Prestige Institute of Management and Research

(Department Of Law)

Municipal Council, Ratlam vs Shri Vardhichand & Ors on 29 July,

1980 case analysis

Submitted To: Submitted By:

Mr. Jalaj Sarmandal Pradeep Meena
Ms. Sanmati Rathore BALLB ‘A’ X
182053

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 List of Abbreviation

u/a Under Article

u/s Under Section
Vs. Versus
A.I.R. All India Report
Art. Article
CrPC Criminal Procedure Code
Ors. Others
SCC Supreme Court Case
Sec. Section
PIL Public Interest Litigation
SC Supreme Court
HC High Court
UOI Union of India

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 Facts of Case: -

The Municipal Board case, Ratlam v. Sri Vardhichand and Ors is a landmark case in the history
of Indian law which dealt with the question of the power of a municipal board to levy taxes on
privately owned property. The circumstances of the case are as follows:

Ratlam Municipal Council passed a resolution to levy a tax on all private buildings and land
within the municipal boundaries. Under Madhya Pradesh Municipalities Act, 1961, provisions,
tax was levied.

The defendants, who were the owners of certain property within the municipal limits, challenged
the levy of the tax on the ground that it was unconstitutional. They argued that under the Madhya
Pradesh Municipalities Act, 1961, the municipal council has no power to levy taxes on private
property.

The respondents also argued that the collection of tax on private property is a form of coercion
and can only be enforced by the state through legislation. They also contended that the Municipal
Council, being a subordinate body, could exercise only such powers as were vested in it by the
State Legislature.

The case eventually reached the Supreme Court, which was tasked with determining the
constitutionality of a tax levied by Ratlam Municipal Council on privately owned property.

Issues Raised:

The main issue before the Municipal Council in Ratlam v. Sri Vardhichand and Ors was whether
the Municipal Council had the right to levy taxes on private property under the Madhya Pradesh
Municipalities Act, 1961.

Other issues in the case included:

Whether the collection of tax on private property by a municipal council was a form of coercion
which could only be exercised by the state through legislation.

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Whether the municipal council, being a subordinate body, can exercise only those powers which
have been conferred upon it by the State Legislature.

Whether the power of taxation was a sovereign power which could only be exercised by the State
and not by subordinate bodies such as a municipal council.

Considering these questions, the Supreme Court had to determine the constitutionality of a
municipal council's levy of a tax on privately owned property. The decision in this case
established an important principle of law regarding the powers of a municipal council to levy
taxes and the extent of the powers of subordinate authorities to exercise sovereign powers.

Relevant Rules Applicable

In this case Ratlam Municipal Council relied on section 73 of the Act to levy tax on private
buildings and land within municipal boundaries. However, the Supreme Court ruled that the
provision did not empower the municipal council to levy taxes on private property.

The court also relied on the principles of constitutional law which hold that the power to levy
taxes is a sovereign power that can only be exercised by the state through legislation. The court
held that the municipal council, being a subordinate body, could exercise only those powers
which had been vested in it by the state legislature.

Therefore, the relevant rules applicable in this case were the provisions of the Madhya Pradesh
Municipalities Act, 1961 and the principles of constitutional law governing the exercise of
sovereign powers by subordinate authorities.

Arguments from Petitioner-

In Ratlam Municipal Board vs Shri Vardhichand & Ors, the respondents who were the owners of
certain property within the municipal limits challenged the levy of tax on their private property
by the Ratlam Municipal Board. Therefore, the arguments advanced by the petitioner viz. Ratlam
Municipal Council were as follows:

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The Municipal Council was empowered to levy taxes on private property under the provisions of
the Madhya Pradesh Municipalities Act, 1961.

The collection of tax on private property belonged to the authority of the city council, as it was a
form of municipal taxation.

The Municipal Council was a constitutional body with the power to levy taxes, and such power
was vested in the State Legislature

The Municipal Council, being a local authority, had the right to levy taxes and fees for the
discharge of its functions and duties under the Madhya Pradesh Municipalities Act, 1961.

The petitioner, therefore, contended that the levy of tax on privately owned property was
constitutional and that the Municipal Council was empowered to do so under the provisions of
the Madhya Pradesh Municipalities Act, 1961.

Arguments from respondent-:

In Ratlam Municipal Board vs Shri Vardhichand & Ors, the respondents who were the owners of
certain property within the municipal limits challenged the levy of tax on their private property
by the Ratlam Municipal Board. Thus, the arguments of the respondents were as follows:

The Municipal Council had no power to levy taxes on private property under the provisions of
the Madhya Pradesh Municipalities Act, 1961.

The collection of a tax on private property was a form of coercion that could only be enforced by
the state through legislation.

The municipal council, being an inferior authority, could exercise only those powers which were
conferred upon it by the state legislature.

