Judgment:
B.S. PATIL, J.
1. In these batch of writ petitions, petitioners are allenging the notification dated 03.02.2010 issued by the Government through Department of Urban Development, thereby framing rules providing for imposition and recovery of improvement charges. The said rules are framed in exercise of powers conferred under Section 466(b) read with Section 421 of Karnataka Municipal Corporations Act, 1976 (for short, the Act'). These Rules are known as Karnataka Municipal Corporation (Recovery of Improvement Expenses) Rules, 2009, (for short, 'the Rules'). The Rules are published in the official gazette on 05.02.2010. They have come into force with effect from 17.01.2007. Pursuant to the Rules framed, the Bruhat Bangalore Mahanagara Palike (for short, `BBMP') has issued a Circular dated 07.02.2011 declaring the improvement expenses to be collected in respect of different properties coming within the jurisdiction of the BBMP by notifying the rate at which such improvement expenses shall be collected at the time of effecting khata in favour of the applicants. The petitioners in these writ petitions are also aggrieved by the Circular issued and as also the consequential demands made for collection of improvement expenses. Some of the petitioners have also challenged the action initiated by the BBMP to cancel the khata or to recover the amount of improvement expenses wherever the same has not been collected while effecting khata. As the main question involved in these writ petitions is with regard to the validity of the Rules, the Circular issued and also the consequential action initiated, all these writ petitions have been heard together and are being disposed of by this common order.
2. The background of the controversy raised in these cases, stated in nutshell, is that the BBMP has been established by including vast extent of area, which was otherwise outside the jurisdiction of the erstwhile Bangalore Mahanagara Palike. On 07.11.2007, the respondent-BBMP had issued a Circular providing for recovery of betterment charges in order to generate funds for improvement of infrastructure in the areas, which were merged and made part of BBMP. The collection of improvement charges was to take place at the time of registering khata in respect of new properties. This was challenged by filing W.P.No.5035/2008. By order dated 21.07.2008, this Court allowed the writ petition quashing the Circular dated 07.11.2011. The minutes of the proceedings of the BBMP, which disclosed that Rs.200 crores (Rupees two hundred crores) was spent in the year 1995 to provide water supply and also for other evelopment expenses, that was made the basis and foundation to impose and recover the improvement expenses was also quashed holding that in the absence of specifics regarding the expenses incurred by the BBMP towards development expenses that too in respect of the areas falling within the larger areas of BBMP pursuant to the notification constituting the said BBMP, the figure of Rs.200 crores (Rupees two hundred crores) expended in the year 1995 cannot have any nexus or provide justification for the recovery of improvement expenses under Section 466 of the Act. It is useful to refer to the observations made in paragraph No.8 of the said order. It reads as under: -
"8. In the instant case, it is admitted that the power to declare expenses on certain works or improvements, as set out in the sections mentioned in clause (a) of Section 466 is not applicable. If that is so, then what is applicable is clause (b) which subjects the recovery of improvement expenses, to the framing of rules in that regard. An examination of the minutes of the proceedings Annexure-D of the ls , respondent, discloses that Rs.20 crores was spent in the year 1995 to provide water supply, and for other development expenses, which is the basis and foundation to impose and recover from the petitioner improvement charges. In the absence of specifics over the expenses incurred by the I st respondent, as development expenses and that too in respect of the areas fallen within the larger area of BBMP pursuant to the notification constituting the said BBMP, the figure of Rs.200 crores expended in the year 1995 cannot have nay nexus or is justification to recover improvement expenses under Section 466 of the Act. A bare reading of clause (b) of Section 466 what is discernable is that recoveries are for the amount expended or likely to be incurred. In the instant case, it is not known whether expenses were incurred for the areas that fell beyond the territorial jurisdiction of the then existing BMP nor is it shown that such amounts were in fact expended for the petitioner's property and areas falling within the territorial jurisdiction of BBMP. So, also, what is not forthcoming is as to what is the reasonable expenses likely to be incurred by the BBMP, so as to entitle it to recover the same as improvement charges, in advance, from the petitioner. Looking at it from any angle, the fallacy in the reasoning of the 1st respondent as set out in the proceedings Annexure-D lies in the superficial, cursory nature of consideration undertaken therein without reference to relevant material constituting legal evidence of a fact of incurring expenditure by which the 1st respondent could have exercised the jurisdiction eliteier pm under Section 466 of the Act to impose and recover improvement charges. The proceedings Annexure-D fall short of the requirement of law and is shown to suffer from infirmities which patently tantamounts to arbitrary exercise of power. It is no doubt true that the Ist respondent, in the absence of the elected body and the Standing Committees, is entitled to exercise power under Section 466 of the KMG Act, but such exercise of power must be fully justified."
3. After this Court passed the above judgment, respondent No.1 has issued the impugned notification by framing Rules, which are made to come into force with effect from 17.01.2007 as per sub-rule (3) of Rule 1. The Rules are made applicable to the improvement expenses incurred by the Commissioner directly or indirectly for providing basic civic amenities under Section 466(b) of the Act, to persons residing in such localities. Improvement expenses are defined under Section 2(b) to mean such of the 'improvement expenses' incurred by the Commissioner under clause (b) of Section 466 of the Act and also includes expenses pertaining to the following works namely:-
Formation of roads by metaling asphalting. leveling of roads, improvement of roads, concreting of roads, construction of bridges and flyovers to reach a group of houses or locality or an extension;
(ii) Formation of drains, improvement of drains, coverage of drains;
(iii) Providing water supply, sewerage, system treatment plants, construction and improvement storm water drains;
(iv) Providing street lighting road median lighting, park, play ground and other lights in public places; and
(v) Such other works and civic amenities as may be nodfied by the State Government, by notification.
Rule 3, deals with "Property liable for levy of expenses", it reads as under: -
"3. Property liable for levy of expenses.- Improvement expenses shall be levied and recovered on the properties that are directly or indirectly benefited as a result of the improvement expenses incurred by the Commissioner towards certain of basic infrastructure and for such other works to improve the general living condition of citizens d includes expenses incurred on land newly converted from agriculture use to nonagricultural purpose."
