payment of any sum out of the 261 municipal fund shall be made unless the expenditure of the same is covered by a current budget-grant.
It is in the light of these provisions that we have to consider whether the delegation made to the Corporation by S. 150 in the matter of imposing optional taxes is within the permissible limits of delegation. The contention on behalf of the appellant is that in view of these provisions there is sufficient guidance to the Corporation in the matter of fixing the rates of optional taxes and levying them on the inhabitants of the area and it cannot be said that Parliament by enacting s. 150 transgressed the limits of permissible delegation.
The question as to the, limits of permissible delegation of legislative power by a legislature to a subordinate authority has come before this Court in a number of cases and the law as laid down by this Court is not in doubt now.
Considering the complexity of modern life it is recognised on all hands that legislature cannot possibly have time to legislate in every minute detail. That is why it has been recognised that it is open to the legislature to delegate to subordinate authorities the power to make ancillary rules for the purpose of carrying out the intention of the legislature indicated in the law which gives power to frame such ancillary rules. The matter came before this Court for the first time In The Delhi Laws Act, 1912(1), and it was held in that case that it could not be said that an unlimited right of delegation was inherent in the legislative power itself. This was not warranted by the provisions of the Constitution, which vested the power of legislation either in Parliament or State legislatures and the legitimacy of delegation depended upon its being used as an ancillary measure which the legislature considered to be necessary for the purpose of exercising its legislative powers effectively and completely. The legislature must retain in its own hands the essential legislative function.
Exactly what constituted essential legislative function", it was held further, was difficult to define in general terms, but this much was clear that the essential legislative function must at least consist of the determination of the legislative policy and its formulation as a binding rule of conduct. Thus where the law passed by the legislature declares the legislative policy and lays down the standard which is enacted into a rule of law, it can leave the task of subordinate legislation which by its very nature is ancillary to the statute to subordinate bodies, i.e., the making of rules, regulations or bye-laws.
The subordinate authority must do so within the frame-work of the law which, makes the delegation, and such subordinate legislation has to be consistent with the law under which it is made and cannot go beyond the (1) [1951] S.C.R. 747.
262 limits of the policy and standard laid down in the law.
Provided the legislative policy is enunciated with sufficient clearness or I standard is laid down, the courts should not interfere with the discretion that undoubtedly rests with the legislature itself in determination the extent of delegation necessary in a particular case.
In Raj Narain Singh v. The Chairman Patna Administration Committee(1) the same question arose and it was held that "air executive authority can be authorised by a statute to modify either existing or future laws but not in any essential feature. Exactly what constitutes an essential feature cannot be enunciated in general terms but it is clear that modification cannot include a change of policy.
Essential legislative function consist it the determination of the legislative policy and its formulation as a binding rule of conduct." In Harishankar Bagla v. The State of Madhya Pradesh 2 s. 3. of the Essential Supplies (Temporary Powers) Act, 1946 was attacked as unconstitutional on the ground of excessive delegation of legislative power. In that case reliance was placed on the re in Delhi Law Act(1) where the majority held that "the essential powers of legislation cannot be delegated and that the legislature must declare the policy of 'the law and the legal principles which are to control any given cases and must provide a standard to guide the officials or the body empowered to execute the law.
Applying these principles this Court held that the Act there impugned had laid down the principle and that principle was the maintenance or increase in supply of essential commodities and of securing equitable distribution and availability at fair prices. It was further held that this sufficiently formulated the legislative policy and the ambit and tile character of that Act Was such that the details of that policy could only be worked out by delegating that power to a subordinate authority within the frame-work of that policy. The Court therefore held that s. 3 of the impugned Act was not ultra vires the legislature on the ground of excessive delegation of legislative power.
