IT IS WELL ESTABLISHED that the ‘Right to Vote’ forms a fundamental tenet of the United States Constitution. However, the exercise of this particular right was historically impeded for the African American population through a ‘poll tax’, essentially a blanket fee imposed on all potential voters to enter the polling areas and cast their ballots.
This fundamental right to vote was hence rendered illusory, effectively discriminating against the African American population. These taxes were subsequently held unconstitutional by the United States Supreme Court in Harper v. Virginia Board of Elections (1966). The 24th amendment to the U.S. Constitution was subsequently ratified on January 23, 1964, which categorically prohibited state and federal governments from levying such taxes on voters.
While such overt voter suppression tactics may seem like relics of the past, analogous barriers continue to exist in different contexts. Closer home, our property tax framework fosters a similar hurdle. A property tax is a variable tax levied on land and buildings within a municipal corporation’s jurisdiction, which helps fund local infrastructure projects. The rates of such taxes, as well as methodologies for assessments are statutorily provided by each state’s legislative assembly.
Most legislations in India appear to foster their own variation of the ‘poll tax’, which applies as individuals attempt to appeal against their property tax dues. A uniform issue underlying such frameworks that warrants severe concern and renders these mechanisms fallacious, is the ‘pre-deposit condition’ precedent to appeal a property tax assessment. Put simply, the mandatory requirement to pre-deposit the seemingly wrongful amount of tax, makes the right to appeal such assessments useless in its entirety.
Much like the poll taxes in the U.S., this condition disproportionately burdens taxpayers, effectively nullifying their right to appeal erroneous assessments and rendering the mechanism futile.
The geographical or socio-economic conditions prevailing within the state rarely necessitate multiple legislations, such as in Maharashtra. The Maharashtra Municipal Corporation Act, 1949 (‘Maharashtra Act’), inter alia, comprises charging provisions for property taxes across Maharashtra, whereas The Mumbai Municipal Corporation Act, 1888 (‘Mumbai Act’) only governs the city of Mumbai in this regard.
The Maharashtra Act, was one of the first comprehensive legislations for local municipal corporations, and its provisions are largely replicated in subsequent acts such as the The Uttar Pradesh Municipal Corporation Act, 1959, and fifteen other such state legislations. More importantly, the Maharashtra Act brought along a provision for mandatory pre-deposit of a property tax assessment in order to appeal the same. Any individual looking to appeal against a wrongful assessment of their property tax dues will have to first deposit the disputed amount of tax with the authorities.
An excerpt of the same is reproduced below.
“III. Appeals against Valuations and Taxes.
406. (1) Subject to the provisions hereinafter contained, appeals against any rateable value [or the capital value, as the case may be,] or tax fixed or charged under this Act shall be heard and determined by the Judge.
(2) No such appeal [shall be entertained] unless–
…
(e) in the case of an appeal against a tax, or in the case of an appeal made against a rateable value [or the capital value, as the case may be ] [the amount of the disputed tax claimed from the appellant, or the amount of the tax chargeable on the basis of the dispute rateable value up to the date of filing the appeal, has been deposited by the appellant with the Commissioner].
…”
This particular provision within the Maharashtra Act has emerged as a troublesome precedent for several other state legislations. As illustrated, Section 406(2)(e) of the Maharashtra Act prohibits appeals from being ‘entertained’ if the disputed tax amount is not deposited with the Commissioner.
The use of the word ‘entertained’ itself is problematic insofar as it acts as a preliminary injunction, preventing even the presentation of appeal. Moreover, the provision requires individuals to deposit 100 percent of the disputed tax amount before the authorities. Pre-deposit condition mandates, such as Section 406(2)(e), are based upon the rationale that such requirements disincentivise frivolous appeals. Numerous legislations comprising such provisions, however, only require 50 percent or an even smaller proportion of the disputed amount to be deposited.
Suppose you are a responsible citizen having historically paid Rs. 10,000 as part of their property tax dues for the past several years, consistently adhering to the laws of the municipal corporation. One fine day however, you receive an erroneous property tax assessment with an exorbitantly high sum, such as Rs. 10,00,000. The only legal recourse to appeal against such assessment is to deposit the full amount before the authorities, within a meagre span of fifteen days.
The Maharashtra Act’s appealing mechanism was not always as defunct. The Bombay Municipal Corporation Act, 1949 (‘Bombay Act’) was a precursor to the Maharashtra Act, and governed property taxes before the establishment of the state of Maharashtra.
Section 406(2)(e) of the Bombay Act brought along a proviso (exception) as well, which was conveniently omitted in the latter statute. The proviso reads as follows:
“… Provided that where in any particular case the judge is of the opinion that the deposit of the amount by the appellant will cause undue hardship to him, the judge may in his discretion, either unconditionally or subject to such conditions as he may think fit to impose, dispense with a part of the amount deposited…”
Put simply, this proviso exempted parties from the mandate of pre-depositing disputed amounts so as to not cause undue hardship to them. There seems to be no clear justifications as to why this proviso was scrapped from being included in the Maharashtra Act. The inclusion of such exemption would uphold the right to appeal accorded by the statute, and not render it merely illusory. This drives the discussion towards examining the constitutional validity of such a 100 percent pre – deposit condition.
