Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1079 OF 2009
(Arising out of SLP (C) No.12139 of 2007)
M. Chandru … Appellant
Versus
The Member Secretary, Chennai Metropolitan
Development Authority & Anr. … Respondents
WITH
CIVIL APPEAL NOS. 1080, 1081, 1083, 1082 & 1084
OF 2009
(Arising out of SLP (C) Nos.12438, 16200, 16203, 16202 and 14359 of
2007)
J U D G M E N T
S.B. Sinha, J.
1. Leave granted.
INTRODUCTION
2. Legality and/or validity of Infrastructure Development Charges (IDC)
by Chennai Metropolitan Development Authority (CMDA) allegedly on
2
behalf of Chennai Metropolitan Water Supply and Sewerage Board (the
Sewerage Board) for issuing planning permission in regard to the
construction of multi-storeyed building and/or special building is in
question in this appeal which arises out of a judgment and order dated
20.12.2006 passed by a Division Bench of the High Court of Judicature at
Madras in W.P. No.34702 of 2006.
BACKGROUND FACTS
3. Appellants herein are builders and developers and individuals who
had applied for grant of permission for construction of multi-storeyed
building and/or special building before the CMDA. They were asked to
deposit specified sums towards IDC payable to the Sewerage Board by
CMDA. Contending that CMDA had no power to collect IDC and the
Sewerage Board is otherwise obligated to supply water and provide
sewerage connection, they filed writ petitions before the High Court of
Madras. The said writ petitions have been dismissed by reason of the
impugned judgment.
SUBMISSIONS
4. Mr. L. Nageshwar Rao, learned counsel appearing on behalf of the
appellants, would contend :
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1) The Chennai Metropolitan Water Supply and Sewerage Act, 1978
(the 1978 Act) containing no provision for delegation of power to an
outsider, the purported demand made by the CMDA must be held to
be wholly illegal;
2) As no special services are to be rendered to the builders and/or
developers or individuals so as to satisfy the doctrine of quid pro quo ,
the impugned judgment cannot be sustained.
5. Mr. Krishnamurty, learned senior counsel appearing on behalf of the
respondent, on the other hand, urged :
1) The Board being bound by the directions issued by the State of Tamil
Nadu, delegation to compute the IDC and collect the same by CMDA
cannot be held to be ultra vires the power of the Sewerage Board..
2) CMDA being the local authority and having been in-charge of supply
of water and providing sewerage, such delegation was made for
convenience of the applicants.
3) As charges are being levied and collected towards provision for or
improvement of water supply or sewerage service, the same meet the
legal requirement of quid pro quo .
4
STATUTORY PROVISIONS
6. The Legislature of the State of Tamil Nadu enacted the Tamil Nadu
Town and Country Planning Act, 1971 (the 1971 Act). Levy of
development fees by CMDA is prescribed thereunder as a pre-condition for
grant of permission to construct building.
Relevant provisions of the 1971 Act read as under:
“ 9-A. Establishment of the Chennai
Metropolitan Development Authority.— (1)
With effect from such date as the Government
may, by notification in the Tamil Nadu
Government Gazette appoint in this behalf, there
shall be established for the Chennai Metropolitan
Planning area an authority by the name of the
Chennai Metropolitan Development Authority.
xxx xxx xxx
9-E. Relation with the Chennai Metropolitan
Water Supply and Sewerage Board.— (1)
Notwithstanding anything contained in this Act,
the Chennai Metropolitan Development Authority
shall fully consult and collaborate the Chennai
Metropolitan Water Supply and Sewerage Board
constituted under the Chennai Metropolitan Water
Supply and Sewerage Act, 1978 with respect to
any provision regarding water supply or sewerage
services and matters connected therewith that may
be included in any development plan prepared or
to be prepared under this Act for the Chennai
Metropolitan Planning Area or any part thereof.
