Judgment

MATHEW, J. :- The respondents in these appeals filed writ petitions in the Bombay High Court challenging the validity of the Borough Municipalities (Validation of Certain Taxes on Buildings and Lands) Act, 1965 (Maharashtra Act No. III of 1966), hereinafter called the "Validating Act", on the ground that the provisions of the Act violated their fundamental rights under Article 14 of the Constitution and for restraining the appellants from levying house tax on the mills, factories and buildings connected therewith of the respondents or collecting the same from them. A Division Bench of the High Court held that Sections 3 (b), 4 (1), 4 (2) and 5 of the Validating Act were invalid as they contravened Article 14 and granted the prayer for restraining the appellant-Municipality from levy and collecting the tax.

2. These appeals, by certificate, are directed against the judgment of the Division Bench.

3. Till the year 1947, the appellant-Municipality used to levy house tax on the mills, factories and buildings connected therewith of the respondents in these appeals on the basis of their annual letting value, and the annual letting value for this purpose was ascertained in the normal way, that is, by ascertaining the amount at which the buildings might reasonably be expected to let from year to year. In 1947, the appellant-Municipality made fresh rules for levy of house tax and Rule 2 (c) of the new rules ran as follows :

"2 (c) In the case of mills and factories and buildings connected therewith, house tax on buildings shall be levied at the usual rate on the annual rental value fixed at Rs.40/- for every 100 square feet or portions thereof for each story, floor or cellar.

"Explanation : The expression "building connected therewith" means and includes warehouses, godowns, millshops, etc., which are within the compound of mill premises but does not include residential buildings, such as bungalows, out-houses.

"Note : Buildings which are not taxed under Rule 2 (c) shall be taxed under the ordinary rules."

Under this rule, the annual rental value of all the buildings of mills and factories other than residential buildings was fixed at a uniform rate of Rs. 40/- for every square foot of floor area irrespective of the actual rental value of the premises.

4. One of the respondents, namely, Lokamanya Mills, Barsi, Limited, claimed refund of amounts paid by them on the basis that Rule 2 (c) was ultra vires the Boroughs Act and they filed 4 suits for the same. Against the decrees dismissing the suits, appeals were preferred to this Court and they were finally disposed of by this Court in Lokamanya Mills, Barsi Ltd. v. Barsi Borough Municipality, (1962) 1 SCR 306. This Court, after referring to the provisions of Section 78 and the explanation to Section 75 of the Boroughs Act, held that the Municipality could levy a rate on lands and buildings on the basis of their capital or annual letting value and that in framing rule 2 (c), the Municipality had adopted a mode of valuation different from the one sanctioned by the Boroughs Act. The Court also observed :

"The vice of the rule lies in an assumed uniformity of return per square foot which structures of different classes which are in their nature not similar, may reasonably fetch if let out to tenants and in the virtual deprivation to the rate-payer of his statutory right to object to the valuation."

Accordingly, the Court allowed the appeals and decreed the suits.

5. The main objects of the Validating Act were to enable the municipality governed by the Boroughs Act to levy house tax on mills, factories and buildings connected therewith on the basis of Rule 2 (c) and to validate the levy and collection of the tax with retrospective effect. Section 3 of the Validating Act brings about certain amendments in the Boroughs Act. In Section 3 of the Boroughs Act, a clause is inserted which lays down that "rate on buildings or lands" includes any tax imposed on buildings or lands. Another amendment intro