DHRANGADHRA CHEMICAL WORKS LTD. versus THE DHRANGADHRA MUNICIPALITY

In accordance with the opinion of the majority, the appeal is allowed. No order as to costs.

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DHRANGADHRA CHEMICAL WORKS LTD.

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v. THE DHRANGADHRA MUNICIPALITY

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(and connected petition)

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(B. P. SINHA, JAFER IMAM, J. L. K.APUR, P. B. G.AJENDRAGADKAR and K. N. W ANCHOo, JJ.)

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Municipality-Regulation of discharge of ejjl.uent-Issue of notice-Objection to such notice and requisition specified therein- Scope of enquiry by Special Officer-Existence of nuisance, if can gone into-Bombay District Municipal Act, I9DI, adapted and applied the State of Saurashtra and amended by Act XI of I955·

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The respondent Municipality issued a notice under sub-s. (1) of l53A of the Bombay District Municipal Act, 1901, as adapted and applied to the State of Saurashtra and as amended by Act XI of 1955, calling upon the appellant to show cause why it should not be directed to discharge the effluent of it's chemical works in the manner specified in the notice. On the :ippellant objecting to the notice and the requisition contained therein, a Special Officer was appointed by the Government under sub-s. (3) of that section to hold an enquiry in the matter. The Special

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treated some of the issues raised, as preliminary issues of law and held .that the question whether the discharge of the effluent polluted the water and adversely affected the fertility of the soil was a matter for the subjective satisfaction of the Municipality and binding on him and was as such beyond the scope of his enquiry. The question for determinatiOn in this appeal was whether the Special Officer was right in the view he took of s. l53A(3) of the Act and in restricting ·the scope of the enquiry in the way he did.

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that Special Officer took a wrong view of his jurisdiction under s. 153A(3) of the Act and was in error in restricting the scope of the enquiry.

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There could be no doubt on a proper appreciation of the scheme laid down by the provision of s. 153A.of the Act, correctly construed, that while the subjective satisfaction of the Municipa- Iity as to the existence of the nuisance could not be questioned at the initial stage when it sought to put the machinery provided by sub-s. in motion or under sub-s. where such existence was admitted, the situation contemplated by sub-s. where the notice and the requisition were wholly disputed, and no mere modification of the requisition sought, was entirely different.

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The language of sub-s. and particularly the words " to hold an enquiry into the matter" used by it clearly indicated that where there was such a contest, it was the duty of the Special Officer to enquire into the existence of the alleged nuisance and come to a finding of his own. The status of the Special Official and powers conferred on him by the relevant provisions of the Act, clearly indicated that sub-s. was intended by the Legislature to be a protection against any arbitrary exercise of its power by the Municipality.

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It was of the utmost importance that such proceedings should in the interest of the community, be disposed of with all possible expedition.

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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 173of1959.

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Appeal by special leave from the judgment and order dated July 16, 1958, of the Special Officer appointed under section 153(3) of the Bombay District Municipal Act, 1901 (Bombay Act No. 111 of 1901), as applied to Saurashtra, Zalawad Di'vision, Surendarnagar.

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AND ORIGINAL JURISDICTION: Petition No. 174 of 1958.

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Petition under Article · 32 of the Constitution of India for the enforcement of Fundamental Rights.

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Purshottam Tricumdas, P. N. Bhagwati, Tanibhai D. Desai and I. N. Shroff, for the appellant and petitioner.

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N. G. Chatterjee, S. K. Kapur and A. G. Ratnaparkhi, for the respondent in appeal and respondent No. 2 in the petition.

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B. Sen and R. H. Dhebnr, for respondent No. 3 in petition.