Rule 4, provides for "Recovery of improvement expenses", it reads as under: -
Recovery of improvement expenses.- The commissioner having regard to the expenditure incurred a various infrastructural facilities provided or to be provided may declare it as improvement expenses under Section 466 and may levy and collect such improvement expenses from the owner or occupier of the undeveloped, partially developed or single unit property or a group of properties or a locality or extension that are assessed or newly added to the Assessment Register and which have been benefited or likely to be benefited by such improvement expenses."
Rule 5, provides for "Mode of collections", it reads as under: -
"5. Mode of collections.- Improvement expenses so incurred may be collected from the owner or occupier of the property mentioned in rule 3 above at the time of registration of Khatha in full sum or in installments at any time and in such manner as the Commissioner may consider to be deems fit."
Rule 6, deals with "Properties not liable for levy of improvement expenses", it reads as under: -
"6. Properties not liable for levy of improvement expenses.- Properties located in the layout formed and developed by the Planing Authority, Urban Development Authorities, Housing Board Layouts and Layout formed by the KIDB, KSSIDC, etc.. and the layouts approved by the planning authority and formally transferred to the Local Authority after its all round development as indicated in the approved development ... are not liable for levy of improvement expenses in respect of improvement works already done by said authorities. "
Rule 8, provides for levy of improvement expenses on properties converted in a single unit order and latter fragmented with proper legal title. It reads as under: -
"8. Fragmented properties. - Properties converted in a single unit order and latter fragmented with proper legal title and approval of the planning or concerned local authority are liable for levy of improvement expenses. However, remaining portion of single unit property gets the sanction of site development plan from the competent authority, the remaining portion of the property shall also be liable for payment of provement expenses."
parties measuring more than 2,400 sq. ft. (222.98 sq. to 6,000 sq. ft. (557.41 sq. mtrs.), the improvement.
4. These Rules are challenged urging several grounds. Pursuant to these Rules, the impugned Circular dated 07.02.2011 is issued. As the Circular is also challenged, it is necessary to refer to this Circular and the effect of the same. The Circular states that in accordance with the approval granted by the BBMP in its meeting held on 29.12.2009 to meet the expenses for providing basic infrastructure and for having already provided such infrastructure to the properties falling within the limits of the BBMP, as per Section 466 of the Act, such expenses incurred has been declared as improvement expenses in respect of the categories of properties described at SI. Nos.1 to 7 of the Circular and that the same has to be collected by the concerned Authorities at the time of registration of khata. The Circular further makes it clear that in respect of site measuring upto 1,000 sq. ft. (111.48 sq. mtrs.) the improvement expenses to be collected shall be at Rs.150/- per sq. mtrs; for properties measuring more than 1,200 sq. ft. upto 2,400 sq. fts. (111.48 sq. mtrs. up to 222.96 sq. mtrs) the improvement expenses shall be collected at Rs.200/- per sq. mtrs; for charges shall be collected at Rs.300/- per sq. mtrs: and in respect of properties measuring more than 6,000 sq. ft. (557.41 sq. mtrs ), the improvement charges shall be collected up to Rs.400/- per sq. mtrs. The Circular further makes it clear that in respect of properties for which Khata has already been registered and which are liable for payment of improvement expenses. the concerned officers shall issue demand notice and take action of the recovery of the amount.
5. It is relevant to notice that in several cases action is initiated for recovery of improvement expenses and in some other cases action for cancellation of the Khata already effected has been initiated on the ground that the improvement expenses have not been paid and in many other cases, demand notices are issued demanding improvement charges, making it clear that unless and until the same was paid, the Khata would not be transferred in the name of the applicants.
6. Statement of objections are filed by the State and the BBMP supporting the impugned Rules, the Circular and the action initiated.
7. I have heard Mr. Udaya Holla and Mr. Padmartabha Mahale, learned Senior Counsel who have addressed arguments for the petitioners. Their arguments have been adopted and supplemented by the learned Counsel appearing for the petitioners in their respective writ petitions. Mr. Nanjunda Reddy, learned Senior Counsel has addressed his arguments for the BBMP, whereas Mr. Keshav Reddy, learned Additional Government Advocate has supported the Rules framed by the Government appearing for the State.
8. The following contentions are urged by the learned counsel appearing for the petitioners: -
a) The impugned Rules and the Circular issued are illegal and unsustainable, as the provision made for collection of improvement charges for registering Khata in the name of the applicant is contrary to Section 114 of the Act.
b) The levy of improvement expenses as per the impugned Rules is in the nature of imposition of tax and not fee and therefore, the impugned Rules are illegal and also that there is no quid pro quo between the levy and the service rendered.
c) Though Rules 4 & 5 provide for imposition of improvement charges only in respect of the expenses incurred or to be incurred, there is nothing to show as to how the improvement expenses ranging from Rs.100/- to Rs.400/- per sq. mtrs. for sites having different dimensions has been imposed by the impugned Circular. It is also urged in this regard that the proceedings of the committee constituted for fixing the improvement expenses has failed to adopt any reasonable basis and has taken several irrelevant factors into consideration including the amounts spent by the Bangalore Development Authority (for short, `BDA') and the Karnataka Housing Board (for short, 'KHB') for formation of layouts by them, ignoring the fact that in the case on hand, layouts have been formed by the petitioners and not by the BBMP.
d) That there is discrimination in the matter of levy of improvement expenses based only on the dimension of the sites as provided in the impugned circular which is arbitrary, unreasonable and violative of Article 14 of the Constitution of India.
e) That unless there is a benefit given to the land owner from whom the improvement expenses is sought to be collected, the levy cannot be permitted.