In the Western India Theatres Limited v. Municipal Corporation of the City of Poonia(4), a question arose with respect to the Bombay District Municipal Act, 1901, which gave power to the municipality to levy "any other tax to the nature and object of which the approval of the Governor in Council shall have been obtained prior to the selection contemplated in sub-cl. (i) of cl. (a) of section 60". This provision was attacked as unconstitutional on the ground that the legislature had completely abdicated its function and delegated essential legislative power to the municipality to determine the nature of the tax to be imposed (1) [1955] 1 S.C.R. 290.
(2) [1951] 1 S.C.R. 380.
(3) [1951] S.C.R. 747.
(4) [1959] Suppl. 2. S.C.R. 71.
263 on the rate payers and that power was unguided, uncanalised and vagarant. The delegation was upheld by this Court on the ground that s. 59 authorised the municipality to impose tax thereunder for the purposes of the Act. The Act there under consideration defined the obligations and functions cast upon the municipality and it was observed that taxes could only be levied for implementing those purposes and not for any other purpose. It was finally observed that the impugned section did lay down the procedure which the municipality had to follow in imposing a tax and the legislature could not in the circumstances be said to have abdicated its function in favour of the municipality.
In Hamdard Dawakhana (Wakf) Lal Kuan v. Union of India(1), this Court struck down one provision of the impugned Act as the legislature had established no criterion or standard and had not prescribed any princple on which the particular disease or condition was to be specified. It will be seen that the same principle that the legislature could not delegate unguided, power to a subordinate body was the basis of this decision.
In Vasantlal Maganbhai Sanianwal v. The State of Bombay(1), the question of delegation of legislative power arose. This Court enunciated the principle thus :
"Although the power of delegation is a constituent element of the legislative power, it is well-settled that a legislature cannot delegate its essential legislative function in any case and before it can delegate any subsidiary or ancillary powers to a delegate of its choice, it must lay down the legislative policy and principle so as to afford the delegate proper guidance in implementing the same. A statute challenged on the ground of excessive delegation must therefore be subjected to two tests, (1) whether it delegates essential legislative function or power and (2) whether the legislature has enunciated its policy and principle for the guidance of the delegate." In jyoti Pershad v. The Administrator for the Union Territory of Delhi(3), in connection with the Slum Areas (Improvement and Clearance) Act, 1956 it was observed that "so long as the legislature india cated in the operative provisions of the staute with certainty, the policy and purpose of the enactment, the mere fact that 'he legislation was skeletal or that very detail of the applicaion of law to a particular case, was not laid down in (1) [1960] 2 S C.R. 671. (2) [1961] 1 S.C.R. 341.
(3) [1962] 2 S.C.R. 125.
L6Sup.C.I/68-4 264 the enactment itself or the fact that a discretion was left to those entrusted with administering the law, afforded no basis either for the contention that there had been an excessive delegation of legislative power so as. to amount to an abdication of its functions, or that the discretion vested was uncanalised and unguided so as to amount to a carte blanche to discriminate." The last case to which reference may be made is Devi Das Gopal Krishnan v. State of Punjab(1). There the law on the subject of excessive delegation on was summarised thus at p.
1901:
"The Constitution confers a power and imposes a duty on the legislature to make laws. The essential legislative function is the determination of the legislative policy and its formulation as a rule of conduct. Obviously it cannot abdicate its functions in favour of another. But in view of the multifarious activities of a welfare State, it cannot presumably work out all the details to suit the varying aspects of a complex situation. It must necessarily delegate the working out of details to the executive or any other agency. But there is danger inherent in such a process of delegation. An overburdened legislature one controlled by a powerful executive may unduly overstep the limits of delegation. It may not lay down any policy at all; it may declare its policy in vague and general terms; it may not set down any standard for the guidance of the executive; it may confer an arbitrary power on the executive to change or modify the policy laid down by it without reserving for itself any control over subordinate legislation.
