Suganmal vs State Of Madhya Pradesh And Ors.

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Not extracted

Decision Date: 4 November, 1964

Coram: J.R. Mudholkar, K.N. Wanchoo, M. Hidayatullah, P.B. Gajendragadkar, Raghuber Dayal

In this matter the Supreme Court of India, sitting as a bench comprising Justices J. R. Mudholkar, K. N. Wanchoo, M. Hidayatullah, P. B. Gajendragadkar and Raghubar Dayal, heard an appeal by special leave from a petition filed under article 226 of the Constitution. The petition had been presented by the appellant, seeking a writ of mandamus against the State of Madhya Bharat, the Special Tax Commissioner and the Assessing Office of Industrial Tax. The relief claimed was the refund of Rs. 62,809‑5‑2, which the appellant alleged had been illegally collected by the Industrial Tax Officer during the years 1943 to 1948 on account of industrial tax. The High Court had dismissed the petition on a number of grounds. The appellant, identified as the managing proprietor of Bhandari Iron and Steel Company, operated a foundry at Shilnath Camp in Indore where the enterprise engaged in mechanical engineering, and in the founding and re‑rolling of iron, brass and malleable iron. At the relevant time the Indore State was governed by the Indore Industrial Tax Act, 1927, which imposed an industrial tax upon cotton mills, and the Indore Excess Profits Duty Order, 1944, which required payment of excess‑profits duty. Although the company did not run a cotton mill, it complied with the statutory requirement to file returns and to deposit industrial tax wherever its balance‑sheet reflected profits. Consequently the company paid an advance of Rs. 18,234‑5‑2 in 1944 toward industrial tax before any provisional assessment was made. The provisional assessment for the years 1941‑43 was issued in 1945 and for 1945‑46 in 1946, and the tax liability was fixed at Rs. 62,809‑5‑2. After deducting the advance already paid, the appellant deposited a further Rs. 44,575 on or before 9 June 1948. The tax for the various years was finally assessed in 1951 and 1952. The appellant challenged the assessment orders before the appellate authority; those appeals were decided in June 1955. The appellate authority allowed the appeals on the ground that the company was not liable to pay industrial tax because it did not carry on any business that fell within the scope of the tax, and accordingly set aside the assessment orders. However, the appellate authority did not issue any direction for the State to refund the tax that had already been collected from the appellant.

Following the appellate decision, the appellant approached several officers of the State Government of Madhya Bharat seeking a refund of the tax amounting to Rs. 1,37,770‑14‑2. The appellant had first requested the appropriation of Rs. 37,951‑7‑0 as excess‑profits duty from the total sum of Rs. 1,75,722‑5‑2 that it had paid in respect of both tax and excess‑profits duty. The Government complied with the appellant’s request by adjusting the amounts due for excess‑profits duty and subsequently refunded a portion of the sum. The amount refunded by the Government, as recorded, was Rs. 74,961‑9‑0, which was paid after 26 January 1950, the date on which the Constitution came into force. The Government, however, declined to admit the claim for a refund of the Rs. 62,809‑5‑2 that had been realized from the appellant prior to that date, and therefore refused to return that particular amount.