(2) With respect to any such development plan,
the execution of or the carrying out of any work
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under such plan shall, in so far it relates to water
supply or sewerage service or matters connected
therewith, be entrusted to and be the sole
responsibility of the Chennai Metropolitan Water
Supply and Sewerage Board, and if any work
under such plan is in the process of being executed
or carried out on the date of coming into force of
this section, the Chennai Metropolitan
Development Authority shall continue and
complete such work in accordance with section 27
of the Chennai Metropolitan Water Supply and
Sewerage Act, 1978.
xxx xxx xxx
59. Levy of development charges.— (1) Subject
to the provisions of this Act and the rules made
thereunder every planning authority including a
local authority where such local authority is the
planning authority, shall levy charges (hereinafter
called the development charges) on the institution
of use or change of use of land or building or
development of any land or building for which
permission is required under this Act in the whole
area or any part of the planning area within the
maximum rates specified in section 60:
Provided that the rates of development charges
may be different for different parts of the planning
area and for different uses:
Provided further that the previous sanction of the
Government has been obtained for the rates of
levy.
(2) When a planning authority including a local
authority where such local authority is the
planning authority shall have determined to levy
development charges for the first time or at a new
rate, such authority shall forthwith publish a
notification in the Tamil Nadu Government
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Gazette specifying the rates of levy of
development charges.
(3) The development charges shall be livable on
any person who undertakes or carries out any such
development or institutes or changes any such use.
(4) Notwithstanding anything contained in sub-
section (1) and (2), no development charges shall
be levied on development, or institution of use or
of change of use of, any land or building vested in
or under the control or any State Government or of
any local authority.
xxx xxx xxx
63-A. Apportionment of development charges
in certain cases.— Where any development
charges are levied or recovered under the
provisions of this Chapter in respect of the use or
change of use of land or building or development
of any land or building in the Channai
Metropolitan Planning Area, and if any such chare
or any part, thereof is relateable to provision for or
improvement of water supply or sewerage service,
the Chennai Metropolitan Development Authority
shall pay over the Chennai Metropolitan Water
Supply and Sewerage Board constituted under the
Chennai Metropolitan Water Supply and Sewerage
Act, 1978, such charge or part thereof.”
7. The 1978 Act was enacted to provide for the constitution of
Sewerage Board to attend to the growing needs and for proper development
and regulation of water supply and sewerage services in the Chennai
Metropolitan Area. Relevant provisions of 1978 Act are as under :
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2.(f) “local authority” means –
(i) the Municipal Corporation of Chennai; or
xxx xxx xxx
(v) the Tamil Nadu Water Supply and Drainage
Board constituted under Section 4 of the
Tamil Nadu Water Supply and Drainage
Board Act, 1970 (Tamil Nadu Act No.4 of
1971) (hereinafter referred to as the Tamil
Nadu Water Supply and Drainage Board);
or
xxx xxx xxx
(vii) the Chennai Metropolitan Development
Authority established under Section 9-A of
the Tamil Nadu Town and Country Planning
Act, 1971 (Tamil Nadu Act No.35 of
19721), (hereinafter referred to as the
Chennai Metropolitan Development
Authority);
xxx xxx xxx
6.
Powers of the Board.— (1) The Board
shall, subject to the provisions of this Act,
have the power to do anything which may
be necessary or expedient for the purpose of
carrying out its functions and duties under
this Act.
(2) Without prejudice to the generality of the
foregoing provision, the Board shall have the
power --
(i) to take over all existing responsibilities,
powers, controls, facilities, services and
administration relating to water supply and
sewerage in or for the Chennai Metropolitan
Area;
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(ii) to enlarge, improve or develop existing
facilities and to construct and operate new
facilities for water supply and sewerage in
or for the Chennai Metropolitan Area;
(iii) to prepare schemes for water supply and sewerage
(including abstraction of water from any natural source
and the disposal of waste and pollution water) in or for
the Chennai Metropolitan Area;
xxx xxx xxx
(xii-a)to collect infrastructure development
charges from the applicant builder or
developer of such multistoreyed building or
special building as may be prescribed for
the provision of adequate water supply or
sewerage;
xxx xxx xxx
(xv) to do all things necessary for the purpose of carrying out
the provisions of this Act.”
7.
