# MUNICIPAL COMMISSIONER OF DUMDUM MUNICIPALITY AND ORS. ETC v. INDIAN TOURISM DEVELOPMENT CORPORATION AND ORS. ETC

- **Citation:** [1995] Supp. 2 S.C.R. 433
- **Court:** Supreme Court of India
- **Decided:** 1995-08-01
- **Bench:** S.C. Agrawal, B.P. Jeevan Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/municipal-commissioner-of-dumdum-municipality-and-ors-etc-v-indian-tourism-13133
- **Pages:** 28

## Headnote

Constitution of India, 1950:
A1ticles 285 ( 1) and 298-Property tax-Levy on property of Union of
India vesting in statutory corporation-Held : not exempt from tax.
International Airp01ts Auth01ity Act, 1971:
A
B
c
Sections 3(2) and 12-Authority-A distinct juristic entity created for D
carrying on commercial activity--Properties vested in if-No longer the properties of Union of India-Not a limited vesting for the purpose of better
management-Letter and Certificate-Asserting properties belonged to Union
of India-Did not represent a decisiorr-Not binding on the Municipal Corporation as it was not heard.
Section 31-Authority-Claiming and obtaining benefits of depreciation
under the Income Tax Act, 1961 for more than twenty years-Held : it could
not claim that the properties did not belong to it.
E
Section 34-Authority-supersession of-Vesting of properties "Owned" F
or "cpntrolled" by it in the Central Government-Held : usual regulatory
provision and did not imply that the properties belonged to the Union of
India.
Delhi Municipal Corporation Act, 1957 :
Sections 113 and 119-Municipal Corporatian-''Authority within a
state"---Not competent to levy taxes upon the property of the Union of India.
Administrative Law :
G
Declaration by Government under a provision-Valid only if there was H
433
434
SUPREME COURT REPORTS [1995) SUPP. 2S.C.R.
A
a disput~Tot binding on third party which was not heard.
B
c
Words and Phrases: "vest" and "vesting''-Meaning of - In the context
of Section 16( 1) of the International Airport Authority Act, 1971.
The International Airport Authority of India granted a licence in
respect of a portion of land vesting in it in favour of the respondents,
whereupon the latter had constructed a hotel. The appellants levied property taxes upon the said land and the hotel building constructed thereon and
made a demand therefore on the respondents. The respondents filed a writ
petition in the High Court challenging the said demand. The High Court
allowed the petition. Aggrieved by the High Court's judgment, the appellants preferred the present appeal.
On behalf of the respondents it was contended that the expression
"vesting" had different shades of meaning and did not necessarily mean the
vesting of ownership; that the land for which licence was given belonged to
D the Union of India and thus exempt from tax; that Section 34(2)(c) of the
International Airport Authority Act, 1971 provided for "vesting" of the
property in the Union of India; that Section 34(2)(c) of the Act used both
the expressions "owned" and "controlled" which meant properties owned by
•
the Union of India and also controlled by it; and that the Government of
India had decided under Section 12(3) of the Act vide letter and Certificate
E
that the properties belonged to the Union of India which decision was
binding of the appellants.
Allowing the appeal, this Court,
HELD: 1.1. According to clause (1) of Article 285 of the Constitution,
F the properties of the Union of India shall be exempt from all taxes imposed
by a state or by any other authority within a State except insofar as Parliament may by law provide otherwise. A municipality or a municipal corpora·
tion is certainly an authority within a State. Therefore, the municipality is
not competent to levy any taxes upon properties of the Union of India by
G virtue of this article. [ 439-B]
1.2. Section 113 of the Delhi Municipal Corporation Act, 1957
specified the several kirids of taxes which the corporation shall levy for the
purpose of the Act. Property taxes is one of the taxes mentioned in this
section. Section 119 exempts the properties of the Union from taxation.
II
[439-EJ
DUMDUM MUNICIPALITY v. l.T.D.C.
435
2.1. The International Airports Authority is a corporation created A
under the International Aiq)orts Authority Act, 1971 with no share capital
but which has its own properties, its own fund, accounts, employees and
capable of lending and borrowing and entering into contracts. The proper·
tie

## Text

_Characters 0–39,751 of 67,300. This is a partial read: ask again with offset=39751 for what follows._

MUNICIPAL COMMISSIONER OF DUMDUM
MUNICIPALITY AND ORS. ETC.
V.
INDIAN TOURISM DEVELOPMENT CORPORATION
AND ORS. ETC.
AUGUST 1, 1995
[S.C. AGRAWAL AND B.P. JEEVAN REDDY, JJ.]
Constitution of India, 1950:
A1ticles 285 ( 1) and 298-Property tax-Levy on property of Union of
India vesting in statutory corporation-Held : not exempt from tax.
