Karnataka High Court Quashes BBMP Bylaws Levying Fees On Developers As Ultra Vires Municipal Corporations Act

A single bench of Justice M Nagaprsanna while deciding on a batch of petitions filed by developers said:

"There is no power under Act to impose the impugned levies i.e., ground rent, licence fee, building licence fee, scrutiny fee and security deposit. It is trite that fees can be imposed only if there is quid pro quo. Quid pro quo in legal parlance is that 'fee' that can be imposed for a service that is rendered."

The bench also said "Imposition of labour cess under the Welfare Cess Act is upheld, but its demand for payment upfront in terms of Government Orders dated 18.01.2007 and 28.02.2007, stands quashed."

The court clarified that the State or the BBMP is not precluded from bringing in the impugned levies under the provisions of the Act or the Rules by making suitable amendments to the Act and the Rules.

Submission of the petitioners:

Advocate Nayanatara spearheaded the submission on behalf of the batch of petitioners. It was argued by her that the levy of fee is in blatant violation of the boundaries of power to do so by the BBMP. The characterization of the impugned levy is without the authority of law. Moreover, it is neither a fee nor a tax as there is no correlation between what is charged and quid pro quo.

Finally, she submitted that the impugned levy is violative of Article 19(1)(g) of the Constitution of India and all the levies are without the authority of law as neither the Statute nor the Bye-laws empower the BBMP for that.

Further, she contended that imposition of lake rejuvenation fee invoking Section 18(1)(A) of the Karnataka Town and Country Planning Act is also impermissible as it is imposed by way of a Circular dated 27.01.2017.The petitioners in these petitions are entitled for refund of the entire amount deposited without prejudice.

BBMP Submissions:

Advocate V Sreenidhi opposed the petitions; he contended that,

"It is a fee that is leviable by the BBMP in terms of powers conferred in it by the byelaws. For maintenance of streets of the City on which materials belonging to the petitioners in all these cases are transported, a fee is collected which cannot be termed as unjustified."

He added that "Building materials used for construction are being lavishly placed on roads of the BBMP while undertaking construction, for which the petitioners in all these cases are bound to pay for the use of public places to store the materials and hence levy of ground rent."

Sreenidhi also contended that plethora of documents are to be scrutinized by several officers of BBMP and infrastructure that is created for scrutiny of such documents. It empowers the BBMP to charge a scrutiny fee and it would defend imposition of Labour Cess on the direction of Government; it is only the Government orders issued from time to time under the Welfare Act that are implemented.

As regards the imposition of Lake Rejuvenation Fee, the BBMP submitted that it is at the direction of the State in terms of the circular of the Government dated 27.01.2017, the BBMP has issued a circular on 30.03.2017 as directed by the State for collection of Lake Rejuvenation Fee and the betterment charges linked to the guidance value.

Court findings:

The court went through the bylaws under which the fees are levied and the judgements of apex court relied on by the petitioners. It noted,

"The impugned exorbitant demands now made by the Corporation are all on the strength of certain circulars. Ground rent, licence fee, scrutiny fee, building licence fee and lake rejuvenation fee are linked to guidance value by issuing circulars dated 04.09.2015, 27.01.2017 and 30.03.2017."

It added "Guidance value of a property is a value fixed by a Committee constituted under Section 45B of the Karnataka Stamp Act, 1957. The said guidance value so fixed by the Committee would vary on the location of the property."

The court observed, "...therefore, imposition of ground rent, linking of licence fee and scrutiny fee to the guidance value are manifestly arbitrary, as the guidance value would vary from place to place."

Further it opined as follows:

"Linking guidance value for the same purpose of imposition of ground rent would result in gross arbitrariness and is violative of Article 14 of the Constitution of India. It is these circulars that linked the demand of the impugned levy to the guidance value that left the citizens bleeding and the business houses fleeing."

Junking the defence of the BBMP, the court said, "It is unimaginable how the BBMP can impose the fee taking shelter under Section 295. Though Section 295 deals with the power of making bye-laws for regulation of buildings, nowhere empowers the BBMP to impose the impugned levy." Finally, the court held "I hold, that the imposition of the impugned imposts is impossible to be countenanced."

The court allowed the petitioners to seek a refund of the amount deposited with the court or paid to the corporation under protest. Insofar as all other payments were made, they would all be at liberty to give representation to the BBMP and the BBMP would consider the refund of the amounts, in accordance with law and the findings of this Court.

Case Title: Sunderam Shetty and The State of Karnataka

Case No: Writ Petition No. 4601

Date of Order: 04.08.2021

Coram: Justice M Nagaprasanna

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