Development Authorities Can't Levy Impact Fee, Open Area Penalty Without Statutory Authority: Allahabad High Court

The Allahabad High Court has held that a Development Authority cannot levy impact fee or open area penalty. It held that Section 15(2-A) of the Uttar Pradesh Urban Planning and Development Act, 1973 permits it to charge only development fees, mutation charges, stacking fees and water fees.

The two levies had been impugned only on the rate at which they were worked out, and not on the Authority's power to impose them at all. The Court held that a declaration of the law by a Constitutional Court speaks from the beginning, and the petitioner could not be shut out from its benefit.

Noting that Mathura Vrindavan Development Authority and another v. Rajesh Sharma and others confirmed the levy of development charges while holding charges outside Section 15(2-A), impact fee among them, to be hit by Article 265 of the Constitution, the bench of Justice J.J. Munir and Justice Indrajeet Shukla held,

“A reading of Section 15(2-A) of the Act of 1973 and the remarks of their Lordships of the Supreme Court in Rajesh Sharma make it pellucid that neither impact fee nor open area penalty can be levied by a Development Authority.”

Petitioner, a sole proprietorship firm running a retail outlet of the Indian Oil Corporation, applied on 27.09.2004 for sanction of the site-plan of a petrol pump resited at Thornhill Road, Prayagraj. Sanction came nearly three years later, and by a memo dated 22.05.2007 the Prayagraj Development Authority demanded Rs.25,05,635/- under several heads, of which Rs.15,04,238/- was impact charges and Rs.6,01,695/- open area penalty.

The writ petition sought abatement of the two levies on the circle rate of Rs.5800/- per square meter in force in 2004, rather than the rate of Rs.9000/- notified from 24.06.2006, the delay over the sanction being no fault of the dealer.

Counsel for petitioner argued that the levies were illegal altogether, relying on Smt. Rekha Rani v. State of U.P. and others and the Supreme Court's decision in Mathura Vrindavan Development Authority and another v. Rajesh Sharma and others. The Authority filed no counter affidavit at any stage between 2007 and 2026.

“It is well-known that the judgment of a Constitutional Court is declaratory and declares the law what it has always been. Judgments are, therefore, not prospective unless a Constitutional Court declares the law therein and makes it prospective form a particular date.”

Holding that the Development Authority cannot levy impact fee or open area penalty, the Court declined to touch the remaining levies in the same notice, such as subdivision fee, which the petitioner had never impugned and could conveniently have challenged by seeking an amendment of the petition.

Accordingly, the demand notice was quashed to the extent of the two levies, and Rs.21,05,933/- directed to be refunded out of the sums deposited, after setting off the other charges in the notice, within one month of receipt of the order by the Vice-Chairman, PDA, with simple interest at 6% per annum from 12.06.2007 until actual refund.