International Airp01ts Auth01ity Act, 1971:
A
B
c
Sections 3(2) and 12-Authority-A distinct juristic entity created for D
carrying on commercial activity--Properties vested in if-No longer the properties of Union of India-Not a limited vesting for the purpose of better
management-Letter and Certificate-Asserting properties belonged to Union
of India-Did not represent a decisiorr-Not binding on the Municipal Corporation as it was not heard.
Section 31-Authority-Claiming and obtaining benefits of depreciation
under the Income Tax Act, 1961 for more than twenty years-Held : it could
not claim that the properties did not belong to it.
E
Section 34-Authority-supersession of-Vesting of properties "Owned" F
or "cpntrolled" by it in the Central Government-Held : usual regulatory
provision and did not imply that the properties belonged to the Union of
India.
Delhi Municipal Corporation Act, 1957 :
Sections 113 and 119-Municipal Corporatian-''Authority within a
state"---Not competent to levy taxes upon the property of the Union of India.
Administrative Law :
G
Declaration by Government under a provision-Valid only if there was H
433
434
SUPREME COURT REPORTS [1995) SUPP. 2S.C.R.
A
a disput~Tot binding on third party which was not heard.
B
c
Words and Phrases: "vest" and "vesting''-Meaning of - In the context
of Section 16( 1) of the International Airport Authority Act, 1971.
The International Airport Authority of India granted a licence in
respect of a portion of land vesting in it in favour of the respondents,
whereupon the latter had constructed a hotel. The appellants levied property taxes upon the said land and the hotel building constructed thereon and
made a demand therefore on the respondents. The respondents filed a writ
petition in the High Court challenging the said demand. The High Court
allowed the petition. Aggrieved by the High Court's judgment, the appellants preferred the present appeal.
On behalf of the respondents it was contended that the expression
"vesting" had different shades of meaning and did not necessarily mean the
vesting of ownership; that the land for which licence was given belonged to
D the Union of India and thus exempt from tax; that Section 34(2)(c) of the
International Airport Authority Act, 1971 provided for "vesting" of the
property in the Union of India; that Section 34(2)(c) of the Act used both
the expressions "owned" and "controlled" which meant properties owned by
•
the Union of India and also controlled by it; and that the Government of
India had decided under Section 12(3) of the Act vide letter and Certificate
E
that the properties belonged to the Union of India which decision was
binding of the appellants.
Allowing the appeal, this Court,
HELD: 1.1. According to clause (1) of Article 285 of the Constitution,
F the properties of the Union of India shall be exempt from all taxes imposed
by a state or by any other authority within a State except insofar as Parliament may by law provide otherwise. A municipality or a municipal corpora·
tion is certainly an authority within a State. Therefore, the municipality is
not competent to levy any taxes upon properties of the Union of India by
G virtue of this article. [ 439-B]
1.2. Section 113 of the Delhi Municipal Corporation Act, 1957
specified the several kirids of taxes which the corporation shall levy for the
purpose of the Act. Property taxes is one of the taxes mentioned in this
section. Section 119 exempts the properties of the Union from taxation.
II
[439-EJ
DUMDUM MUNICIPALITY v. l.T.D.C.
435
2.1. The International Airports Authority is a corporation created A
under the International Aiq)orts Authority Act, 1971 with no share capital
but which has its own properties, its own fund, accounts, employees and
capable of lending and borrowing and entering into contracts. The proper·
ties held by it can be categorized into (1) those that were transferred to it
under Section 12 of the Act at the time of its inception and (2) those that
have been acquired by it subsequent to its constitution. [ 449-H; 450-A-B]
2.2. The International Airports Authority of India is being a
statutory corporation distinct from the Central Government and that the
properties vested in it by Section 12 of the International Airports Authority
Act, 1971 cannot be said to have been vested in it only for proper manage·
ment. After the date of vesting, the properties so vested are no longer the
properties of the Union of India for the purpose of and within the meaning
of Article 285. The vesting of the said properties in the Authority is with
the object of ensuring better management and more efficient operation of
B
c
the airports covered by the Act. Indeed that is the object behind the very D
creation of the Authority. But that does not mean that it is a case of limited
vesting for the purpose of better management. The Authority cannot,
therefore, invoke the immunity created by Article 285(1) of the Constitu·
tion. The levy of property taxes by the relevant Municipal bodies is
unexceptionable. [ 459-C-F]
E
Western Coalfields Limited v. Special Area Development Authority,
[1982) 1 sec us, referred to.
