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Western Coalfields Limited v. Municipal Council, Birsinghpur Pali And Another
Factual and Procedural Background
The Birsinghpur Colliery was nationalised under the Coal Mines (Nationalisation) Act, 1973. Pursuant to a direction issued by the Central Government under Section 5 of that Act, the mine vested in the appellant-company. The first respondent attempted to levy property tax on the Colliery under Section 127-A of the Madhya Pradesh Municipalities Act, 1961. Contending that the Colliery’s property was exempt because it constituted Union Government property, the appellant filed a writ petition before the High Court of Madhya Pradesh. The High Court summarily dismissed the petition, relying on the Supreme Court’s earlier judgment in Western Coalfields Ltd. v. Special Area Development Authority (1982) 1 SCC 125. The present civil appeal was brought to the Supreme Court by special leave against that order, along with an SLP and a transferred case involving substantially similar facts.
Legal Issues Presented
- Whether property that vests in a government company pursuant to Sections 3, 5 and 11 of the Coal Mines (Nationalisation) Act, 1973 is to be treated as property “owned by or vesting in the Union Government” for the purpose of the tax exemption in Section 127-A(2) of the Madhya Pradesh Municipalities Act, 1961.
Arguments of the Parties
Appellant's Arguments
- The appellant, through learned Additional Solicitor General Mr Raval, contended that although legal title stands in the appellant’s name, the property in fact vests in the company on behalf of the Union. Consequently, under Section 127-A(2) of the M.P. Municipalities Act, 1961, the Colliery is immune from property tax.
- Reliance was placed on paragraph 147 of New Delhi Municipal Council v. State of Punjab (1997) 7 SCC 339, which states that a State legislature cannot levy tax upon Union property.
- Air India Statutory Corporation v. United Labour Union (1997) 9 SCC 377 was invoked to emphasise that an entity functioning as an “instrumentality of the State” can be treated as an arm of Government.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Western Coalfields Ltd. v. Special Area Development Authority (1982) 1 SCC 125 | Earlier decision involving the appellant; basis on which the High Court summarily dismissed the writ petition. | Mentioned as background. The Supreme Court proceeded to consider the present appeal on its own merits. |
| New Delhi Municipal Council v. State of Punjab (1997) 7 SCC 339 | Article 289 immunity: State property is exempt from Union taxation unless used for trade or business; conversely, a State legislature cannot tax Union property (para 147, para 179). | Cited by the appellant. The Court acknowledged the proposition but held it inapplicable because, after vesting under Section 5, the property belonged to the appellant-company, not the Union. |
| Air India Statutory Corporation v. United Labour Union (1997) 9 SCC 377 | Criteria for determining whether an entity is an “instrumentality of the State” under Article 12. | The Court found the citation inapposite; the case concerned Article 12 and did not alter the statutory vesting effected by Sections 3, 5 and 11 of the Coal Mines Act. |
| Municipal Commissioner, Dum Dum Municipality v. Indian Tourism Development Corporation (1995) 5 SCC 251 | Addresses taxation of property held by a government company after statutory vesting. | The Court viewed the present issue as “substantially covered” by this decision and, agreeing with it, declined to reconsider its reasoning. |
Court's Reasoning and Analysis
The Court’s analysis turned on the text of Sections 3, 5 and 11 of the Coal Mines (Nationalisation) Act, 1973. Section 3 transferred all rights, title and interest of the private owner to the Union. Section 5 empowered the Central Government to direct that such rights “shall, instead of continuing to vest in the Central Government, vest in the government company.” Pursuant to such a written direction, the rights in the Birsinghpur Colliery vested in the appellant-company. Section 11 correspondingly vested management and control in that company.
Because the statutory scheme transferred full ownership and management to the appellant, the company held the property “in its own right and for itself,” not as an agent or trustee for the Union. The exemption in Section 127-A(2) of the M.P. Municipalities Act applies only to property that is owned by or vesting in the Union Government. Consequently, the Colliery’s property falls outside the exemption.
