IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.07.2010 CORAM: THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.Nos.7981 and 22142 of 2009 and M.P.Nos.1,1,2,2,3 and 3 of 2009 Dr.Nedunchezhiyan Engineering College, Represented by its Administrative Officer, K.Senthil, Raja Nagar, Vaidyanadhapuram Village, Thozhudur Post, Cuddalore District 606 303. ...Petitioner in W.P.No.7981/2009 Neyveli Educational Trust Rep. By its Secretary, M.Natarasan Neyveli Educational Trust Campus, Kumbakonam Main Road, Keelakollai,Marungur Post, Panruti Taluk, Cuddalore District. ...Petitioner in W.P.No.22142/2009 Vs 1.The State of Tamil Nadu, Rep. By its Secretary to Government, Rural Development and Panchayat Raj Department, Fort St.George, Chennai -9. 2.The Director of Rural Development and Panchayat Raj, "Panagal Building", Saidapet, Chennai 600 015. ...Respondents 1 and 2
in both WPs
3.Thozhudur Panchayat,
Rep. By its President,
Thozhudur,
Mangalur Panchayat Union,
Tittakudi Taluk,
Cuddalore District 606 303. …3rd respondent in
W.P.No.7981/2009
4.Marungur Panchayat,
Rep. By its President,
Marungur, Panruti Taluk,
Cuddalore District 607 103. …3rd respondent in
W.P.No.22142/2009
PRAYER:-Petitions filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorari, calling for the records relating to the order of the first respondent dated 05.03.2008 in G.O.Ms.38 Rural Development and Panchayat Raj (PR-1) Department and consequential orders of the third respondent dated 17.04.2009 and 25.02.2009 respectively and quash the same.
For petitioners : Mr.K.Selvaraj
For Respondents : Mr.P.S.Raman,Advocate General
Assisted by
Mr.M.Dhandapani,Spl.G.P.
For RR1 & 2
C O M M O N O R D E R
These writ petitions came to be posted before this Court on being specially ordered by the Honble Chief Justice vide order dated 21.07.2010.
2. Heard the learned counsel for the petitioner and Mr.P.S.Raman, learned Advocate General assisted by Mr.M.Dhandapani, learned Special Government Pleader for the respondents 1 and 2.
3. The petitioners are running educational institutions located under the third respondent Thozhudur Panchayat and Marungur Panchayat respectively. The prayer of the petitioners is to call for the records relating to the order of the first respondent dated 05.03.2008 in G.O.Ms.38 Rural Development and Panchayat Raj (PR-1) Department and consequential orders of the third respondent dated 17.04.2009 and 25.02.2009 respectively and quash the same.
4. The learned counsel drew inspiration from the judgment of the Supreme Court in T.M.A.Pai Foundation and others v. State of Karnataka and others reported in (2002) 8 SCC 481 to contend that imparting education cannot be done by the State alone and private educational institutions have a role to play. Therefore, in the interest of education, the Government should grant wholesale exemption to all the educational institutions as the Supreme Court has held that such motives are charitable in nature. Infact the unamended rule was interpreted by a Division Bench of this Court in Sriram Educational Trust, represented by its Chairman v. The President, 89, Perumalpattu Panchayat Union, Thiruvallur Taluk and District reported in 2008 (1) CTC 449. The view expressed was that educational institutions of all types are eligible to get exemption. Therefore, he prayed for setting aside the amendment making a new classification.
5. However, this Court is unable to accept the contention putforth by the learned counsel. First of all reliance placed by the learned counsel on the decision of the Division Bench in Sriram Educational Trust’s case (cited supra), is misconceived since the ratio of the judgment has been reversed by a Full Bench of this Court in The President, K.Vellakulam Panchayat, Kallikudi Chatram, Madurai District v. Kamaraj College of Engineering and Technology, Managing Board, rep. By its Secretary, S.P.G.C.Srimurugan reported in 2009 (5) CTC 289. The Full Bench while reversing the view taken by the Division Bench dealt with the scope of the taxing power of a village panchayat and the constitutional scheme under which the power has been delegated including the effect of the power of exemption granted by the State.