This self effacement of legislative power in favour of another agency either in whole or in part is beyond the permissible limits of delegation. It is for a Court to bold on a fair, generous and liberal construction of an impugned statute whether the legislature exceeded such limits. But the said liberal construction should not be carried by the Courts to the extent of always trying to discover a dormant or latent legislative policy to sustain an arbitrary power conferred on executive authorities. It is the duty of the Court to strike down without any hesitation any arbitrary power conferred on the executive by the legislature." It may be added that Devi Das's(1) case did not differ from the Liberty Cinema (2 ) case. What was held there was that there (1) A.I.R. [1967] S.C. 1895. (2) [1965] 2 S.C.R. 477.
265 can be no general principle that merely the needs of the delegate can necessarily and always be a guideline. It was further held that each statute has to be examined to find out whether there are guidelines therein which prevent delegation from being excessive.
It is in the light of these general principles which are well-settled that the constitutionality of the delegation in S. 150 has to be considered. However, as we are particularly concerned with the fixation of rates of a tax, we may refer to certain cases which deal with this aspect of the matter. In Pandit Banarsi Das Bhanot v. The State of Madhya Pradesh(1), this Court observed as follows :
"Now the authorities are clear that it is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like." The appellant relies on this observation to show that the delegation in s. 150 of the Act cannot be said to be excessive as the rates of tax cannot be said to be an essential feature of the law relating to taxation. On the other hand learned, counsel for the respondent contends that this observation is much too wide if it means that it is open to the legislature to delegate without any guidance whatsoever the power to fix the rate of tax. In particular, it is urged on behalf of the respondents that the cases which have been referred to in support of this conclusion in Pt. Banarsi Das case(1) do not support the proposition laid down there if it is to be read as giving unqualified power to fix the rate without any guidance, control or safeguard.
With respect, it seems to us that if this observation means that it is open to the legislature to delegate the power to fix the rate, of tax to another authority without any qualification, guidance, control or safeguard, it is too widely stated and does not appear to be supported by the authorities on which it is based, though those authorities do indicate that in certain cases it is open to the legislature to give power to another authority to fix rates under proper guidance, control and safeguard. Take the case of Powell v. Apollo Candle Company Limited(1). In that case S. 133 of the Customs Regulation Act of 1879 of New South Wales was under attack. That section ran thus :
"Whenever any article of merchandise then unknown to the collector is imported, which, in the opinion of the collector or the commissioners, is apparently a substitute for any known dutiable article, or is (1) [1959] S.C.R. 427.
(2) L.R. [1885] X A.C. 282.
266 apparently designed to evade duty, but possesses Properties in the whole or in part which can be used or were intended to be applied for a similar purpose as such dutiable article, it shall be lawful for the Governor to direct that a duty be levied on such article at a rate to be fixed in proportion to the degree in which such unknown article approximates in its qualities or uses to such dutiable article; and such rate thus fixed shall be published in a Treasury order in the Gazette, and one other newspaper published in Sydney, and exhibited in the long room or other public place in the Custom House, and a copy of all such Treasury orders shall, without unnecessary delay, be laid before both Houses of Parliament." A bare perusal of the section shows that though the power was delegated to the Governor to levy the duties, it gave complete guidance to him in the manner of fixing the rate of duty and finally provided that the order passed by the Governor would be laid before both Houses of Parliament without unnecessary delay. The observations of the Privy Council in that case have in our opinion to be read in the context of the words of S. 133 where full guidance was provided as to the fixation of the rate.
In J. W. Hampton v. United States(1), the Congress gave power to the President to make changes in the rates provided in the Tariff Act of 1922. That was challenged as a forbidden delegation of legislative power to executive authority. But the challenge was negatived by the Supreme Court of the United States on the ground that the Congress had laid down by legislative act an intelligible principle to which the person authorised to fix the rate of customs duties on imported merchandise was to conform. In that case the President could vary the rates with the aid of his advisers after proper investigation on the ground of differences of cost of production in the United States and abroad and to make such increases and decreases in rates of duty as were found necessary to equalise the cost of production. The limit of such change was also fixed upto 50 per centum of the rates specified in the law. This case does not support the proposition that rates of tax can be delegated to a subordinate authority without any guidance, though it is an authority for the proposition that this can be done if guidance s given for the purpose. The observation in Banarsi Das's case(1) the rates of tax are not essential features of legislation therefore seems, with respect, to be too broadly steed, though it may be admitted that rates of taxation also can in certain circumstances be delegated to a subordinate authority with proper guidance and subject to safeguards and limitations in that behalf.
