SURI PRITHVI COTTON MILLS LTD. & ANR. versus BROACH BOROUGH MUNICIPALITY & ORS.

Citation: [1970] 1 S.C.R. 388 · Decided: 25-04-1969 · Supreme Court of India · Bench: M. HIDAYATULLAH · Disposal: Dismissed

Cited by 39 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

388 
SURI PRITHVI COTION MILlS LTD.&: ANR. 
v. 
BROACH BOROUGH MUNICIPALITY & ORS. 
April 25, 1969 
[I\i. HIDAYATULLAH, C.J., J. M. SHELAT, V. BHARGAVA, 
B 
K. S. HEGDE AND A. N. GROVER, JJ.] 
Bombay M1u1icipal Boroughs A.cl, 1925, s. 13-Uvy of 'rare' on tax 
and buildings-'Rate' held not to include tax on capital value or percen. 
rage of cpi1al value-Defect Sought IO be removed by Gujarar Imposition 
of Taxes by Municipalities (Validation) Act, 1963-Enacrmenr of s. 99 of 
Gujarat Municipalities Act to give power to municipalities to levy tax on 
capital value or percentage of capital value of lands and buildingt-
Powor of Stare ugislature undtr item 49 List II of Seventh Schedt 'e ro 
Constitution levy tax on capital value of buildings-Elficacy of V tu .. !e.. •ing 
Act-Principles on which retrospective validation can be upheld .. 
Section 73 of the Bombay Municipal Boroughs Act, 1925 allows the 
municipality to levy 'a rate on building or lands or both situate within the 
municipality'. The Rules under the Act applied the rates on the basis df 
the percentage on the capital value of lands and buildings. 
In Patti 
Gordhandas Hargovindas v. Municipal Commissionor, Ahmedabad, [1964] 
2 S.C.R. 608 this Court held that the term 'rate' must be given the special 
meaning it had acquired in English law and must be confined to an impost 
on the basis of the annual letting value; it could not be validly levied on 
the basis of capital value though capital value could be used for the pur-
pose of workin' out the annual letting value. 
Paced with this decision 
the Gujarat Legislature pasoed the Gujarat Imposition of Taxes by Munici-
palities (Validation) Act. 1963. By s. 3 of this Act pest a.uessment and 
collection of 'rate' on lands and buildings on the basis of capital value or a 
percentage o! capital value was declared valid despite any iudgment of a 
court or Tribunal to the contrary, and future assessment and collection on 
the basis of cal'ital value for the ocriod before and after the Validation 
Act was authorised. 
At the same time s. 99 was enacted in the Gujarat 
Municipalities Act to provide for the levy·of a tax on lands and buildinll' 
'lo be ba!icd on the annual letting value or the capital value or a percen-
tage of capital value of the buildings or lands or both." 
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Appellant No. I was a company carrying on the manufacturers of 
cotlon goods al Broach. It was B!!essed for the assessment years 1961-62, 
1962-63 and 1963-64 to a rate on lands and buildings under s. 73 of the 
Bombay Municipal Borou,hs Act on the basis of a percentaRe 
of the 
capital value. 
It filed wnt petitions in the High Court challenging 
the 
uid as~csscnents. After the Validation Act of 1963 was passed it amend-
G 
ed the petitions to challenae the validity and efficaciousness of s. 3 of the 
said Act. The Hi~h ·Court dismissed the writ petitions. 
Appeals with 
certificate were flied before this Court. 
HELD : (I) When a le.•islature sets out to validate a tax declared by a 
court to he illegally collecred under an ineffective or invalid law, the call!e 
for ineffectiveness or invalidity mult he removed befdrc validation can be 
H 
said to take place effectively. 
The most imoortant condition is that the 
leei .. t:iture must pos<;e<;o:; the power to impose the t1tx, for if it d~ not. 
the action must ever r"'main ineffective and illegal. 
Granted le~is1~tive 
competence it is not sufficient to .declare merely that the decision of the 
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PRITHVI: MILLS V. BROACH MUN!C. 
389 
court shall , not biud, for that is tantamount to reversing the decision in 
exercise of judicial wwer .which the legislature does not possess or exer-
cise. 
A Court's decision must always 
bind unless 
the conditions on 
which it is based are so fundamentally altered that the decision could not 
have been given in the altered circumstances, [392 H-393 BJ 
Ordinarily, a court bolds a tax to be invalidly imposed because the 
power to tax is wanting or the statute or the rules or both are invalid or 
do not sufficiently createJ'urisdiction. Validation 
of a tax so declared 
illegal ma7 be dono only · the grounds elf illegality or invalidity are capa-
ble of being relllOftd. and are in fact removed and the tax thus made legal. 
Sometimes this la done by providing for jurisdiction where jurisdiction bas 
not been properly invested before. Sometimes this is done by re-enacting 
retrowectively a valid an4 le"1 taxing provision and then by fictio

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