(Prayer: Case disposed of on 20-3-1958) reffered to the High Court in pursuance of the order of the High Court in CM.P..by the District Munsif of Karur under O. 27-A. and S. 115 C.P.C. and under Art. 265 of the Constitution for its decision on the following question, viz, whether the levy and collection of land revenue is illegal and unconstitutional by reason of Art. 265 of the Constitution.)

Ramachandra Iyer, J.

This is a case withdrawn by this Court under Art, 228 of the Constitution from the file of the District Munsiis Court, Karur, where it was egistered as O. S. No. 267 of 1956 as it involved a substantial question of law as to the interpretation of Art. 265 of the Constitution the determination of which is necessary for the disposal of the suit.The petitioner is a ryotwari pattadar of certain wet and dry lands covered by patta Nos. 96 and 623 in Krishnarayapuram village, Kulitalai Taluk, Tiruchirapalli D. He filed O.S. No. 267 of 1956 in the Court of the District Munisif of Karur against the State of Madras represented by the Collector of Tiruchirapalli, the respondent herein, praying for the recovery of a sum of Rs. 2412-0 collected from him as land revenue for fasli 1365, as such levy and collection of the tax was illegal and unconstitutional by reason of Art. 265 of the Constitution of India which provides that no tax shall be levied except by authority of law. The petitioner claimed that the respondent had no statutory right to levy and collect assessment on ryotwari lands and as such the collection of land revenue was contrary to Art. 265 of the Constitution. The respondent justified the right to collect the land revenue and contended that Art. 265 was not contravened. The question for determination is, therefore, whether the levy and collection of land revenue in respect of ryotwari lands is illegal and unconstitutional by reason of Art. 265 of the Constitution. Art. 265 of the Constitution provides No tax shall be levied or collected except by authority of law.

Before proceeding further it is necessary to set out the main features of the ryotwari system of land tenure and the basis of assessment on the lands. It is well known that system of permanent settlement of Lord Corn Wallis was introduced only in a few places in the old Madras Presidency and that the Board of Directors of the East India Company prohibited its extension to the rest of the presidency. Thereafter collection of revenue was by way of village settlement or by granting lease of the whole villages to a middleman that is to a renter or headman or to a joint body of inhabitants. That system of collection of land revenue was not found satisfactory and the ryotwari system of Sir Thomas Munroe was adopted between 1812 and 1818. It was conceived as a system of land revenue administration without the middleman, the ryots being treated as proprietors of their holdings and liable to pay assessment direct to the Government. The assessment however, was not fixed either in regard to the land or in regard to the period. Arable lands were classified according to the nature of the soil and assessment was fixed according to the quality and extent of the land. Each field or holding was valued separately and the holder was free to pay the revenue and keep the field or free himself by giving it up as he pleased. (Badan Powells Land System in British India, Vol. 3. p. 5) Settlements of revenue are made for such periods as the Government fixed for each district and they are notified in the District Gazatte by the Collector. Ordinarily they are being made once in thirty years. The Standing Orders of the Board of Revenue contain the basis, rates and methods of assessment. S. O. I. R. 3 states that the assessment fixed represents the commuted value of the Governments share of the surface cultivation. The State Government will fix the period of settlement and during the currency of the period no revision of assessment is possible. Badon Powell in his work Land System in British India, Vol. 3 at pp. 106-107 says:

Though the zamindari system was introduced by Regulation XXV of 1802 no general revenue Act exists; nor has the ryotwari system ever been established by legislative enactment..Really the Standing Orders of the Board are the land Revenue Code of this province and no one can thoroughly master the revenue administration without studying these in detail..

The assessment of land revenue by periodical settlement! contemplated by the Boards Standing Orders is thus a part of the system on which the ryotwari pattadar was allowed to have the land.

From very early times the land revenue was the most recognised item of revenue for the State. Mr. Soundararaja Iyengar in his book Land Tenures in Madras Presidency points out at page II, after referring to the ancient Hindu scriptures and Smritis, that the ancient law-givers have laid down most distinctly that the sovereign is entitled to a share of the produce on the land for protecting the life, the liberty and the property of the people under his charge. Reference has also been made by the learned author at page 151 of his wok that according to the Tamil classics land revenue amounting to 1/6th of the produce was levied by the King payable either in money or in kind at the option of the farmer.