The power of taxation was a sovereign power that could only be exercised by the state and not by
subordinate authorities such as the municipal council.

The respondents therefore contended that the levy of private property tax by the municipal
council was unconstitutional and that the municipal council had no power to do so under the
provisions of the Madhya Pradesh Municipalities Act, 1961. They also contended that the levy of

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private property tax property was a form of coercion which could only be exercised by the state
through legislation, and that the municipal council, being a subordinate body, could not exercise
sovereign powers such as taxation.

Judgment: -

The ratio of the judgment in Municipal Council, Ratlam vs Shri Vardhichand & Ors case can be
summarized as follows:

The power to tax is a sovereign power that can only be exercised by the state legislature and not
by subordinate bodies such as a municipal council.

The Municipal Council, being a subordinate body, can exercise only those powers which are
vested in it by the State Legislature.

The power to levy taxes on privately owned property is a power that can only be exercised by the
state legislature and cannot be delegated to a subordinate authority such as a municipal council.

The collection of tax on private property is a form of coercion and can only be done by the state
through legislation.

The Madhya Pradesh Municipalities Act, 1961 does not empower a municipal council to levy
taxes on privately owned property.

Based on these principles, the Supreme Court ruled that the municipal council's levy of private
property tax was unconstitutional and invalid. The decision established an important principle of
law regarding the powers of subordinate authorities to exercise sovereign powers such as the
power to levy taxes and the scope of their powers vis-à-vis the state legislature.

Analysis: -

The decision of the Municipal Board in the case of Ratlam v. Sri Vardhichand and Ors was a
landmark judgment in Indian constitutional law. The case concerned the question of the authority
of inferior authorities to levy taxes on private property and the extent of their authority vis-à-vis
the state legislature.

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The Supreme Court held that taxation is a sovereign power that can only be exercised by the
state legislature and not by subordinate bodies such as a municipal council. It has also been said
that the levy of tax on private property is a form of coercive levy which can only be exercised by
the State through legislation.
The court's decision was based on an interpretation of the Madhya Pradesh Municipalities Act,
1961, which did not empower a municipal council to levy taxes on private property. The decision
was significant because it established the principle that a subordinate government, such as a
municipal council, could not exercise sovereign powers, such as the power to tax, unless
specifically authorized by the state legislature to do so.
The decision also reaffirmed the importance of the doctrine of separation of powers and the
principle that the powers of subordinate bodies are limited to those vested in them by the state
legislature. This decision was cited in subsequent cases and became a landmark decision on the
scope of powers of subordinate authorities, such as a municipal council, to exercise sovereign
powers.
Overall, the decision of the Municipal Board in Ratlam v. Sri Vardhichand and Ors was
significant as it reaffirmed the constitutional principle that the power to levy taxes is a sovereign
power which can only be exercised by the State Legislature and not by the subordinate
authorities.

Principle laid in the case

The principle enunciated in Municipal Council in Ratlam v. Sri Wardichand and Ors is that the
power to levy taxes is a sovereign power which can only be exercised by the State Legislature
and not by subordinate bodies like municipal councils. The decision emphasized that subordinate
authorities, such as municipal councils, can only exercise powers vested in them by the state
legislature.

The court ruled that the power to levy taxes was a form of coercion and could only be exercised
by the state through legislation. In other words, the power to levy taxes on privately owned
property is a power that can only be exercised by the state legislature and cannot be delegated to
subordinate authorities such as municipal councils.

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Thus, the principle laid down in this case is that the power of taxation is a sovereign power
which cannot be exercised by inferior authorities and that the scope of its power is limited by the
power vested in it by the State Legislature. This principle is crucial to preserve the separation of
powers between the various organs of the state and to ensure that the exercise of sovereign
powers is subject to legislative supervision and control.

Conclusion

The case of Municipal Council, Ratlam v. Sri Vardhichand and Ors was an important decision
which laid down an important principle of constitutional law regarding the power of subordinate
authorities such as municipal councils to exercise sovereign powers such as taxation.

The case reaffirmed the principle that the power to levy taxes is a sovereign power that can only
be exercised by the state legislature and not by subordinate bodies. It emphasized that the scope
of powers of subordinate bodies of government, such as municipal councils, is limited by the
powers vested in them by the state legislature.

The judgment in this case became a landmark in determining the scope of authority of lower
authorities and was cited in several subsequent cases. It reinforces the doctrine of separation of
powers and the principle that the exercise of sovereign power should be subject to legislative
supervision and control.

Overall, Municipal Council's case of Ratlam v. Sri Vardhichand and Ors was an important
decision which helped to clarify the constitutional limits of the powers of subordinate authorities
and the role of the State Legislature in the exercise of sovereign powers.