Bombay High Court Dismisses Developers' Pleas Against Levy Of ₹800 Crores Aggregate Development Charges

Development charges are imposed to provide public amenities and for the improvement of the area. Only planning authorities undertaking such development would be exempt from such charges under the provision, the court held.

The order passed by Justices RD Dhanuka and Kamal Khata resolved a seven-year-old dispute which will add over Rs. 800 crore to the kitty of planning authorities like BMC and MHADA. The bench dismissed 130 petitions by developers challenging demand notices for Development Charges by planning authorities.

"The Development Charge allows the Authority to generate a need for resources to fund and maintain the amenities. In our view, Section 124F has to be read ejusdem generis with remaining part of Section 124F, vesting, control, possession as well as, in view of the fact that the exemption is only granted for the development undertaken by the Central or the State Government or Local Authorities and not by private parties. "

The bench accepted the State's submission that in case of any ambiguity in a tax provision it is the assessing or revenue authorities that would benefit.

Moreover, it rejected various contentions of the defence including the primary argument that since the land belonged to the government, even if a private party stepped in to build, development charges would not be applicable.

They emphasized that redevelopment projects have rehab components as well as area which is handed over to the planning authority. Senior Advocates Milind Sathe, Pravin Samdani and several others contended that the section should be interpreted as per its literal meaning.

Section 124F reads as under. "No development charge shall be levied on institution of use or of change of use, or development of, any land or building vested in or under the control or possession of the Central or State Government or of any local authority."

The petitioners argued that 'or' in the section meant it should've been read disjunctively. Conversely, Senior Advocate Aspi Chinoy along with Advocate General Ashutosh Kumbhakoni and Advocate Akshay Shinde submitted that the words 'or' must be read as 'and' to achieve the legislative intent.

Re-development would be included in the word 'development,' used in the section. Also, lands "vested" in the government would not merely mean ownership of the land, but its actual development, the bench held.

Developers made separate arguments for projects on lease hold land. They argued there were already a lot of restrictions regarding what was permitted or not permitted on the land. Moreover, they were also paying a premium. They argued that the legislative intent was to exempt redevelopments from developmental charges. However, the bench held that the government would still not have ownership over the developed construction.

The bench observed that the developers had undertaken the redevelopments independently, and the planning authorities had not appointed them as contractors. Therefore, the developers now can't say that development or redevelopment is on behalf of or for the exempted category. "In our view, since the development is by a private party and not by or on behalf of the Authority, the exemption for Development Charges is not applicable. It cannot be held that the property vests in public authority only because they have title to it, when control and possession is not with the Authority."

Lastly, the court noted that the statement and objects of the amendment by which section 124A, under which development fee is applicable, "found that plans and schemes undertaken by the Planning Authorities are capital intensive and that it has not been possible for these Authorities to achieve the desired results, mainly because of lack of funds for effective implementation of such development plans or town planning schemes."