6. In paragraphs 13,17 and 18, the Full Bench observed as follows:
“13). From the aforesaid constitutional provisions and State enactments, while it will be evident that Parliament, with a view to empower the Village Panchayat to have its own financial resources, inserted Article 243-H empowering the State Government to legislate authorizing a Panchayat to levy and collect appropriate taxes, duties, tolls and fees in accordance with the procedure prescribed by the State; the State of Tamil Nadu, in terms with Article 243-H empowered the Village Panchayat to levy house tax. Under sub-section (1) of Section 171, the Village Panchayats have been mandated to levy such house tax on all houses in every Panchayat Village. Under Section 176 while it has been mandated not to grant any exemption from payment of surcharge or tax specified under Section 168 or 171, the Panchayats have been empowered to grant such exemption only in accordance with the Rules as prescribed by the State. Therefore, it is the Panchayat which has the authority to decide whether it will grant exemption or not and if it so decides to grant exemption from payment of tax under Section 171 it requires to follow the procedure as prescribed under the rules. In view of the aforesaid provision of Article 243-H and Section 171(1) r/w Sections 172 and 176, the State Government cannot force the Panchayat to grant exemption of tax to one or other category of person or building
17). We have already noticed that Rule 15 is a subordinate legislation which cannot override the substantive provisions of the Act such as Sections 171(1), 172 and 176. Section 171(1) mandates the Village Panchayat to levy house tax on all the houses of the Village Panchayat. The mandate is also clear from Section 172, wherein the basis of levy of house tax has been prescribed. There is a prohibition from grant of exemption of surcharge or tax under Section 176 except in accordance with the rules. Therefore, if Rule 15 is read with the aforesaid Sections 171,172 and 176, it is to be held that under Rule 15 it is not mandatory to grant exemption from house tax, but is an enabling provision allowing the Village Panchayat to grant exemption to a class of buildings as specified therein, if it so chooses. Rule 15 cannot be held to be mandatory to exempt class of buildings from payment of house tax, which otherwise will run counter to Sections 171, 172 and 176 of the Act and may render Rule 15 ultra vires. Therefore, the word “shall” used in Rule 15 has to be read as “may” to give effect to the said rule of exemption.
18). We accordingly, hold that the exemption prescribed under Rule 15 is not mandatory and is an enabling provision empowering the Village Panchayat or Panchayat Union to grant exemption to a class of buildings as specified therein. The corollary is that it is open for the Village Panchayat or Panchayat Union not to grant such exemption in favour of one or other class of such buildings. The Court cannot force the Panchayat to exercise its discretionary power to grant exemption to one or other class of buildings in absence of any decision taken by the Village Panchayat or Panchayat Union to grant such exemption. Once a Village Panchayat or Panchayat Union takes a decision to grant exemption in favour of one or other class of buildings, only in that case no discrimination can be made between two similarly situated persons and no order can be passed in an arbitrary manner.”
(Emphasis added)
7. Notwithstanding the decision of the Full Bench, the learned counsel for the petitioner contended that in respect of institutions located in areas coming under Municipalities and Municipal Corporations, a total exemption is given from the Property Tax levied by such local bodies whereas Panchayat are charging Property Tax and that is discriminatory.
8. While challenging the vires of tax levied by a Panchayat, one can only look into the provisions of the Panchayat Act. Similar legislations applied to other bodies cannot be telescoped into the present law to decide the vires of the tax levied. In this context, it is necessary to refer to the judgment of the Supreme Court in State of Tamil Nadu and others v. Ananthi Ammal and others reported in (1995) 1 SCC 519, wherein in paragraphs 6 and 7, it was held as follows:-
“6. In State of M.P. v. G.C. Mandawar a Constitution Bench held that Article 14 does not authorise the striking down of the law of one State on the ground that, in contrast with the law of another State on the same subject, its provisions are discriminatory, nor does it contemplate the law of the Centre or of a State dealing with similar subjects being held to be unconstitutional by a process of comparative study of the provisions of the two. The sources of authority for the two being different, Article 14 can have no application. In Sant Lal Bharti v. State of Punjab this was reiterated.
7. When a statute is impugned under Article 14 what the court has to decide is whether the statute is so arbitrary or unreasonable that it must be struck down. At best, a statute upon a similar subject which derives its authority from another source can be referred to, if its provisions have been held to be reasonable or have stood the test of time, only for the purpose of indicating what may be said to be reasonable in the context. We proceed to examine the provisions of the said Act upon this basis.”
Hence, the challenge on that ground must fail.
9. Even on the question of drawing inspiration from T.M.A. Pai Foundation’s case (cited supra), the 11 Judges’ Bench made a distinction between an aided institution and an unaided institution while answering question Nos.5(b) and (c). The respective questions and answers furnished by the Supreme Court may be usefully extracted below:-
“Q.5.(b) Whether the minority institutions right of admission of students and to lay down procedure and method of admission, if any, would be affected in any way by the receipt of State aid?
A. While giving aid to professional institutions, it would be permissible for the authority giving aid to prescribe bye-rules or regulations, the conditions on the basis of which admission will be granted to different aided colleges by virtue of merit, coupled with the reservation policy of the State qua non-minority students. The merit may be determined either through a common entrance test conducted by the university or the Government concerned followed by counselling, or on the basis of an entrance test conducted by individual institutions the method to be followed is for the university or the Government to decide. The authority may also devise other means to ensure that admission is granted to an aided professional institution on the basis of merit. In the case of such institutions, it will be permissible for the Government or the university to provide that consideration should be shown to the weaker sections of the society.
