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citation codes
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Acts
  • sections 113 and 191, clause (2) of the District Municipalities Act,
  • section 44 of the District Municipalities Act (IV of 1884),
  • Section 27 of the Indian Contract Act (IX of 1872)
  • section 113 of the District Municipalities Act,
  • provisions in the District Municipalities Act
  • section 23 of the Indian Contract Act.
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Cites
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
Judges
Acts
  • sections 113 and 191, clause (2) of the District Municipalities Act,
  • section 44 of the District Municipalities Act (IV of 1884),
  • Section 27 of the Indian Contract Act (IX of 1872)
  • section 113 of the District Municipalities Act,
  • provisions in the District Municipalities Act
  • section 23 of the Indian Contract Act.
Smart Summary

Factual and Procedural Background

The plaintiff sued for Rs. 1,760 as damages for breach of a contract alleged to have been entered into with the Municipal Councillors of Mayavaram. The plaint avers that on 12 April 1899 the plaintiff and one Nagoro Kanni Rowthan entered into a contract with the defendant whereby, in consideration of Rs. 100 paid by the plaintiff as fees and Rs. 50 paid as security (total Rs. 150), the defendant agreed to grant the plaintiff the monopoly or exclusive right to sell flesh within the municipal limits for one year. Owing to disputes between butchers and the Municipal Council, the Chairman made an arrangement with the plaintiff and Kanni Rowthan and received Rs. 150. The lower Appellate Court dismissed the suit, inter alia, on the ground that the agreement was void as a monopoly. The appellate court below's decree is reviewed and modified in this opinion.

Legal Issues Presented

  1. Whether, with reference to section 44 of the District Municipalities Act (IV of 1884), it was competent for the Chairman to enter into the alleged agreement without the previous sanction of the Councillors, and if not whether it was actually sanctioned by the Councillors and embodied in writing as required.
  2. Whether the agreement is opposed to public policy and therefore void under section 23 of the Indian Contract Act (IX of 1872).
  3. Whether provisions of the District Municipalities Act relied on (notably sections 113 and 191, clause (2)) authorize or validate the alleged exclusive arrangement.

Arguments of the Parties

Plaintiff's Arguments (as presented)

  • Counsel for the plaintiff (Mr. Ranga Chariar) relied on sections 113 and 191, clause (2) of the District Municipalities Act to contend that the municipal authorities could enter into and validate the arrangement granting the exclusive right to sell meat.
  • Reference was made to section 27 of the Indian Contract Act during argument, though the court stated it had no application to the case.

Defendants' Arguments (as presented)

  • Mr. Krishnaswami Ayyar for the defendants argued that the decision to grant or withhold licenses under section 191(2) must be made case by case with reference to sanitary and other considerations, and it would be a breach of duty for Commissioners to pre-determine that licenses would be entertained only from persons selected by them.
  • The defendants cited Rossi v. Edinburgh Corporation to support the proposition that municipal powers should not be stretched to interfere with ordinary rights of citizens.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Rossi v. Edinburgh Corporation Limits on stretching municipal legislative provisions so as not to interfere with ordinary rights of citizens. Used to support the view that municipal enactments cannot be construed to authorize arrangements that unlawfully interfere with citizens' rights.
Logan v. Pyne Municipal corporations' powers are strictly confined to statutory grants; courts will not infer power to create monopolies; doubts resolved against corporations. Adopted as stating general principles that municipal power cannot be construed to grant exclusive privileges absent express legislative authority.
In re Lowe An ordinance granting exclusive scavenging privileges was an attempt to create a monopoly and therefore void. Cited as an American authority analogous to the present case, supporting the invalidity of municipal acts creating monopolies.
City of Bloomington v. Whal An ordinance confining sale of meats to limited locations is invalid as tending to create a monopoly. Relied upon as an authority showing ordinances that confine trade to selected persons or places are void as monopolistic.

