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Jugalkishore Kabra v. Municipal Committee

Madhya Pradesh High Court

Oct 30, 1957

Judgment

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Factual and Procedural Background

This is the plaintiffs' second appeal from a decree dated 27-3-1952 of the Additional District Judge, Narsimhapur, which affirmed the decree dated 16-4-1951 of the Civil Judge (Class II), Sohagpur at Narsimhapur, dismissing the plaintiffs' Civil Suit No. 63-A of 1949.

The three plaintiffs-appellants were ratepayers (taxpayers) of the Municipality of Piparia. The defendants-respondents numbered eleven: defendant 1 was the Municipal Committee of Piparia (Tahsil Sohagpur); defendant 2 was the nominated President; defendant 11 was Shri Moolchand Bamoria, the Honorary Secretary; defendants 3–10 were nominated members.

Previously a Notified Area Committee existed, converted into a Municipality by Gazette Notification on 8-1-1949. The plaintiffs alleged that by a resolution dated 13-4-1949 the Municipal Committee transferred Plot No. 39/2 (area 3 acres) of mouza Deogaon Piparia to defendant 11 in exchange for defendant 11's Plot No. 42/2 (area 3 acres). The plaintiffs attacked this exchange as unconscionable, unauthorised and illegal, and prayed for cancellation of the deed executed on 14-4-1949 and restoration of possession of Malik Makbuza field No. 39/2 to the Municipality.

At trial the suit was dismissed on grounds that (a) ratepayers were not entitled to bring such a suit, (b) the resolution was passed in good faith, and (c) the bargain was neither unconscionable nor unauthorised nor illegal. The lower appellate Court affirmed these findings and additionally held the suit defective for want of notice to respondents 2–10 under Section 48 of the C. P. and Berar Municipalities Act, 1922.

Legal Issues Presented

Whether ratepayers (taxpayers) of the Municipality had the legal competence to bring the civil suit challenging the transfer/exchange of municipal immovable property.
Whether failure to give notice to certain municipal members under Section 48 of the C. P. and Berar Municipalities Act was fatal to the suit, or whether such notice could be waived.
Whether the C. P. and Berar Municipalities Act (and related provisions) expressly or impliedly excluded the jurisdiction of the Civil Court so as to bar the plaintiffs' suit (interaction with Section 9, Civil Procedure Code).
Whether the exchange of land effected by the Municipal Committee on 13-4-1949 was ultra vires, illegal or vitiated by mala fides (fraud) or unconscionability.
Whether disparity in the values of the lands exchanged rendered the transaction invalid or required the Court to interfere with the Municipality's discretion regarding price.

Arguments of the Parties

Appellants' Arguments

The exchange resolution and the subsequent deed (14-4-1949) were unconscionable, unauthorised and illegal and should be cancelled with restoration of possession.
Ratepayers are aggrieved and entitled to maintain a suit to prevent misapplication of municipal property/funds.
Emphasised the substantial disparity in the prices of the two lands exchanged as evidence of an improper bargain.
Challenged the lower courts' findings on competence of ratepayers and on the legality of the exchange.

