1984 (1) TMI 63 - SC - Income Tax

Interim relief vacated for blocking municipal revenue under amended ss. 123-124; must balance ratepayer harm and service disruption

SC set aside the HC's interlocutory order that restrained the municipality from recovering a graduated consolidated rate under the amended ss. 123-124 of ... Interlocutory order restraining municipality from recovering a graduated consolidated rate on the annual value of the holdings in terms of the amended provisions in ss. 123 and 124 of the Bengal Municipal Act, 1932, as amended by the Bengal Municipal (Amendment) Act, 1980 - HELD THAT:- The only consideration at that juncture is to ensure that no prejudice is occasioned to the rate payers in case they ultimately succeed at the conclusion of the proceedings. The court has to show awareness of the fact that, in case like the present, a municipality cannot function or meet its financial obligations if its source of revenue is blocked by an interim order restraining the municipality from recovering the taxes as per the impugned provision. And that the municipality has to maintain essential civic services like water supply, street lighting and public streets, etc., apart from running public institutions like schools, dispensaries, libraries, etc. What is more, supplies have to be purchased and salaries have to be paid. The grant of an interlocutory order of this nature would paralyze the administration and dislocate the entire working of the municipality. It seems that these serious ramifications of the matter were lost sight of while making the impugned order. We mean no disrespect to the High Court in emphasizing the necessity for self-imposed discipline in such matters in obeisance to such weighty institutional considerations like the need to maintain decorum and comity. So also we mean no disrespect to the High Court in stressing the need for self-discipline on the part of the High Court in passing interim orders without entering into the question of amplitude and width of the powers of the High Court to grant interim relief. The order passed by the High Court is set aside. Issues involved: Interlocutory order restraining municipality from recovering graduated consolidated rate u/s 123 and 124 of Bengal Municipal Act, 1932 as amended by Bengal Municipal (Amendment) Act, 1980.Judgment Details:The Supreme Court expressed concern over the trend of High Courts granting interlocutory orders too easily, emphasizing that stays on tax recovery should be exceptional, not the norm. The Court highlighted that the mere filing of a writ petition does not render a levy invalid, and the focus should be on preventing prejudice to rate payers. It was noted that requiring the levying authority to give an undertaking to refund or adjust the levy if found invalid is a suitable approach, rather than immediately halting tax collection. The Court recognized the need to balance protecting taxpayers with ensuring the municipality's ability to provide essential services and meet financial obligations.The Court criticized a previous instance where an interim order was vacated by a Division Bench but later reinstated without proper reasoning. Emphasizing the importance of self-discipline and institutional respect, the Court urged High Courts to carefully consider the implications of interim orders on public interest and institutional functioning. The Court stressed the necessity of maintaining decorum and comity in such matters and highlighted the importance of striking a delicate balance between preserving public interest and avoiding irreparable harm.In conclusion, the appeal was allowed, setting aside the High Court's order restraining the municipality from collecting the graduated consolidated rate. The Siliguri Municipality undertook to refund the rate difference if the writ petition succeeded. No costs were awarded in the case.