Q.5.(c) Whether the statutory provisions which regulate the facets of administration like control over educational agencies, control over governing bodies, conditions of affiliation including recognition/ withdrawal thereof, and appointment of staff, employees, teachers and principals including their service conditions and regulation of fees, etc. would interfere with the right of administration of minorities?
A. So far as the statutory provisions regulating the facets of administration are concerned, in case of an unaided minority educational institution, the regulatory measure of control should be minimal and the conditions of recognition as well as the conditions of affiliation to a university or board have to be complied with, but in the matter of day-to-day management, like the appointment of staff, teaching and non-teaching, and administrative control over them, the management should have the freedom and there should not be any external controlling agency. However, a rational procedure for the selection of teaching staff and for taking disciplinary action has to be evolved by the management itself.
For redressing the grievances of employees of aided and unaided institutions who are subjected to punishment or termination from service, a mechanism will have to be evolved, and in our opinion, appropriate tribunals could be constituted, and till then, such tribunals could be presided over by a judicial officer of the rank of District Judge.
The State or other controlling authorities, however, can always prescribe the minimum qualification, experience and other conditions bearing on the merit of an individual for being appointed as a teacher or a principal of any educational institution.
Regulations can be framed governing service conditions for teaching and other staff for whom aid is provided by the State, without interfering with the overall administrative control of the management over the staff.
Fees to be charged by unaided institutions cannot be regulated but no institution should charge capitation fee.”
(Emphasis added)
10. The Supreme Court itself has made the distinction between an aided institution and an unaided institution being subject to two different systems of control. While the aided institution is liable for a greater control by the laws made by the State, an unaided institution is not subject to similar control. Infact on the question of fee to be charged by unaided institution, there is no such restriction as seen from the above passage. The unaided institutions were always subject to House tax which law has also been made clear by the Full Bench. The present amendment excludes the exemptions granted to an aided institutions starting self financing courses in the same premises, thereby earning revenue. The State is not obliged to exempt such institution on the lines which was followed before the impugned amendment.
11. In the matter of exemption of a taxing statute, it is for the State to make proper classification. It cannot be said such classifications are hit by Article 14 either on the ground of it being a class legislation or that such a tax will amount to arbitrary exercise of power. In this context, it is necessary to refer to the decision of the Supreme Court in R.K. Garg v. Union of India reported in (1981) 4 SCC 675, wherein in paragraph 8 it was held as follows:
“8. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J., that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud where Frankfurter, J., said in his inimitable style:
“In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events – self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability.”
The Court must always remember that “legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry”; “that exact wisdom and nice adaption of remedy are not always possible” and that “judgment is largely a prophecy based on meagre and uninterpreted experience”. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Roig Refining Company be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues”.
12. On the question of discrimination in the grant of exemption in a taxing statute, the Supreme Court in Sri Krishna Das v. Town Area Committee, Chirgaon reported in (1990) 3 SCC 645, in paragraph 31 observed as follows:-
“31. The contention that the tax is discriminatory in view of the exemptions granted to some of the products and to those that enter the TAC by rail or motor transport is equally untenable. It is for the legislature or the taxing authority to determine the question of need, the policy and to select the goods or services for taxation. The courts cannot review these decisions. In paragraph 16 of the counter-affidavit the TAC tried to explain the reason for not taxing salt, sugar and rice stating that they were not local produce but were imported from distant places and that the tax was levied only on the local produce which came from the neighbouring places. Courts cannot review the wisdom or advisability or expediency of a tax as the court has no concern with the policy of legislation, so long as they are not inconsistent with the provisions of the Constitution. It is only where there is abuse of its powers and transgression of the legislative function in levying a tax, it may be corrected by the judiciary and not otherwise. Taxes may be and often are oppressive, unjust, and even unnecessary but this can constitute no reason for judicial interference. When taxes are levied on certain articles or services and not on others it cannot be said to be discriminatory. Cooley observes: “Every tax must discriminate; and only the authority that imposes it can determine how and in what directions.” The TAC having decided to impose weighing dues on the goods mentioned in the bye-laws it is not for the court to question it on the ground that some similar commodities or commodities arriving by rail or road were not subjected to the tax.”
13. In the light of the above, this Court is not inclined to entertain the writ petitions. Hence, the writ petitions will stand dismissed. No costs. Consequently, connected miscellaneous petitions will also stand dismissed.
svki
To
1.The Secretary to Government,
The State of Tamil Nadu,
Rural Development and
Panchayat Raj Department,
Fort St.George, Chennai -9.
2.The Director of Rural Development
and Panchayat Raj,
“Panagal Building”,
Saidapet, Chennai 600 015.
3.The President,
Thozhudur Panchayat,
Thozhudur,
Mangalur Panchayat Union,
Tittakudi Taluk,
Cuddalore District 606 303.
4.The President,
Marungur Panchayat,
Marungur, Panruti Taluk,
Cuddalore District 607 103