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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4554 OF 2018 (Arising out of SLP(C)No.38618/2016)

CHAMPA LAL                                         APPELLANT(S)

VERSUS

STATE OF RAJASTHAN AND ORS.                        RESPONDENT(S)

CIVIL APPEAL NO.4556  OF 2018 (Arising out of SLP(C)No.11091/2017)

J U D G M E N T

Chelameswar, J.

Leave granted.

These two appeals are inter connected tossing up an important

question of law regarding the interpretation of Article 243 Q of

the Constitution of India.   

It  is  not  necessary  for  us  to  give  the  complete  factual

details and history of the case for the purpose of this order

except  the  bare  minimum.  The  litigation  revolves  around  the

upgradation by a notification dated 6.10.2008 of Gram Panchayat of

Napasar Village as Nagar Palika (Municipality) Class IV1 category

by  the  State  of  Rajasthan  purportedly  in  exercise  of  power

conferred  under  Section  3(1)(A)  of  the  Rajasthan  Municipalities

Ordinance 20082. Legality of the said notification was challenged

1 State Government while exercising power conferred to it under section 3 (1) (A) of the Nagar Palika ordinance 2008,  State Government hereby declares Gram Panchayat Napasar as Nagar Palika Fourth category.   Existing limit/area of the  Gram Panchayat Napasar will be the area of Nagar Palika Napasar. 2 The ordinance was eventually replaced by Rajasthan Municipalities Act, 2009.

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before  the  Rajasthan  High  Court  in  a  writ  petition.   It  was

dismissed by a learned Single Judge.  Aggrieved by the dismissal,

the matter was carried in a writ appeal.  During the pendency of

the  writ  appeal,  the  impugned  notification  dated  6.10.2008  was

withdrawn by another State of Rajasthan by a notification dated

18.9.2009.  The writ appeal was therefore, rendered infructuous.

Challenging  the  notification  dated  18.9.2009,  another  writ

petition came to be filed.  The said writ petition was allowed by a

Division  Bench  by  its  judgment  dated  13.5.2015  quashing  the

notification and directing the State to take consequential steps.3

Aggrieved  by  the  same,  SLP(C)No.11091/2017  came  to  be  filed.

Pursuant to the direction of the High Court, a fresh notification

dated 2.6.2016 came to be issued once again for establishing a

Nagarpalika  for  the  Napasar  village.  Challenging  the  said

notification, another writ petition came to be filed before the

Rajasthan  High  Court.  It  was  dismissed  by  a  judgment  dated

3.8.2016.  On appeal, the same was confirmed by the Division Bench

by  its  judgment  dated  12.9.2016.  Aggrieved  by  the  same,

SLP(C)No.38618 of 2016 is filed.

The  correctness  of  the  two  judgments  of  the  High  Court

impugned in these two appeals, is questioned on various grounds.

In  our  opinion,  it  is  not  necessary  to  examine  the  various

submissions made before us.  The impugned actions of the respondent

State which culminated in the two impugned judgments of the High

Court suffers from a fundamental infirmity which goes to the root

3 The consequent act referred to by the court is that a new notification was directed to be issued.

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of the matter.

The establishment of municipalities and their organisations is

governed by Part IX A (consisting of Articles 243P to 243ZG) of the

Constitution  of  India  inserted  in  the  Constitution  by  the

Constitution 74th (Amendment) Act, 1992 with effect from 1.6.1993.

Article 243P (e) defines the expression “Municipality” to mean an

institution  of  self-government  constituted  under  Article  243  Q.

Article 243 Q of the Constitution of India declares as follows:

“243Q. Constitution  of  Municipalities:-  (1)There  shall  be constituted in every State-

(a) a  Nagar  Panchayat  (by  whatever  name  called)  for  a transitional area, that is to say, an area in transition from a rural area to an urban area;

(b) a Municipal Council for smaller urban area; and  

(c) a Municipal Corporation for a larger urban area,

in accordance with provisions of this Part:

Provided that a Municipality under this clause may not be constituted in such urban area or part thereof as the Governor may, having regard to the size of the area and the municipal services  being  provided  or  proposed  to  be  provided  by  an industrial establishment in that area and such other factors as he  may  deem  fit  by  public  notification,  specify  to  be  an industrial township.

