JUDGMENT : (PER : HONOURABLE MR.JUSTICE JAYANT PATEL) 1. Admit. Ms. Davawala, learned counsel waives notice for respondent. With the consent of the learned advocates appearing for both the sides, the matters are finally heard. 2. As in both the appeals, common questions are involved, they are being considered simultaneously. 3. Both the appeals are directed against the judgment and order passed by the learned Small Cause Judge, whereby the bills for assessment of the property tax are set aside. 4. The short facts of the case are that the officers of the Corporation issued the bill for the property tax of the property belonging to respondent. The respondent being aggrieved by the aforesaid bill, preferred appeals being MAV No.5/11 and 4/11 before the learned Small Cause Court Judge. The learned Small Cause Judge, at the conclusion of the appeals, found that the properties are belonging to Central Government and therefore, the Corporation has no power to impose tax as per Article 285(1) of the Constitution and hence, allowed the appeals by quashing and setting aside the bill. It is under these circumstances, the present appeals before this Court. 5. As such, on the aspect of power of the Corporation to charge property tax on the property of the Central Government is concerned, the matter could be said as prohibited by Article 285(1) of the Constitution and therefore, the fault cannot be found with the order of the learned Small Cause Judge. However, the learned counsel appearing for both the sides have brought to our notice the decision of the Apex Court dated 19.11.2009 in the case of Rajkot Municipal Corporation and Ors. Vs. Union of India, wherein also, the Corporation had issued bill for recovery of tax and ultimately, the Apex Court in the said decision directed for dispute to be resolved by a committee constituted for such purpose. 6. We may mention that in the above referred decision, the Apex Court, at paras 6 to 11, observed thus “6. When these appeals were earlier listed for hearing, both sides agreed that they will attempt a broad consensus on several pending issues and narrow down the areas of controversy and agree for a dispute resolution mechanism. We are told that in pursuance of it, discussions were held among various departments of the Government of India with the Department of Urban Development. We are told that in pursuance of it, discussions were held among various departments of the Government of India with the Department of Urban Development. In pursuance of it, an affidavit dated 9.4.2009 has been filed on behalf of Union of India crystallizing its stand on various issues. Union of India has now agreed in principle for the following: i. It is liable to pay service charges to the municipal corporations for providing services like supply of water, conservancy/sewerage disposal, apart from general services like approach roads with street lights, drains etc. ii. It will pay service charges to the Municipal Corporations, for the services, as stated in its circulars dated 10.5.1954, 29.3.1967, 25.5.1976 and 26.8.1986, but will not pay any taxes. iii. Having regard to the fact that only service like supply of water could be metered and other services like drainage, solid waste management, approach roads, street lighting etc., could not be metered, the percentage of property tax will be worked out as service charges, on the basis of instructions issued by the Ministry of Finance. iv. The concerned Ministry of the Union to which the property belongs will enter into separate contracts with the respective municipal corporation for supply of services and payment of service charges and pay the bills for annual service charges regularly. v. Union of India and its departments will periodically review the arrangements with the respective municipal corporations, as suggested by its Advisory committees and make modifications or revisions in the rates of service charges. vi. Wherever properties of state government are exempted, such exemption shall apply to properties of central government also. Under no circumstances, the service charges payable by the Union of India will be more than the service charges paid by the state government. vii. The arrangement will not affect the legal rights conferred by the appropriate laws, in regard to any property held by the Union. 7. Under no circumstances, the service charges payable by the Union of India will be more than the service charges paid by the state government. vii. The arrangement will not affect the legal rights conferred by the appropriate laws, in regard to any property held by the Union. 7. The Union of India has also stated that taking note of the relevant circumstances, it has decided to pay service charges at the following rates: (a) 75% of the property tax levied on private owners, where the properties of the Union are provided by the municipal corporations with all services/facilities as were provided to other areas within the municipal corporation;(b) 50% of the property tax levied on private owners, in regard to properties of the Union, where only some of the services/facilities were availed; and (c) upto a maximum of onethird (33 and 1/3%) of the property tax levied on private owners in regard to properties which did not avail any of the services provided by the municipal corporation, as they were self sufficient on account of all services being provided by the Union itself. 8. It was also clarified that where no services were availed from the municipal corporation, a rate within the ceiling of 33 and 1/3% of the property tax, will be negotiated and settled having regard to the relevant circumstances. In so far as properties of Indian Railways are concerned, it was stated that as it owns properties in virtually every municipal corporation in India and normally all its properties do not utilise the services provided by municipal corporations, Railways propose to pay only a token service charge of 5% or such other rate as may be agreed by mutual negotiations. 9. Learned counsel for the appellants submitted that the appellant municipal corporations submitted that they were broadly in agreement with what has been stated and agreed by Union of India in the said affidavit. 9. Learned counsel for the appellants submitted that the appellant municipal corporations submitted that they were broadly in agreement with what has been stated and agreed by Union of India in the said affidavit. The appellant-Municipal Corporations also confirmed and agreed: (i) that they will not levy or demand any "property tax" in respect of the properties belonging to Union of India and used for the purposes of the government; (ii) that the demands will relate only to service charges for direct services like supply of water and conservancy/sewerage disposal services, and other general services such as approach roads with street lighting, drainage etc.; (iii) that they broadly agreed to the rates of service charges agreed by Union of India; and (iv) that if there is defaults or if negotiations with the concerned departments for in regard to service charges fail they will not take any coercive steps for recovery (like cutting off supplies) nor resort to revenue recovery proceedings, but will take recourse to other remedies available to them in law for recovery. 