Respondents' Arguments

The Municipal Committee acted in good faith; the exchange was within the Committee's powers and not unlawful or unconscionable.
The suit was incompetent because the C. P. and Berar Municipalities Act of 1922 is exhaustive and does not permit a ratepayer to file such a suit in a Civil Court; thus civil jurisdiction is barred (argued as barred under Section 9 of the Civil Procedure Code).
The lower appellate Court additionally held that notice required under Section 48 was not given to respondents 2–10 and that this defect barred the suit.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Vellayan Chettiar v. Govt. of the Province of Madras, AIR 1947 PC 197	A notice under Section 80, Civil Procedure Code, is for the protection of the authority and can be lawfully waived by the authority.	The Court analogised this principle to notices under Section 48 of the Municipalities Act and held that absence of objection in written statements meant respondents 2–10 waived any right to the notice.
Secretary of State v. Sheoramjee, ILR (1949) Nag 875; (AIR 1952 Nag 213)	Followed the principle that protective procedural notices can be waived.	The Court cited it as a supporting authority for treating the Section 48 notice as waivable where no objection was taken.
Municipal Corporation, Bombay v. Govind Laxman, AIR 1949 Bom 229	Established that every rate-payer can prevent a public body from acting contrary to law or its charter and can sue (including under Section 45, Specific Relief Act of 1877).	The Court relied on this ruling as the principal authority supporting the competence of a ratepayer to sue to restrain misapplication of municipal funds or unauthorized action.
Cawashah Bomanji Parakh v. Prafulla Nath Rudra, ILR (1941) Nag 266; (AIR 1941 Nag 364)	Held that a mere sanction beyond municipal power does not alone entitle an individual ratepayer to obtain injunction; plaintiff must show special damage.	The Court distinguished this Nagpur decision on its facts and noted it did not conflict with earlier decisions recognizing a ratepayer's right where misapplication of funds causes injury.
Ramdularay v. Chhindwari Municipality, 6 Nag LR 53	Cause of action arises from injury to the plaintiff, not merely from a perverse exercise of discretion by a Corporation.	The Court distinguished facts and noted the case supported the proposition that an identifiable injury is necessary, but that misapplication of municipal funds typically causes such injury to ratepayers.
Vaman v. Municipality of Sholapur, ILR 22 Bom 646	Recognized that an individual rate-payer could be entitled to file suit for injunction against misapplication of municipal funds.	The Court cited it as consistent authority supporting the ratepayer's right to sue and relied upon it in relation to the Bombay decision.
Attorney-General v. Leeds Corporation, 1929-2 Ch 291	In England the Attorney-General commonly brings public rights suits, but ratepayer suits are not barred and are decided on merits.	Used to illustrate the English practice that ratepayers may challenge municipal actions and that such suits are adjudicated on their merits rather than being dismissed procedurally.
Attorney-General v. Smethwick Corporation, 1932-1 Ch 562 at p.568	Same line as Leeds: ratepayer (or representative) suits are decided on merits in England.	Supported comparison with English practice allowing tax-payer challenges to municipal dispositions of property.
64 Corpus Juris Secundum, 2133 (p. 947)	Secondary authority stating that, subject to limitations, taxpayers may challenge municipal dispositions of property; relief available to annul wrongful dispositions absent mere discretionary judgments without illegality, fraud or abuse.	The Court cited it to show corroborating foreign (U.S.) authority supporting taxpayer standing to challenge wrongful dispositions and the limits on attacking discretionary sales.
Shiromani Gurdwara Prabandhak Committee v. Shiv Ratan Deo Singh, AIR 1955 SC 576	Exclusion of Civil Court jurisdiction requires clear and unambiguous language or necessary implication in the statute.	The Court applied this principle to hold that the Municipalities Act contained no such clear exclusion and therefore did not bar the ratepayers' civil suit.
Wolyer-hampton New Water Works Co. v. Hawksford, (1859) 6 CB (NS) 336	A taxpayer (or shareholder) has an election to proceed under a statute or by common law unless the statute necessarily excludes the common law remedy.	The Court invoked this English authority to support the proposition that the Municipal Act's provision did not oust the common law remedy unless expressly stated.

Court's Reasoning and Analysis

The court proceeded in a step-by-step legal analysis, applying statutory text and cited authorities strictly as set out below.

