Toll Collection Ratification Upheld, But Diversion of Funds Quashed: Madras High Court

Madras High Court Upholds Toll Ratification, But Blocks Diversion of Funds

Madurai, Tamil Nadu – In a significant judgment concerning toll collection on the Madurai Inner Ring Road, a division bench of the Madras High Court, comprising Justices P.Velmurugan and K.K.Ramakrishnan , has partly overturned a previous single judge ruling. The court upheld the ratification of toll collection by the Madurai Corporation for a period after the initial notification expired, but quashed a government order that sought to divert surplus toll funds for other municipal projects.

The case originated from a challenge by the Virudhunagar and Madurai District Bus Owners Associations against the continued collection of toll fees on the Inner Ring Road beyond the initial five-year period stipulated in the Government Order G.O.Ms.No.149 dated 23.10.2000. Initially, the toll collection was authorized from November 1, 2000, to October 31, 2005. However, the Madurai Corporation continued to levy tolls even after this period without a fresh notification.

Background and Arguments

The Bus Owners Associations argued that the continued toll collection was illegal and unauthorized under the Indian Tolls Act, 1851. They contested a subsequent Government Order, G.O.Ms.No.29 dated 31.01.2011, which retrospectively ratified the toll collection from November 1, 2005, to October 31, 2010. The associations sought a refund of the tolls collected during this period.

The Madurai Corporation and the Tamil Nadu Government countered that the original G.O.Ms.No.149 intended for a 15-year toll collection period to recoup the investment in the Inner Ring Road project. They argued that the ratification was a valid measure to regularize the continued collection and that the funds were necessary to service the debt incurred for the road construction.

Court's Reasoning and Decision

The division bench differentiated between "illegality" and "irregularity" in the context of the toll collection. While acknowledging the absence of a fresh notification immediately after the initial five-year period, the court deemed it an irregularity that could be rectified through ratification, rather than an illegality.

The judgment emphasized that G.O.Ms.No.149, in its clauses, contemplated a 15-year toll collection period and indicated that decisions regarding the annual increase and continuation of tolls would be made later. The court stated that the ratification order (G.O.Ms.No.29) was a valid attempt to regularize the ongoing collection, especially since the loan for the road construction was still outstanding.

> "Reading of Clause 10(g) shows that a decision will be taken later as to whether the rate of annual increase should be calculated with 8% level or be reduced. Toll to be collected from 6th year of the remaining of 10 years shall be notified later based on the provisions contained in Clause 10(g). A plain reading of these three Clauses in para No.10, it is made clear that already the Government has decided that the collection of toll shall be in force for 15 years."

Consequently, the court allowed the writ appeals filed by the Madurai Corporation (W.A(MD)Nos. 8 & 9 of 2015), setting aside the single judge’s quashing of the ratification order. Simultaneously, the appeals filed by the Bus Owners Associations seeking a refund (W.A(MD)Nos.1501 and 1502 of 2014) were dismissed.

Diversion of Funds Quashed

However, in a partial victory for the Bus Owners Associations, the court quashed G.O.Ms.No.25 dated 05.02.2016. This government order had directed the transfer of a surplus of ₹36 Crores from the Inner Ring Road toll collection escrow account to the Madurai Corporation's general revenue account for other developmental projects. The court recognized the argument that toll funds are specifically meant for road-related expenses and not for general revenue augmentation.

Despite quashing G.O.Ms.No.25, the court did not order an immediate refund of the tolls collected from 2005 to 2010. Instead, it granted the Bus Owners Associations the liberty to pursue a refund through a civil suit, allowing for the exclusion of the time spent on the writ petition for limitation purposes.

Implications

The judgment offers clarity on the concept of ratification in administrative law, particularly concerning toll collection. It underscores that while irregularities can be ratified, the purpose of toll collection remains tied to the infrastructure project for which it was levied. The decision highlights the judiciary's role in balancing revenue needs with the principle that levies must be authorized by law and used for their designated purpose. Bus owners seeking refunds will now need to navigate the civil court route.