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1959. May 19. The Judgment of the Court was delivered by

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IMAM J.-The case of the respondent Municipality was that the appellant's chemical works discharged effl~ent in very large quantities containing calcium, sodmm and other salts through Katcha Channels thereby corrupting potable water of the wells in the surrounding area so as to render it unfit for use and also prejudicially affecting the fertility of the soil in the surrounding area by percolation. The respondent Municipality accordingly, after having obtained the approval of the Government, issued a notice dated the 14th June, 1956, to the appellant under s. 153 A(l) of the Bombay District Municipal Act, 1901, as adapted and applied to the State of Saurashtra and as amended by Act XI of 1955 (hereinafter referred to as the Act), to show cause in writing within a period of one month from the date of the receipt of the notice why it should not be directed to arrange within a period of nine months from the date of such direction for the discharge of the effluent through a covered pucca drainage and for pumping it over a distance of about 8 miles in the ' Ran ' area of Cutch near Kuda, as shown in the plan annexed to the notice.

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The appellant rep1ied to this notice by a letter dated the 10th of July, 1956. According to the appellant, the effluent -was being discharged until 1943 through a Katcha Channel .running parallel to the railway line in the direction of Halvad. In 1944 it was felt that as the water of some of the wells in the areas known as Harijanvas and Kolivas close to the vicinity of the channel might be affected another channel was constructed for discharging the effluent, which was at a considerable distance away from Kolivas and Harijanvas and still further away from the city which lies on the western side of the railway lines whereas the factory is at a considerable distance away on the eastern side of the railway lines. It was pointed out that during the last 3 or 4 years, periodical surveys of the water of various wells in the city had been taken by the appellant and these tests had shown that the water was not in any way polluted by reason of the effluent being discharged through the existing channels, that all the papers and reports relating to the tests carried out periodically by the appellant were available for inspection by the respondent Municipality and that they could be inspected by appointment. The appellant further enquired whether before issuing the notice the respondent Municipality had carried out similar tests for analysing the water of the various wells and that if such analysis had been made it might be allowed to inspect and survey the reports and other relevant papers connected therewith. Regarding the fertility of the soil the appellant emphatically denied that the same had been in any way adversely affected by the discharge of the effiuent through the existing channels. The appellant further pointed out that the respondent Municipality's direction that the appellant should arrange the discharge of the effiuent through a covered pucta drain for pumping it over a distance of about 8 miles as shown in the plan would involve an expenditure of nearly 8 to 9 lakhs of rupees which, having regard to the prevailing conditions, would involve a capital outlay of such an enormous amount as to cripple the appellant's activities. The appellant further pointed out that the scheme &uggested by the respondent Municipality was impracticable and difficult to implement for technical reasons and that the appellant's engineer had been consulted in that respect. Finally, the appellant informed the respondent Municipality that in these circumstances it objected to the requisitions and expressed its inability to carry out the same.

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The respondent then requested the Government to appoint a Special Officer under the provisions of s. 153 A (3) of the Act. The Government by its order dated the 17th of May, 1958, appointed Mr. T.U. Mehta, District and Sessions Judge, Jhalawad District, as a Special Officer to hold an enquiry into the matter and to complete it within three months from the date of the Notification.

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When the matter came before the Special Officer he recorded the order which is the subject matter of the present appeal by special leave. The Special Officer had framed 7 Issues of which Issues Nos. 1 to 4 were treated by him as preliminary Issues of law. Of the 7 Issues framed Issue No. 4 was one of the most important ones for consideration and it was to the following effect:-·

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"Is it shown that the question whether the discharge of the effluent from the factory of the respondent company is polluting water and adversely affects the fertility of the soil, is a question of the subjective satisfaction of the Municipality and that this question is beyond the scope of the present

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enquiry?" Along with this Issue, Issue No. 6 had to be considered which was as follows :-

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" If the Point No. 4 is decided in the negative, is it proved that the effluents discharged by the factory of the respondent corrupt potable waters of the wells in the surrounding area so as to render them unfit for any use, and also affect prejudicially the fertility