The State refunded Rs 74,961‑9‑0 that had been paid after 26 January 1950, the date on which the Constitution came into force. However, the same authority refused to admit the claim for a refund of Rs 62,809‑5‑2 that had been realised from the appellant prior to that date, and consequently denied any return of that amount. When the State declined to refund the latter sum, the appellant instituted a writ petition seeking the issue of a writ of mandamus against the State of Madhya Bharat and the other respondents. The petition asked the respondents to perform their statutory duty and/or to cause the refund of Rs 62,809‑5‑2, which the appellant alleged it was legally entitled to receive. The respondents contested the claim, and the High Court dismissed the writ petition. The High Court held that there was no statutory obligation on the State to refund the amount, that the order of the appellate authority did not necessarily impose a refund duty on the State, and that a writ of mandamus could not be issued for the purpose of refunding tax wrongly realised as held by the appellate authority, because such an order would amount to executing the decisions of the appellate authority. The appellant obtained special leave to appeal this order of the High Court. Two questions arise for determination in this appeal. The first question is whether a petition under article 226 of the Constitution that prays solely for the refund of money alleged to have been illegally collected by the State as tax is maintainable under article 226. The second question is whether a writ of mandamus, if a case for its issue is made out, can be issued under article 226 for the refund of taxes collected prior to the coming into force of the Constitution, although the final assessment was made after 26 January 1950 and was later set aside by the appellate authority. On the first point, it is the view of the Court that, although the High Court possesses the power to pass any appropriate order in the exercise of the powers conferred by article 226, a petition that solely seeks a writ of mandamus directing the State to refund the money is not ordinarily maintainable. The reason is that a claim for such a refund can always be pursued in a suit against the authority that illegally collected the money as a tax. The Court has been referred to cases in which orders were issued directing the State to refund taxes illegally collected, but all such cases involved petitions that challenged the validity of the assessment and sought consequential relief for the return of the illegally collected tax. No case has been cited in which the courts were approached under article 226 merely for the purpose of obtaining a refund of money due from the State because of its illegal exaction. The Court does not consider it proper to extend the principle that justifies a consequential order directing the refund of amounts illegally realised, when the order under which the amounts were collected has been set aside, to cases in which only orders for the refund of money are sought. The parties had the right to question the illegal assessment orders on the ground of their illegality or unconstitutionality and could therefore invoke article 226 for the protection of their fundamental right. The Courts, on setting aside the assessment orders, exercised their jurisdiction in proper circumstances to order the consequential relief for the refund of the tax illegally realised. The Court finds no good reason to extend this principle, and therefore holds that, as a general rule, no petition for the issue of a writ of mandamus will be entertained solely for the purpose of ordering a refund of money to which the petitioner claims a right.

The Court stated that it would not consider it appropriate to broaden the principle that allows a consequential order for refund of illegally obtained amounts. It further held that this principle could not be extended to cases where the petitioner only seeks a direct order for refund of money. The parties possessed the right to challenge the assessment orders on grounds of illegality or unconstitutionality, and therefore they could invoke Article 226 to protect their fundamental rights. When the courts set aside those assessment orders, they exercised jurisdiction to grant consequential relief in the form of refund of the illegally realized tax. The Court found no satisfactory reason to apply this reasoning to petitions that merely request a writ of mandamus for the return of money claimed as a right. Consequently, the Court held that such petitions would not ordinarily be entertained because the remedy of a civil suit remained available to the aggrieved party. The Court then cited the decision in Sri Satya Narain Singh v. District Engineer, P.W.D., to illustrate its position. In that case, the petitioner had originally prayed for several reliefs under Article 226, but some of those prayers were unavailable when the High Court rendered its order. He therefore limited his request to a single relief, seeking a directive that the State allow an abatement of rent due to the exemption of state‑owned roadway buses from toll liability. A single judge granted the prayer as presented, but on appeal the Division Bench dismissed the petition, holding that the petitioner was not entitled to rent abatement. The Bench explained that while the petitioner might claim rent or licence fee abatement under general law, such relief could be pursued only through a civil suit, not through proceedings under Article 226. The Court also observed that no lawful order existed exempting roadway buses from paying tolls, and therefore the petition for rent abatement could not succeed. Nevertheless, because the petitioner had asked for any other relief, the Court found no obstacle to granting appropriate relief. It consequently issued a writ of mandamus directing the State to pay full tolls for every crossing of the roadway buses during the relevant period. The Court clarified that this case did not involve enforcement of a contractual liability of the State Government. Instead, it concerned the State’s refusal to pay tolls that it was required to pay under Section 15 of the Northern India Ferries Act, 1878. The Court concluded that the decision in that case could not be invoked to support the argument that a petition solely seeking a writ of mandamus for refund of tax or any other money due from the State is normally maintainable. The Court also indicated that it might refer to another authority.

