ORDER
M.S. Shah, J.
1. Rule. In the facts and the circumstances of this case, the petition is taken up for final disposal today and the learned advocates for the parties have been heard at length.
2. This petition by a former president of the Nadiad Municipality challenges the order dated 27th November, 2001 (Annexure A) passed by the Director of Municipalities under Section 70(1) of the Gujarat Municipalities Act, 1963 (“the Act” for brevity) requiring the petitioner to pay the municipality a sum of Rs. 1,00,989/-.
3. The petitioner was elected as a councillor of Nadiad Municipality for the period between 1994 to 1999. The petitioner was elected as the President of the Municipality for the period between 10-1-1998 and 10-1-1999. By the notice dated 27-7-1999, the Director of Municipalities, Gujarat State (“the Director” for brevity) called upon the petitioner to show cause why the petitioner should not be required to pay an amount of Rs. 1,00,989/- to the Municipality on the ground that the petitioner had caused the loss of the said amount to the Municipality by employing 20 daily rated employees for collection of tax and octroi for the period between December 1998 to March 1999. It was also alleged that before making such appointment of employees on fixed salary basis, the petitioner had not taken prior permission of the competent authority and had run the administration in an arbitrary manner. Hence, the aforesaid notice was issued under Section 70 of the Gujarat Municipality Act, 1963 (hereinafter referred to as ‘the Act’).
4. In her reply dated 2nd January, 1999, the petitioner raised certain contentions and also submitted her defence on merits.
(i) The proceedings under Section 70(1) of the Act can be initiated only against the councillors and not against the President of the Municipality or against a person in respect of the functions performed by a councillor as the President of the Municipality.
(ii) The octroi Inspector of the Municipality submitted a report dated 14-11-1998 regarding inadequate staff for collection of taxes and therefore, daily rated employees were required to be appointed on temporary basis and therefore, 20 daily rated employees were appointed on the fixed salary for the period of only four months from December 1998 to March 1999. On account of the said additional staff, the income of the municipality had increased from Rs. 4,30,48,468/- in the previous year to 4,38,22,976/- for the year Under consideration i.e. 1998-99.
(iii) As against the aforesaid increase in tax collection to the extent of Rupees 7,08,789/, the additional expenditure incurred by the municipality for employing 20 daily rated employees on fixed salary for the period of four months was only Rs. 1,00,989/- Hence, no loss was caused to the municipality by employing the 20 daily rated employees.
(iv) The services of all the 20 daily wagers were terminated with effect from 31-3-1999. Hence the Municipality was not saddled with any future liability. No amount was paid to the employees while discontinuing their employment on 31st March, 1999.
(v) The situation requiring the employment of 20 daily wagers was an emergent situation. If additional staff was not available at the octroi nakas, the octroi nakas might have been required to be closed down. The municipality is permitted to engage 10% of the total set up of the staff as additional staff in an emergent situation. 20 employees in the tax department engaged on daily wages on fixed salary for the aforesaid four months period from December 1998 to March 1999 was within the permissible limit of 10% additional staff.
(vi) After the petitioner stepped down as the President of the Municipality, the Municipality engaged 113 daily rated employees. The list of such workmen was also annexed with the reply dated 2-8-1999.
5. At the hearing before the Director of the Municipalities on 4-10-2001, the representative of the Municipality produced along with the letter dated 3-10-2001 the following documents;
(1) the report dated 14-11-1999 of the Octroi Inspector of the Nadiad Municipality about the shortage of staff and the statement that the services of those daily wagers appointed for four months for tax collection were discontinued from 31-3-1999.
(2) the appointment orders of the daily rated employees along with their salary statement month wise.
(3) the month wise collection of the taxes for the year 1998-99 along with the comparative statement of taxes collected in each corresponding month of the previous year.
(4) the increase in collection of octroi and tax in 1998-99 as compared to the previous year was Rs. 7,08,789/-.
6. It appears that the hearing of the matter was adjourned before the Director from time to time and the petitioner had remained present before the Director on 18-9-2001 with a request to take into consideration the contents of her reply. The learned advocate for the petitioner herein states that another learned advocate for the petitioner appeared before the Director and made submissions on 18-9-2001. It appears that thereafter the aforesaid documents were produced by the municipality on 4-10-2001.
The Director thereafter passed the impugned order dated 27-11-2001 directing recovery of an amount of Rs. 1,00,989/- to be made from the petitioner under Section 70(1) of the Act.