Powers of Board to call for information.— The Board
may, for the purpose of carrying out the provisions of
this Act, by notice require any person to furnish such
information in his possession relating to water supply
and sewerage systems, and shall act as a centre for the
collection and exchange information on such matter, in
order to facilitate the preparation of studies, scheme or
plans and the development of policies which promote the
purposes of this Act.
81. Power to make regulations.— (1) The
Board may make Regulations not inconsistent with
this Act for carrying out the purposes of this Act.
(2) In particular and without prejudice to the
generality of foregoing power, such regulations
may provide for all or any of the following
matters, namely :–
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(a) to (j) …
(jj) the manner of and the basis on which the
infrastructure development charges shall be
collected;
(k) to (p) …”
8. Clause (jj) of Section 81 of the 1978 Act provides for regulation
making power pursuant whereto or in furtherance whereof the State of
Tamil Nadu made Regulations in the year 1998 known as The Chennai
Metropolitan Water Supply and Sewerage Infrastructure Development
Charges (Levy and Collection) Regulations, 1998 in respect of ‘manner’
and ‘basis’ for collection of charges, relevant provisions whereof are as
under :
“3.(a) Applicant mean and includes the applicant
builder or development of multi-storeyed
buildings or special buildings as the case may be
for the provision of adequate water supply or
sewerage and matters connected thereto.
(b) ‘Multi-storeyed building’ means and block
or buildings exceeding of 4 floors and/or 15
meters in height.
(c) ‘Special building’ means any block or
buildings means not less than three floor but not
exceeding four floors.
(d) ‘Infrastructure Development’ means any
provision made by the Board regarding water
supply and sewerage services and matters
connected therein.
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4. The Board shall collect infrastructure
development charges through Chennai
Metropolitan Development Authority from the
applicant of multi-storeyed buildings or special
building as the case may be for the provision of
adequate water supply or sewerage and the matters
connected thereto at the flat rate of Rs.64/- per sq.
meter (of the built up area).”
DELEGATION
th
9. On or about 5.3.1998, the Sewerage Board in the 197 meeting of its
Board of Directors resolved to collect infrastructure development fee at a
flat rate of Rs.64/- per square meter and to authorize CMDA to act as its
agent for calculation, collection and remittance of the infrastructure
development charges or IDC to the Board and to grant NOC to applicant
builders of special buildings and multistoreyed flats without referring
individual cases to the Board. An office order being No.9/98 issued on
23.3.1998 by CMDA as regards processing of applications for planning
permission fixing Rs.64/- per square meter as IDC for multi-storeyed
building which was to be collected by CMDA and transfer to Sewerage
Board.
10. A Government Order being No.146 was also passed by Housing and
Urban Development Department directing CMDA to collect Rs.64/- per
square meter from applicants towards IDC.
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11. The 1978 Act was amended in terms whereof Sections 6(2)(xii-a) and
Section 81(jj) were inserted empowering the Sewerage Board to collect IDC
from applicant, builder or developer of multi-storeyed or special buildings.
12. Appellant herein applied for planning permission for construction of
a multi-storeyed building before CMDA on 8.11.2005. A sum of
Rs.53,29,500/- towards development charges was demanded by CMDA in
terms of its letter dated 8.9.2006 including a sum of Rs.5,30,500 towards
IDC payable to the Sewerage Board for developing water and sewerage
facilities as a pre-condition for considering the said application.
13. It is on the aforementioned premise, the writ petition was filed which
by reason of the impugned judgment has been dismissed.
FINDINGS OF THE HIGH COURT
14. (a) Levy has been made for the services rendered and to strengthen
and maintain the water supply and sewerage infrastructure.
(b) Levy of development charges is permissible in law in terms of
Section 59 of the 1971 Act.
(c) It helps the applicant to get processed the planning permission
application at one location.
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(d) Special Buildings and multi-storeyed buildings are responsible
for the sudden spurt in demanding the infrastructure facilities at high rate
and sometimes it requires huge investment.
(e) Sections 45 and 56 merely deal with charges for consumption
of water and guidelines for availing the water and sewage connection
whereas IDC is collected for overall infrastructure development.