The Court rejected the appellant’s reliance on NDMC v. State of Punjab, noting that the inability of a State legislature to tax Union property is irrelevant once the property no longer belongs to the Union. The reference to Air India was likewise dismissed as dealing with Article 12 and not with statutory vesting. Finally, the Court endorsed the reasoning in Municipal Commissioner, Dum Dum Municipality, which had reached a comparable conclusion on similar facts.
Holding and Implications
Civil Appeal, SLP and Transferred Case DISMISSED WITH COSTS (where awarded).
Immediate Effect: The appellant-company remains liable to pay property tax levied by the first respondent on the Birsinghpur Colliery.
Broader Implications: The judgment affirms that once property is statutorily vested in a government company under the Coal Mines (Nationalisation) Act, 1973, such property is not “Union property” for the purpose of tax immunity under state municipal legislation. No new legal doctrine was created, but existing principles from Dum Dum Municipality have been reinforced.
1. The appeal relates to the Birsinghpur Colliery. It was nationalised by reason of the Coal Mines (Nationalisation) Act, 1973 and by reason of a direction issued by the Central Government under Section 5 thereof, it vested in the appellant. The first respondent sought to levy property tax on the Colliery. The levy was challenged by the appellant by way of a writ petition before the High Court of Madhya Pradesh. The writ petition was summarily dismissed, relying upon the judgment of this Court in the case of the appellant itself Western Coalfields Ltd. v. Special Area Development Authority (1982) 1 SCC 125. This appeal against the order of summary dismissal is filed by special leave.
2. The first respondent sought to tax the property of the Colliery in exercise of the power contained in Section 127-A of the M.P Municipalities Act, 1961. Section 127-A contains sub-section (2) which states that property tax shall not be leviable on “buildings and lands owned by or vesting in (i) the Union Government …”.
3. Sections 3, 5 and 11 of the Coal Mines (Nationalisation) Act, 1973, so far as they are relevant to this appeal, read thus:
“3. Acquisition of rights of owners in respect of coal mines.—(1) On the appointed day, the right, title and interest of the owners in relation to the coal mines specified in the Schedule shall stand transferred to, and shall vest absolutely in, the Central Government free from all encumbrances.
5. Power of Central Government to direct vesting of rights in a government company.—(1) Notwithstanding anything contained in Sections 3 and 4, the Central Government may, if it is satisfied that a government company is willing to comply, or has complied, with such terms and conditions as that Government may think fit to impose, direct, by an order in writing, that the right, title and interest of an owner in relation to a coal mine referred to in Section 3, shall, instead of continuing to vest in the Central Government, vest in the government company either on the date of publication of the direction or on such earlier or later date (not being a date earlier than the appointed day), as may be specified in the direction.
(2) Where the right, title and interest of an owner in relation to a coal mine vest in a government company under sub-section (1), the government company shall, on and from the date of such vesting, be deemed to have become the lessee in relation to such coal mine as if a mining lease in relation to the coal mine had been granted to the government company and the period of such lease shall be the entire period for which such lease could have been granted under the Mineral Concession Rules; and all the rights and liabilities of the Central Government in relation to such coal mine shall, on and from the date of such vesting, be deemed to have become the rights and liabilities, respectively, of the government company.
(3) The provisions of sub-section (2) of Section 4 shall apply to a lease which vests in a government company as they apply to a lease vested in the Central Government and references therein to the ‘Central Government’ shall be construed as reference to the government company.