2.3. There cannot be a distinction between the properties, which are
vested by the Central Government in the Authority on the date of its F
constitution and the properties which have been acquired or constructed
after that date by the Authority. It may happen that the properties which
have been vested in the authority at its inception have been re-built,
improved, expanded and developed beyond recognition. Such a distinction
would not only be artificial but difficult to operate in practice. The annual G
report published by the Authority from year to year discloses how the
Authority has understood the vesting. The annual report shows that the
Authority claims to be the owner of all the properties without making any
·distinction between those that were vested in it at its inception and those
which have been acquired and/or constructed later. It has also claimed
depreciation on all the properties under Section 32 of the Income Tax Act H
436
SUPREME COURT REPORTS (1995) SUPP. 2 S.C.R.
A
which can be claimed only by the owner of the properties. The issue has
really to be decided on the basis of the provisions of the Act.
[453-F-H; 454-A-B]
3. The expressions "vest" and "vesting" have different shades of meaning. The nature and character of vesting should not be determined with
B
reference to the preamble and sub-section (1) of Section 16 of the Act alone
but on a totality, i.e., on a conspectus of the provision of the Act. The several
provisions of the Act make it cloar that the Authority is a distinct juristic
entity, having its own properties, fund and employees, and that it is capable
of borrowing from any source including from Government of India. The Act
c expressly makes the Authority liable to pay income tax like any other
company and its income arises mainly from the properties vested in it. This
fact coupled with the fact that there are no words of restriction in Section 12
of the Act does establish conclusively that the properties vested in it under
· Section 12 - properties which were hitherto owned by the Union of India -
cease to be the properties of the Union of India and that the said vesting is
D
neither restricted nor temporary. The vesting is no doubt for ensuring
better management of ah-ports but the said purpose underlying the creation
of the Authority cannot be read as a restriction or as a ground for curtailing
the· meaning of vesting. Section 34 of the Act is the usual regulatory
provision found in such enactments. [450-C, F; 451-E-G]
E
Fruit and Vegetable Merchants Union v. Delhi Improvement Trust,
[1957) S.C.R. 1, referred to.
4.1. Once an Authority is superseded under Section, 34(1) of the Act,
there is, in law, no Authority. In such a situation, provision has to be made
F
with respect to the properties hitherto vesting in the Authority a~d clause
(c) of sub-section (2) is precisely the proVision providing for it. Evidently,
the Parliament did not wish to vest the properties in the persons appointed
·to manage the affairs of the Authority for a limited period. It is for that
reason that the. said clause says that during the period of supersession such
G properties vest in .the Central Government which get revested in the
Authority once it is re-constituted. [452-F-G]
4.2. Section 34(2) (c) of the Act does not use the expression "managed",
as it ought to, but uses a different expression "c~ntrolled by". It seems to
refer to those properties which may not be owned by the Authority but are
H under its control on the date of supersessiorl. From the two words "owned"
DUMDUM MUNICIPALITY v. I.T.D.C.
437
and "controlled" in Section 34(2)(c) of the Act, no inference can be drawn
A
which militates against the entire scheme of the Act. [453-C·D]
4.3. A circumstance common to both Sections 33 and 34, which
establishes the distinct identity of the Authority is the requirement that
before taking action under either of the sections, notice to show cause has
to be given to the Authority and it has to be heard. [453-E]
B
5.1. The letter and the certificate of the Government of India do not
represent a decision within the meaning of Section 12(3) of the Act since
that sub-section seems to contemplate a dispute between the Union of
India and the Authority. No such dispute ever existed. Secondly it cannot C
bind the Municipal Corporation for the reason that it was not heard before
rendering the said decision. Yet another feature of these letter and certifi·
cate is that they do not draw a distinction between properties transferred
by the Union of India to the Authority and the properties acquired and/are
controlled by the Authority after its constitution. According to the Central
Government, all the properties of the Authority are really the properties D
of the Union· a stand which is not taken by the appellants even. (456-E-G]
5.2. Section 31 of the Act expressly states that the Authority shall be
a company within the meaning of Income Tax Act, 1961 and shall be liable
to tax upon its income, profits and gains. If the properties vested in the E
Authority by Section 12 of the Act continue to be the properties of the
Union, the income arising therefrom should also be the income of the
Union and not the income of the Authority. When Section 31 of the Act
says that the income, profits and gains of the authority shall be liable to
tax under the Income Tax Act, it means clearly that it shall be assessed
according to the provisions of that Act which includes Section 32 of the
Income Tax Act, 1961 providing for depreciation on the assets from which
F
the income arises. As a matter of fact, the Authority has been claiming and
obtaining the benefit of Section 32 of the Income Tax Act, which it could
have claimed only if it were the owner of those assets. Having done that
over a period of more than twenty years, the Authority cannot now turn G
round • when it is sought to be taxed under the relevant Municipal
Corporation Act • and say that those properties do not belong to it.
[456-G-H; 457-A-C]
Andhra Pradesh State Road Corporation v. The Income Tax Officer,
[1964) 7 SCR 17, followed.