DELEGATION ISSUE
15. Indisputably, development charges for land and building are levied in
terms of the provisions of Section 59, 60 and 69 of the 1971 Act. Such
charges are payable at the time of seeking planning permission for the
development of land and building. The stipulated charges, at the relevant
time, was Rs.1,00,000/- per hectare in the case of development of land and
Rs.25/- per square meter in the case of buildings. Water and sewage
charges are levied in terms of Sections 45 and 56 of 1978 Act, which are
required to be paid to the Sewerage Board at the time of seeking connection.
16. As noticed hereinbefore, IDC at the rate of Rs.64/- per square meter is
levied only on builders or developers of special buildings or multi-storeyed
buildings in terms of Section 6(2)(xii-a) of 1978 Act and Regulations made
pursuant to the amendment of Section 81(2)(jj) thereof. IDC indisputably is
13
in addition to the charges levied under Sections 59, 60 and 6 1 of 1971 Act
and Sections 45 and 56 of 1978 Act.
17. Regulations, as noticed hereinbefore, were framed as regards,
‘manner’ and ‘basis’ for collection of charges.
18. The High Court opined that as the CMDA had been empowered to
collect the said charges in terms of the Regulations by reason of a resolution
of the Board of Directors of the Sewerage Board in its meeting held on
5.3.1998, the same is valid in law.
19. The Sewerage Board is a State within the meaning of Article 12 of the
Constitution of India. It is a creature of a statute. It can delegate its power
provided there exists a provision in the Act. Power to delegate, thus, being
a statutory requirement must find its place in the principal Act itself and not
in the Regulation. The High Court, in our opinion, has asked unto itself a
wrong question. The appropriate question required to be posed was not as
to whether the CMDA was appointed as an agent, but was as to whether the
Sewerage Board could delegate its power to CMDA. It may have some
advantages. But the same may not answer the legal requirement.
20. Mr. Krishnamurty, however, has submitted that the Sewerage Board
is bound by the direction issued by the Government.
14
CMDA may be a local authority within the provisions of the 1978 Act
but it is an independent body. Prima facie, there is nothing to show that it
has any statutory role to play in the functioning of the Sewerage Board. As
a local authority, it has certain duties to perform. It, however, appears that
the function relating to water supply and sewage services are vested in the
Board itself. It was, therefore, the Board which could levy the charges. It
had such a power in terms of Sections 45 and 54 of the Act. Our attention
has been drawn to Section 78(b) of the Act to contend that the Government
has power to issue orders and directions. Such orders and directions can be
issued when the Government forms an opinion that the same are necessary
or expedient for carrying out the purpose of the Act. Directions cannot be
issued in respect of the matters which are beyond the provisions of the
statute.
21. However, it appears that Section 81(2)(jj) which was inserted by
Tamil Nadu Act 49 of 1988, the Board has been empowered to frame
regulations in relation to the ‘manner’ and ‘basis’ on which the IDC shall be
collected. In terms of the aforementioned power, Regulation 4 has been
made in terms whereof CMDA has been authorized to collect IDC. Thus,
the matter providing for collection of IDC is a matter of procedure and not a
substantive provision. It, in that view of the matter, is not a delegation of
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power. CMDA is not appropriating any fund collected on behalf of the
Sewerage Board. It has no power to utilise any amount. The power of
collection is merely an incidental power. They have no power to assess or
appropriate the same; the rate having been fixed.
22. Although for different reasons, we, thus, uphold that part of the order
of the High Court on this count.
QUID PRO QUO
23. State or the Board did not state as to on what basis the rate of Rs.64/-
per square meter was fixed. What was the amount to be spent towards
services to be rendered to the multi-storeyed and special buildings had not
been spelt out. What had merely been stated was that the amount was
necessary to be spent for overall development of the water supply and
sewerage system. It is not contended before us that IDC is not a fee but a
tax. If it is a fee, the principle of quid pro quo shall apply. Like a State, all
other authorities who are statutorily empowered to levy the same must spell
out as to on what basis, the same is charged. The State has not placed any
material before the High Court. The High Court has also not addressed
itself properly on the same issue. It failed to pose unto itself a relevant
question. It proceeded on the basis as if over all development charges by
itself is sufficient to levy a fee without spelling out how the services
16
rendered will satisfy the equivalence doctrine for the purpose of levy and
collection of fees.