I) That even in respect of sites allotted by the Karnataka Industrial Area Development Board, which has all the facilities such as connecting road wherein the layout has been already formed and in respect whereof no services are extended by the BBMP, the demand has been made for payment of improvement expenses which is totally unauthorised and illegal.
g) That even if the petitioners are entitled to develop only a portion of the property, the improvement expenses are sought in respect of the entire property, which is illegal.
h) That there is no guarantee that the amount collected in the guise of the improvement expenses will be spent for improvement and in the absence of any provisions made in this regard to ensure that the amount is spent for the said purpose, there is every likelihood of the amount diverted to other purposes.
i) That the levy of fee, retrospectively, is illegal.
9. In support of their contentions, petitioners have placed reliance on the following judgments: -
i) B.H.HONNAHALAGE GOWDA AND OTHERS VS KAFtNATAKA APPELLATE TRIBUNAL, BANGALORE AND OTHERS - 1992 KAR.L.J. 522 (DB);
ii) ALLIANCE BUSINESS ACADEMY, REP. BY ITS DIRECTOR, BANGALORE VS H.JAYARAM REDDY AND OTHERS - ILR 2005 KAR 450;
iii) ASIAN INSTITUTE OF RURAL DEVELOPMENT VS BANGALORE CITY CORPORATION, BANGALORE ILR 2003 KAR 2478;
iv) STATE OF UTTAR PRADESH AND OTHERS VS DEEPAK FERTILIZERS & PETROCHEMICAL CORPORATION LTD. - (2007)10 SCC 342; AND
v) BANGALORE DEVELOPMENT AUTHORITY VS AIRCRAFT EMPLOYEES CO-OPERATIVE SOCIETY LTD., AND OTHERS DISPOSED OF ON 24.01.2012.
10. Mr. Nanjunda Reddy, learned Senior Counsel appearing for the respondent-BBMP submits that the improvement expenses levied is a fee and not a tax. The intention of the Rule Making Authority in collecting the charges is to provide basic amenities and the required rastructure to the beneficiary from whom the fee is collected and hence it is a fee. Mr. Nanjunda Reddy contends that the taxing power is exercised to raise the revenue, for which, separate mechanism is provided under the Act. In this regard, he has referred to Section 103 of the Act, which deals with the taxes to be imposed and Section 104 of the Act, which provides for imposition of tax on advertisement to contend that taxes can only be levied as expressly provided under the Act and the present levy of improvement expenses is not by way of imposition of tax, but it is a fee collected for the service rendered and the benefit extended to the owners/occupiers of the properties.
11. He has next contended that the Rules framed by the State are within the purview of the Rule Making Power and hence they are intra vires. Referring to Section 466(b) of the Act, he points out that the twin requirements namely: -
(a) the expenses ought to have been already incurred or to be incurred by the BBMP; and (b) such expenses must be in respect of any work mentioned in any Rule made under the Act, to which Section 466 is applicable. have been satisfied.
12. If these two requirements are satisfied, it is urged the levy will be within the competence of the Rule Making Power. His submission is, that if these two requirements are satisfied, the Commissioner may declare such expenses in respect of such work as improvement expenses. Referring to Rule 1(3) and Rule 2(b)(ii)(ifi)(iv) of the impugned Rules, he contends that these requirements are satisfied and therefore, the rules are intra vires.
13. His next contention is, that the Rules are neither arbitrary nor opposed to the statutory provisions including Section 114 of the Act. Placing relia'nce on the judgment in the case of INDIAN EXPRESS NEWSPAPERS (BOMBAY) PRIVATE LTD. & OTHERS VS UNION OF INDIA & OTHERS - AIR 1986 SC 515, he contends that the delegated legislation passed authorizing imposition of the improvement expenses is not opposed to any recognised principles, based on which, the delegated legislation could be challenged.
14. It is his next contention that quid pro quo does not mean that individual service must be extended to individual owners of different properties. He justifies the collection of improvement expenses from the newly added areas which form part of BBMP urging that these areas are going to be benefited from the expenses incurred or to be incurred for developing the infrastructure. Dealing with Rule 5, which authorizes the collection of improvement expenses at the time of registration of Khata, he submits that it is only one mode of recovery and the same does not run counter to Section 114 of the Act. He contends that this Rule gives discretion to the Commissioner to collect it at any stage or even in installments, hence the same is just and reasonable.
15. Dealing with the validity of the Circular dated 07.02.2011 and strongly defending it, learned Senior Counsel Mr. Nanjunda Reddy submits that the source of power for the Circular is contained in Rules 4 & 5 and therefore, there is no illegality in the Circular. He also justifies the retrospectivity given to the Rules, which are brought into force with effect from 17.01.2007, contending that by virtue of Section 421(4A) of the Act, such a power is conferred on the Rule Making Authority. Reliance is placed on the judgment of the Supreme Court reported in the case of DR. INDRAMANI PYARCELAL GUPTA AND OTHERS VS W.R.NATU AND OTHERS - AIR 1963 SC 274 and in the case of OHIBITION AND EXCISE SUPDT., A.P. AND OTHERS VS TODDY TAPPERS COOP. SOCIETY, MARREDPALLY AND OTHERS - (2003)12 SCC 738.
16. Referring to the seven categories of properties, in respect whereof the fee has to be collected as provided in the impugned Circular, he justifies the same stating that it is in conformity with Rule 4. Justifying the quantum of levy of improvement expenses at different rates in respect of sites having different dimensions, learned Senior Counsel contends that BBMP has collected the data from the BDA, Housing Board apart from bringing to bear its own experience based on the same, the quantum of improvement expenses is fixed. He has invited the attention of the Court to the additional statement of objections in this regard filed in W.P.Nos.7614-16/2011 and the Annexures enclosed to the same to point out that after the data from the BDA and the Housing Board was collected, the same was made available to the committee constituted for determining the improvement expenses and after the matter was discussed in the meeting of the committee, the same was sent to the Taxation and Finance Committee, thereafter, the recommendation of the Taxation Committee has been epted by the Council. He, thus, tries to demonstrate that there was ample material available for the respondent to fix the quantum of fee. He also points out that the BBMP was required to take the entire areas included in its jurisdiction as a unit and provide general facilities and therefore, it was not necessary to provide service to individual areas or properties. Once a broad correlation is established between the service rendered and the fee collected, it would be sufficient to justify the levy is his submission. In this regard he has placed reliance on the judgment of the Apex Court in the case of BANGALORE DEVELOPMENT AUTHORITY VS. THE AIR CRAFT EMPLOYEES COOPERATIVE SOCIETY LTD., AND OTHERS reported in 2012 STPL (WEB) 54 SC.