7. Mr. H. J. Nanavati learned advocate for the petitioner has submitted that the impugned order passed by the Director is illegal as the same suffers from non application of mind in respect of the specific case put up by the petitioner in her reply high lighting all the relevant aspects. The Director has not given any reason for not holding that the material produced by the municipality supported the petitioner’s case, especially the fact that there was an increase in the tax collection for the year 1998-99 (as compared to the previous year) by more than Rs. 7,08,789/- and also that the daily rated employees were employed by the petitioner pursuant to the octroi inspector’s report dated 14-11-98, and that their services were terminated upon completion of the work on 31-3-1999. It is submitted that merely on the ground that the petitioner had not obtained the permission from the higher authority before engaging the daily rated employees did not mean that any loss was caused to the municipality when the facts on record indicated the contrary that the Nadiad Municipality collected more taxes after the employment of the daily rated employees who were in any case employed only for four months.
8. On the other hand, Mr. Manish Dagli learned A.G.P. appearing for the respondent-State of Gujarat (served through the Director of Municipalities) has submitted that the petitioner has an alternative remedy available under Sub-section (4) of Section 70 of the Act and, therefore, the petition should not be entertained.
It is further submitted that the finding given by the Director that the petitioner had not obtained permission from the competent authority before appointing daily rated employees is not challenged and therefore the impugned order does not require any interference.
9. It is true that Sub-section (4) of Section 70 provides for the alternative remedy of appeal before the District Court. However, considering the questions of law raised by the petitioner and certain important aspects having a bearing on public administration in our country, the Court has heard the learned advocates for the parties on merits and the Court is inclined to pass an order of remand after laying down certain principles on the question of interpretation of Section 70 of the Act so that the Director of the Municipalities shall re-examine the matter in light of those principles.
10. First, taking up the question whether Sub-section (1) of Section 70 of the Act is applicable to the President of the municipality, Mr. Nanavati learned advocate appearing for the petitioner vehemently submitted that since the statute provides that “every councillor shall be personally liable…………………” the President of the municipality cannot be held liable. On the other had Mr. Manish Dagli learned A.G.P. appearing for the respondents has submitted that the President is as much a councillor as any other councillor of the municipality and the statute does not exclude the President from the liability under Section 70(1) of the Act.
11. The Court finds considerable substance in the submission made by learned A.G.P. Mr. Dagli that Sub-section (1) of Section 70 is applicable to all councillors including the President of the Municipality. There is no dispute about the fact that the President of the Municipality is elected by the councillors from among themselves.
At this stage reference may be made to the relevant provisions of the Act, which read as under :–
Section 31 provides that a municipality shall be presided over by a president who shall be elected by the councillors from among themselves in the manner prescribed by rules made by the State Government.
Section 45 lays down the functions of the president which include watching over the financial and executive administration of the municipality and to exercise supervision and control over the acts and proceedings of all officers and servants of the municipality in matters of executive administration and in matters covering the accounts and records of the municipality, and also doing any act in cases of emergency with expenditure to be incurred from the funds of the municipality.
Sub-section (1) of Section 70 reads as under
“Every councillor shall be personally liable for the misapplication of any fund to which he shall have been a party or which shall have happened through or been facilitated by gross neglect of his duty as a councillor;
Provided that no councillor shall be personally liable in respect of any contract or agreement made, or for any expense incurred by, or on behalf of the municipality; the funds at the disposal of each municipality shall be liable for, and be charged with, all costs in respect of any contract or agreement and all such expenses”.
Looking to the scheme of the Act providing that the President is also one of the councillors and the nature of the administrative powers of the president, there are more chances of the president of the municipality rather than an individual councillor, misapplying the funds of the municipality and therefore, the Legislature could not have intended to exclude the president from the liability for the misapplication of the funds. This is equally applicable to the loss caused to the municipality by gross neglect of his duty by the president. Hence, the first contention of Mr. Nanavati for the petitioner that Sub-section(1) of Section 70 is not applicable to the president of the municipality is hereby rejected.
12. Coming to the next contention on merits, the statutory language makes it clear that a councillor can be held to be personally liable for the misapplication of any fund (the funds of the municipality) provided;
(i) the misapplication is by or pursuant to the decision to which the concerned councillor (including the president) was a party; or
(ii) the misapplication takes place through , or was facilitated by, gross neglect of his duty by the councillor (including the president).