H
438
SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.
A
CIVIL APPELLATE JURISDICTION.: Civil Appeal No. 6696 of
B
c
D
E
F
G
H
1995 Etc. Etc.
From the Judgment and Order dated 18.9.87 of the Calcutta High
Court in F.M.A.T. No. 4052 of 1984.
Arun Prakash Chatterjee, F.S. Nariman, T.L. Viswanatha Iyer, V.C.
Mahajan, A. Bhattacharjee, P.K. Chakraborty, Ms. Ratna Bhattacharjee,
Lalit Bhasin, Neeraj Sharma, Vineet Kumar, Ms. Nina Gupta, Ms. Kiran
Bhardwaj, KP.A. Menon, P.K. Pillai, S.K. Ghosal, S.K. Dutta, Aruneshwar
Gupta, Gupta Naroola & Co., Ms. Binu Tamta, Ms. Anil Katiyar, Ms.
Madhu Tewatia, Ranbir Yadav, Pallav Shisodia for J.B. Dadachanji & Co.,
Dushyant Dave, Subash Sharma for the appearing parties.
The Judgment of the Court was delivered by
B.P. JEEVAN REDDY, J. Leave granted.
The question arising in this batch of appeals is whether the properties vested in the International Airport Authority of India under the
provisions of International Airports Authority Act, 1971 can yet be called
the properties of the Union within the meaning of Article 285 of the
Constitution of India and, therefore, exempt from all taxes imposed by a
State or by any authority within a State - to be more precise by the
municipality. The Delhi High Court has answered the said question in the
negative, i.e., in favour of the Delhi Municipal Corporation whereas the
Calcutta High Court has taken a contrary view. A learned Single Judge of
the Bombay High Court has also taken the same view as the Calcutta High
Court but the said judgment is now the subject matter of a letters patent
appeal before the Division Bench of the same court.
Article 285 comprises two clauses. Though clause (2) is not attracted
in these matters, we may yet set out the entire .article:
"285. Exemption of property of the Union from State taxation,-{1)
The property of the Union shall, save in so far as Parliament may
by law otherwise provide, be exempt from all taxes imposed by a
State or by any authority within a State.
(2) Nothing in clause (1) shall, until Parliament by law otherwise
provides, prevent any authority within a State from levying any tax
-.
.... -
DUMDUM MUNICIPALITY v. I.T.D.C. (B.P.JEEVANREDDY,J.)
439
on any property of the Union to which such property was immeA
diately before the commencement of this Constitution liable or
treated as liable, so long as that tax continues to be levied in this
State."
According to clause (1), the properties of the Union of India shall
be exempt from all taxes imposed by a State or by any other authority
within a State except insofar as Parliament may by law provide otherwise.
A municipality or a municipal corporation is certainly an authority within
a State. Therefore, the municipality is not competent to levy any taxes upon
B
the properties of the Union of India by virtue of this article. But what the
Municipal Corporations of Delhi and Calcutta say is that the properties C
which they are seeking to tax now are not the properties of the Union but
the properties of the International Airport Authority of India (Authority)
and that the properties of the Authority do not enjoy the immunity in
clause (1) of Article 285. For a proper appreciation of the question, it is
necessary to examine the provisions of the International Airport Authority D
of India Act, 1971 which created the said Authority. But before we do that,
it would perhaps be appropriate to refer to the taxing provisions in the
Delhi Municipal Act and the Bengal Municipal Act and also mention
briefly how the disputes have arisen.
Section 113 of the Delhi Municipal Corporation Act specifies the
several kinds of taxes which the corporation shall levy for the purpose of
the Act. Property taxes is one of the taxes mentioned in this section. Section
119 exempts the properties of the Union from taxation. Sub-section (1) of
section 119 is practically a repetition of Article 285. It is not necessary to
set out the provisions of this section inasmuch as Article 285 prevails
irrespective of the wording of this section. Pursuant to the provisions of
the Delhi Municipal Corporation Act, the Municipal Corporation levied
property taxes upon the land and properties comprised in Indira Gandhi
International Airport Terminal-II. The construction of the said terminal
E
F
was commenced in May, 1986. The corporation levied taxes with effect
from April 1, 1986 upon the properties comprised in the said terminal. G
When a notice of demand was served upon the Authority for payment of
the tax assessed by the corporation, the Authority filed Writ Petition No.
578 of 1987 in the Delhi High Court challenging the demand. The main
contention of the authority was that the property of the Union of India has
been vested in it by the Act only for the purpose of its management and H
440
SUPREME COURT REPORTS [1995]SUPP. 2S.C.R.