(2) In this article, “a transitional area”, “a smaller urban area” or  “  a larger urban area”  means such area as the Governor may, having regard to the population of the area, the density of the  population  therein,  the  revenue  generated  for  local administration,  the  percentage  of  employment  in  non- agricultural  activities,  the economic importance or  such other factors as he may deem fit, specify by public notification for the purposes of this Part.”

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Article 243Q contemplates the constitution of three different

categories  of  bodies  known  as  (i)  Nagar  Panchayat  for  a

transitional area, (ii) Municipal Council for a smaller urban areas

and (iii) Municipal Corporation for a larger urban area.   

It is declared under Article 243Q(2) that the expressions “a

transitional  area”,  “a  smaller  urban  area”  and  “a  larger  urban

area” (hereinafter collectively referred to as “AREAS”) would mean

such  areas  as  may  be  specified  by  the  Governor  by  a  public

notification for the purpose of Part IX A of the Constitution of

India.  Article 243Q(2) further obligates the Governor to have due

regard to the various factors mentioned therein before specifying

the  AREAS  i.e.  population  of  the  area,  the  density  of  the

population,  the  revenue  generated  in  the  area  for  local

administration,  percentage  of  employment  in  non-agricultural

activities, the economic importance or such other factors as he may

deem fit.   

It, therefore, appears from the scheme of Article 243Q(2) that

the  Governor  is  not  free  to  notify  ‘AREAS’  in  his  absolute

discretion  but  is  required  to  fix  the  parameters  necessary  to

determine whether a particular AREA is a transitional area or a

smaller urban area or a larger urban area with due regard to the

factors mentioned above.  It is implicit that such parameters must

be uniform for the entire State. It is only after the determination

of  the  parameters,  various  municipal  bodies  contemplated  under

Article 243Q(1) could be constituted.

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In  response  to  a  specific  query  whether  any  notification

contemplated under Article 243(Q)(2) had been issued by the State

of  Rajasthan,  Mr.  Guru  Krishnakumar  learned  senior  counsel

appearing for the State of Rajasthan, produced two notifications

dated 4.7.1995 and 30.4.2012.  On a plain reading of both the

notifications, it appears that these notifications had been issued

in  exercise  of  the  statutory  powers  conferred  on  the  State

Government  by  two  different  enactments  known  as  “The  Rajasthan

Municipality  Act,  1959  (since  repealed)  and  the  Rajasthan

Municipalities Act, 2009.  Apart from the declaration regarding the

source  of  power  for  the  issuance  of  these  notifications  to  be

authority  conferred  by  the  various  provisions  of  the  above

mentioned two enactments, it appears from the tenor and scheme of

the  notifications  that  these  notifications  purport  to  classify

municipalities only on the basis of population.  The various other

parameters to which regard is required to be had under Article

243Q(2)  were  not  taken  into  consideration  for  the  purpose  of

classification made under the above mentioned two notifications.

Therefore,  in  our  opinion,  these  two  notifications  cannot  be

treated as notifications contemplated under Article 243(Q)(2).   

In  the  absence  of  any  notification  which  meets  the

requirements of Article 243Q(2), the entire exercise undertaken by

the  State  of  Rajasthan  in  upgrading  the  Napasar  village  Gram

Panchayat  to  be  a  Nagarpalika  –  [that  is  equivalent  to  Nagar

Panchayat as mentioned in Article 243Q(1)(a)] is unconstitutional

as it is inconsistent with the requirements of the Constitution

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under Article 243Q of the Constitution of India.  Therefore, the

initial  notification  dated  6.10.2008  itself  is  unsustainable.