Notice under Section 48: The Court treated the notice requirement under Section 48 of the C. P. and Berar Municipalities Act as analogous to a Section 80 CPC notice, citing Vellayan Chettiar v. Govt. of Madras and Secretary of State v. Sheoramjee. Because none of the defendants (2–10) objected in their written statements to the absence of a Section 48 notice, the Court concluded they had waived the right to that notice; therefore the lower appellate Court's reliance on want of notice was misplaced.
Competence of ratepayers to sue: The Court adopted the rule stated in Municipal Corporation, Bombay v. Govind Laxman that a ratepayer whose pocket is affected by misapplication of rates or unauthorized application of municipal funds has standing to sue in a Civil Court and may seek relief including under Section 45 of the Specific Relief Act. The Court distinguished Nagpur decisions (e.g., Cawashah Bomanji Parakh) which required proof of special damage on the facts there, and held that misapplication of municipal funds generally causes at least some injury to ratepayers enabling suit.
Whether the Municipal Act bars civil jurisdiction: Respondents contended that the Municipal Act was exhaustive and barred civil suits (invoking Section 9 CPC). The Court relied on Shiromani Gurdwara Prabandhak Committee v. Shiv Ratan Deo Singh to state the principle that exclusion of civil jurisdiction requires clear and unambiguous language. Finding no provision in the Municipalities Act that expressly barred a ratepayer's civil suit, and no necessary implication to that effect, the Court held that the suit was not barred under Section 9 CPC.
Ultra vires / requirement of Government sanction under Section 42: The Court examined Section 42 (quoted in the opinion) which requires government sanction only for transfers of property vested in a committee by the Crown. The Court found no evidence or notification on file that Khasra No. 39/2 had ever been vested in the Notified Area Committee by the State; therefore government sanction was not required and the resolution of 13-4-1949 was not ultra vires on that ground.
Good faith and absence of mala fides: The Court accepted the factual findings of the two Courts below that the exchange was made in good faith under Section 47 of the Municipalities Act. The Court enumerated the factual circumstances relied upon by the lower courts—use of 39/2 as a trenching ground for night-soil and rubbish; local agitation to remove the trenching ground; consideration of respondent 11's land as suitable; prior application to acquire land by the Committee; amendments and directives requiring compost processing; recommendations from the Agricultural Assistant and the Bio-Chemist to effect the exchange and to drop the land acquisition as time-consuming; and governmental pressure to expedite compost processing. These circumstances were held sufficient to negative mala fides.
Interest/permission under Section 44-A and disparity of values: The Court noted respondent 11 had obtained the requisite permission under Section 44-A before becoming Honorary Secretary, addressing the statutory bar on interested servants. As for the disparity in values of the lands, the Court emphasized that land value varies with demand and necessity and that the Municipality's assessment and exercise of discretion as to price is not for the Court to substitute; absent illegality, fraud or clear abuse of power, disparity alone did not invalidate the exchange.
Conclusion of analysis: On the cumulative application of the above points, the Court concluded there was no ground to interfere with the findings that the exchange was within the Committee's competence, not ultra vires, and was made in good faith; the appellate conclusions that the plaintiffs lacked competence and that notice was fatal were either incorrect or inapplicable.

Holding and Implications

Holding: The second appeal was dismissed. The Court ordered dismissal of the appeal with costs. In emphatic form: APPEAL DISMISSED (second appeal dismissed; costs awarded to respondents).

Implications:

The dismissal leaves intact the lower Courts' factual findings that the exchange was passed in good faith and with due care and attention and that the transaction was not shown to be fraudulent or ultra vires on the record before the Court.
The Court held that a ratepayer has standing to sue to prevent misapplication of municipal funds or unauthorized disposition of municipal property; a municipal statute does not oust civil jurisdiction unless there is clear and unambiguous language to that effect.
The Court treated procedural notice requirements (here, under Section 48) as waivable where the protected authority does not object; absence of objection in pleadings was treated as waiver.
No new broad precedent ousting existing principles was established; the decision applies established authorities to the facts and upholds the Municipal Committee's discretion where exercised in the circumstances described and absent proof of mala fides.

This summary is strictly confined to the statements and materials contained in the provided opinion and does not add facts or inferences beyond that text.

Show all summary ...

1. This is plaintiffs' second appeal from a decree dated 27-3-1952 passed by the Additional District Judge, Narsimhapur, affirming the, decree dated 16-4-1951 of the Civil Judge (Class II), Sohagpur at Narsimhapur, dismissing the plaintiffs' Civil Suit No. 63-A of 1949.

2. The three plaintiffs-appellants are taxpayers of the Municipality of Piparia. The defendants-respondents are eleven in number. Defendant-respondent 1 is the Municipal Committee of Piparia, Tahsil Sohagpur. Defendant-respondent 2 is the nominated President. Defendant-respondent 11 Shri Moolchand Bamoria is the Honorary Secretary of the Municipality.