17. Elaborating the principle regarding the broad con-elation between the benefit and the quantum of fee, he has placed reliance on the judgment of the Apex Court in the case of P.M.ASHWATHANARAYANA SETTY & OTHERS VS STATE OF KARNATAKA & OTHERS - 1989 Supp (1) SCC 696 and in the case of RAJESH KUMAR & OTHERS VS DY. CIT & OTHERS - (2007)2 SCC 181.
18. Mr. Keshav Reddy, learned Additional Government Advocate justifies the Rules and the classification of smaller gger plots differently for the purpose of levy of different rates. He has placed reliance on the decision reported in the case of DELHI MUNICIPAL CORPORATION VS MOHD. YASIN - MR 1983 SC 617 to point out that the expenses incurred need not be incurred directly.
19. Having heard the learned counsel appearing for the parties and on careful perusal of the entire materials on record the following points arise for consideration in these writ petitions: -
i) Whether the rules framed are beyond the Rule Making Power of the State and are therefore ultra virus?
ii) Whether the improvement charge levied is a tax or is it in the nature of a fee collected for service rendered. If so, is there any quid pro quo?
iii) Whether Rule 5, which enables the collection of improvement charges at the time of registration of Khata and the impugned circular which states that - failure to collect the amount will subject the Officers concerned for action are contrary to the provisions of Section 114 of the Act? Whether the impugned Circular in so far as it lays down the quantum of improvement expenses to be collected for sites having different dimensions at different rates is arbitrary, discriminatory and is therefore, unsustainable?
v) Whether the Rule Making Authority has the power to make the Rules operational retrospectively?
20. Point No.1: - The first point to be considered is, whether the impugned Rules are within the competence and powers of the State Government? In other words, whether the Rules in question are ultra vires the power of the Rule Making Authority?
21. Section 421 of the Act confers power on the Government to make Rules. Sub-section (1) of Section 421 of the Act states that the Government may after previous publication by notification make Rules to carry out the purposes of this Act. It cannot be disputed that the Corporation is enjoined with several duties and obligations with regard to the execution of developmental works, maintenance of streets, ensuring the health and sanitation, regulating the supply of water and other works connected ;therewith apart from many other functions. Therefore, as per Section 421 of the Act, the Government is entitled to make Rules to carry out the purposes of the Act.
22. Similarly, Section 466 of the Act confers power on the Commissioner to declare the expenses on certain works as improvement expenses. Section 466(b) of the Act makes it clear that if the expenses to be recovered have been incurred or are to be incurred in respect of any work mentioned in any Rule made under this Act, wherein Section 466 of the Act is made applicable to such expenses, then the Commissioner with the approval of the Standing Committee may declare such expenses to be improvement expenses.
23. The impugned Rules are framed by the State Government invoking the power under Section 421(1) of the Act and by making reference to the provision contained under Section 466(b) of the Act. As is clear from Rule 1(3) of the Rules, the Rules are made applicable to improvement expenses incurred by the Commissioner, directly or indirectly for providing basic civic amenities as per clause (b) of Section 466 of the Act. Therefore, the Rules are enacted for carrying out the purposes of the Act, particularly in order to recover the expenses incurred in respect of the work mentioned in these Rules.
24. The expenses that can be recovered as per the impugned Rules are described as 'improvement expenses', which includes expenses pertaining to the following works:-
1. Formation of roads including construction of bridges and flyovers;
2. Formation of drains, their improvement and coverage;
3. Providing water supply, sewerage, construction and improvement of storm water drains;
4. Providing street lighting, road median lighting, park, playground and other lights in public places;
5. Such other works and civic amenities as may be notified by the State Government by notification.
25. The above mentioned works are stated in the definition of the term 'improvement expenses' as found in Rule 2(b) of the Rules. The works referred to herein above are the works that are required to be carried out by the Corporation. erefore, if any expenses are incurred in respect of any respect of matters as provided in those provisions and in as the improvement charges sought to be levied as per such work and if the Rule Making Authority provides for collection of such expenses as expenses recoverable from the properties that are directly or indirectly benefited from the improvement expenses incurred towards creation of basic infrastructure, then it cannot be said that the Rules framed are beyond the power and authority of the State Government or ultra Ares the provisions of the Act.
26. Point No.2: - As regards the second point i.e., whether the levy of improvement expenses as per the impugned Rules and the Circular issued is in the nature of a tax or a fee. Mr.Uday Holla, learned Senior Counsel has fairly submitted that in view of the law laid down by the Apex Court in the case of BANGALORE DEVELOPMENT AUTHORITY VS AIRCRAFT EMPLOYEES CO-OPERATIVE SOCIETY LTD. & OTHERS - disposed of on 24.01.2012, he will not seriously press the contention raised with regard to the nature of the levy. Mr. Nanjunda Reddy, learned Senior Counsel taking me through the various provisions of the Act including Sections 103 & 104 which deal with taxes to be imposed, submits that the Corporation can levy and collect taxes only the impugned Rules, it is only a fee that is to be collected for the service rendered. It is his contention that the Corporation is rendering various services and is extending basic infrastructure to improve the general living conditions of citizens and is authorized to collect such improvement expenses from the owner or occupier of the developed, partially developed or single unit property or a locality or extension that is assessed or newly added to the assessment register. He thus demonstrates that there is co-relation between the levy and the benefit extended and hence it is a fee.
27. Keeping in mind the law declared by the Apex Court in the judgments referred to above and the service rendered by the BBMP for which the expenses are charged and recovered, it is clear that the amount collected cannot be termed as a tax. On the other hand, it clearly falls within the meaning of fee collected for the service rendered or the benefit given.