(1) 72 Law Ed. 624 : 276 U.S. 624.
(2) [1959] S.C.R. 427.
267 The next case to which reference may be made is Corporation of Calcutta and Another v. The Liberty Cinema(1) where the majority upheld the fixation of a tax on cinema shows, even though the Calcutta Municipal Act of 1951 prescribed no limits to which the tax could go. In that case the majority referred to the view taken in Pandit Banarasi Das's case(1) and interpreted the dictum in that case to mean that the fixation of rate can be left to a non-legislative body but this was qualified by the observation that when the power to fix the rate of tax was Left to another body, the legislature must provide guidance for such fixation. In that case the majority found guidance in various provisions of the statute to which it is not necessary to refer, though the minority was of the opinion that there was no guidance therein.
The question again arose in Municipal Board, Hapur v. Raghuvendra Kripal(3). There the U.P. Municipalities Act No. 2 of 1916, gave power to the municipality to fix rates of tax and provided an elaborate procedure for doing so and also provided for sanction of Government. But one provision of that statute raised a conclusive presumption that the procedure prescribed had been gone through on a certain notification being issued by Government and the question arose whether by reason of such a conclusive presumption there was not a delegation of essential legislative function. In that case the majority while dealing with the question of excessive delegation observed that the taxes in question were local taxes for local needs for which local enquiries had to be made and so they were left to the representatives of the local population which would bear the tax. It was further observed that such taxes must vary from town to town, from one Board to another, and from one commodity to another. Regard being had to the democratic set-up of the municipalities which need the proceeds of these taxes for their own administration, (it was observed) it as proper to leave to these municipalities the power to impose and collect those taxes, which were pre-determined along with a procedure for consulting the wishes of the people concerned. Over and above that there was power given to the State Government to check their action. In those circumstances delegation as to the fixing of rate of tax to the Municipal Board was upheld as permissible delegation.
The minority judgment also accepted these propositions and observed that though generally speaking, the rate of tax was one of the essentials of taxing power given to the
legislature, it must be recognised that there might be situations where the legislature might delegate to a subordinate authority that power under proper safeguards.
It was also observed that in the matter of local taxation, like taxation by municipal boards, district boards and bodies of that character, (1) [1965] 2 S.C.R. 477.
(2) [1959] S.C.R. 427.
(3) [1966] 2 S.C.R. 950.
268 there was pre-eminently a case for delegating the fixation of the rate of tax to the local body, the reason for this being that problems of different municipalities might be different and one municipality might require one kind of tax at a particular rate at a particular time while another municipality might need another kind of tax at another rate at some other time. It was further observed that "the legislature can in the case of taxation by local bodies delegate even the authority to fix the rate to the local body provided it has taken care to specify the safeguards for the purpose." The difference between the majority and the minority only was that the majority thought that the conclusive presumption raised by one of the provision was valid while the minority thought that by reason of the conclusive presumption all the safeguards were wiped out at one stroke and therefore it became a case of excessive delegation.