In referring to the decision in Burmah Construction Co. v. State of Orissa 1, the Court noted that the petition before that case sought a writ directing the State of Orissa to refund the sales tax amount and the penalty imposed on the appellant. Shah J., speaking for the bench, observed that a High Court ordinarily declined to entertain a petition under article 226 of the Constitution that aimed to enforce a civil liability arising from a breach of contract or a tort by ordering the payment of money to the claimant, and that the usual course was to leave the aggrieved party to pursue the claim in an ordinary civil suit. However, the judge added that on occasion a writ under article 226 could be used against the State or a State officer to enforce a statutory duty that required payment of money.

The Court then held that, as a general rule, petitions that solely prayed for the repayment of money from the State by way of a writ of mandamus were not to be entertained. The Court explained that the party who suffered the loss retained the right to approach a civil court for the recovery of the amount, and that the State was free to raise every defence that might be available in a civil action. Such defences, the Court observed, could not usually be properly presented or examined within the limited scope of writ jurisdiction.

Turning to the second question, the Court considered whether the petitioner was entitled to a writ of mandamus for the restitution of tax that had been collected before the Constitution came into force. After examining the materials, the Court concluded that the appellant had failed to establish a case that warranted the issuance of a writ of mandamus for that purpose.

The Court subsequently referred to a recent decision of this Court in State of Madhya Pradesh v. Bhailal Bhai 2. In that matter, the assessee, through a writ petition, contested the validity of the tax assessments made against him and also asked for consequential relief in the form of a refund of the taxes that had been collected. The Court held that the High Court possessed the authority, for the purpose of enforcing fundamental rights and statutory rights, to grant consequential relief by ordering the repayment of money that had been realised by the Government without legal authority. The Court then listed the various factors that must be examined when deciding whether to grant such a consequential order. In quoting the observations on page 1011, the Court reiterated that the special remedy provided by article 226 was not intended to completely replace the ordinary civil‑court route for obtaining relief, nor to deny the State the legitimate defences that are normally available in a civil suit. It was emphasized that the power to grant relief under article 226 was discretionary, especially when the writ sought was of the mandamus type, and that the High Courts must duly consider the relevant matters before exercising that discretion.

The Court explained that when exercising its discretionary authority under article 226, a High Court must consider several relevant factors. One important factor was the length of time the aggrieved party had waited before seeking the special remedy and the reason for any delay. Another factor concerned the complexity of the factual and legal questions that needed resolution in order to determine whether consequential relief was appropriate. The Court illustrated these principles with a situation in which a person approached the Court seeking relief under article 226 on the ground that he had been assessed tax under a legislative provision that was later held to be void, and that he had paid that tax by mistake. Even if the Court found that the assessment was indeed void and the payment was a mistake, it was not automatically required to order repayment. The decision to direct repayment rested on the Court’s discretion, which had to be exercised after examining the particular facts and circumstances of each case. The Court noted that it was neither easy nor desirable to lay down a rigid rule that would apply universally. However, as a general principle, the Court stated that where there has been an unreasonable delay, it ordinarily should not assist the party by invoking the extraordinary remedy of mandamus. Furthermore, even in the absence of delay, if the Government or the statutory authority against whom the relief was sought raised a prima facie, triable issue—such as a question of limitation—concerning the merits of the claim, the Court should ordinarily refuse to issue a writ of mandamus for payment. In both of these circumstances, the Court considered it a proper use of its discretion to direct the party to pursue his remedy through the ordinary civil‑court process rather than to grant the extraordinary relief under article 226.