28. In the judgment of the Apex Court referred to supra, one of the questions that fell for consideration was, whether demand of various charges under the Cauvery scheme towards the execution of the scheme of work of augmenting water supply etc., amounted to levy of tax and was therefore ultra vires the provisions of Article 265 of the Constitution? Answering this question and also the incidental question that was raised regarding the quid pro quo, the Apex Court after referring to the previous judgments of the Supreme Court in the cases of KEWAL KRISHNAN PURL VS STATE OF PUNJAB - (1980)1 SCC 416, SOUTHERN PHARMACUTICALS AND CHEMICALS, TRICHUR & OTHERS VS STATE OF KERALA & OHTERS - (1981)4 SCC 391 and the judgment in the case of SREENIVASA GENERAL TRADERS VS STATE OF A.P. - (1983)4 SCC 353 and several other judgments, has held in paragraph 64 that the condition imposed by the BDA requiring payment of certain charges for augmentation of water supply, electricity, transport, etc., cannot be characterized as levy of tax. The Apex Court has further pointed out that the BDA was obliged to provide different types of amenities to the population of the Bangalore Metropolitan Area including the allottees of the sites in the layouts prepared by the House Building Societies. The Apex Court has observed that though it was quite possible that all them may not be the direct beneficiaries of one or the other amenities made available by the BDA, but that cannot detract from the fact that they would certainly be benefitted by the construction of the Outer Ring Road and Intermediate Ring Road, Mass Rapid Transport System, etc., and they will also be the ultimate beneficiaries of the Kaverl scheme because of availability of additional 270 MLD water to Bangalore which will enable the BWSSB to spare water for the private layouts. Thus, in the light of the above observations, the Apex Court has come to the conclusion in the aforernentioned judgment that the charges demanded by the BIM under the newly added provision in Section 32(5A) of the BDA Act, could not be termed as tax and declared unconstitutional on the ground that the same was not sanctioned by law enacted by the competent legislature. Therefore, it has to be held that the improvement charges levied by the impugned rules cannot be termed as tax. 29. The next aspect for consideration is, whether the Rules framed are arbitrary and there is no connection between the levy and the benefit extended.
The contention of the petitioners is, that there Is no cobtion or relationship whatsoever with the improvements carried out or to be carried out by the BBMP and the benefit that has accrued or is likely to accrue to the properties of the petitioners that have been added to the larger area constituted as BBMP. In other words, according to them, there is no quid pro quo between the service rendered/benefit extended and the levy of improvement expenses on individual properties belonging to the petitioners.
31. Rule 3 of the Rules makes it clear that improvement expenses shall be levied and recovered on the properties that are directly or indirectly benefited as a result of the improvement expenses incurred by the Commissioner towards creation of infrastructure and for such other works to improve the general living condition of citizens and includes expenses incurred on land newly converted from agricultural use to non-agricultural purposes.
32. It is therefore clear that even if indirect benefit is derived by certain properties on account of the improvement activities taken up for creation of basic infrastructure and for improving general living conditions of citizens, the said roperties are made to suffer the levy of improvement expenses. It is relevant to notice here that extension of benefit such as formation of roads, construction of bridges and flyovers to reach certain extensions, formation of drains, provision to provide water supply, sewerage, street lights, parks, playground and other amenities are by their nature services extended to the community of people as a whole and is a benefit that goes to serve the properties situated in different areas. They cannot be termed as benefits extended to only certain specified properties or persons residing in those properties. Many a time benefit extended to one area in matters such as health, sanitation, drainage, roads, bridges will certainly act as benefit extended to a large section of the residents of the city as it reduces health hazards, traffic congestion, water supply and sewage problems to a major portion of the city or in some cases to the entire city. Therefore, the service or the benefit extended in such circumstances cannot be judged from the nature of the benefit that each individual property in different localities actually receives. Quid pro quo does not, therefore, mean extension of individual service. Therefore, Rule 3 which enables levy of improvement expenses for such A1/4b,jse nefits extended directly or indirectly to the properties situated in different localities/extensions cannot be termed as arbitrary or illegal. But it has to be stated that the BBMP has to show that such newly added localities or extensions have been extended such benefit. The burden is this regard lies on the BBMP to establish the same.
33. It is true with regard to levy of fees, there is, and must always be, co-relation between the fee collected and service intended to be rendered and there must be, by and large, quid pro quo for the services rendered. But the co-relation between the levy and the services rendered cannot be of mathematical exactitude nor can it be insisted that similar benefit should accrue to all the concerned. All that is required is that there must be a reasonable relationship between the levy of fee and the services rendered. In the case of KISHAN LAL LAIMMI CHARD VS STATE OF HARYANA - (1993) SUPP(4) SC C 461, while dealing with the constitutionality of the levy of cess under the Haryana Rural Development Act, 1986, the Apex Court after examining the scheme of the Act, has held that there was a broad, reasonable and general co-relationship between the levy and e resultant benefit to the producer of the agricultural ce, dealer and purchasers as a class, though no single payer of the fee received direct or personal benefit from those services and although the general public also benetitted from some of the services like laying of roads because the primary service was to the producer, dealer and purchaser of the agricultural produce. In OM PARKASR AGARWAL VS GIRT RAJ KOMORI - (1986)1 SCC 722, the Apex Court has pointed out that it is not a postulate of a fee that it must have relation to the actual service rendered. However, the rendering of service has to be established. It is held in this case that the element of quid pro quo is not possible or even necessary to be established with arithmetical exactitude. But it must be established broadly and reasonably that the amount is being spent for rendering services to those on whom the burden of the fee falls. There is no postulate of a fee that it must have a direct relation to the actual services rendered by the authorities to each individual to obtain the benefit of the service. The element of quid pro quo in the strict sense is not always a sine: qua non for a fee, is what is held in the judgment referred to supra.
34. In view of the above, it cannot be held that the Buttes framed confer arbitrary or unguided power for levying vement expenses.