A
administration and that the properties continue to be owned by the Union
and hence, exempt from taxation under Article 285 of the Constitution. The
writ petition was dismissed by the Delhi High Court on January 8, 1991
which is the subject matter of Civil Appeal No. 6698 of 1995 (ari~ing from
Special Leave Petition (C) No. 1176 of 1991).
B
c
The Authority has granted a licence in respect of a portion of the
land vesting in it in favour of Air India, which is a corporation constituted
under the provisions of the Air Corporations Act, 1953. Air India has
constructed certain buildings upon such land. The Delhi Municipal Corporation levied property taxes upon the said buildings and made a demand
upon Ar India, questioning which it filed Writ Petition (C) No. 3889 of
1975 in the Delhi High Court. The contention in this writ petition is
practically the same as in the writ petition by the Authority. Air India's
additional submission was that since the land upon which it has constructed
its buildings is vested in the Authority, no taxes could have been levied
D upon Air India. Against the dismissal of the writ petition, Air India has
preferred Civil' Appe~I No. 6699 of 1995 (arising.'from Special Leave
Petition (C) no. 7882 of 1993).
The Union of India has preferred an independent appeal (arising
from Special Leave Petition (C) No. 5926 of 1991) against the judgment of
E
the Delhi High Court in Writ Petition (C) No. 578 of 1987.
Section 123 of the Bengal Municipal Act, 1932 empowers the Commissioners to levy a rate on the annual value of the holdings. Section 128
lays down the method of determining the annual value. Tax can be levied
F
both on land and buildings. The Dum Dum Airport at Calcutta vests in the
Authority by virtue of the provisions of the Act. The Authority granted a
licence in respect of a portion of land vesting in it in favour of the Indian
Tourism Development Corporation Limited (I.T.D.C.) whereupon the latter has constructed a hotel known as "Hotel Airport Ashok". The Dum
Dum Municipality levied property taxes upon the said land and the hotel
G building constructed thereon and made a demand therefor on I.T.D.C.
Questioning the demand, l.T.D.C. approached the Calcutta High Court by
way of a writ petit~on contending that inasmuch as the land on which the
hotel is constructed is the property of the Union of India - which had been
vested in the Authority only for the purpose of management of the airport
H - no taxes can be levied upon such land nor can any taxes be levied upon
.....--
DUMDUM MUNICIPALITY v. l.T.D.C. [B.P. JEEVANREDDY, J.)
441
buildings constructed upon such land. the I.T.D.C. further contended that A
inasmuch as the property tax levied under the West Bengal Municipal Act,
1932 was a composite tax both upon the land and building, no taxes can
be levied upon the building if no taxes can be levied upon the land. Both
the said contentions have been upheld by a learned Single Judge of the B
Calcutta High Court whose decision has been affirmed on appeal by a
Division Bench. Civil Appeal No. 6696of1995 (arising from Special Leave
Petition (C) No. 5337 of 1988) arises from the judgment of the Division
B~~
C
We may now take up the provisions of the International Airport
Authority Act, 1971. The preamble to the Act says that it is "an Act to
provide for the constitution of any authority for the management of certain D
aerodromes whereat international air transport services are operated or
are intended to be operated and for matters connected therewith". Subsection (3) of Section 1 says that the Act shall apply in the first instance
to the aerodromes of Bombay (Santa Cruz), Calcutta (Dum Dum), Delhi E
(Palam) and Madras (Meenambakkam) and to such other aerodromes as
the Central Government may notify in that behalf. Section 2 defines certain
expressions occurring in the Act. The expression "Airport" is defined in
clause (a) to mean, "an aerodrome as defined in clause (2) of section 2 of F
the Aircraft Act, 1934 (22 of 1934) and to which this Act applies or is made
applicable".* "Authority" is defined in clause ( c) to mean, "International
Airport Authority of India constituted under section 3".
G
Section 3 provides for the constitution and inc_orporation of the
authority. It says that with effect from the commencement of the Act, the
Central Government shall constitute an authority to be called the International Airport Authority of India. Sub-section (2) says, "the authority shall H
be a body corporate by the name aforesaid having perpetual succession
and a common seal, with power, subject to the provisions of this Act, to
acquire, hold and dispose of property both movable and immovable, and
to contract and shall by the said name sue and be sued". The Authority
comprises of certain number of members, all of whom are appointed by
The expression "aerodrome" is defined by clause (2) of Section 2 of the Aircraft Act,
1934 in the following words; "Aerodrome means any definite or limited ground or water
area intended to be used, either wholly or in part, for the land or departure of aircraft,
and includes all buildings, sheds, vessels, piers and other structures thereon or appertaining thereto."
442
SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.
A
the Central Government.