Misapplication of funds of the municipality is therefore, a sine qua non for initiation of proceedings under this provision and such proceedings would not lie merely on the ground of a mere procedural irregularity like not obtaining permission of the higher authority. It appears to the Court that there is considerable substance in the submission made by the learned advocate for the petitioner that when the provision is enacted to compensate the municipality for the loss caused to it on account of any act or omission of the councillor, the authority initiating or conducting the proceedings under Section 70 of the Act must satisfy itself that financial loss had in fact been occasioned to the municipality. Of course the funds may be income of municipality itself or the funds might have been made available by some other public body or agency by way of grant or it may even be any donation made to the municipality but it is only for misapplication of funds entrusted to the municipality that the question of personal liability under this provision can arise. Hence, the proceedings cannot be initiated under Section 70(1) only on the ground of procedural irregularity like not obtaining prior permission from the higher authority. The actual loss must be shown to have been caused to the municipality. It must be clarified at the same time that misappropriation need not necessarily involve misappropriation. The two words are defined as under:–
To
misapply
=
to apply (esp. funds) wrongly
to
misap-
propriate
=
to apply (usually another’s
money)
to one’s own use, or to a wrong use.
(The Concise 1998) Oxford
Dictionary. 9th Edition, 1998)
to
misapply
=
to apply wrongly, to use for a wrong purpose
to
misap-
propriate
=
to put to a wrong use. es-
pecially
to use another’s money for oneself.
(Chamber’s
Family Dictionary – 1990 (Edition)
Misapplication is thus a wider term than misappropriation. It is, therefore not necessary for invoking the provisions of Section 70(1) that the councillor is to be alleged to have derived any personal benefit. Use of the Municipality’s funds for a wrong purpose or causing financial loss to the Municipality through gross neglect of the Councillor is sufficient to fasten the liability on the councillor to compensate the Municipality for the loss caused to it.
13. In the facts and circumstances of the case, the Director has held that the petitioner had caused the loss of Rupees 1,00,989/- to the municipality by employing 20 daily rated employees for the period between December 1998 to March 1999. As against the aforesaid charge, the defence of the petitioner was that the aforesaid additional staff was required to be employed on account of the report dated 14-11-1998 of the octroi inspector which fact was also confirmed by the representative of the municipality who appeared before the Director of Municipalities on 4-10-2001. The petitioner’s case that the employment of the said daily rated employees was only for the period of 4 months for collection of octroi and other taxes and that the services of daily wagers were not continued 31-3-1999, was confirmed by the municipality and the Director has not given any finding adverse to the petitioner in that regard. The Director has also not rejected the petitioner’s case, as confirmed by the municipality, that tax collection of the municipality had gone up by Rs. 7,08,789/- as compared to the taxes collected for the previous year ended March 31, 1998. As against this increase in income, the total salary paid to the 20 daily rated employees by the municipality for the period of four months was only Rs. 1,00,989/-. The Director has brushed aside all these relevant facts by making an observation that it was not clear whether the increase in income was attributable only to the employment of 20 daily wagers. Apart from the fact that the Director ought to have referred to the octroi Inspector’s report dated 14-11-1998 about the paucity of staff on the octroi nakas, the Director also ought to have considered the material produced by the municipality regarding the month wise figures of tax collection for the year under consideration and the previous year. The Director has not given any finding that the tax collection for the months of December 1998 to March 1999 in the year under consideration was less than the tax collection for the corresponding months of the previous year. 14, Another important aspect which has been completely lost sight of by the Director is the fact that the petitioner had specifically pleaded in para 3 of her reply that the staff was so Inadequate that even after the petitioner stepped down as the president in January 1999, the municipality had engaged 113 daily rated workmen. A list of such workmen was enclosed with the petitioner’s reply. It appears from the impugned order that in letter No. 977, dated 3-10-2001 of the Municipality produced before the Director, the above averment was not disputed or explained, still the Director did not choose to call for the necessary details from the municipality. The Court, therefore, finds some substance in the submission of the learned advocate for the petitioner that when no proceedings are initiated against the subsequent president of the Nadiad Municipality for employing such large number of daily rated workmen, it Indicates that there was justification for the petitioner in employing 20 daily rated employees for four months for tax collection in view of the octroi inspector’s report dated 14-11-1998.