Court's Reasoning and Analysis

The court examined the statutory provisions relied on by the plaintiff (sections 113 and 191(2) of the District Municipalities Act and reference to section 44) and found none that authorized creation of an exclusive monopoly. Section 191(2)'s licensing power was interpreted as aimed at guarding sanitary conditions; it does not permit Commissioners to pre‑determine that only selected persons may be entertained for licenses. The court accepted the defendants' submission (and cited Rossi v. Edinburgh Corporation) that municipal powers cannot be stretched to interfere with ordinary rights. Applying the established principle (as set out in Logan v. Pyne and supported by the American authorities cited) that municipal corporations possess only expressly granted or necessarily implied powers and that monopolies will not be inferred, the court held the agreement void as opposed to public policy under section 23 of the Indian Contract Act. Consequently, the plaintiff's claim for damages based on the breached monopoly agreement failed. However, the court reasoned that the Rs. 150 paid was in truth part of the void arrangement (not a statutory collection under the Act) and equity required its refund to the plaintiff; the objection that the sum was collected under the Act and hence non‑recoverable under section 262(2) was rejected.

Holding and Implications

The decree of the lower Appellate Court is modified. The plaintiff is awarded Rs. 150 (refund of the sum paid), and each party is to pay his own costs.

Direct effect: the plaintiff's larger claim for Rs. 1,760 in damages is dismissed for lack of a valid contractual monopoly, but the plaintiff recovers Rs. 150 paid under the void arrangement. No broader precedent was announced beyond application of established principles that municipal bodies cannot be taken to have power to create monopolies absent express statutory authority.

    Somu Pillai v. Municipal Council, Mayavaram

    The plaintiff brought this suit for Rs. 1,760 damages alleged to have been sustained by him by the breach of a contract stated to have been entered into with him by the Municipal Councillors of the town of Mayavaram. The lower Appellate Court without giving findings upon certain matters of fact arising in the case, dismissed the suit on the ground, among others, that the alleged agreement was, upon the plaintiff's own showing, void as one intended to create a monopoly.

    This decision is clearly right. The first paragraph of the plaint states the effect of the agreement sued upon thus:—“The plaintiff and one Nagoro Kanni Rowthan entered into a, contract with the defendant on the 12th April 1899 whereby in consideration of Rs. 100 paid by the plaintiff to the defendant on account of fees and Rs. 50 paid as security, the defendant undertook to grant and secure to the plaintiff the monopoly or exclusive right of selling flesh within the municipal limits of Mayavaram for one year from the said date.” Whether the agreement relied on was one which, with reference to section 44 of the District Municipalities Act (IV of 1884), it was competent for the Chairman to enter into without the previous sanction of the Councillors and if not whether it was actually sanctioned by the Councillors and embodied in writing as required by the provisions of the said Act are points in controversy. There is no doubt, however, that, owing to some disputes between the butchers who were in the habit of selling meat in Mayavaram about the time the agreement is stated to have been entered into and the Municipal Council, the then Chairman of the Municipality made an arrangement with the plaintiff and Kanni Rowthan to the effect stated in the passage quoted above from the plaint and received the sum of Rs. 150 from the plaintiff and Kanni Rowthan. Mr. Ranga Chariar on behalf of the plaintiff referred to sections 113 and 191, clause (2) of the District Municipalities Act, and urged that it was competent to the Municipal authorities to enter into the arrangement in question and that it was valid. Section 27 of the Indian Contract Act (IX of 1872) to which some reference was made in the course of the argument has of course no application to a case such as the present. The question really is whether the agreement is not one opposed to public policy and therefore void under section 23 of the said enactment. No one denies that, under section 113 of the District Municipalities Act, the funds raised under the provisions of the enactment are to be applied in connection not only with the specific purposes enumerated in the section but also in connection with “other measures of public utility calculated to promote the safety, health, comfort or convenience of the people.” But it is difficult to see what all this has to do with the present question.

