Supreme Court Upholds Development Charges but Strikes Down Other Levies in Uttar Pradesh: Mathura Vrindavan Development Authority vs. Rajesh Sharma (2023) INSC 448 (28 April 2023)

Date of the Judgment: 28 April 2023

Citation: 2023 INSC 448

Judges: M.R. Shah, J. and C.T. Ravikumar, J.

Can a state government authorize development authorities to impose various fees and charges beyond what is explicitly permitted by the governing legislation? The Supreme Court of India recently tackled this question, examining the extent of powers of the State of Uttar Pradesh and its Development Authorities to levy various charges related to urban development. This case clarifies the permissible charges under the U.P. Urban Planning and Development Act, 1973, specifically addressing whether the state government can expand the scope of these charges through executive orders. The judgment was delivered by a two-judge bench comprising Justice M.R. Shah and Justice C.T. Ravikumar, with Justice M.R. Shah authoring the opinion.

Case Background

The case arose from a series of appeals against judgments and orders passed by the High Court of Judicature at Allahabad. These judgments had quashed demand notices issued by various Development Authorities and the State of Uttar Pradesh. The notices sought to collect various fees and charges, including external/internal development charges, inspection/supervision fees for sanctioning layout plans, sub-division charges, stacking charges, and impact fees. The High Court had ruled that these levies, other than development charges/fees, were not permissible under the U.P. Urban Planning and Development Act, 1973.

The dispute centered around the legality of these demand notices, with the Development Authorities claiming they were authorized by the State Government under Section 41 of the Act. The High Court, however, found that the Act only allowed for specific charges under Section 15(2-A) and that the state government’s orders could not expand the scope of these charges.

Timeline:

Course of Proceedings

The original writ petitioners challenged the demand notices issued by the Development Authorities in the High Court of Judicature at Allahabad. The High Court, in its judgments, quashed the demand notices for charges such as external/internal development charges, inspection fee/supervision fee, sub-division charges, stacking charges, and impact fee, holding that these were not permissible under the U.P. Urban Planning and Development Act, 1973. However, the High Court upheld the levy of development charges/fees, except in one case (Rekha Rani & Others) where it set aside the levy of development charges as well.

Aggrieved by the High Court’s decision, the Development Authorities and the State of U.P. filed appeals in the Supreme Court. Some of the original writ petitioners also filed appeals challenging the interim orders of the High Court, which refused to stay the demand notices but directed a refund with 6% interest if the Supreme Court ruled against the Development Authorities.

Legal Framework

The case primarily revolves around the interpretation of the U.P. Urban Planning and Development Act, 1973. Key provisions include:

• Section 2: Defines terms such as ‘development,’ ‘development area,’ ‘development authority,’ ‘development fee,’ ‘land use conversion charge,’ ‘mutation charges,’ ‘stacking fees,’ and ‘water fees.’
• Section 14: Restricts development in a development area without prior permission from the Vice-Chairman of the Development Authority.
• Section 15: Outlines the process for applying for development permission and specifies the fees that can be levied. Specifically, Section 15(2-A) states: “The Authority shall be entitled to levy development fees, mutation charges, stacking fees and water fees in such manner and at such rates as may be prescribed.”
• Section 41: Grants the State Government the power to issue directions to the Development Authorities for the efficient administration of the Act.
• Article 265 of the Constitution of India: States that “No tax shall be levied or collected except by authority of law.”

The core issue is whether the State Government, under Section 41, can authorize the levy of charges not explicitly mentioned in Section 15(2-A) of the Act.

Arguments

Arguments by the State of U.P. and Development Authorities:

• The State of U.P. argued that under Section 41 of the Act, it had the power to issue orders allowing Development Authorities to recover various charges, including external/internal development charges, inspection/supervision fees, sub-division charges, stacking charges, and impact fees.
• They contended that these orders were issued in the larger public interest and for the development of areas under the jurisdiction of the Development Authorities.
• They relied on the Supreme Court’s decision in State of U.P. & Others v. Malti Kaul (Smt.) & Another, (1996) 10 SCC 425, to support the levy of development charges/fees.
• The Development Authorities asserted that they collected the charges based on orders issued by the State Government.

Arguments by the Original Writ Petitioners:

• They conceded that the levy of development charges/fees was legal, as per the decision in Malti Kaul (supra).
• They argued that other charges were illegal because Section 15(2-A) of the Act only permits the levy of development fees, mutation charges, stacking fees, and water fees.
• They contended that Article 265 of the Constitution of India requires that any levy must be authorized by law, and the state government’s orders under Section 41 could not expand the scope of permissible charges.
• They argued that Section 41 is supervisory in nature and does not allow the state to authorize levies not mentioned in Section 15(2-A).
• One counsel argued that even development charges/fees should not be levied on land not covered by a development plan, even if it falls within the jurisdiction of a Development Authority.

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the levy of development charges/fees by the various Development Authorities of the State of U.P. is valid?
2. Whether the various demand notices by way of external/internal development charges, inspection fee/supervision fee while granting of sanction layout plan, sub-division charges, stacking charges and impact fee etc. (other than development charges/fees) are valid?
3. Whether the State Government, in exercise of powers under Section 41 of the Act, 1973, could have issued the orders permitting/allowing the Development Authorities to levy the charges/fees other than provided under Section 15(2-A) of the Act, 1973?