B
c
D
E
F
G
H
Chapter-III is entitled "Property and Contracts". Section 12 in this
chapter provides for "transfer of assets and liability of Central Government
to the Authority". Sub-section (1) of Section 12 reads :
"12. (1) Save as otherwise provided in sub-section (2), as from such
date as the Central Government may appoint by notification in the
Official Gazette in relation to any airport,-
(a) all properties and other assets vest in the Central Government for the purposes of the airport and administered by the
Director-General of Civil Aviation immediately before such
day shall vest in the Authority ;
(b) all debts, obligations and liabilities, all contracts entered
into and all matters and things engaged to be done by, with,
or for the Central Government immediately before such day
for or in connection with the purposes of the airport shall be
deemed to have been incurred, entered into and engaged to
be done by, with, or for the Authority;
(c) all non-recurring expenditure incurred by the Central
Government for or in connection with the purposes of the
airport up to such day and declared to be capital expenditure
by the Central Government shall, subject to such terms and
conditions as may be determined by the Central Government,
be treated as the capital provided by the Central Government
to the Authority;
( d) all sums of money due to the Central Government in
relation to the airport immediately before such day shall be
deemed to be due to the Authority;
( e) all suits and other legal proceedings instituted or which
could have been instituted by or against the Central Government immediately before such day for any matter in relation
to the airport may be continued to instituted by or against
the Authority;
(f) every employee holding any office under the Central
•
DUMDUM MUNICIPALITY v. l.T.D.C. [B.P. JEEV AN REDDY, J.)
443
Government immediately before such day solely or mainly for A
or in connection with such affairs of the airport as are
relevant to the functions of the Authority under this Act shall
be treated as on deputation with the Authority but shall hold
his office in the Authority by the same tenure and upon the
same terms and conditions of service as respects remuneration, leave, provident fund, retirement or other terminal
benefits as he would have held such office, if the Authority
had not been constituted and shall continue to do so until the
Central Government, either on its own motion or at the
request of the Authority, recalls such employee to its service
B
or until the Authority, with the concurrence of the Central C
Government, duly absorbs such employee in its regular service, whichever is earlier;
Provided that during the period of deputation of any such
employee with the Authority, the Authority shall pay to the Central D
Government, in respect of every such employee, such contribution
towards his leave salary, pension and gratuity as the Central
Government may, by order, determine:
Provided further that any such employee, who has, in respect
of the proposal of the Authority to absorb him in its regular service, E
intimated within such time as may be specified in this behalf by
the Authority his intention of not becoming a regular employee of
the Authority, shall not be absorbed by the Authority in its regular
service."
Sub-section (3) says that "if any dispute or doubt arises as to which
of the properties, rights or liabilities of the Central Government have been
transferred to the Authority or as to which of the employees serving under
F
the Central Government are to be treated as on deputation with, the
Authority, under this section such dispute or doubt shall be decided by the G
Central Government in consultation with the Authority and the decision of
the Central Government thereon shall be final." Section 13 declares that
any land required by the authority for discharging its functions shall be
deemed to be needed for a public purpose and can be acquired as such
under the Land Acquisition Act, 1894. Section 14 says that subject to the
provisions' of Section 15, the Authority shall be competent to enter into and H
444
SUPREME COURT REPORTS (1995] SUPP. 2 S.C.R.
A
perform any contract necessary for the discharge of its functions under the
Act. Section 15 prescribes the mode in which contracts on behalf of the
Authority shall be executed.
B
c
Chapter-IV sets out the functions of the Authority. Sub-section (1)
of Section 16 says that "subject to the rules, if any, made by the Central
Government in this behalf, it shall be the function of the Authority to
manage the airports efficiently". Subsection (2) casts a duty upon the
authority to provide at the airports such services and facilities as the
necessary and desirable for the efficient operation of air transport services
at such airports. The proviso to sub-section, however, says that the function
of providing air navigation services at the airport shall, however, continue
to be discharged by the Central Government till such date as the Centr~
Government may specify. Sub-section 3 elaborates the functions of the
Authority. It includes developing, constructing and maintaining run-ways,
taxiways, aprons, terminals and ancillary buildings at the airports, to construct residential buildings and create townships for its employees, estabD lish and maintain hotels, restaurants, and rest-rooms at or near the airports
and so on.
E
F
Chapter-V deals with finance, accounts and audit. Section 19 in this
chapter says that the authority shall have its own fund and all receipts of
the Authority shall be credited thereto and all payments of the authority
shall be made therefrom. Section 18 says that the Central Government may
provide any capital, over and above the capital pro~ded under Section
12(1)( c) that may be required by the authority for discharge of its functions.
The Central Government can also "pay to the Authority, on such terms and
conditions as the Central Government may determine, by way of loans or
grants such sums of money as the Government may consider necessary for
the efficient discharge by the Authority of its functions under this Act".