Judicial perspectives
The constitutionality of pre-deposit conditions has been a subject of great debate, especially within the property tax appealing domain. The underlying legal basis for a constitutional challenge borrows heavily from Mardia Chemicals Ltd. v. Union of India. (2004), an abundantly cited precedent in this regard.
The Supreme Court in Mardia Chemicals dealt with a challenge to Section 17 of the SARFAESI Act, which mandated the pre-deposition of 75 percent of the amount within the demand notice. Interestingly, Section 17 of SARFAESI Act also included a waiver proviso, allowing authorities to exempt parties from such pre-deposit requirements as per their discretion. Nonetheless, the Supreme Court found this mandate to be unreasonable and arbitrary, and hence held the provision to be ultra vires Article 14 of the Constitution.
The Delhi Municipal Corporation Act, 1957 comprises a pari materia provision for appealing property tax assessments, as under Section 406 of the Maharashtra Act. The Delhi High Court in Gagan Makkar v. Union of India (2012) held a similar provision to be violative of Article 14. The High Court underscored the lack of a discretionary proviso exempting such requirement, relying on the previous verdict in Shyam Kishore v. Municipal Corporation of Delhi (1991).
Keeping in mind that there exists no proviso to exempt this requirement of pre-depositing the tax amount along with the fact that property taxes may often sum up to lakhs of rupees, the Court held that the effect of such provision was onerous. The right of appeal was yet again rendered illusory, and the Court in Gagan Makkar rightly held the provision ultra vires the Constitution.
The principles carved out in Mardia Chemicals and Gagan Makkar have not confined themselves to just property tax appealing mechanisms. They have also creeped into stamping legislations. The Rajasthan High Court in Choksi Heraeus v. State & Ors. (2008), relying on the above judgements, observed that there should be a relaxation provision within the pre-deposit mandate in the Rajasthan Stamp Act, 1998. The Court held that the appealing remedy under Section 65 of the Rajasthan Stamp Act, imposes a condition that is burdensome, onerous and arbitrary.
In light of these decisions, it is plausible that Section 406(2)(e) of the Maharashtra Act, in its present form, is arbitrary and ultra vires of the Constitution. The validity of this particular provision has been previously examined within three separate verdicts before distinct fora:
(1) The Supreme Court in Anant Mills Co. Ltd. v. State of Gujarat (1975).
(2) The Gujarat High Court in Surat Municipal Corporation v. Baroda Rayon Corporation (1999).
(3) The Bombay High Court in Walchandnagar Industries Limited v. Municipal Corporation (2014).
The Supreme Court in Anant Mills held that the effect of Section 406 did not, in any manner whatsoever, create a discrimination offensive to the equality enshrined under Article 14, and upheld its constitutional validity. The top Court relied upon the exemption (proviso) as part of the earlier statute, and observed that the same relieves applicants of any undue hardship.
The Gujarat High Court in Surat Municipal Corporation followed suit and held it to be intra vires of the Constitution as well. Both these verdicts revolve around Section 406 of the (earlier statute) Bombay Provincial Municipal Corporations Act, 1949. This legislation was passed along with the infamous exemption proviso that remains omitted in its present form.
The Bombay High Court’s Walchandnagar is by far the only precedent that has comprehensively dealt with Section 406 of the Maharashtra Act. The appellant had placed reliance on Gagan Makkar in order to demonstrate undue hardship and its consequent unconstitutionality. The High Court, however, erroneously upheld its constitutional validity. It must be highlighted that there was no relaxation proviso attached to the new statute, evidently violative of the principles carved out in Mardia Chemicals, Gagan Makkar and Choksi Heraeus.
Nonetheless, it reasoned that the right of appeal is a creature of a statute and its exercise shall be conditional upon the legislature’s wisdom. “When such a law authorizes filing of an appeal, it can impose conditions as well.”
The Court’s reasoning is problematic insofar it conflates the legislature’s freedom, with enacting provisions that are manifestly arbitrary and wholly negate the right to appeal itself. The absence of any sort of judicial discretion in exempting the litigant pressed with undue hardship, is central to Section 406’s constitutional infirmity.
Overall, the Bombay High Court’s verdict fails to align itself with the well-established jurisprudence on pre-deposit conditions. There remains a need for less intrusive measures within these frameworks, and statutes enacted upon not-so shaky constitutional grounds. As long as Walchandnagar remains good law, the legislature shall continue to impose its modern ‘poll-tax’ on appealing the common individual’s erroneous property tax assessment.