There has been a controversy as to whether the land revenue collected by the State was in the nature of rent or tax. For the purpose of the present case it is unnecessary to go into that question as the learned Advocate General who represented the State invited as to proceed on the footing of its being a tax-In all countries it has long been recognised that the Sovereign is entitled to levy tax on all lands within its territory. Such a right is one of the prerogatives of the sovereign. That was also the position in England till conflict arose between the King and the people and till it was put an end to by the Bill of Rights (L) Williams and Mary, S. II Chap. II). In Attorney General v. Vilts United Dairies 37 T.L.B. 884=91 L.J. K.B. 897., Lord Justice Atkin (as he then was) stated.

No power to make a charge upon a subject for the use of the Crown could arise except by virtue of the prerogative or by statute and the alleged right under the prerogative was disposed of finally by the Bill of Rights.Though the attention of our an cestors was directed especially to abuses of the prerogative there can be no doubt that this statute declares the law that no money shall be levied for or to the use of the Crown except by grant of Parliment. We know how strictly Parliament has maintained this right and in particular how jealously the House of Commons has asserted its predominance in the power of raising money. An elaborate custom of Parliament has prevailed by which money for the service of the Crown is only granted at the request of the Crown made by a reasonable Minister and assented to by a resolution of the House in Committee. By constitutional usage no money proposal can be altered by the second chamber, whose powers are confined to acceptance or rejection. Similar elaborate checks exist in respect to authority for expenditure of the Public Revenue both in respect to obtaining the statutory authority to expend money and to obtaining the executive acts necessary to place the money at the disposal of the spending authority.

It will thus be seen that it was as a result of the Bill of Rights that the sovereign in England lost his prerogative right to levy a tax and that after the Bill of Rights taxation could be effected by a statute of Paliament.

But in India the prerogative right to tax was recognised in the ruler and there has no abrogation of such a right as in England. In Bellv. Municipal Commissioners for the City of Madras 25 Mad. 457 at p. 482., Bashyam Iyengar J. observed:

On the other hand it is probably true that the Crown has according to the Common law of India certain prerogatives which it may exercise in India though not in England, notably the prerogative of imposing by an executive not assessment on lands and varying the same from time to time.

To the same effect is the observation of Subramania Iyer J. in Madathapu Ramayya v. Secretary of State for India in Council 27 Mad. 386 at 388., which is in these terms:

Such imposition is in the due exercise of the prerogative possessed in this country by the Crown, viz., that of exacting from a subject holding arable land the Crowns proper share of the produce thereof or the equivalent of such produce, which is the modern land revenue. At page 394 Bashyam Iyengar J. observed:

The right of the Government to assess land to land revenue and to vary such assessment from time to time is not a right created or conferred by any statute but as stated in my judgment Bell v. Municipal Commissioner for the City of Madras 25 Mad. 457 at p. 482., it is a prerogative of the Crown according to the ancient and common law of India. The prerogative right consists in this, that the Crown oan by an executive act determine and fix the Rajabhagatn or the Kings share in the produce of the land and vary such share from time to time.

That taxation is one of the prerogatives of the sovereign in this country has been further stated in a decision in Kelu Nair v. Secretary of State for India 48 Mad. 586 [LQ/MadHC/1925/26] at p. 580=22 L.W. 762. It was held in that case that the proprietorship of theryotwari holder in his holding was subject to the prerogative which the Crown has according to the common law of India of imposing by an executive act assessment land and varying it from time to time.

There are, therefore, two aspects of the matter: (i) it is an inherent feature of the ryotwari system that the Government has a share, and as stated in Boards Standing Order 1, R. 4 the assessment represents the commuted value of the Governments share of the cultivation and (2) the assessment is by virtue of the prerogative right of the Government which under the law obtaining in this country it always possessed. Such being the legal basis for the assessment, the procedure adopted for the levy is what is contained in the Boards Standing Orders. In Prasad Rao v. Secretary of State in Council 40 Mad. 886=6 L.W. 360 (P.O.)., the Privy Council recognised that the incidents of the ryotwari tenure were governed by custom and at page 897 observed:

The practice of the Government estates is to make periodical settlement with ryots whereby the Governments share in the produce is commuted for a fixed annual payment in assessing which the wet lands are separately classified. The annual payment is incapable of increase during the period for which settlement is made.