Formerly there was a Notified Area Committee, which was converted into a Municipality by Gazette Notification on 8-1-1949. Defendants-respondents 3 to 10 were nominated members of the said Municipality. The allegations in the plaint are that by a resolution dated 13-4-1949 the Municipal Committee gave its own Plot No. 39/2, area 3 acres, of mouza Deogaon Piparia to the defendant-respondent No. 11 in exchange for his worthless Plot No. 42/2, area 3 acres in the same mouza.

The said transfer of exchange was attacked by the plaintiffs-appellants as unconscionable, unauthorised and illegal, and it was prayed that the deed, executed on 14-4-1949 in accordance with the resolution dated 13-4-1949, be cancelled as invalid and possession of Malik Makbuza field No. 39/2 be restored to the Municipality.

3. The trial Court dismissed the suit on the grounds that the rate-payers are not entitled to file such a suit, that the resolution was passed in good faith and that the bargain was neither unconscionable, nor unauthorisd nor illegal.

4. The dismissal of the suit on these grounds was upheld by the lower appellate Court. In addition to these grounds, it was added by that Court that the suit must also fail on account of want of notice to the respondents 2 to 10 under Section 48 of the C. P. and Berar Municipalities Act, 1922 II of 1922).

5. All the three findings are assailed before me by Shri R. S. Dabir, learned counsel for the appellants, and I have no doubt that the attack on the first and third findings is well founded. In Vellayan Chettiar v. Govt. of the Province of Madras, AIR 1947 PC 197 (A), it was laid down by their Lordships of the Judicial Committee that a notice under Section 80, Civil Procedure Code, is for the protection of the authority concerned; and, if in a particular case, he does not require that notice, he can lawfully waive his right to the notice.

This has been followed in Secretary of State v. Sheoramjee, ILR (1949) Nag 875: (AIR 1952, Nag 213) (B). The same principle would be applicable to a notice under Section 48 of the C. P. and Berar Municipalities Act. There was no objection raised in the written statements by any of the defendants about a notice under Section 48, and it should be taken that defendants 2 to 10 waived their right to such a notice.

6. As regards the rate-payers' competence to file such a suit, the general rule now is that if a rate-payer's pocket is affected by a decision allowing the misappropriation of a rate, which he is compelled to pay or its application to purposes which are unauthorized or illegal, he is a person who has grounds to say that he is aggrieved by the decision and can come to a Civil Court against the decision.

All the relevant rulings on the point have been referred to and discussed in Municipal Corporation, Bombay v. Govind Laxman, AIR 1949 Bom 229 (C), and the rule deduced from several cases has been stated thus : Every rate-payer has a right to prevent the public body to which he pays the rate from acting contrary to law or contrary to its own charter. The rate-payer can come to Court by way of a suit, and can also invoke the Jurisdiction of the Court under Section 45, Specific Relief Act of 1877.

7. The cases reported in Cawashah Bomanji Parakh v. Prafulla Nath Rudra, ILR (1941) Nag 266; (AIR 1941 Nag 364) (D), or in Ramdularay v. Chhindwari Municipality, 6 Nag LR 53 (E), can be distinguished on facts. The first is a Nagpur case where the permission to construct a building was given by the Municipality to the respondent No. 1. A rate-prayer, then, filed a suit for permanent injunction restraining the Municipal Committee, Nagpur, and respondent No. 1 from building a house on a plot of land situated in Circle No. 19-A, known as Civil Station.

It was held by a Division Bench of the High Court that the mere fact that the sanction to build granted by a Municipal Committee is beyond its power will not by itself entitle an individual ratepayer to sue for injunction restraining the person constructing the building. It was further added that the plaintiff must prove some special damage or injury occasioned to him by reason of the permission to build granted by the Committee.

8. At page 270 (of ILR Nag): (at p. 366 of AIR), the judgment referred to several judicial decisions including that of Vaman v. Municipality of Sholapur, ILR 22 Bom 646 (F), where an individual rate-payer was held entitled to file a suit for an injunction against the Corporation in respect of the misapplication of its funds. There is nothing in the Nagpur ruling which raises a doubt about the correctness of the decision of Vaman v. Municipality of Sholapur (F), (cit. sup.) upon which reliance has been placed in Municipal Corporation Bombay v. Govind Laxman (C), (cit. supra).

