The auction of the right to collect tax was ultra vires the Corporations Act, illegal, and void, as it violated the requirement that all moneys raised by any tax be credited to the Municipal Fund and the principle that the recovery of tax is a sovereign function that cannot be delegated to private individuals or bodies.

( 1 ) THIS petition and M. P. No. 174/92 were heard together as they involve the same question viz. whether a Municipal Corporation can delegate/convey by auction the right to realise a tax leviable under the M. P. Municipal Corporations Act, 1956 (hereinafter called as the "corporations Act ). This petition has been filed by the Indore Nagar Nigam Karmachari Congress a registered body of the employees of Indore Municipal Corporation. The other petition M. P. No. 174/92 is filed by employees of Municipal Corporation, Ujjan.

( 2 ) THE petitioners in both these cases contend that the decision of the Respondents, Municipal Corporations, to grant the right of collection of terminal tax on passengers, on the basis of an auction is bound to affect adversely the promotional prospects of their Members, the employees of the aforesaid Corporations. It is contended that under the provisions of the Act and the Rules and Bye-laws made thereunder, a specific procedure for recovery of taxes is provided which cannot be deviated from. The Petitioners have therefore prayed for quashing of notifications inviting tenders for collection of recovery of terminal tax by the aforesaid Municipal Corporations as also the State Government's letter granting permission to adopt such a course for collection of tax.

( 3 ) THE Respondent Municipal Corporation, on the other hand have come out with a plea that the step has been taken to avoid leakage in collection process of the tax. They have contended that because of rampant corruption amongst the employees charged with the duty of collecting these taxes, the Corporations had been suffering tremendous loss of revenue. There was no other method to check it but to auction the right to realise these taxes. It was also contended that the Corporations will stand to benefit because they will be getting the maximum amount in lieu of taxes because of keen competition amongst the tenderers. The Corporations would not have any hassles in collecting the amount of tax also. According to the Corporations, it was in public interest to allow them to realise maximum amount of money through auction.

( 4 ) A Division Bench of this Court in Indore Bhed Bakra Vikreta Sangh v. Municipal Corporation, Indore, 1992 Jab LJ 34 had an occasion to consider validity of auction of right to recover market fees on sell and purchase of cattle and other animals in a market. In that case it was held that all the money received by or on behalf of the Corporation including amounts realised as tax have to be first deposited in the Municipal Fund and then only the amount could be spent on any of the recognised purposes of the Act. The action of the Corporation in auctioning the right to recover market fees was held to be illegal in that case. The Petitioners contend that on the same basis auctioning of right to recover terminal tax on passengers has to be declared illegal. On the other hand Respondents submit that view taken by this Court in Indore Bhed Bakra Vikreta Sangh v. Municipal Corporation, Indore (supra), deserves reconsideration. ( 5 ) SECTION 86 of the Corporations Act provides, for creation of Municipal Fund. It reads as under:-"86. Municipal fund to be sole and to be held in trust.- there shall be one Municipal Fund and it shall be held by the Corporation in trust for the purposes of this Act, subject to the provision therein contained. "section 87 of the Corporations Act provides for the money to be credited to the Municipal Fund. Section 87 (1) of the Act which is relevant for our purposes reads as under:-"87. Credit of moneys to Municipal Fund.- (1) There shall be credited to the Municipal Fund- (a) all moneys received by or on behalf of the Corporation under the provisions of this Act or of any other law for the time being in force or under any contract; (b) balance standing to the credit of the Municipality of the city for which the Corporation is constituted; (c) all proceeds of the disposal of property by, or on