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of the soil in the surrounding area by percolation ?" The Special Officer decided Issue No. 4 in the affirmative and held that the question whether the discharge of the effluent polluted the water and adversely affected the fertility of the soil was one for the subjective satisfaction of the respondent Municipality and was beyond the scope of the enquiry before him. Having found this he held that Issue No. 6 did not arise for consideration. In dealing with Issue No. 5 whether the notice issued by the respondent Municipality was mal,a fide, arbitrary, capricious and that the same had been issued without the respondent Municipality sufficiently applying its mind, the Special Officer was of the opinion that it was, " out of the purview. of the present enquiry." Issues 2 and 3 were decided by the Special Officer in favour of the appellant and need not be referred to for the purpose of the present appeal. Issue No. 1 dealt with the question whether ss. 153A to 153G of the Act violated the fundamental rights of the appellant guaranteed under Articles 14, 19 and 31 of the Constitution. It was pointed out by the Special Officer that during the course of the argument on behalf of the appellant it was not pressed that the fundamental rights covered by Articles 14 and 31 were infringed. The submission was confined to the infringement of Art. 19 of the Constitution. This contention was rejected by the Special Officer. The Special Officer in his order stated that "The result of the above findings is that this Tribunal shall now proceed to decide the only remaining Issue which is Issue No. 7. I therefore order that the case should proceed with the determination of this Issue." This Issue was in these words :-

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" If it is found that the effluents of the factory of the respondents corrupt the potable waters and fertility of the soil, what final recommendation should be made about the method and manner of the discharge of these effluents?"

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It was urged on behalf of the appellant that the Special Officer had unduly restricted the scope of the enquiry by taking an erroneous view as to the scope of the enquiry before him and thus had refused to exercise jurisdiction which was vested in him under the Act. It was further submitted that s. 153A of the Act offends Art. 19 of the Constitution.

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On behalf of the respondent it was contended that the Special Officer has not erred in holding that the existence of a nuisance of the kind mentioned in s. 153A(l) of the Act was a matter for the subjective satisfaction of the respondent Municipality and beyond the scope of his enquiry. S. 153A of the Act did not offend Art. 19 of the Constitution because it would be a. reasonable restriction to the exercise of the fundamental right under Art. 19(l)(C) to prevent a. nuisance which would affect t.he public health and fertility of the soil. Having regard to the submissions made on on behalf of the appellant and the respondent it is necessary to quote the provisions of ss. 153A and 153B of the Act. Section 153A states :

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" Regul~tion of discharge of effluent containing salt or other chemicals by factories.

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(1) If it be shown to the satisfaction of the Municipality that the owner or mana~r of ·a factory, situated or located within the limits of the Municipal District, is discharging from such factory effluent containing salt or other chemicals in such manner as renders, or is likely to render, saline the potable waters of wells, tanks, ponds or other water receptacles, or corrupts, or is likely to corrupt, such water in such a way as to render it unfit for any use by the public or is prejudicially affecting, or is likely to the fertility of the soil, in the

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so affect1 surrounding area either by percolation or otherwise, the Municipality may, with the previous approval of the Government, issue a written notice to the manager or the owner of such factory, requiring him to show cause in writing within a fixed period why he should not be directed to arrange within such period as may be fixed in such notice, or as may be extended from time to time, for the discharge of such effluents in such manner as may have been previously approved by the Government and as may be specified in the notice, so that the discharge of such effluents may not have the effect of rendering saline or corrupting the waters of wells, tanks, ponds or other water receptacles, or of prejudicially affecting the fertility of the soil, in surrounding area.

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(2) If no reply to the notice given under subsection (1) is received from the manager or the owner of the factory within the fixed period, or if a reply is received to the effect tha.t the manager or the owner consents to comply with the requisition in such notice, the Municipality may forthwith pass such order as may be necessary for the purpose. of regulating the discharge of effluents in the manner specified in such notice.