35. Point No.3: - The next point that falls for consideration is, whether Rule 5 of the Rules which requires collection of improvement expenses at the time of registration of the khatha in full sum or in installments at any time and is such manner as the Commissioner may deem fit, is contrary to Section 114 of the Act?
36. Section 114 obligates the transferor and the transferee of a property in respect whereof the title is transferred to give notice of such transfer to the Commissioner. Similar obligation is cast to give notice in case of death of a person in whom the title of the property is vested and which is required to be transferred to his heir. Section 114(3) which is material for our purpose provides that whenever such transfer comes to the knowledge of the Commissioner or Authorized Officer through such notice, the name of the transferee shall be entered in the Property Tax Register. Sub-section (3) is substituted by Act No.32 of 2003 with effect from 20.08.2003. Section 114(4) lays down that every person who makes a transfer without giving notice to the Commissioner shall continue to be liable for payment of the property tax assessed on the premises transferred, until he ves notice or until the transfer should have been recorded in the Corporation Registers. However, the liability of the transferee for the payment of the tax is not affected. It is thus clear from a perusal of Section 114 of the Act, particularly sub-section (3) of Section 114 of the Act, the name of the transferee shall be entered in the Property Tax Register whenever such transfer of the property comes to the knowledge of the Commissioner by virtue of the notice given by the Transferor and the Transferee intimating the fact of such transfer. The incident of entering the name of the Transferee in the Property Tax Register makes such Transferee liable to pay the tax and it will have the effect of recording the name of the transferee as the khathedar for such purpose. For the purpose of entering the name of the transferee in the property tax register, the procedure prescribed is required to be followed. If there is any fee to be collected, the same could be collected.
37. So far as the improvement expenses incurred or to be incurred which are sought to be levied and collected from the owner or occupier of the property is concerned, the same has absolutely no connection with the name of the transferee being entered in the property tax register. Therefore, the 'payment of improvement expenses cannot be made a condition for entering the name of the transferee in the property tax register.
38. Rule 5, in so far as it provides for collection of the improvement expenses in full sum at the time of registration of khatha is therefore, quiet contrary to the object and purpose for which the khatha is transferred/registered and Section 114(3) of the Act which makes it obligatory for the Commissioner that the name of the transferee shall be entered in the property tax register whenever such transfer of the property comes to his knowledge through a notice given as provided under Section 114(1) & (2).
39. Even otherwise. Rule 5 confers unguided and arbitrary powers on the Commissioner in so far as the mode of collection of the improvement expenses at the time of registration of khatha in full sum or in installments at any time and in such manner as the Commissioner deems fit. In the scheme of the Act regarding collection of improvement charges. Section 467 of the Act makes provision laying down certain guidelines regarding the collection of such improvement expenses from the owner or the occupier. Section 467 of the Act is extracted hereunder:-
"467. Improvement expenses by whom payable.- (1) Improvement expenses shall be a charge on the premises, in respect of which or for the benefit of which the same shall have been incurred and shall be recoverable in installments of such amounts, and at such intervals, as will suffice to discharge such expenses together with interest thereon within such period not exceeding 20 years as the Commissioner may in each case determine.
(2) The said installments shall be payable by the owner or occupier of the premises on which the expenses are charged; Provided that when the occupier pays any such installment, he shall be entitled to deduct the amount whereof from the rent payable by him to the owner or to recover the same from the owner."
40. It is clear from the above provision that the improvement expenses in respect of a premises incurred for its benefit shall be a charge on such premises and shall be recoverable in installments of such amounts and at such intervals as will suffice to discharge such expenses together with interest thereon within such period not exceeding 20 years as the Commissioner may in each case determine. It urther seen from the provision that the installments shall be payable by the owner or the occupier of such premises. provided that when the occupier pays the installments he shall be entitled to deduct the amount from the rent payable to the owner. Section 467 of the Act applies to improvement expenses that fall within the ambit of Section 466(a) & (b) of the Act. Therefore, it is clear that Section 467 of the Act lays down the mode of collection of improvement expenses that have been incurred by making it clear that they shall be recovered in installments at such intervals which has to be determined by the Commissioner exercising his discretion. The present Rule enacted in Rule 5 of the Rules therefore, is contrary to Section 467 of the Act in so far as it provides for recovery of the entire sum at the time of registration of khatha. While Section 467 of the Act makes it obligatory to recover the improvement expenses that have been already incurred, only by way of installments at intervals, Rule 5 has conferred power on the Commissioner to collect the entire improvement expenses incurred or to be incurred from the owner or the occupier of the property at the time of registration of khatha either fully or in installments. Therefore, Rule 5 is ultra vires the provisions contained under Section 467 of the Act and is therefore liable to be struck down to that extent.
41. It has to stated that when the legislature has provided for the collection of improvement expenses by enacting Section 467 of the Act providing for the mode of such collection conferring discretion in the Commissioner by laying down adequate guidelines and safeguards, the State Government cannot in the guise of making Rules in exercise of its Rule Making Power make provisions that are contrary to the intention expressed in the parent statute and which has the effect of placing heavy financial burden on the owner of the property to pay all the improvement expenses incurred and to be incurred at once, at the time of registration of khatha leaving it to the discretion of the Commissioner to opt for payment in installments, if he deemed fit. Hence, the said Rule is ultra vires the parent statute viz., Section 467 of the Act to that extent. Therefore, what follows is that the mode of collection of improvement charges can be as provided under Section 467 of the Act.
42. Point No.4: - The next point to be considered is, whether the impugned Circular is illegal being contrary to the Rules and the statute?
43. As regards the legality and correctness of the Circular dated 07.02.2011 issued by the Commissioner, BBMP, Counsel for the petitioners have very strongly contended that the amount of improvement expenses prescribed for different sites having different dimensions is totally arbitrary, unreasonable and baseless. It is relevant to notice here that in W.P.No.5035/2008 disposed of on 21.07.2008, this Court has already observed that in the absence of specifics over the expenses incurred by the respondent as development expenses that too in respect of the areas that have fallen within the larger areas of BBMP, the claim made by the respondent-BBMP that Rs.200 crores was spent in the year 1995 to provide water supply and other development expenses could not be regarded as having any nexus or justification to recover the expenses under Section 466 of the Act.
