J.S.Furnishings Ltd. vs Mcd & Anr
2011 Latest Caselaw 984 Del

             *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

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

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

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

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.

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

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

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

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 ..