Treatment of the Issue by the Court:

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• State of U.P. & Others v. Malti Kaul (Smt.) & Another, (1996) 10 SCC 425: The Supreme Court followed this case, affirming the legality of development charges/fees.
• K.K. Bhalla v. State of M.P., (2006) 3 SCC 581: The Supreme Court cited this case to emphasize that the State Government’s power to issue directions is limited to matters of policy and does not extend to creating new levies.
• Poonam Verma v. Delhi Development Authority, (2007) 13 SCC 154: The Supreme Court cited this case to reinforce that directions under similar provisions must relate to policy and cannot interfere with the day-to-day affairs of the authority.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the principle that any levy must be explicitly authorized by law, as mandated by Article 265 of the Constitution. The Court emphasized that the U.P. Urban Planning and Development Act, 1973, specifically Section 15(2-A), enumerates the permissible charges, and this list cannot be expanded by executive orders issued under Section 41. The Court’s reasoning was rooted in a strict interpretation of the statute, ensuring that the Development Authorities could not impose charges without express legal backing. The Court also relied on its previous judgments, particularly Malti Kaul (supra), to affirm the legality of development charges/fees, while distinguishing other charges as impermissible.

Fact:Law Ratio

The Court’s reasoning was predominantly based on legal considerations (80%), focusing on the interpretation of the U.P. Urban Planning and Development Act, 1973, and the constitutional requirement for legal authorization of levies. The factual aspects of the case (20%), such as the specific charges demanded, were secondary to the legal analysis.

Logical Reasoning:

Key Takeaways

• Development Authorities in Uttar Pradesh can only levy the charges explicitly mentioned in Section 15(2-A) of the U.P. Urban Planning and Development Act, 1973, which includes development fees, mutation charges, stacking fees, and water fees.
• The State Government cannot authorize the levy of additional charges through orders issued under Section 41 of the Act. Section 41 only provides supervisory powers, not the power to expand the scope of permissible levies.
• Any levy imposed by a government body must have explicit legal backing, as per Article 265 of the Constitution of India.
• The Supreme Court upheld the levy of development charges/fees, relying on its previous decision in Malti Kaul (supra).
• Amounts collected for charges other than those specified in Section 15(2-A) must be refunded with 6% interest per annum to the original writ petitioners who challenged the demand notices.

Directions

The Supreme Court directed that any amounts already paid by the original writ petitioners, other than the permissible development charges/fees and charges under Section 15(2-A), be refunded with 6% interest per annum within twelve months. This refund applies only to those who challenged the demand notices in the High Court. The Court also clarified that it did not express any opinion on the levy of betterment charges, which are permissible under Section 35 of the Act. The Court also clarified that any individual/original writ petitioner has any other grievances, it will be open for them to approach the High Court by way of independent proceedings.

Specific Amendments Analysis

Not Applicable, as there is no discussion on any specific amendment in the judgment.

Development of Law

The ratio decidendi of this case is that a state government cannot authorize the levy of charges by development authorities beyond what is explicitly permitted by the governing statute. The Supreme Court reinforced the principle that any form of taxation or levy must have clear legal authorization, as per Article 265 of the Constitution of India. The Court clarified that Section 41 of the U.P. Urban Planning and Development Act, 1973, provides supervisory powers to the State Government but does not empower it to expand the scope of permissible levies beyond what is specified in Section 15(2-A). This decision underscores the importance of statutory interpretation and the limits of executive power in financial matters, ensuring that public bodies cannot impose charges without clear legal backing.

Conclusion

The Supreme Court’s judgment in this case clarifies the extent of the powers of Development Authorities in Uttar Pradesh to levy charges related to urban development. While it upheld the levy of development charges/fees based on previous precedent, it struck down the levy of other charges such as external/internal development charges, inspection/supervision fees, sub-division charges, stacking charges, and impact fees. The Court emphasized that these charges were not authorized by law, as Section 15(2-A) of the U.P. Urban Planning and Development Act, 1973, only permits the levy of specific charges. The judgment underscores the principle that any levy must be explicitly authorized by law and that the State Government cannot expand the scope of permissible charges through executive orders under Section 41 of the Act.

Category

Parent Category: U.P. Urban Planning and Development Act, 1973

Child Categories:

• Section 15(2-A), U.P. Urban Planning and Development Act, 1973
• Section 41, U.P. Urban Planning and Development Act, 1973
• Development Charges
• Mutation Charges
• Stacking Fees
• Water Fees
• Urban Development
• Land Development
• Levy of Charges
• Constitutional Law
• Article 265, Constitution of India

FAQ

Q: What charges can Development Authorities in Uttar Pradesh legally collect?

A: Development Authorities in Uttar Pradesh can only collect development fees, mutation charges, stacking fees, and water fees, as specified in Section 15(2-A) of the U.P. Urban Planning and Development Act, 1973.

Q: Can the State Government authorize additional charges?

A: No, the State Government cannot authorize additional charges through executive orders under Section 41 of the Act. Section 41 only provides supervisory powers, not the power to create new levies.

Q: What happens if I have paid charges that are not allowed?

A: If you have paid charges other than development fees, mutation charges, stacking fees, and water fees, you are entitled to a refund with 6% interest per annum, provided you challenged the demand notices in the High Court.

Q: What is the significance of Article 265 of the Constitution in this case?

A: Article 265 mandates that any levy must be authorized by law. The Supreme Court emphasized that the State Government cannot impose charges without explicit legal backing.

Q: Does this judgment affect betterment charges?

A: No, the Supreme Court did not express any opinion on betterment charges, which are permissible under Section 35 of the Act.