10. The appellants however expressed reservations only in regard to the stand of the Railways that it will only pay nominal service charges at 5% of the property tax. They point out that there can be no property of Railways which can be termed as 100% self sufficient in regard to services, as common indirect services provided by the Municipal Corporation (like approach roads with street lighting etc.) will be enjoyed by them. They also drew our attention to the fact that Ministry of Railways (Railway Board)had also issued a circular dated 24.7.1954, similar to the circulars issued by the Government of India, Ministry of Finance, providing for payment of part of the property tax, as services charges for water, scavenging etc. The learned Solicitor General however stated that she was not sure whether the said circular continues in force or was superseded by other circulars. Be that as it may. 11. In view of the above, there is no need to consider the appeals on merits. We dispose of appeals and pending applications by recording the following broad agreement between the parties: (i) The Union of India and its departments will pay service charges for the services provided by the appellant municipal corporations. They will not pay any property tax. 11. In view of the above, there is no need to consider the appeals on merits. We dispose of appeals and pending applications by recording the following broad agreement between the parties: (i) The Union of India and its departments will pay service charges for the services provided by the appellant municipal corporations. They will not pay any property tax. The service charges will be paid at 75%, 50% and 33 1/3% respectively of the property tax levied on private owners, depending upon whether Union of India or its department is utilising the full services, or partial services or nil services. The Union of India represented by its concerned department will enter into agreements/understandings in regard to service charges for each of its properties, with the respective municipal corporation. (ii) The above arrangement is open to modification or periodical revisions by mutual consent. In the event of disagreement on any issue, parties will resort to a dispute resolution mechanism by reference to a three Member Mediation Committee consisting of a representative of the Central government, a representative of the concerned municipal corporation and a senior representative (preferably the Secretary in charge of the department of municipal administration) of the State of Gujarat. If Railways or any other department of Union of India owning a property changes the agreement/understanding unilaterally, or fail to reach a settlement through the Mediation Committee in regard to any disputes, or fails to clear the dues, it is open to the concerned Municipal Corporation to initiate such action, as it deems fit in accordance with law by approaching the jurisdictional courts/tribunal for final and interim reliefs. xxx xxx xxx (iv) The municipal corporations shall not resort to coercive steps (such as stoppage of supplies / services) nor resort to revenue recovery proceedings for recovery of any service charge dues from Union of India or its departments. (v) The service charges payable by Union of India will under no circumstances be more than the service charges paid by state government for its properties. Wherever exemptions or concessions are granted to the properties belonging to the state government, the same shall also apply to the properties of Union of India. (v) The service charges payable by Union of India will under no circumstances be more than the service charges paid by state government for its properties. Wherever exemptions or concessions are granted to the properties belonging to the state government, the same shall also apply to the properties of Union of India. (vi) If the Railways does not to abide by the four general circulars of the Union of India dated 10.5.1954, 29.3.1967, 28.5.1976 and 26.8.1986 and the general consensus set out above, it is open to municipal corporation to take such action as is permissible in law.” 7. The aforesaid order shows the following position (1) The property tax cannot be recovered by the Corporation. However, at the same time, the occupier of the property, i.e., Union of India or any instrumentality thereof, has to pay a particular percentage towards service charge. (2) The composition or quantum of the service charge may differ from case to case but the basis would be the broad amount included in the bill of property tax. (3) It is also observed that in the event of any dispute or when there is no mutual arrangement made or there is any disagreement, the parties will resort to the resolution mechanism by reference to three member mediation committee, consisting of representative of the Central Government, representative of the concerned Municipal Corporation and a senior representative (preferably the Secretary in charge of the department of municipal administration) of the State of Gujarat. 8. The learned counsel appearing for both the sides submit that if the matter is referred to such committee and the composition/quantum of the service charges is finalised, they have no objection for such purpose. 9. Under the circumstances, it is observed and directed as under: (1) It would be open to the Corporation to approach before the Committee if already formed for taking appropriate decision on the aspect of service charges recoverable by the Corporation from the occupier of the property of the Central Government. (2) In the event the committee is not in existence, the committee comprising of (1) Secretary, Urban Development Department of the State of Gujarat (2) A representative of the Municipal Corporation and (3) A representative of the Central Government, preferably of the respondent Company shall stand constituted. (2) In the event the committee is not in existence, the committee comprising of (1) Secretary, Urban Development Department of the State of Gujarat (2) A representative of the Municipal Corporation and (3) A representative of the Central Government, preferably of the respondent Company shall stand constituted. (3) The matter shall be examined by the Committee about the percentage of the bill amount of the property tax payable as service charges. (4) The aforesaid exercise shall be completed within a period of four months from the receipt of the order of this Court by the concerned committee. (5) The decision of the committee shall be binding upon the Corporation as well as upon the respondent without prejudice to their rights to approach before the higher forum, as may be available in law. 10. The present appeals are disposed of in terms of the aforesaid directions. Considering the facts and circumstances, no order as to costs. Direction Issued.