There has been statutory recognition of the incidents of the tenure and of the right of the Government to levy and collect the assessment. Regulation 23 of 1802 provided for the establishment in each district of an office for keeping the records in the native language relating to public revenue and for preserving the same. The preamble to that regulation emphasised the necessity to preserve records relating to assessment of revenue and of Public demands. The Revenue Recovery Act II of 1864 which purported to consolidate the laws for the recovery of tax arrears of revenue in India put the collection of revenue on a statutory basis. Under S. 1 of the Act the landholder is defined as including all holders of land under ryotwari settlement or in any way subject to the payment of revenue direct to State Government. S. 3 of the Act enacts:

Every landholder shall pay to the Callector, or other Officer empowsred by him to receive it, the revenue due upon his land on or before the day on which it falls due, according to the kistbandi or other engagement, and where no particular day is fixed, then within the time when the payment falls due according to local usage; provided that except where property is held under a Sanad I-Milkiyat-i-istimrar or other similar instrument it shall be lawful for the Board of Revenue, by notification published in the District Gazette, to alter and fix from time to time, the amount of the several kistsor instalments and the dates at which they shall respectively become payable.

This provision is a charging section as it imposes a liability on the landholder to pay the assessment. Consistent with the nature and incidents of the tenure the section recognised the right of the Board of Revenue to alter and fix from time to time the kists. The Act contains elaborate provisions for the collection of arrears of revenue. S. 58 like the provisions in Statute 21 Geo-III Ch. 70 (referred to in llberts Government of India, p. 268) is a reminder of the origin of the land revenue assessment as a prerogative right and precludes the civil Court from taking cognisance of any dispute as to the rate of land revenue.

There have been a number of other statutes in Madras which recognised the Ryotwari Assessment Act XIV of 1920 (Madras Local Boards Act) provides under S. 79 (1) for the annual rental value of property to be calculated on the basis of the assessment. Madras Act XXVI of 1948 provides under S. 22 for ryotwari settlement of the estate taken over by the Government on the basis of the ryotwari settlements. Madras Act XXIV of 1954 and Act XXX of 1955 provide for the levy of surcharge on the basis of land revenue.

Under Art. 266 of the Constitution all revenues received by the State Government form part of the consolidated fund and moneys out of this fund could be appropriated in the manner provided in the Constitution. Art. 202 provides for laying before the Houses of Legislature a statement of estimated receipts and expenditure for the State for every financial year. Art. 203 provides for the demands for grants and Art. 204 provides for the passing of an Appropriation Act in respect of the grants made and the amounts charged on the consolidated fund. Land revenue to be collected would form part of the estimated receipts under Art. 202 and grants would be made for the excess over the receipts and the Appropriation Act would put the grants on a statutory basis. The collection of ryotwari assessment is thus brought before the Legislature every year.

In China Navigation Co., Ltd. v. Attorney Genaral (1932) 2 K. B. 197. the question arose as to whether the Crown in England was bound to afford military assistance to British subjects in foreign countries. The plaintiffs were a shipping company trading particularly in Chinese and neighbouring waters, where their ships carried a large quantity of valuable cargo and numerous passengers. At all material times the Chinese and neighbouring waters were infested with pirates. The plaintiff company requested the Grown to provide armed guards for their ships for protection against piracy. Armed guards were provided for a time but later the Crown claimed that the supply of armed guards would be continued only on condition that the cost was paid by the shipping company. The plaintiff company paid the sums demanded but later contended that the Crown was not entitled without the sanction of Parliament to demand payment of the cost of such measures as providing armed guards, and that they were under no obligation to male the payments for the use of the Crown without statutory or other authority. They brought an action praying for a declaration to that effect. The Court of Appeal held that there is no legal duty on the Crown to afford protection to British subjects in foreign parts and that excepting so far as they are regulated by statute matters relating to the army remain within the prerogative of the Crown which could not be interfered with by the Courts and if in the exercise of such prerogative the Crown agrees to afford military assistance on payment such stipulation is perfectly valid. In regard to receipt of such moneys by the Crown without there being a lawful parlia mentary enactment, Scrutton, L.J. observed at page 217 thus:

The financial side of the matter, the question of imposing a charge on subjects without the consent of Parliament, is illuminated by two memoranda from the Treasury produced to us during the second hearing. The first sets out the way in which receipts for services rendered by the army and navy have been dealt with during the last one hundred and twenty years. After much discussion the system was put en a statutory footing by the Public Accounts and Charges Act, 1891. S. 2 deals with all such receipts a s appropriations in aid, under the direction of the Treasury of money provided by parliament for any purpose and as such they are so applied and audited and dealt: with. The suggestion that such receipts are not authorised by Parliament disappears. The second memorandum shows in detail in the case of a payment by the present appellant company for services similar to those the subject of the present appeal the progress of the particular payment through the various revenue authorities, till at last it is sanctioned as an appropriation in aid under the head Miscellaneous receipts by the Appropriation Act for the year, and this is devoted to the relief of the sum voted by Parliament,