The last case to which reference may be made is Devi Das Gopal Krishnan(1). This was not a case of municipal taxation. In. this case the legislature gave power to the State Government to fix sales tax at such rates as the State Government thought fit. The case of Liberty Cinema(2) was distinguished in this case and it was pointed out that the needs of the Slate and the purposes of the Act could not give sufficient guidance for the purpose of fixing rate of sales tax by the State Government. There is in our opinion a clear distinction between delegation of fixing the rate of tax like sales tax to the State Government and delegation of fixing rates of certain taxes for purposes of local taxation. The needs of the State are unlimited and the purposes for which the State exists are also unlimited. The result of making delegation of a tax like sales tax to the State Government means a power to fix the tax without any limit even if the needs and purposes of the State are to be taken into account. On the other hand, in the case of a municipality, however large may be the amount required by it for its purposes it cannot be unlimited, for the amount that a municipality can spend is limited by the purposes for which it is created. A municipality cannot spend anything for any purposes other than those specified in the Act which creates it. Therefore in the case of a municipal body, however large may be its needs, there is a limit to those needs in view of the provisions of the Act creating it. In such circumstances there is a clear distinction between delegating a power to fix rates of tax, like the sales tax, to the State Government and delegating a power to fix certain local taxes for local needs to a municipal body.
A review of these authorities therefore leads to the conclusion that so far as this Court is concerned the principle is well established (1) A.I.R. 1967 S.C. 1895.
(2) [1965] 2 S.C.R. 477.
269 that essential legislative function consists of the determination of the legislative policy and its formulation as a binding rule of conduct and cannot be delegated by the legislature. Nor is there any unlimited right of delegation inherent in the legislative power itself. This is not warranted by the provisions of the Constitution. The legislature must retain in its own hands the essential B legislative functions and what can be delegated is the task of subordinate legislation necessary for implementing the purposes and objects of the Act. Where the legislative policy is enunciated with sufficient clearness or a standard is laid down, the courts should not interfere. What guidance should be given and to what extent and whether guidance has been given in a particular case at all depends on a consideration of the provisions of the particular Act with which the Court has to deal including its preamble.
Further it appears to us that the nature of the body to which delegation is made is also a factor to be taken into consideration in determining whether there is sufficient guidance in the matter of delegation.
What form the guidance should take is again a matter which cannot be stated in general terms. It will depend upon the circumstances of each statute under consideration; in some cases guidance in broad general terms may be enough; in other cases more detailed guidance may be necessary. As we are concerned in the present case with the field of taxation, let us look at the nature of guidance necessary in this field. The guidance may take the form of providing maximum rates of tax upto which a local body may be given the discretion to make its choice, or it may take the form of providing for consultation with the people of the local area and then fixing the rates after such consultation. It may also take the form of subjecting the rate to be fixed by the local body to the approval of Government which acts. F as a watch-dog on the. actions of the local body in this matter on behalf of the legislature. There may be other ways, in which guidance may be provided. But the purpose of guidance, whatsoever may be the manner thereof, is to see that the local body fixes a reasonable rate of taxation for the local area concerned. So long as the legislature has made provision to achieve that reasonable rates of taxation are fixed by local bodies, whatever may be the method employed for this purpose provided it is effective it may be said that there is guidance for the purpose of fixation of rates of taxation. The reasonableness of rates may be ensured by fixing a maximum beyond which the local bodies may not go. It may be ensured by providing safeguards laying down the procedure for consulting the wishes of the local inhabitants. It may consist in the supervision by Government of the rate of taxation by local bodies. So long as the law has provided a method by which the local body can be controlled and there is 270 provision to see that reasonable rates are fixed, it can be said that there is guidance in the matter of fix in rates for local taxation. As we have already said there is preeminently a case for delegating the fixation of rates of tax to the local body and so long as the legislature has provided a me-hod for seeing that rates fixed are reasonable, be it in one form or another, it may be said that there is guidance for fixing rates of taxation and the power assigned to the local body for fixing the rates is not uncontrolled and uncanalised. It is on the basis of these principles that we have to consider the Act with which we are concerned.
We may, before we consider the provisions of The Act, refer to the position prevalent in the United States of America so far as local taxation is concerned. Even though the doctrine of separation of Dowers Drevails in that country, it is recognised there that delegation of power to local authorities for fixing rates of taxes for local purposes does not amount to excessive delegation by the legislature.