44. The stand of the BBMP is that after this decision was rendered, the BBMP constituted an expert committee to give a report regarding fixation of improvement expenses for the properties situated in the undeveloped areas. The expert committee in its meeting dated 23.09.2010, after considering all aspects, recommended for collection of betterment expenses at different rates for properties having different dimension. A copy of the proceedings of the expert committee is produced at Annexure-R5. It is further asserted in the statement of objections that the expert committee report was placed before the Standing Committee (Tax and Finance) and the said committee has passed a resolution on 15.10.2010 reducing the improvement expenses as per Annexure-R6. Thereafter, the Council on 29.12.2010 accepted the said resolution of the standing committee. It is urged for the respondent-BBMP that the Engineers of the BBMP had prepared estimate regarding expenses to provide basic amenities, such as roads, drains, UGD facilities, street lights, park, play ground etc., These Engineers have prepared the estimate by taking into consideration the amounts spent by different authorities like BDA, KHB and BWSSB for executing the aforementioned works and based on the cost incurred for these works the improvement pieces has been fixed.
45. As can be seen from the proceedings dated 23.09.2010 of the committee constituted for determining the improvement expenses produced at Annexure-R5, the committee has proceeded on the basis of the amount spent by the BDA and the KHB for formation of the layout in undeveloped lands, for the purpose of fixation of improvement expenses. It has further observed that generally lands in respect whereof the Khata transfer was sought were the lands which are not developed and which have been converted from agriculture to non-agriculture. Even though such lands are developed after the Khata is transferred, as the BBMP is required to provide additional facilities and such properties are entitled to make use of existing facilities by way of main roads, water supply and sewage, the properties must be subjected to collection of improvement expenses. It is in this background that the committee has obtained statistics from the BDA and KHB regarding the development expenses for formation of layouts, which disclosed that BDA was spending on an average Rs.460/- per sq. mtrs. and the KHB at Rs.1,025/- per sq. mtrs. Thereafter, it has taken the amount spent by the BDA for development of layouts, as the basis for determining the improvement expenses.
46. It is further stated that as regards the classification made between the smaller and larger sites, the BBMP has proceeded on the basis that persons belonging to economically weaker section, utilised the facilities extended by the BBMP in a smaller way, whereas the economically well to do persons and persons owning residential apartments and those engaged in commercial activities utilised such facilities in a larger way. Hence, taking note of the ability of the owners of the properties, the rate of improvement expenses has been determined.
47. It has to be noticed that the amount spent by the BDA as development expenses for formation of layouts cannot become the basis for determining the improvement expenses. The BDA acquires activities, such as, formation of roads, virgin lands and carries out several cleaning the lands and leveling it for drainage, apart from providing "other infrastructure" for making it into a layout. In the process, it incurs substantial expenditure. The BBMP does not form any, layout or make sites or provide for internal roads in the layouts or carry out improvement of layouts by providing street lights, drainage inside the private layouts. The expenditure in this regard has to be necessarily met by the owners of the land or the developers, who form the layouts. Therefore, there is no reasonable basis for making the development expenses incurred by the BDA, as the basis to arrive at the improvement expenses to be recovered by the owners of the land/site, which is included in the jurisdiction of the BBMP. The purpose of levying the development expenses, as is clear from the impugned rules framed is to make the properties pay for the benefit derived directly or indirectly as a result of the improvement expenses incurred towards creation of basic infrastructure. The power vested in the Commissioner as per Rule-4, to declare such expenses as improvement expenses is , qualified by the clause, which states as under: -
'The commissioner having regard to the expenditure incurred on various infrastructural facilities provided to or to be provided, may declare it as improvement expenses under Section 466 of the Act and may levy and collect such improvement expenses from the owner or occupier of the properties that are assessed or newly added to the assessment Register, which have been benefited or likely to be benefited for such improvement expenses:"
48. It is thus, clear that there must be infrastructural facilities already provided or to be provided to certain properties that have been benefited or likely to be benefited for such improvement expenses. Though, the relationship between the service rendered and the fee collected cannot be established with is mathematical exactitude, there should be relationship between the service rendered and the fee collected and that relationship has to be reasonable. Unless, the Corporation makes a systematic exercise to list out the infrastructure and the services that is required or intended to be rendered to the newly added localities or extensions into the BBMP and unless it shows that by and large there is a quid pro quo, it cannot be said that there is a reasonable relationship between the levy of the fee and the service rendered. Unless, such reasonable relationship between the two is established, the action cannot stand the test as laid down in the decision of the Hon'ble Apex Court in the case of SRINIVASA GENERAL TRADERS VS. STATE OF ANDHRA ,MADESH - (1983)4 SCC 353 Again in the recent decision of - the A e Court in the case of BANGALORE DEVELOPMENT AUTHORITY VS. AIRCRAFT EMPLOYEES CO-OPERATIVE SOCIETY LTD.. AND OTHERS in CIVIL APPEAL NOS.7503- 7537/2002 DECIDED ON 24.01.2012, the Apex Court after referring to the judgment in Srinivasa General Traders case and several other judgments rendered earlier including the judgment in the case of OM PRAKASH AGARWAL ETC., VS. GIRL RAJ KISHORI AND OTHERS - AIR 1986 SC 726 and in the case of ITC LIMITED VS. STATE OF KARNATAKA - 1985(SUPPL.) SCC 476, it is made clear that the element of quid pro quo is not possible or even necessary to be established with arithmetical exactitude. But it must be established broadly and reasonably that the amount was being spent for rendering services to those on whom the burden of fee falls. In the said judgment, the Apex Court while repelling the challenge made to the condition imposed by the BDA requiring the House Building Co-operative Society Limited for augmentation of electricity and transportation etc., has held that the same could not be termed as the demand made by the BDA that amounts to levy of tax and was ultra vires Article 265 of the Constitution.
