Article 226 | Writ Jurisdiction Can't Be Exercised To Question Economic Or Fiscal Reforms : Supreme Court

The Supreme Court on Monday (December 8) upheld the authority of civic bodies to revise property tax rates, holding that such revisions cannot be challenged unless the procedure adopted is arbitrary or in clear violation of the governing statutory provisions.

“The matters of tax revision fell squarely within the domain of the appellant-Corporation, and the High Court ought not to have reassessed the merits of the policy decision as if it was sitting in appeal over the said decision.”, observed a bench of Justice Vikram Nath and Justice Sandeep Mehta while setting aside the Bombay High Court's Nagpur bench decision which quashed the Akola Municipal Corporation decision to revise the property tax rates nearly after 16 years when it last revised in 2001.

The Court said that the High Court's Writ Jurisdiction cannot be exercised to challenge the economic/fiscal policy or reforms undertaken by the government.

“This Court has also held that judicial interference by way of public interest litigation is available only if there is injury to public because of dereliction of constitutional obligations on the part of the Government. The writ jurisdiction of the High Court cannot be exercised in public interest for questioning the economic/fiscal policy or reforms sought to be undertaken by the Government or its functionaries.”, the court added.

The Respondent, a corporator and social worker from Akola, filed a Public Interest Litigation (PIL) before the Nagpur Bench of the Bombay High Court. He challenged the Corporation's resolution dated April 3, 2017, which revised the method for calculating the Annual Letting Value (ALV) of properties, leading to an increase in property tax for the period 2017-18 to 2021-22. The Respondent-petitioner argued the revision was illegal and violated due process.

The High Court quashed the resolution, prompting the Municipal Corporation to appeal to the Supreme Court.

Setting aside the High Court's decision, the judgment authored by Justice Vikram Nath “the High Court ought not to have embarked upon a roving inquiry into the merits or wisdom of the decision to revise the tax rates unless it was demonstrated that the procedure adopted by the appellant-Corporation was ex-facie arbitrary, perverse, unreasonable or in blatant derogation of the governing statutory provisions.”

Since no such material was placed before the Court on the Respondent's behalf that the Appellant-Corporation has adopted a procedure in blatant derogation of the law, the Court said that “the High Court transgressed the permissible limits of judicial review in interfering with the decision of the appellant-Corporation to revise the rate of property taxes.”

Further, the Court emphasized on the critical need for financial self-sufficiency of municipalities, stating that:

“Municipal bodies, being autonomous institutions constituted under statutes, are entrusted with extensive and multifaceted responsibilities that bear a direct and immediate nexus to the daily lives, welfare and safety of the citizens residing within their territorial limits. Their functional efficacy, financial stability and administrative independence are integral to the discharge of these statutory obligations. It is therefore imperative that such municipal bodies possess adequate and independent sources of revenue to sustain and strengthen their operational capacities. A municipal administration that is compelled to depend upon the State for grants, doles or other forms of financial largesse would be structurally weakened and rendered incapable of performing its statutory duties in a timely and efficient manner. The scheme of municipal governance envisages financial autonomy as a necessary concomitant of administrative autonomy; without such independent revenue-generation mechanisms, including periodic revision of taxes and charges as permissible in law, the very purpose for which these bodies are constituted would stand frustrated.”

In fact, the Court even criticized the Appellant-Corporation for not revising the tax rates periodically from 2001-2017, observing:

“It is in these facts and circumstances, the respective Municipal Legislations and the Rules framed thereunder give powers/authorize the municipal bodies to take steps for revision in the rates of property taxes so that adequate revenue may be generated and the functioning of the municipal bodies may not be adversely affected for lack of funds. The fact that the tax structure in respect of properties falling within the jurisdiction of the appellant-Corporation had not been revised and the verification of the properties situated within its jurisdiction, had not been done from the year 2001-2017, by itself, depicts gross laxity on part of the authorities concerned.”

Accordingly, the appeal was allowed.

Cause Title: AKOLA MUNICIPAL CORPORATION AND ANR. VERSUS ZISHAN HUSSAIN AZHAR HUSSAIN AND ANR.

Citation : 2025 LiveLaw (SC) 1179

Click here to download judgment

Appearance:

For Appellant(s) : Mr. Vinay Navare, Sr. Adv. Mr. Suhaskumar Kadam, Adv. M/S. Black & White Solicitors, AOR

For Respondent(s) : Mr. A.I.S. Cheema, Sr. Adv. Mr. Kunal Cheema, AOR Ms. Kritika Gakhar, Adv. Mr. Rushabh Tripathi, Adv. Mr. Shubham Chandankhede, Adv. Ms. Aarti Gupta, Adv. Mr. Aaditya Aniruddha Pande, AOR Ms. Anagha S. Desai, AOR Mr. Aaditya Aniruddha Pande, AOR Mr. Siddharth Dharmadhikari, Adv. Mr. Shrirang B. Varma, Adv. Mr. Bharat Bagla, Adv. Mr. Sourav Singh, Adv. Mr. Aditya Krishna, Adv. Mr. Adarsh Dubey, Adv. Ms. Chitransha Singh Sikarwar, Adv. Mr. Satyajit A Desai, Adv. Mr. Sachin Singh, Adv. Mr. Pratik Kumar Singh, Adv. Ms. Anagha S. Desai, AOR Mr. Sanchit Agrahari, Adv.