    The other provision of the Act relied on by Mr. Ranga Chariar, viz., section 191, clause 2, lays down that “no place in any municipality shall be used for selling or storing for sale any flesh or fish intended for food, unless a license for such use of the place has been previously obtained from the Chairman.” The argument with reference to this provision was that a sale of meat in an unlicensed place was unpermitted, that it was absolutely in the discretion of the Commissioners to grant or withhold licenses under the above provision, that it was consequently open to them to restrict the grant of licenses to any individual chosen by them, and that it followed that an agreement such as that in question was authorized under the Act. This argument is obviously unsound. The manifest intention of the provision in regard to the grant of licenses in respect of places where meat is to be sold is mainly to empower the Municipal authorities to guard against the prevalence of insanitary conditions in the use of such places. Prmâ facie it would be the duty of the Commissioners to grant licenses to applicants in the matter unless clear grounds for refusal existed with reference to the object in the view of the law in prescribing the necessity for the issue of such licenses. Be this as it may, unquestionably as pointed out by Mr. Krisbnaswami Ayyar on behalf of the defendants, the decision as to the propriety of granting or withholding the license must be made in each case with reference to its particular circumstances and it would be a direct violation of their duty for the Commissioners to resolve beforehand that no application in the matter would be entertained or considered except from a person or persons selected by them. Though no doubt full effect should he given to the purpose of provisions in enactments constituting local bodies such as the municipality here so as to repress the mischief contemplated and advance the remedy given, yet, that the language of these enactments is not to be stretched to cover attempts made, under the colour of such legislative provisions, to interfere in any way with the exercise of the ordinary rights of citizens, will be seen from the recent decision of the House of Lords in Rossi v. Edinburgh Corporation(1) cited by Mr. Krishnaswamy Aiyar. (See specially the observations of the Lord Chancellor at page 26 and of Lord Davey at page 28.) It is thus evident that neither of the provisions in the District Municipalities Act relied on behalf of the plaintiff affords the slightest foundation for the contention that the agreement in question is warranted by that enactment. That under the English Common Law agreements having for their object the creation of monopolies are void as opposed to public policy is beyond dispute and the same is equally true under section 23 of the Indian Contract Act. The American cases to which we referred in the course of the argument are almost on all fours with the present case. In Logan v. Pyne(2) it was held by the Supreme Court of Iowa that where a city had been authorized by its charter to license, tax and regulate omnibuses, it had no power to grant an exclusive right to run omnibuses within its limits. In In re Lowe(3) the Supreme Court of Kansas ruled that an ordinance providing that the Mayor and Council may appoint two or more persons as scavengers who shall have the exclusive privilege of removing garbage not only from public premises but from private premises as well, was an attempt to create a monopoly and was therefore void; and in the City of Bloomington v. Whal(4) it was laid down by the Supreme Court of Illinois that an ordinance of a city confining the sale of meats to two lots in the city was invalid as tending to create a monopoly. The general principles to be followed in cases like the present were stated in Logan v. Pyne cited above, thus—“The power of Municipal Corporations is strictly confined within the limits prescribed by the statutes creating them and will not be extended by the Courts upon mere inference. It always depends upon express grant or must be necessarily implied as incident to other powers expressly granted or indispensable to the object and purpose for which the corporations were created. Doubts as to the existence of such powers must be resolved against the corporations and in favour of the public. A Municipal Corporation can grant, if at all, exclusive privileges for the protection of business which, without prohibitory legislation, would be free to all men, only under express legislative grant of power. Monopolies being prejudicial to the public welfare, the Courts will not infer grants thereof, refusing to presume the existence of legislative intention in conflict with public policy.” We need scarcely add that in this statement of the law we entirely concur. The District Municipalities Act, containing nothing that warrants the creation of the monopoly in question, the plaintiff's claim for damages fails, and it is unnecessary to consider the other contentions as to limitation, &c., raised on behalf of the defendants.

    We think, however, that the plaintiff is entitled to a refund of the Rs. 150 paid to the municipality. No doubt a portion of this sum was treated as fee for licenses to the plaintiff permitting him to sell flesh and fish in certain localities in the town. But we are unable to agree with the suggestion on behalf of the councillors that amount should be viewed as collected under the provisions of the Act and therefore under section 262(2) of the Act not recoverable by suit. In our opinion the payment of the sum in question was in truth made as a part and parcel of the void arrangement, and under circumstances which render it equitable that the same should be returned by the municipality.

    The decree of the lower Appellate Court will be modified by awarding to the plaintiff Rs. 150, each party paying his costs.

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    Comments

    Somu Pillai v. Municipal Council, Mayavaram
    (Mar 31, 1905)