The Court also referred to earlier authority. In Sohan Lal v. University of India, it was held that a writ would not be appropriate where the decision sought would amount to a decree declaring a party’s title and ordering restoration of possession; in such cases the proper remedy was a suit for title in a civil court, and a writ of mandamus could be entertained only when the facts were undisputed and the title was clear. Counsel for the appellant then cited Commissioner of Police, Bombay v. Gordhandas Bhamji in support of the argument that a writ of mandamus for a refund of money could be issued when the petitioner’s right to refund did not arise under any specific statutory provision but under “any law.” In that case, the Court had to interpret the phrase “under any law” in the proviso to section 45 of the Specific Relief Act and held that the expression was broad enough to cover all kinds of law. The Court clarified, however, that the construction of “any law” in the Specific Relief Act could not be transferred to the exercise of powers under article 226, especially because two earlier Supreme Court decisions had expressly limited the issuance of a mandamus for recovery of money to situations where the petitioner was entitled to the money under a statute. The appellant had been unable to base his claim for refund on any statutory provision or rule. Rule 8(a) of the relevant Rules provided for a refund of excess tax realised before the completion of the assessment, but the appellant’s claim did not fall within that statutory framework.

In interpreting the proviso (b) to section 45 of the Specific Relief Act, this Court previously observed that the expression “any law” was intended to be broad enough to include all categories of law. The earlier decision involved a duty that arose under rules formulated pursuant to a power conferred by a statute, thereby linking the duty to statutory authority. However, the Court now holds that the same expansive construction of “any law” cannot be applied when considering the issuance of a writ of mandamus under Article 226 of the Constitution. This limitation is reinforced by two earlier judgments of this Court, which expressly state that a mandamus for recovery of money may be issued only when the petitioner’s right to recover the money is founded upon some statutory provision. In the present matter, the appellant has been unable to locate his claim for refund within any existing statute or statutory rule. Rule 8(a) of the applicable Rules provides for a refund of excess tax realised before the completion of assessment, but only where the tax payable is subsequently determined to be lower and the assessee applies for refund within one month of the date of final assessment completion. The rule does not contain any provision that, in the event an appellate authority sets aside the final assessment, the tax that was realised must be refunded to the assessee upon his application within a prescribed time‑frame. Accordingly, the High Court was correct in concluding that the appellant possesses no right, under any statutory law, to a refund of the tax that was paid. Moreover, the High Court correctly observed that no legal duty is imposed on the State to return the amount that was realised and later found to be inconsistent with law. The mere finding of the appellate authority that the tax collected was not authorised by any law does not constitute a decision obligating the State to return the amount, nor can it be treated as legislation creating such an obligation. The appellant has cited Section 72 of the Contract Act in an attempt to argue that the State is bound to return the amount, but determining whether the present facts fall within that provision is a question for determination in a regular suit, not in proceedings under Article 226. In the factual backdrop already explained, the State can raise several defences, the principal one being that the appellant’s claim is barred by the limitation period. It is therefore a moot issue to decide whether the appellant’s payment of tax was made under a “mistake” as contemplated by Section 72 of the Contract Act. For these reasons, the Court is of the opinion

In the matter before the Court, it was held that the High Court had correctly declined to issue a writ of mandamus directing the recovery of the amount of Rs 62,809‑5‑2, which the respondent claimed to have collected between the years 1944 and 1948. Because the High Court’s refusal was deemed proper, the Court stated that it was unnecessary to consider or pronounce on the separate legal question concerning the precise moment at which a right to obtain a refund would arise—whether that right vested at the time the sum was actually realised by the State or only after the appellate authority had declared the final tax assessment to be illegal. Accordingly, the Court concluded that no further analysis of that issue was required. The Court emphasized that its primary function in this appeal was to examine whether the High Court’s refusal was legally justified, and that the underlying question of tax refund entitlement lay outside the scope of the writ proceedings. Having reached this conclusion, the Court then proceeded to dispose of the appeal itself. It ordered that the appeal be dismissed and directed that each party bear its own costs of the proceedings. Consequently, the matter was closed without any monetary award to either side, and the parties were left to bear the expenses they had already incurred. The dismissal of the appeal was recorded as final, and no further relief was granted to either side.