49. However, in paragraph No.68 of the said judgment, a direction is issued to the State Government to take appropriate decision to find out whether the levy of supervision charges, improvement charges, examination charges, slum clearance development charges and MRTS cess at the rates specified in the communications of the BDA was excessive.
50. In the light of the above mentioned judgments of the Apex Court, if this Court examines the basis adopted by the BBMP collecting the details of development charges incurred by the BDA for formation of layouts by it, for levy of developmental expenses, it cannot be said that there is a reasonable relationship between the collection of such expenses and the service rendered, in as much as, unlike BDA, which forms the entire layout providing for all basic infrastructure, the BBMP is not engaged in formation of such layouts for the benefit of the owners or the occupiers of the properties that are included in its jurisdictional limits. Therefore, there is no reasonable basis in the exercise undertaken by the BBMP through the committee constituted by it, in this regard. In fact, on an earlier occasion, when a eijcular providing for recovery of improvement charges was issued on 07.11.2007 in W.P.No.5035/2008, this Court has made it clear in paragraph No.8 of its order slated 21.07.2008 that the amount of Rs.200 crores spent in the year 1995 cannot have any nexus nor can it be a justification to recover the improvement expenses under Section 466 of the Act. Even after a fresh exercise was done by the BBMP, pursuant to the order passed in the aforementioned writ petition, the BBMP has failed to come forward with necessary data regarding the amount expended or likely to be incurred for the purpose of providing basic amenities and infrastructure to the newly added properties/extensions and localities, into the limits of BBMP. The exercise that is now undertaken by referring to the expenses incurred by the BDA for formation of layouts has to be characterized as unreasonable and arbitrary. Having no rational nexus with the purpose for which the exercise is undertaken.
51. Similarly, levy of different rates of improvement expenses for properties having different dimensions by adopting a method of charging lesser amounts for sites having smaller dimensions with increase in the quantum of o the larger sites by following a thumb rule namely enlarger the site, larger the levy, is also not supported by any reasonable basis. Except the extent of site, no other criteria is made the basis for levying increased improvement expenses for larger sites.
52. The proceedings dated 23.09.2010 of the committee constituted for fixation of the improvement expenses, the copy of which is annexed to the statement of objections as Annexure-R5, discloses that persons belonging to economically weaker sections residing in smaller sites, make use of the infrastructure provided by the BBMP in a smaller way, compared to the owners of the larger sites. This does not have any reasonable basis. It cannot be said that the owners of the smaller sites are always economically weak and invariably utilise lesser infrastructure provided by the BBMP. Without ascertaining the economic and financial ability of the owners of the sites, such an approach adopted to collect increased amount from the owners of larger areas, only because the area is newly incorporated into the jurisdiction of the BBMP, cannot be termed as reasonable exercise undertaken by the Commissioner. It cannot be lost sight that most of these areas which are included in the P, were a part of the villages in the outskirts and many agriculturists who owned the lands, might have got converted and become a part of the newly constituted BBMP. They will have to now shell down huge amounts towards improvement charges at higher rates because they possessed larger sites/properties. Therefore, the basis for differential treatment lacks intelligible or reasonable criteria. Hence, the differential rates charged, cannot be sustained.
53. Point No.5: - In so far as the question raised regarding retrospective effect give to the Rules which are brought into force with effect from 17.01.2007, Section 421(4A) of the Act confers power on the Rule Making Authority to give retrospective effect to the Rules. Section 421(4A) of the Act reads as under:
"421(4A) A rule under this Act may be made with retrospective effect, and when such a rule is made, the reasons for making the rule shall be specified in a statement laid before both Houses of the State Legislature, and subject to any modification made under sub-section (6), every rule made under this Act, shall have effect as if enacted in this Act."
54. In the judgment of the Apex Court in the case of DR. RAMANI PYARELAL GUPTA & OTHERS VS W.R.NATU & OTHERS - AIR 1963 SC 274, it is held that a statute which could validly enact a law with retrospective effect could in express terms validly confer upon a rule-making authority a power to make a rule or frame a bye-law having retrospective operation. The same result would follow where the power to enact a rule or a bye-law with retrospective effect so as to affect pending transactions, is conferred not by express words but where the necessary intendment of the Act confers such a power. As Section 421(4A) of the Act confers such a power to make a rule with retrospective effect subject to the condition stated therein, it cannot be said that retrospective effect given to the Rules is without authority of law. Accordingly, this point is answered against the petitioners.
55. For the aforementioned reasons, these writ petitions are allowed in part. The challenge made to the Rules except Rule 5 is dismissed.
i) Rule 5 which provides for collection of improvement expenses at the time of registration of Khata is set aside only to the extent it provides for recovery of the amount at the time of registration of khatha.
ii) Provisions made in the said Rule for collecting the full sum is also declared as ultra vires the provisions contained under Section 467 of the Act.
(iii) The action of the Commissioner in issuing the impugned Circular determining the amount of improvement expenses to be collected from the owners or occupiers of the sites/lands as specified in the impugned circular, is declared as illegal.
(iv) Different rates of improvement expenses fixed for different sites based only on the dimension of the sites is declared as arbitrary and unreasonable.
(v) Consequential action taken to reject the request for recording the Khata in favour of the applicants solely on the basis of non-payment of the improvement charges is declared as illegal.
(vi) The BBMP is directed to register the Khata in favour of the applicants, provided they have satisfied all the other legal requirements in that regard.
(vii) Cancellation of Khata effected on the ground of non payment of improvement charges declared as illegal and such actions are hereby set aside, in so far as it pertains to the petitioners.
(viii) Liberty is reserved to the BBMP to undertake the exercise afresh of quantifying the CIA improvement expenses its collection in the light of the observations made above.
(ix) If some of the petitioners have already paid the improvement charges as demanded by the BBMP, they will be either entitled for refund of the same or for getting it adjusted towards the other dues payable. Asst. it 7 I.
(viii) Parties to bear their respective costs.