This conclusion has been reached there on the basis of historical facts. Whenever a municipal corporation is created, and is charged with carrying on certain specified functions, it is necessary to provide it with funds, for otherwise it cannot carry on the purposes for which it has been created. The funds may be provided as grants; but the general pattern has always been that power of local taxation is vested in a municipal body as an essential attribute for all the purposes of its existence. Thus in the United States of America, even though the power of taxation belongs exclusively to the legislative branch of the Government, it may be delegated by the legislature to municipal corporations : [See United States v. City of New Orleans(1)].
Though delegation as to municipal taxation is held to be permissible under the U. S. Constitution, it is so because of historical reasons peculiar to that country. The American example may not be an apt analogy but the history of municipal Acts in our country indicates that for nearly a century or more power of taxation has been delegated to municipal bodies. In some Acts all taxes delegated to the municipal bodies are compulsory; in other Acts all taxes so delegated are optional: (see U.P. Municipalities Act). In some cases some taxes are compulsory and some taxes are optional as is the case in the present Act. In some cases maximum limits are provided for some taxes and not for others; in some cases no maximum is provided, though there are restrictions and safeguards within which the municipal bodies must act. In all cases however, there has been a large area of delegation of taxing power for local purposes to local bodies subject to control by Government or to such other procedural safeguards as the legislature considers necessary in the matter of imposition of (1) 25 L. Ed. 225.
271 taxes. According to our history also there is a wide area of delegation in the matter of imposition of taxes to local bodies subject to controls and safeguards of various kinds which partake of the nature of guidance in the matter of fixing rates for local taxation. It is in this historical background that we have to examine 'the provisions of the Act impugned before us.
We have already set out S. 150 of the Act which delegates power to the Corporation to levy any of the optional taxes at such rates as it thinks fit and further gives power to it to specify persons, and articles and properties on which tax will be levied and the system of assessment to be adopted and exemptions if any to be granted. The delegation thus made is certainly wide and the question is whether there is any guidance in the form already indicated to the Corporation in carrying out the duties imposed upon it under s, 150 of the Act.
The first circumstance which must be taken into account in this connection is that the delegation has been made to an elected body responsible to the people including those who pay taxes. The councillors have to go for election every four years. This means that if they have behaved unreasonably and the inhabitants of the area so consider it they can be thrown out at the ensuing elections. This is in our opinion a great check on the elected councillors acting unreasonably and fixing unreasonable rates of taxation.
This is a democratic method of bringing to book the elected representatives who act unreasonably in such matters. It is however urged that S. 490 of the Art provides for the supersession of the Corporation in case if is not competent to perform or persistently makes default in the performance of the duties imposed upon it by or under the Act or any other law or exceeds ,or abuses its power. In such a case the elected body may be superseded and all powers and duties conferred and imposed upon the Corporation shall be exercised and performed by such officer or authority as the Central Government may provide in this behalf. It is urged that when this happens the power of taxation goes in the hands of some officer or authority appointed by Government who is not accountable to the local electorate and who may exercise all the powers of taxation conferred on the elected Corporation by the Act. This however has not happened in the present case and we need not express any opinion on the question whether such officer or authority would be competent to increase the rates of taxes already fixed when the Corporation is superseded or can impose new taxes which were not there at the time of supersession. That is a matter which may have to be considered when such a situation arises; but so long as the power of taxation conferred by S.
150 is exercised by the elected body there will always be a check in the form of the members thereof having to face the 272 electorate after every four years with the liability of being thrown out if they act unreasonably. This check which is inherent in an elected municipal body, must enter into the verdict whether the delegation to such a body, even though it is wide in extent, can be upheld on the basis that this is a method of controlling the actions of the elected body and setting a limit to which it can go in the matter of taxation, even though no maximum as such is provided in the Act.
Another guide or control on the limit of taxation is to be found in the purposes of the Act. The Corporation has been assigned certain obligatory functions which it must perform and for which it must find money by taxation. It has also been assigned certain discretionary functions. If it undert