[Section 18(b)). Section 20 provides the manner in which surplus funds
have to be allocate by the Authority. According of this section, any balance
of its annual net profits remaining after meeting its expenditure and after
providing.for reserves etc. shall be paid over to the Central Government.
G Sections 21 to 24 contain certain regulatory provisions concerning the
finances of the authority.
Chapter-VI entitled "Miscellaneous comprises Sections 25 to 41.
Section 25 creates an obligation upon the authority to prepare and submit
to the Central Government, at the end of each financial year, an annual
H report in the prescribed form giving an account of its activities during that
-
DUMDUMMUNICiPALITY v. I.T.D.C. (B.P.JEEVANREDDY,J.)
445
financial year and shall also set out therein an account of the activities A
which it proposes to undertake during the next financial year. Such report
has to be laid before both Houses of Parliament as soon as it is submitted.
Section 31 provides specifically that "for the purposes of the Income-tax
Act, 1961 ( 43 of 1961) or any other enactment for the time being in force
relating to income-tax or any other tax on income, profits or gains, the
Authority shall be deemed to be a company within the meaning of the B
Income-tax Act, 1961 ( 43 of 1961) and shall be liable to tax accordingly on
its income, profits and gains." Sections 33 and 34 confer upon the Central
Government certain powers vis-a-vis the authority to which we must refer
in a little more detail in view of the fact that they are strongly relied upon
before us in support of the proposition that the properties vested by the C
Act in the Authority do yet constitute and represent the properties of the
Union. Sub-section (1) of Section 33 says, "if at any time, the Central
Government is of opinion that in the public interest it is necessary or
expedient so to do, it may, by order, direct the Authority to entrust the
management of any airport with effect from such date and to such person
as may be specified in the order and the Authority shall be bound to D
comply with such direction; Provided that before an order is made under
this sub-section the Authority shall be given a reasonable opportunity of
being heard in the matter". Sub-section (3) says that an order made under
sub- section (1) of Section 33 shall, unless rescinded sooner, be in operation for a period of six months which can be expended for a further period
or periods not exceeding eighteen months. Sub- section ( 4) says that during E
the operation of an order made under sub-section (1) it shall be competent
for the Central Government to issue from time to time such directions to
the authority as are necessary to enable the authorised person to exercise
the powers and discharge the functions of the Authority effectively. Subsection (5) says that on the cesser of operation of an order made under
sub-section (1) in relation to any airport, the authorised person shall cease F
to exercise any powers and functions and the Authority shall continue to
exercise and perform such powers and functions according to the Act. Subsection (6) clarifies that on the cessor of an order under sub- section (1),
the authorised person shall hand over all or any property remaining with
him to the Authority. Section 34 confers upon the Central Government the
power to supersede the Authority in certain situations and for a limited G
period. Sub-section (1) of Section 34 reads thus :
"34. (1) If, at any time, the Central Government is of opinion-
(a) that on account of a grave emergency the Authority is H
A
B
c
D
E
446
SUPREME COURT REPORTS [1995) SUPP. 2 S.C.R.
unable to discharge the functions and duties imposed on its
by or under the provisions of this Act; or
(b) that the Authority has persistently made default in complying with any direction issued by the Central Government
under this Act or in the discharge of the functions and duties
imposed on it by or under the provisions of this Act and as
a result of which default the financial position of the
Authority or the administration of any airport has
deteriorated; or
(c) that circumstances exist which render it necessary in the
public interest so to do,
the Central Government may, by notification in the Official
Gazette, superse~e the Authority fro such period , not exceeding
six months, as may be specified in the notification;
Provided that before issuing a notification under this sub-section for the reasons mentioned in clause (b ), the Central Government shall give a reasonable opportunity to the Authority to show
cause why it should not be superseded and shall consider the
explanation and objections, if any, of the Authority."
Sub-section (2) sets out the consequences and effects of a notification published under sub-section (1) of Section 34. With effect from the
date of such publication superseding the Authority, all the members shall
vacate their offices with effect from their supersession and all the powers,
F
functions and duties of the Authority shall be exercised and discharge by
such person or persons as the Central Government may direct. Clause ( c)
of sub-section (2) says that with effect from the date of publication of
notification under sub-section (1) superseding the authority "all property
owned or controlled by the Authority shall, until the Authority is re-constituted under sub-section (3), vest in the Central Government". Section 35
G says that the Authority shall be bound by such directions as may be given
by the Central Government on questions of policy. The proviso to sub-section (1), however, provides that before giving any such direction, the
Authority shall be given an opportunity to express its views in the matter.
Section 36 confers rule-making power upon the Central Government
H whereas Section 37 confers the regulation-making power upon the
DUMDUMMUNICIPALtrY v. l.T.D.C. [B.P.JEEVANREDDY,J.]
447
Authority.