I am therefore of opinion that the payment where made, is sanctioned) and controlled by Parliament in the Appropriation Act under the system of appropriation in aid under the Act of 1891. Lawrence, L. J. refers to the receipt of moneys in such cases and states that all receipts in respect of the army have to be applied as an appropriation in aid of the money provided by Parliament for that service under S. 2 of the Public Accounts and Charges Act, 1891 and have therefore to be brought in the army estimates, In practice the Army Council submits its estimates to the Treasury which critically examines them and after approval by the Treasury the estimates are submitted to Parliament and may be discussed in Parliament before the granting of supply and the passing of the Appropriation Act. His Lordship observes at page 235 thus:

The sums paid by the plaintiff company for the provision of aimed guards on its ships were included in the estimates for the years in which they were received as an appropriation in aid, and were duly granted by Parliament as part of the supply for the army for that year; they were subsequently passed as proper receipts by the Comptroller and Auditor General, In the face of these faots it is difficult to see how the contention that the Crown has levied money for its use without grant of Parliament, contrary to the Bill of Rights can successfully be maintained.

Slesser, L. J., observed at page 240 in these terms:

Parliament on being shown that the Department requires to spend a certain sum, but that receipts from fees etc., will amount to a smaller sum, grants the difference, together with authority to use the sum received from the fees, and therefore the Department is limited to the gross expenditure from the sum granted and the fees, and is financially in exactly the same position as if it had asked Parliament for the whole sum and paid the fees into the Exchequer.

It can, therefore, be said that the levy of assessment on lands has been made by sanction of the legislature and statutorily affirmed by the Appropriation Acts. Thus, though in origin the assessment was on the basis of a prerogative right it was recognised as lawful by custom and statutes, the assessment procedure was codified as it were in the Boards Standing Orders, and there was, therefore, a valid legal sanction prior to the Constitution for the levy, assessment and recovery of land revenue.

Explanation (1) Art. 372 (1) of the Constitution makes it clear that the law in force referred to in the Article is common law as well as statute law. Therefore unless there is some provision in the Constitution which makes ryotwari assessment illegal, the law that previously existed in regard to it will continue to be valid even after the Constitution. The only other relevant Article is 265 which provides No tax shall be levied or collected except by authority of law. If the phrase authority of law is taken to mean statute law Art. 372 will not continue the old system of the levy of land revenue which though legal was not authorised by any statute. If on the other hand the words authority of law include common law as well, the system of land revenue assessment obtaining in this state would continue to be a valid law. In the Constitution the word law has been used simply or in phrases such as according to law, by authority of law by any law in accordance with law in accordance with the provisions of any law by or under law, under the law, under any law etc. In the absence of any express definition the context determines whether law connotes only statute law or something wider-Art. 22 (4) (b) which contains the words in accordance with law obviously contemplates statute law because it is followed by the words made by Parliament. Art. 26(d) which uses the same phrase in accordance with law has been held to mean common law. Vide Sirur Mutt case 1954 S.C.R. 1005. The expression authority of law is found in two Articles, viz., 31 (1) and 265. In Art. 31 (1) law obviously means statute law as indicated by Cls. 3 and 4 of that Article. As regards Art. 265 it is clear that the reference is not to statute law alone. As stated already land revenue is one of the most important items of revenue for a state, and the makers of our Constitution who should certainly be presumed to have an intimate knowledge of the system and of its basis on the sovereign prerogative, would have hardly contemplated that the validity of the system should be nullified by restricting the scope of the word law in Art, 265 to mean only statute law.

In P. J. Joseph v. Asst-Excise Commissioner A.I.R. 1953 Tr. Cochin 146., it has been held that the word law in Art. 265 is statute law. This decision has been followed in State v. Beejal A.I.R. 1954 Raj. 283 [LQ/RajHC/1954/80] . The basis of the decision of the Travancore-Cochin High Court is the decision in Attorney General v. Wilts United Dairies Ltd., (1922) 91 L.J.K.B. 897. As pointed out already that decision was rendered as a result of the peculiar constitutional position in England as a result of the passing of the Bill of Rights which put an end to the prerogative of the Crown. As such this decision cannot possibly apply to India where the prerogative right included the right to levy assessment on land.