9. In Ramdularay v. Chhindwara Municipality (E), (cit. sup.) the plaintiff's Chapri was demolished by orders of the Municipal Committee. It was obvious that the plaintiff was aggrieved, and it was pointed out in that case that the cause of action arises from an injury resulting to the plaintiff and not merely the capricious or perverse exercise of discretion by a Corporation.

10. It will be manifest that there is always some injury, however slight it may be, to the ratepayer due to misapplication of municipal funds and, therefore, he is entitled to file a suit for getting it set aside by a Civil Court.

11. In England, though such suits are gene-rally filed by the Attorney-General as the guardian of public rights, still the rate-payers' suits are not thrown out, but are decided on merits: See Attorney-General v. Leeds Corporation, 1929-2 Ch 291 (G); and Attorney-General v. Smethwick Corporation, 1932-1 Ch 562 at p. 568 (H). In U. S. A. the law appears to be similar. In 64 Corpus Juris Secundum, 2133 (p. 947), we find that subject to some limitations, tax-payers may oppose or question the validity of the action of municipal authorities in disposing of municipal property.

It is further observed there that Courts have recognized or upheld the right of a taxpayer to sue to annul an ordinance providing for the wrongful disposition, or acquisition, of property, or to cancel, rescind, or set aside an unauthorised sale or other disposition of such property, or the unauthorized acquisition of property by municipal authorities.

It is added that where municipal authorities are authorized to sell property, under a statute leaving the sale of the property to their judgment, a taxpayer may not attack such sale in the absence of illegality, fraud, or clear abuse of discretion.

12. From what has gone above it will be clear that in the instant case the Courts below have gone wrong in taking the view that the suit was not competent.

13. The judgment of the Court below is justified by Shri R. L. Sharma, learned counsel for the respondents, on the ground that the C. P. and Berar Municipalities Act of 1922 is exhaustive and docs not permit a rate-payer to file a suit in a Civil Court and the latter cannot take cognizance of it as it is barred under Section 9 of the Civil Procedure Code.

It will suffice to say here that the Supreme Court in Shiromani Gurdwara Prabandhak Committee v. Shiv Ratan Deo Singh, (S) AIR 1955 SC 576 (I), has laid down that me exclusion of jurisdiction of the Civil Court in respect of a suit or an issue which is normally within its competence can be brought about only by clear and unambiguous language or by the necessary implication thereof.

There is nothing in the C. P. and Berar Municipalities Act from which it must be inferred that rate payer's suit would be barred even if the allegation is that the act of sale of property by the Municipal Committee was unauthorized or illegal or beyond its jurisdiction. There is no section in the said Act which excludes in terms the jurisdiction of a Civil Court, It is to be borne in mind that a misapplication of municipal funds tends to increase the burden of taxation and the tax-payer can sue to restrain it or to prevent the abuse of corporate powers in this respect. His right to sue is said to be analogous to the right of stock-holders in a private corporation to sue officers of such corporation.

This remedy, of reaching a Civil Court for redress was already available to the taxpayer; but another special form of remedy to reach the Government so that it may file a suit under Section 49 (3) of the Act No. II of 1922 has been given in the said Municipal Act. The taxpayer, according to the principles laid down by Willies J., in Wolyer-hampton New Water Works Co. v. Hawksford, (1859) 6 CB (NS) 336 (J), has election of proceeding either under the statute or at common law, unless the statute contains words necessarily excluding the remedy of filing a suit in the Civil Court.

As there are no such words in Section 49 of the Act, I hold that the suit was not barred under Section 9 of the Civil Procedure Code.

14. This brings me to the question: whether the exchange of lands was within the power of the Piparia Municipal Committee, or whether it was ultra vires the Municipal Committee? The only section relied upon by Shri R. S. Dabir is Section 42, which runs as follows:

"Subject to such exceptions as the Provincial Government may by general or special order direct, no committee shall transfer any immoveable property except in pursuance of a resolution passed at a meeting by a majority or not less than two-thirds of its members and in accordance with rules made under this Act, and no committee shall transfer any property which has been vested in it by the Crown, except with the sanction of the Provincial Government:"

(The proviso is not important and so is left out) The exchange of properties in suit took place in pursuance of a resolution passed unanimously at a meeting of the Municipal Committee and in accordance with Rule 2 of the Rules made under Section 42, It was, therefore, contended that it is the latter part of this, section that is attracted hero, and the Government's sanction which was necessary was not obtained.