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(3) If a reply to the notice given under subsection (1) is received from the manager or the owner of the fact~ry, objecting or consenting subject to modification to the requisition specified in such notice, the Government shall, on a request made to it by the Municipality in this beha1.f appoint a special judicial officer, who shall not be below the rank of a District Judge (hereinafter referred to as the Special Officer), to hold an inquiry into the matter. The Special Officer shall make the inquiry in such manner and perform such functions and within such time as may be specified .in the orc}er.

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appointment." Section 153B states :

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" Report by Special Officer and order to be. passed

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"th . f G t b M y ume1pa . . 1. ity w1 sanction o overnmen .

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The Special Officer shall on completion of the inquiry entrusted to him under sub-section (3) Section 153A, send his report to the Municipality the Municipality shall, with the previous approval of the Government, pass an order in terms of the

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recommendations of such officer." It was contended on behalf of the appellant that prior to the issuing of notice under s. 153A (1) the existence of a nuisance in the terms'of•the sub-section may be within the subjective satisfaction of the Municipality but after issuing the notice different considerations would arise when the provisions sub-s. (3) are given effect to. 'fhe scheme of s. 153A of the Act is to permit the Municipality, if it is satisfied that a nuisance in the terms of sub-s. (1) exists, to issue a notice requiring the person to whom the notice is issued to show cause why he should not directed to arrange for the discharge of the effiuent in such manner as may have been previously approved by the Government and as mentioned in the notice so that rendering saline or corrupting the water of the wells, tanks, ponds or other wa.t.er receptacles, or prejudicially affecting the fertility of the soil in the surrounding areas may be stopped. In showing cause the person to whom the notice has been issued may under sub-s. (2) consent to comply with the requisition in such notice upon which the Municipality may forthwith pass such orders as may be necessary for the purpose of regulating the discharge of the effiuent in the manner specified in such notice. Upto fihis stage there is no contest between the Municipality and the person to whom the notice has been issued. The question whether a nuisance in the terms of sub-s. (I) exists or not did not arise as the person to whom the notice has been issued by his consent and willingness to comply with the requisition admits the existence of such a nuisance. Different considerations, however, arise where the circumstances attract the provisions of sub-s. (3) and a Special Officer has to be appointed. Under this sub-section if the reply to the notice given under sub-s. (1) objects to the requisition specified in the notice or consents to it subject to modification, the Government shall on the request of the Municipality appoint a special judicial officer "to hold an inquiry into the matter." It is urged on behalf of the appellant that if the requisition in the notice is objected to, the objection includes not only to the allegation of the existence of the nuisance in terms of sub-s. (1) but also to the direction as to the manner in which the discharge of the effluent shall be made. The objection beiffg in regard to both the matters, it was the bounden duty of the Special Officer to hold an enquiry with respect to the entire matter in dispute. At this stage, the satisfaction of the Municipality as to the existence of the nuisance alleged inevitably becomes justiciable. The Special Officer was bound to enquire into the dispute and make its report both as to the existence of the nuisance and the direction as to the manner in which the effluent shall be discharged.

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On behalf of the respondent Municipality it was submitted that under sub-s. (1) the satisfaction is the subjective satisfaction of the Municipality and of no other authority. The requisition under this subsection is to the person on whom the notice is issued to show cause why he should not be directed to arrange for the discharge of the effluent in the manner specified in the notice and not to show cause against the existence of the nuisance. Sub-s. (3) deals with this requisition which is the subject of the enquiry before the Special Officer' and not the existence of a nuisance which was purely a matter for the subjective satisfaction of the Municipality. It is contended that where the Legislature has conferred on the Municipality jurisdiction to determine whether a particular state of fact exists and on finding that it does exist to proceed further and to do something more, then the fact in question is not collateral but is a part of the very issue which the Municipality has to enquire into and that ceases to be justiciable. ·