Unfortunately, this aspect has not been noticed by the High Court

obviously because it was not brought to the notice of the High

Court.  The fact that a litigant before the court does not point

out the relevant principles and provisions of law does not prevent

the  court  from  examining  the  issues  involved  in  the  lis,  more

particularly,  when  the  process  which  is  the  subject  matter  of

litigation before the court is inconsistent with the mandate of the

Constitution. It is a settled principle of law that courts are

bound to take note of the constitution and the laws.4

We, therefore, have no choice but to hold that the initial

notification dated 6.10.2008 is unconstitutional.  Therefore, the

legality of various actions which followed that notification and

4 S.C. Prashar & Another v. Vasantsen Dwarkadas & Others, AIR 1963 SC 1356 98. The Department in this case had relied on the amending Act of 1953 before the High Court. Though the

High Court considered the case from the angle of the second proviso to sub-section 3 of Section 34 and also struck it down as unconstitutional it did not take into consideration Section 31. sub-sections (1), (2) and (3) of Section 34 of the principal Act (including It was argued before us that we cannot take Section 31 into account if it was not referred to by the High Court. But a court is required to take judicial notice of statutes and if Section 31 of the Act 1953 said that of course the amendments as made by the 1953 Act) shall apply and shall be deemed always to have applied to any assessment or re-assessment for any year ending before April 1, 1948, it is the duty of court, and tribunals to read Section 34 in that manner and in no other. In our opinion it was not open to the High Court to read Section 34 without Section 31 which contained a legislative construction and made Section 34 retrospective. This omission has vitiated the High Court's reasoning.

121. The  questions  as  framed  refer  to  the  provisions  of  Section  34(3)  of  the  Income Tax  Act.  They  also mentioned two sets of dates, namely, the dates of the returns (7-3-1951 and 14-1-1952) and the date of the assessment (17-11-1953). Now we know that before the first day of April, 1952, there was a four-year limit for assessments or re- assessments under sub-section 3 of Section 34 but thereafter that limit was removed by the proviso added by Section 18  of  the  amending  Act  of  1953  and  by  Section  31  of  the  same  Act  assessments  made  before  or  after  the commencement  of  the  amending  Act  of  1953  (1-4-1-952)  were  declared  valid  if  proceedings  commenced  after September 8, 1948.  The question as framed cannot be answered without reference to Section 31 and even if parties did not bring it to the notice of the High Court it  was the duty of the High Court to look into the validating provisions of Section 31. If the High Court did not, we know of no rule or decision of this Court which prevents  us  from looking into a validating provision which  existed at  the  time of  the  High Court's decision and was overlooked by it and which by itself furnished the answer to the question propounded for the opinion of the High Court. No decision of this Court lays down that in determining the true answer to a question referred under Section 66, this Court  is  confined only to those sections to which the Tribunal or the High Court referred.  Indeed,  there  are  many  cases  which  say  the  contrary:  see Kusumben  Mahadevia v. CIT [(1960)  3  SCR 417], Zoraster & Co. v. CIT [(1961) 1 SCR 210] and the recent case of Scindia Steam Navigation Co. v. CIT [(1961) 42 ITR 589]. We must, therefore, look into Section 31 to determine these appeals.

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the judgments of the High Court which examined the legality of

those  actions,  in  our  view,  need  not  be  examined.   All  such

subsequent action of the State which led to litigation suffer from

a fundamental constitutional flaw. The impugned judgments of the

High Court rendered without examining the true scope and scheme of

Part IXA of the Constitution and more particularly Article 243Q(2)

are per incuriam.

Mr. A. Subba Rao, learned counsel appearing for the non-State

respondents in SLP(C)No.11091/2017 submitted that in view of the

findings recorded by the High court that in the interregnum, lot of

development (such as the establishment of industries, educational

institutions and hospitals etc.) took place in the geographical

area in question, and therefore, this Court may not interfere with

the notification upgrading the area in question to a Nagarpalika as

such interference would have the effect of reducing the Nagarpalika

into a Gram Panchayat once again.  Confronted with the question as

to  what  would  be  the  prejudice  the  non-State  respondents  would

suffer  by  such  consequence,  Mr.  Rao  submitted  that  there  is  a

possibility of the industries being shifted away from the area in

question.   It is only an apprehension.  We find no basis in the

pleading for such apprehensions nor do we see any reason which

might  lead  to  such  a  possibility.  Therefore,  the  submission  is

rejected.

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The appeals are disposed of accordingly.

......................J.        (J. CHELAMESWAR)

......................J.        (SANJAY KISHAN KAUL)

NEW DELHI APRIL 26, 2018