11. Management, etc., of coal mines.—(1) The general superintendence, direction, control and management of the affairs and business of a coal mine, the right, title and interest of an owner in relation to which have vested in the Central Government under Section 3, shall,—
(a) in the case of a coal mine in relation to which a direction has been made by the Central Government under sub-section (1) of Section 5, vest in the government company specified in such direction, or
4. A nine-Judge Bench of this Court dealt with the right of a State to tax Union property in the case of New Delhi Municipal Council v. State of Punjab (1997) 7 SCC 339. It held (para 179) thus:
“(b) the levy of property taxes under the aforesaid enactments on lands and/or buildings belonging to the State Governments is invalid and incompetent by virtue of the mandate contained in clause (1) of Article 289. However, if any land or building is used or occupied for the purposes of any trade or business — trade or business as explained in the body of this judgment — carried on by or on behalf of the State Government, such land or building shall be subject to levy of property taxes levied by the said enactments. In other words, State property exempted under clause (1) means such property as is used for the purpose of the Government and not for the purposes of trade or business;”
5. Mr Raval, learned Additional Solicitor General appearing for the appellant drew our attention also to para 147 of the judgment where it was held that there is no way in which a State Legislature can levy tax upon the property of the Union. The said paragraph goes on to discuss when the Union can levy tax in respect of property owned by a State. Mr Raval also drew our attention to the judgment of this Court in Air India Statutory Corpn. v. United Labour Union (1997) 9 SCC 377, JT (1996) 11 SC 109 where, in the context of deciding what was an instrumentality of the State for the purposes of Article 12, it was said:
“(7) Though the instrumentality, agency or person conducts commercial activities according to business principles and are separately accountable under their appropriate bye-laws or memorandum of association, they become the arm of the Government.”
Mr Raval's contention is that the property in the Colliery at Birsinghpur vests in the appellant-Company on behalf of the Union and, therefore, by reason of Section 127-A(2) of the M.P Municipalities Act, may not be made subject to the levy of property tax by the first respondent.
6. The answer, in our view, is to be found in the plain language of Sections 3, 5 and 11 of the Coal Mines (Nationalisation) Act, 1973 which we have reproduced above. Under Section 3, from the appointed date the right, title and interest of the erstwhile owner of the Birsinghpur Colliery in its property stood transferred to and vested absolutely in the Union. Section 5 empowered the Union, if it was satisfied that a government company was willing to comply with or had complied with such terms and conditions as the Union might think it fit to impose, to direct in writing
“that the right, title and interest of an owner in relation to a coal mine referred to in Section 3, shall, instead of continuing to vest in the Central Government, vest in the government company …”.
Therefore, the right, title and interest of the erstwhile owner of the Birsinghpur Colliery in its property, which vested in the Union on the appointed day, instead of continuing to vest in the Union, was, by reason of the direction issued by the Union under Section 5, vested in the appellant. Section 11 dealt with the management of the coal mine whereas Section 5 dealt with the right, title and interest in the property of the coal mine. Under Section 5, the general superintendence, direction, control and management of the affairs and the business of the Colliery, which by reason of Section 3 had vested in the Union, now “vest in the government company” in whose favour the direction under Section 5 had been made. In other words, by reason of Sections 5 and 11, the right, title and interest of the erstwhile owner of the Birsinghpur Colliery in the property thereof as also in the superintendence, control, management and business thereof which had vested in the Union, now vested in the appellant consequent upon the direction in that behalf issued by the Union under Section 5. The appellant, as a company, is a legal entity. It holds its property in its own right and for itself. It is, therefore, that we cannot accept the submission of Mr Raval that the property of the Birsinghpur Colliery vests in the appellant-Company on behalf of the Union and that for that reason, cannot be subjected to the levy of property tax under Section 127-A of the M.P Municipalities Act, 1961.
7. The reference to the judgment in the case of Air India Corpn. (1997) 9 SCC 377, JT (1996) 11 SC 109 is inapposite in the present context, for the observation therein that was relied upon was made in the context of determining what is an instrumentality of the State for the purposes of Article 12.
8. We should now add that the issue that we are here concerned with is substantially covered by the judgment of this Court in Municipal Commr. of Dum Dum Municipality v. Indian Tourism Development Corpn. (1995) 5 SCC 251 and agreeing with that judgment, we see no reason to accept Mr Raval's submission that it needs to be reconsidered.
9. The civil appeal is, therefore, dismissed with costs.
SLP No. 5706 of 1997
10. By reason of the order that we have passed in CA No. 6734-A of 1983, the SLP is dismissed, the facts being substantially similar. No order as to costs.
TC No. 359 of 1983
11. By reason of the order that we have passed in CA No. 6734-A of 1983, the transferred case is dismissed, the facts being substantially similar. No order as to costs.
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