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Having regard to the submissions made on behalf of the appellant and the respondent it is necessary to construe the provisions of s. 153A of the Act and to understand the scheme set out in its provisions fdr dealing with a nuisance of the kind mentioned in subs. (1). In our opinion, to justify the issuing of a notice by the Municipality, with the previous approval of the Government, there 'must be in existence such a nuisance to the satisfaction of the Municipality. The satisfaction here is the subjective satisfaction of the Municipality and no other authority could question the action of the Municipality in issuing the notice on the ground that it should not have been so satisfied. Once the notice has issued ordering the person to whom the notice is issued to show cause why he should not be directed to arrange for the discharge of the efll.uent in the manner _specified in the notice, i.t is open to the person to whom the notice is issued to accept the assertion of the Municipality that the nuisance·in question exists and to agree to comply with the direction to arrange the discharge of the eflluent in the manner specified by the notice. In such a case, th~ Municipality may forthwith pass such orders as may be necessary for the purpose of regu· lating the discharge of the eflluent in the manner specified in the notice. In our opinion, this authority is given to the Municipality because the person to whom the notice has been issued does not deny the existence of the nuisance in question and is prepared to comply with requisition in the notice without any objection. If the person to whom the notice has been issued does not· reply to the notice the Municipality may forthwith pass a similar order. In both these cases there is no dispute about the existence of the nuisance in question and what was the subjective satisfaction of the Municipality is admitted to be in accordance with the existing facts. Sub-s, (2) of s. 153 A covers such a situation.

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Sub-s. (3) of s. 153A deals with a situation different from that which arises under sub-s. (2). sub-s. (3) two situations arise (1) where the person whom the notice has been issued objects to it requisition contained therein and (2) where he consents to it subject to modification. ln both cases the Government shall on the request made by the Municipality, appoint a judical officer not below the rank District J ndge to hold an enquiry into the matter. will be noticed that while under sub-s. (2) the and willingness to comply with the requisition notice is .absolute under sub-s.(3) even if the person whom the notice has been issued consents to the tion subject to modification the consent is not absolute. That is to say, some dispute between the person concerned and the l\Iunicipalit.y remains outstanding the manner of carrying it out and that dispute would be the subject of an enquiry by the Special Officer. this situation also, the existence of the nuisance is implicitly admitted and need not be enquired Where, however, the person concerned objects notice and the requisition contained therein absolutely the objection is in substance to the issue of the itself, which means he objects to the declaration Municipality that a nuisance exists as well as direction of the .Municipality as to the manner in the effluent shall be discharged. lf sub-s. (3) was in tented to mean that the person to whom the notice been issued could not object to the assertion l\Iunicipality that a nuisance existed then the "objecting or consenting subject to modification the requisition " would not find a place in the section because in that case it would have been sufficient to have used in the sub-section the "consenting subject to the modification to the tion." The words " to hold an enquiry into matter " clearly suggest that the Special Officer enquire into the entire matter where a party absolutely to the notice and the requisit.ion contained therein. There would have been no need appointment of a special judical officer not below rank of a District Judge as a Special Officer Officer was not required to enquire into the existence of the nuisance. If the existence of a nuisance was assumed because that was a matter for the subjectiye satisfaction of the Municipality, then it would not require a judical officer of the rank of a District Judge to enquire and report only as to the manner in which the effluent should be discharged. That task could be performed by engineers and experts in such matters.

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In our opinion, the scheme under s. 153A is to loo.ve it to the subjl'ictivc satisfaction of the Municipality as to the exis1Pnce of a nuisance before a notice is issued to the party concerned. Sub-s. (1) does not deal with any enquiry into the matter. It merely provides a machinery by which the scheme of s. 153 is set in motion. No difficultv arises once a notice has been issued and the party concerned consents to absolutely or does not choose to reply to it. Under sub-s.(3), however, the appointment of a Special Officer was considered necessary because the dispute between the Munfoipality and the party concerned required investigation and a report from the Officer. Under s. 1538 the Special Officer shall have the same powers as a Civil Court has while trying a suit under the Code of Civil Procedure in the following matters:-