For the sake of convenience, we shall refer to the Authority and its
licencees (Air India and I.T.D.C.) in the ensuing discussion as appellants
and the Municipal Corporations of Delhi and the Dum Dum Municipality
A
as respondents, notwithstanding the fact that in Civil appeal No. 6696 of B
1995 (arising out of Special Leave petition (C) no. 5337of1988) Dum Dum
Municipality is the appellant.
The contention of the learned counsel for the appellants is to the
following effect : the expression "vesting" has several shades of meaning. It
does not necessarily mean the vesting of ownership. The character of C
vesting has to be determined with reference to the relevant provisions of
the enactment. In the case of the International Airport Authority Act, 1971,
the vesting is only for the purpose of management of the airports. In other
words, what is vested is only the management and operation of the airports
with a view to ensue better and efficient operation of services at such D
airports. The properties which were vesting in the Union of India and
which are vested in the Authority by and under Section 12 of the Act
continue to be the properties of the Union of India. They never became
the properties of the Authority. May be, the properties acquired by the
authority subsequent to its constitution become its own properties but so
far as the lands and buildings which were in existence on the date of the E
constitution of the Authority and which were vested in it, they continue to
be the properties of the Union of India. So far as the land which has been
given on licence to Air India is concerned, Sri Nariman says, it is the land
which belonged to the Union of India and was vested in the Authority
under Section 12 of the Act on its constitution in the year 1972. No taxes F
can, therefore, be levied upon such land by the Delhi Municipal Corporation. If the land cannot be taxed, the buildings thereon cannot also be
taxed. So far as 'Hotel Airport Ashok' is concerned, the land upon which
it is located was given on licence to I.T.D.C. by the Authority. It is equally
the property of the Union of India which vested in the Authority by virtue
of Section 12. Moreover, the bengal Municipal Act, 1932 provides for levy G
of an integrated and composite tax upon a holding - which expression is
defined to mean "land held under the title or agreement and surrounded
by one set of boundaries" by clause (21) of Section 3. The land and the
building thereon cannot be dissociated from one another and hence, no tax
can be levied upon the building alone if no tax can be levied upon the land. H
448
SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.
A It is further . submitted that the Government of India has repeatedly
decided, as contemplated by Section 12(3) of the Act, that the properties
concerned herein are the properties of the Union of India and thus exempt
from tax. This decision was communicated to the Municipal Corporation
of Delhi as well. The said decision, being a statutory decision, is binding
B
upon the Municipal Corporation of Delhi. We find it difficult to agree with
the learned counsel for the appellants.
The power to carry on a business is an incident of proprietary power.
Even before the present Article 298 was substituted by the Constitution
Seventh Amendment Act, 1956, this Court had taken the view that the State
C is entitled to engage itself in all activities necessary for the promotion of
the social and economic welfare of the community and that for doing so
no specific legislation is necessary except where the State proposes to
encroach upon private Tights in order to enable it to carry on its business.
Rai Sahib Ram Jawaya Kapur & Ors. v. State of Punjab, [1955] 2 S.C.R 225. ·
D With a view to put the matter beyond any doubt, Article 298 was substituted altogether by the Seventh Amendment Act. It reads :
E
F
G
"298. Power to carry on trade, etc.- The executive power of the
Union and of each State shall extend to the carrying on of any
trade or business and to the acquisition, holding and disposal of
property and the making of contracts for any purpose :
Provided that-
(a) the said executive power of the union shall, in so far as such
trade or business or such purpose is not one with resp~ct to which
Parliament may make laws, be subject in each State to legislation
by the State; and
(b) the said executive power of each Sate shall, in so far as such
trade or business or such purpose is not one with respect to which
the State legislature may make laws, be subject to legislation by
Parliament."
According to the statement of objects and reasons appended to the
bill, the said amendment was brought in "to make it clear that the Union
government, as well as State governments, are competent to carry on any
H commercial or industrial undertaking, whether or not it is related to a
DUMDUM MUNICIPALITY v. I.T.D.C. [B.P. JEEVAN REDDY, J.]
449
matter within the legislative competence of the Union or as the case may A
be of the State. Similarly, the holding, acquisition and disposal of property
and the· making for contracts by the Union or a State could be for any
purpose without constitutional impropriety''.
Even before the advent of the constitution, the State had been
carrying on several activities which were in the nature of commercial/trading manufacturing activity but with the advent of the constitution introducing the concept of a welfare State - or a socialist State, as the case may be
- both the State and Central Governments embarked upon an extensive and
systematic course of activity whereunder several business ventures were
commenced and in many cases taken over. Within a few years, however, it
was realised that a business is to be carried on as a business and not in the
manner of governmental activity. Accordingly, the Central and State
Governments started creating corporations for carrying on these activities.
B
c
In the case of major public utilities, statutory corporations were created
under different enactments.