We are therefore, of opinion that the levy, assessment and collection of land revenue are not rendered illegal by reason of Art. 265 as such levy, assessment and collection were valid prior to the Constitution and they are continued by the force of Art. 372.

Even if a different interpretation is to be given to Art. 265, we would hold that the Revenue Recovery Act II of 1864 furnishes the necessary statutory authority. Under S. 3 of the Act, the landholder (ryotwari pattadar) is liable to pay the revenue due upon his land. It is further provided in the section that the Board of Revenue can by notification published in the District Gazettee alter and fix from time to time the amount of the several kists or instalments and the dates at which they shall respectively become payable. Further provisions in the Act relate to the mode of recovery of arrears. Thus the liability and the mode of collection are provided in the Act itself while the actual assessment with respect to the lands is left to the periodical settlements by the Government.

In Whitney v. Commissioner of Inland Revenue 1926 A. C.37 at 52. Lord Dunedin observed.

Now, there are three stage in the imposition of a tax; there is the declaration of liability that is the part of the statute which determines what persons in respect of what property are liable, Next there is the assessment. Liability does not depend on assessment. That ex hypoihesi has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not roluntarily pay.

The first and third stages in the above analysis are provided for in the Revenue Recovery Act. The second stage, i.e., the actual assessment and rates of tax are under S. 3 of the Act provided to be fixed by the Board of Revenue. That is a matter of detail which the legislature in its wisdom has chosen to delegate to the executive. The liability to pay the tax is by virtue of the charging S. 3 of the Act. In the words of Sargant L.J. quoted in W. H. Cockerline and Co. Commiusioner of Inland Revenue 1926 16 Tax Cases 1 at

1

9. the liability is imposed by the charging Section, viz., S. 38 of the English Act the words of which are clear The subsequent provisions as to assessment and so on are machinery only. They enable the liability to be quantified and when quantified to be enforced against the subject but the liability to definitely and finally created by the charging section and all the materials for ascertaining it are available immediately. In ryotwari settlement the machinery for assessment is the Revenue Boards Standing Orders and S. 3 of the Revenue Recovery Act recognises it. The delegation of actual assessment to the Board of Revenue is consistent with the nature and history of the ryotwari tenure. In Syed Mohamed and Co. v. State of Madras (1952) 2 M. L. J. 598=65 L. W. 1030. it has been held that it is open to the legislature to delegate the power of actual fixing of assessment to a subordinate authority. But the rules as to assessment under the provisions of S. 3 (4) of the Madras General Sales-tax Act were required to be placed before the Legislature and they were to come into force only after they were approved by a resolution of the house. As pointed out already the levy of ryotwari assessment may be deemed to be placed before the Legislature annually under Art. 203 of the Constitution, and applying the principle of China Navigation Co. Ltd. v. Attorney General (1932) 2 K. B. 197. the actual rates of assessment should be deemed to have been approved by the Legislature.

In Sutherlands Statutes and Statutory Construction, Vol. 1 (1943) Edn. Art. 318 (stating the American law) is in these terms:

The delegation of rate-making authority to railroad and public service commissions has been uniformly sustained. Courts have frequently observed that the task of rate-making required expertnees, technical skill, and constant attention and that it was obvious that legislatures were unable to discharge this obligation directly. In all these cases, however, the legislative principle was clearly understood, if frequently being a statutory adoption of common law standards. For this reason, perhaps Courts have not hesitated to sustain delegation couched in such general terms, as to fix reasonable rates or prevent unfair discrimination. The use of delegated power in related fields of monopoly, control and business affected with a public interest have been sustained by the Courts.

It has been customary in all these oases to make the delegation in general terms. Yet almost without exception the delegations have been held valid. This unanimity of decision may be explained by the character of the subject-matter regulated. On the other hand the decisions may be explained by the common law origins of the principle of regulation, by the historical experience with standards in this field, by the Courts own knowledge of the legislative principle. The decisions suggest that if the legislative standard although expressed in general language implies a determinate guide for legislative action the delegation is valid. It is obvious that standards seem more certain in fileds of regulation where there has been prior experience than in new and experimental fields. Logically, however, the issue of power should not be determined by the antiquity of the regulation.

Those observations are apposite to the present case.

We are therefore, of opinion that all the three stages of a valid taxation laid down in Whitney v. Commissioner of Inland Revenue 1926 A.C.

37. i.e., in regard to the levy of assessment and collection of land revenue have statutory authority by reason of the Revenue Recovery Act II of 1864. We answer the question referred by holding that the levy and collection of land revenue is legal under Art. 265 of the Constitution.