Now, there is nothing on the file in this case to indicate that the property comprised in Khasra No. 39/2, which belonged to the Notified Area Committee, was ever vested in it by the State. In the absence of any Notification or evidence on this point in this case, I am of opinion that no sanction of the Government was needed for the exchange of the property, and the resolution passed by the Municipal Committee on 13-4-1949 was not illegal, or ultra vires.

15. There is also no proof in this case to show any fraudulent design. On the other hand, the two Courts below have come to the conclusion that the exchange in question, even though unequal, was in good faith and with due care and attention within the meaning of Section 47 of the Municipalities Act. The circumstances found by the Courts below for drawing this inference are the following:

(1) Khasra No. 39/2 was being used as trenching ground i. e., for depositing night-soil and rubbish. The town of Piparia was expanding and had come just near this land. The residents of the locality were agitating for removal of the trenching ground to some other locality.

(2) The Notified Area Committee contemplated to shift the trenching ground to some other place and asked Moolchand (respondent 11), who was not its Secretary at that time, if he would let his land for this purpose.

(3) Respondent No. 11's land lay between the burial ground and the river and was suitable for a trenching ground.

(4) Then, the Notified Area Committee resolved to acquire new land and applied on 13-8-1948 to the Land Acquisition Officer for acquiring 7 acres of land on the Sohagpur Road.

(5) Meanwhile in 1948 by an Ordinance followed by an Act (XL of 1948), Section 50 (c) of the C. P. and Berar Municipalities Act was amended and the Government could compel a Municipality to undertake the preparation of compost manure from night-soil and rubbish. Piparia Municipality was required to undertake it.

(6) The Agricultural Assistant, on 11-12-1948, (Ex. D-8) wrote to the Compost Development Officer (Bio-Chemist), Nagpur, that the compost processing work could not be carried on the old trenching ground and suggested the exchange of the two properties. The Bio-Chemist himself came, inspected the lands in suit, advised the exchange of the two lands and also the dropping of the land acquisition proceedings as it would have taken, time.

(7) The Government threatened to take action against the Municipality, if compost processing was not expedited.

(8) The exchange of the trenching ground (Khasra No. 39/2) with that of respondent No. 11 Moolchand's land had thus to be effected under a pressing need. The Piparia Municipal Committee, under these circumstances, passed a resolution (Ex. D. 11), on 13-4-1949 for the exchange of the two lands.

16. It may be added here that respondent No. 11, Shri Moolchand, had, before this date, been taken up as Honorary Secretary of the Piparia Municipal Committee; and as there is a bar against servants taking interest in any bargain or contract made with the committee, he informed the Deputy Commissioner and obtained from him the requisite permission under Section 44-A of the Act.

17. The circumstances mentioned above, in my opinion, are sufficient to negative mala fides and the Courts below are justified in drawing an inference that the resolution was passed in good faith and with due care and attention. In view of the provisions embodied in Section 47 of the C. P. and Berar Municipalities Act of 1922, in my Judgment, the suit could not have been decreed.

18. Shri Dabir, again and again, stressed the fact that there was a great disparity in the prices of the two lands exchanged. This is no doubt true, but it has to be borne in mind that the price of a land is not constant; it varies from time to time and is generally governed by the question of demand and supply.

If after the recommendation of the two Government officers that the land of respondent No. 11 was the most suitable for the preparation of compost manure and should be exchanged with the trenching ground, the Municipality felt its need, then, its price should be taken to have gone up much higher than before. Respondent No. 1 could have asked any price for it.

What price should be paid for a particular piece of land, which the Municipality needed at a particular time, cannot be decided by a Court. It is entirely within the discretion of the Municipality concerned. The Court cannot order a Committee to exercise its discretion in a particular manner. That would be substituting the Court's discretion for the discretion of the Committee which the statute does not permit.

19. For reasons stated above, I am satisfied that no interference is called for in this second appeal. I, therefore, dismiss it with costs.