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"(a) summoning and enforcing the attendance of any person and examining him on oath;

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(b) requiring the discovery and production of any documents;

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(c) receiving evidence on affidavits;

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(d) requisitioning any public record or copy thereof from any court or office ;

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(e) issuing commissions for the examination of witnesses or documents ;

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(f) any other matters which may be prescribed." Under s. 153F there is a provision for the appointment of assessors to advise the Special Officer on any technical matter. Under s. 153G the proceedings before the Special Officer shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code. These provisions make clear that the Legislature intended, where there was a.n absolute objection to the notice and the requisition contained therein as in the present case, that the dispute between the Municipality and the party concerned would be enquired into by a judicial officer of the rank of a District Judge. Sub.s. (3) was a protection to the party objecting to the requisition. In these circumstances, the enquiry must necessarily relate to the entire dispute and the words " to hold an enquiry into the matter" are wide enough to suggest this. The Legislature intended that the party to whom the notice had been issued should not be the victim of exercise of any power vested in the Municipality in a capricious manner.

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The Special Officer apparently made no attempt to construe the provisions of sub-s. (3) of s. 153A of the Act. In our opinion, he erred in holding that it was beyond the scope of his enquiry to enquire into the question whether, in fact, the nuisance alleged by the Municipality existed. He had thus denied himself the jurisdiction which he did possess and which he ought to have exercised. It is plain that before the appellant could be called upon to comply with the requisition of the respondent Municipality involving several lakhs of rupees as expenditure the Special Officer ought to decide and report whether a nuisance cf the kind alleged by the respondent Municipality existed. The appellant rightly contends that the order of the Special Officer declining to go into the question whether the nuisance in question existed was one which ought to be set aside.

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As, in our opinion, the Special Officer had wrongly decided that he could not go into the question whether the nuisance existed his order must be set aside. Having regard to the view which we take, the contention on behalf of the appellant that the provisions of s. 153A of the Act offend Art. 19 of the Constitution does not require to be decided ; this position is conceded by the appellant.

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We must point out, however, that the enquiry should be completed without undue delay. The notice was issued in June, 1956, nearly 3 years ago. Proceedings of this kind ought to be handled with the utmost expedition because if a nuisance exists it should be removed without delay in order to preserve the health of the community and the fertility of the soil.

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The appeal is accordingly allowed with costs.

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A petition (No. 174 of 1958) under Art. 32 of the Constitution was also filed by the appellant. It is unnecessary to pass any formal order on this petition as, the appellant has i:mcceeded in the Civil Appeal No. 173 of 1959, and it is dif-!posed of accordingly except that there will be no order for costs in this petition.

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Appeal allowed. COMMISSIONER OF INCOME-TAX, DELHI

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v. MESSRS. P. M. RATHOD & CO.

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(B. P. J. L. and M. ,JJ.)

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of in in States-

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rail-Post

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of to to of

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to States-Indian

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s. 25(I)-lndian s.

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The respondents were manufactur<'rs of perfumery and hair oils at Ratlam in Madhya Bharat which at the relevant time was a Part B State. They sent out agents who canvassed orders. The goods ordered were sent to the customers from Ratlam either through the post by Value Payable Post or they were sent from there by rail and the railway receipts in favour of self were sent through a bank with the direction that they (railway receipts) were to be handed over against ' payment of the enclosed demand draft.' The price when received by the bank was sent by means of a demand draft to the respondents at Ratlam who had it cashed and credited to their account at Bombay. The respondents were assessed to income-tax. in respect of profits from such sales of goods to customers in Part A and C States, for the assessment year 1950-51, at the rate or rates applicable to income, profits or gains arising or accruing in Part A States on the footing that the sales were effected in Part A and C States and the payments were also received there. The respondents claimed that the prices realised constituted receipts in Ratlam

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