Karnataka High Court Quashes Municipal Corporations & Certain Other Law (Amendment) Acts Of 2021 & 2023

The High Court was considering a batch of Petitions filed under Articles 226 & 227 of the Constitution of India challenging the Karnataka Municipal Corporations and Certain Other Law (Amendment) Act, 2021 (Karnataka Act No.01 of 2022).

The Single Bench of Justice R. Devdas observed, “The learned Counsels are right in contending that such levy and collection of fee/cess/surcharge, etc., arising out of the provisions of the KTCP Act, 1961, is not permissible and not applicable to development plan of plots measuring less than 20,000 square meters. On a plain reading of the said provision, it is clear that such levy and collection of fee/cess/surcharge, etc., is directed towards development plans of layouts and very large constructions. It was never intended to be applied to all development plans. However, the respondent BBMP has been indiscriminately levying and collecting such fee/cess/surcharge, etc., in respect of each and every development plan.”

Advocate Sudhakar G V represented the Petitioner while AAG Reuben Jacob represented the Respondent.

Factual Background

In Mr. Sunderam Shetty and Others Vs. State of Karnataka rep. by its Secretary, Urban Development Department and Others (2021), the co-ordinate bench considered whether the impugned imposts/fee suffered from want of legal sanction, insofar as ground rent, licence fee, scrutiny fee, security deposit, lake rejuvenation fee, service charges at 1% of the amount payable to the Palike from out of Building Construction Workers cess – Labour cess was concerned. It was held that the levy and collection did not have any legal basis, and such action was based on Circulars which had no force of law.

As a fallout of the judgment rendered by a co-ordinate Bench of the High Court declaring the Bye-laws under which ground rent, licence fee, scrutiny fee, security deposit etc., was sought to be levied, as ultra vires the Act and therefore unenforceable at the hands of Bruhat Bengaluru Mahanagara Palike (BBMP), amendments were made to the BBMP Act. Hundreds of petitions were filed by residents and builders raising a challenge to the amendments and the consequential imposts/levy in terms of demands raised by the respondent – BBMP. All these writ petitions were clubbed and heard together.

Arguments

One of the main grounds of attack was that the impugned provisions did not in any way set out to change the circumstances under which the imposts/levies were declared as ultra vires in Sunderam Shetty (Supra). It was contended that such action was an attempt to nullify the judgment of the Court, without taking due care to remove the basis of the judgment.

Reasoning

The Bench noted that the respondents had an opportunity to reconsider the rate of levy and imposts while formulating the new law/provisions, pursuant to the judgment in Sunderam Shetty (Supra). It was noticed that the respondents had simply reiterated the rate of levy and imposts, which were struck down, although in the form of circulars issued by the Government. It was further noticed that the BBMP did not place any material before the Government, and the Government did not undertake any exercise to collect empirical data to fix the rates and provide any reason to link the rates with the guidance value.

As per the Bench, the provision made in the Building Bye-laws in clause 3.8 prescribing ‘ground rent’ couldn’t be sustained. The linking of the ground rent to the guidance value also couldn’t be sustained.

The Bench was of the view that the impugned amended provisions contained in the Karnataka Municipal Corporations and Certain Other Law (Amendment) Act, 2021, could not be sustained because the power of fixing the rates for levy of fee or penalty was conferred on the Chief Commissioner, instead of the ‘Corporation’ and the rates were based on guidance value fixed by the Department of Stamps and Registration and the same was arbitrary, irrational and unsustainable. “Similar shall be the fate of the Karnataka Municipal Corporations and Certain Other Law (Amendment) Act, 2023, (Karnataka Act No.37 of 2024), which seeks to define the term ‘ground rent’, ‘guidance value’, ‘scrutiny fee’, etc., and provides for the rate of levy”, it held.

Thus, partly allowing the writ petitions, the Bench quashed the Karnataka Municipal Corporations and Certain Other Law (Amendment) Act, 2021 (Karnataka Act No.01 of 2022) as well as the Karnataka Municipal Corporations and Certain Other Law (Amendment) Act, 2023, (Karnataka Act No.37 of 2024).

“It is hereby declared that the provisions contained in Section 18-A of the Karnataka Town and Country Planning Act, 1961, read with Rules 37-A and 37-C of the Karnataka Planning Authority Rules, 1965, are applicable only in respect of ‘Development Plan’ containing the proposal for construction on plots measuring more than 20,000 square meters in extent and not in respect of plots measuring less than 20,000 square meters”, it ordered.

The Bench further declared that if a fee has been earlier collected for change of land use or while approving a layout plan, a fee shall not be collected for a subsequent ‘Development Plan’ in terms of the ‘Note’ found in TABLE I of Rule 37-A of the Karnataka Planning Authority Rules, 1965. “It is hereby declared that the linking of the fee leviable under Rule 37-A of the Karnataka Planning Authority Rules, 1965, to the ‘market value’ or ‘guidance value’ as determined under Section 45-B of the Karnataka Stamp Act, 1957, is illegal. However, liberty is reserved to the respondent-State Government and the BBMP to re-fix a standard after collecting imperical data”, it held while also adding, “Consequently, all the impugned Circulars which seek to give effect to the Rules 37-A and 37-C of the Karnataka Planning Authority Rules, 1965, are hereby quashed and set aside.”

Thus, declaring that Clause 3.8 of the Bengaluru Mahanagara Palike Building Byelaws, 2003, providing for ‘Ground Rent’, is illegal, the Bench ordered, “Consequently, all the impugned Demand Notices raised by the respondent-BBMP, in respect of the writ petitioners herein are also quashed and set aside. It would be advisable that the BBMP may come out with a scheme for ‘One Time Settlement’ and settle the levy and collect the fee generally acceptable to the citizens of Bengaluru. This would also augment the present situation.”

Cause Title: M/S Sapthagiri Shelters v. The State of Karnataka (Cause Title: Writ Petition No. 23086 OF 2022 (LB-BMP)

Appearance

Petitioner: Advocates Sudhakar G V, Lokesh L.N

Respondents: AAG Y Sri. Reuben Jacob, AGA H.R. Amaravathy, Senior Counsels K.G. Raghavan, Ravi B Naik, Advocate K.B. Monesh Kumar

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