When the additional tax collected in the year ended 31-3-1999 was seven times more than the salary paid to the daily rated employees, more particularly when no future liability of the municipality was created (as those daily wager employees were not continued in employment after 31-3-1999) and subsequently the municipality did employ 113 dally rated workmen after the petitioner ceased to hold the office of the president of the municipality, the Director ought not to have proceeded further against the petitioner. There is of course nothing on record to indicate as to whether the employment of those 113 daily rated workmen was for any project other than the tax collection work and whether the approval of the competent authority was obtained. The matter was, therefore, required to be looked into by the Director from this angle also.
15. The learned A. G. P. has however submitted that payment of salary of Rs. 1,00,989/- to 20 daily rated employees appointed without prior permission of the competent authority per se was misapplication of the funds of the municipality and therefore, the petitioner has been rightly held to be liable to make good the loss to the municipality.
16. The Court has already touched this aspect in para 12 hereinabove. The court would further like to observe that the submission of the learned A.G.P. not only overlooks the object of the statutory provision but reflects typical bureaucratic mentality and attitude which has been causing tremendous harm to public administration in our country. The impression seems to have gone round amongst various statutory functionaries and holders of public offices, high and low, functioning in the midst of a maze of procedural rules in any field that if any action required to be taken in public interest is likely to expose the functionary to the charge of violation of technical procedure, the functionary considers it safe in personal interest not to act at all rather from take the risk of facing any proceedings for such action. If no work is done, nobody is going to find fault with him, because if he does not work, there would be no possibility of charge of violation of procedural rules. This approach aggravated by insensitivity to the needs and hardships of the people has become so endemic that the initiative of a large number of public functionaries and officials has been curbed to the detriment of the society.
17. This is not to say that public functionaries or officials in discharge of their public duties are not required to follow the prescribed procedure, but in a given case when there is any allegation of violation of the prescribed procedure, the disciplinary authority or the concerned authority must consider not only the factum of violation of the procedural rule but also the object of the procedural rule, the financial stakes involved in the transaction in question and in other transactions being ordinarily handled by the concerned individual as a part of his official duties, urgency of the work, time being ordinarily consumed in following the prescribed procedure or the time being ordinarily taken by the higher authority for granting prior sanction, whether the procedure is substantially complied with, whether the action is capable of ex-post facto approval, whether the decision was taken by an individual or a body, whether the body had relied upon the qualifications, skill and judgment of the individual in question, the nature and extent of the, responsibilities cast upon such individual, the nature and extent of the positive work, if any, done by the public functionary/official, certainty and magnitude of the loss caused to the public authority by the act or omission in question, the nature and extent of the work not done by the concerned individual who is charged with not utilizing the funds for the purpose earmarked and the possibility of top pedantic an application of a procedural rule with only a fault finding approach paralysing honest public functionaries/ officials in the discharge of their discretionary duties for the fear of some proceedings being Initiated against them. The authority will have to judge the cumulative effect of all such relevant considerations in the facts and circumstances of a given case.
This is also not to say that any mala fide act done by a public functionary/official in violation of a mandatory rule is to be condoned on the ground that the violation was only of a procedural rule. It is trite saying that bona fides or mala fides are not to be judged merely on the basis of compliance or violation of a procedural rule because an act may be in compliance with a procedural rule and still be mala fide, just as an act may be bona fide notwithstanding the violation of a procedural rule, what is being emphasized is the need not to overlook the broad perspective discussed earlier. Unless this perspective is kept in mind, too technical and pedantic an approach on the part of disciplinary authorities or authorities exercising similar powers with single minded. obsession to the breach of a procedural rule per se can do, and has been doing, considerable damage to the morale of the public functionaries and officials acting honestly and bona fide and their initiative has been curbed; and has even been making a large
number of honest and talented persons shun such responsible public offices.
18. In view of the above discussion, it is clear that the impugned order dated 27-11-2001 suffers from the vice of non application of mind as the Director has not considered the relevant facts and aspects and merely observed that the petitioner had not obtained the sanction of the higher authority and that the petitioner has not produced any evidence to show that the increase in the tax collection was only on account of employment of 20 daily rated employees in question. If the Director was of the view that any clarification was required from the municipality the Director ought to have called upon the municipality to submit the necessary information.
19. For the aforesaid reasons, the impugned order dated 27th November, 2001 (Annexure A) passed by the Director of the Municipalities is herby quashed and set aside and the matter is remanded to the Director of Municipalities for considering the matter afresh, after giving an opportunity of hearing to the petitioner and to the municipality and in light of the observations made in this judgment.
20. Rule is made absolute to the aforesaid extent with no order as to costs.