Karnataka High Court Quashes Amendment Allowing BBMP To Impose Cess While Sanctioning Building Plans, Giving Commencement Certificates

The Karnataka High Court has quashed and set aside the amendments brought into the Karnataka Municipal Corporations Act 1976 in 2021 and 2023, allowing the Bruhat Bengaluru Mahanagara Palike (BBMP) to collect fees and penalties at the time of sanctioning building plans. Justice R Devdas partly allowed petitions filed by residents and builders challenging the amendments brought in by the State and the subsequent demand made by the BBMP.“The Karnataka Municipal Corporations and Certain Other Law (Amendment) Act, 2021 (Karnataka Act No.01 of 2022), is hereby quashed and set aside. The Karnataka Municipal Corporations and Certain Other Law (Amendment) Act, 2023, (Karnataka Act No.37 of 2024), is hereby quashed and set aside,” the Court ordered. The amendments were brought in by the State subsequent to an order of a single judge of the High Court quashing the bylaws of BBMP. While quashing the bylaws, which allowed BBMP to collect ground rent, licence fee, scrutiny fee, security deposit etc., the single judge had noted that the same were ultra vires, had no legal basis and were thus unenforceable. The single judge however gave liberty to the State and BBMP to bring in suitable amendments to the Act and Rules for such levy. Pursuant to this, the State brought in amendments to the Act with retrospective effect, to validate the fee and penalty already collected. These amendments were challenged in the present plea by residents and builders who claimed that the State was attempting to nullify the earlier orders of the court. The petitioners argued that the single judge had already held such levies and imposts to be ultra vires the Act and thus the State or BBMP could not reintroduce the same in the by way of amendment. The petitioners also questioned the approach of the BBMP in linking the levy to the guidance value. The petitioners argued that the Government had brought in the amendments for validating the fee and penalty already collected as refunding the fee already collected would cause a financial burden of Rs. 2363 Crores to the Palike. The petitioners contended that the State had acted with haste, without collecting empirical data regarding the expenses incurred by the Planning department of the Palike and did not fix a reasonable rate to augment the expenditure of the department. The Additional Advocate General, on the other hand, argued that the amendments did not bring in a new levy. He pointed out that the levy of ground rent, license fee, scrutiny fee etc at the time of considering applications for sanction of building plans was prevalent even before the amendments. He added that earlier, the levy was made through Building circulars and byelaws and since they were held as ultra vires, a validating provision was to be brought in to save the collection already made. With respect to guidance value, the State argued that the legislature was empowered to adopt any option available to fix the rate and had decided to adopt the guidance value notified by the State Government as a standard to fix rate. The court noted that pursuant to the judgment of the court in Sunderam Shetty case, the authorities had an opportunity to reconsider the rate of levy and imposts. However, instead of reconsidering the same, the authorities had just reiterated the earlier rates of levy and imposts, which had already been struck down by the court. The court also noted that the BBMP had failed to present any material to justify the rates that had been fixed by way of the amendments. The court also observed that when the State and the BBMP were admitting that the collection was not a tax but a “fee” leviable on the services rendered, such collection should be commensurate with the services. The court thus opined that the concept of quid pro quo would be applicable and in the present case, this basic requirement was not met. The court added that the rates could also not be fixed based on the guidance value as the services rendered by the BBMP had nothing to do with the market value of the property. “On the other hand, this Court does not see any acceptable reason or logic in linking the rates with the guidance value, which is nothing but the approximate market value notified by the Government under the provisions of the Karnataka Stamp Act….Surely, the impugned levy and imposts which are on account of the services to be rendered by the BBMP in the present context, has nothing to do with the market value of the properties. Apparently, there is no rational nexus between the rates and linking of the same to the guidance value. Therefore, this Court is also of the considered opinion that the linking of the impugned levy and imposts to the guidance value cannot be sustained,” the court observed. The court also agreed with the petitioners who contended that the levy and collection was not permissible and not applicable to development...

Karnataka High Court Quashes Amendment Allowing BBMP To Impose Cess While Sanctioning Building Plans, Giving Commencement Certificates

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