24. In Sri Krishna Das v. Town Area Committee, Chirgaon [(1990) 3
SCC 645], this Court observed :
“ 22. A fee is paid for performing a function. A fee
is not ordinarily considered to be a tax. If the fee is
merely to compensate an authority for services
performed or as compensation for the services
rendered, it can hardly be called a tax. However, if
the object of the fee is to provide general revenue
of the authority rather than to compensate it, and
the amount of the fee has no relation to the value
of the services, the fee will amount to a tax. In the
words of Cooley, “A charge fixed by statute for
the service to be performed by an officer, where
the charge has no relation to the value of the
services performed and where the amount
collected eventually finds its way into the treasury
of the branch of the government whose officer or
officers collect the charge is not a fee but a tax.”
23. Under the Indian Constitution the State
Government’s power to levy a tax is not identical
with that of its power to levy a fee. While the
powers to levy taxes is conferred on the State
legislatures by the various entries in List II, in it
there is Entry 66 relating to fees, empowering the
State Government to levy fees “in respect of any
of the matters in this list, but not including fees
taken in any court”. The result is that each State
legislature has the power, to levy fees, which is
co-extensive with its powers to legislate with
respect to substantive matters and it may levy a fee
with reference to the services that would be
rendered by the State under such law. The State
may also delegate such a power to a local
17
authority. When a levy or an imposition is
questioned, the court has to inquire into its real
nature inasmuch as though an imposition is
labelled as a fee, in reality it may not be a fee but a
tax, and vice versa. The question to be determined
is whether the power to levy the tax or fee is
conferred on that authority and if it falls beyond,
to declare it ultra vires.
24. We have seen that a fee is a payment levied by
an authority in respect of services performed by it
for the benefit of the payer, while a tax is payable
for the common benefits conferred by the authority
on all tax payers. A fee is a payment made for
some special benefit enjoyed by the payer and the
payment is proportional to such benefit. Money
raised by fee is appropriated for the performance
of the service and does not merge in the general
revenue. Where, however, the service is
indistinguishable from the public services and
forms part of the latter it is necessary to inquire
what is the primary object of the levy and the
essential purpose which it is intended to achieve.
While there is no quid pro quo between a tax payer
and the authority in case of a tax, there is a
necessary co-relation between fee collected and
the service intended to be rendered. Of course the
quid pro quo need not be understood in
mathematical equivalence but only in a fair
correspondence between the two. A broad co-
relationship is all that is necessary.”
In Jindal Stainless Ltd. (2) & Anr. v. State of Haryana & Ors. [(2006)
7 SCC 241], a Constitution Bench of this Court stated:
“ 40. Tax is levied as a part of common burden.
The basis of a tax is the ability or the capacity of
the taxpayer to pay. The principle behind the levy
18
of a tax is the principle of ability or capacity. In
the case of a tax, there is no identification of a
specific benefit and even if such identification is
there, it is not capable of direct measurement. In
the case of a tax, a particular advantage, if it exists
at all, is incidental to the State’s action. It is
assessed on certain elements of business, such as,
manufacture, purchase, sale, consumption, use,
capital, etc. but its payment is not a condition
precedent. It is not a term or condition of a licence.
A fee is generally a term of a licence. A tax is a
payment where the special benefit, if any, is
converted into common burden.
41. On the other hand, a fee is based on the
“principle of equivalence”. This principle is the
converse of the “principle of ability” to pay. In the
case of a fee or compensatory tax, the “principle of
equivalence” applies. The basis of a fee or a
compensatory tax is the same. The main basis of a
fee or a compensatory tax is the quantifiable and
measurable benefit. In the case of a tax, even if
there is any benefit, the same is incidental to the
government action and even if such benefit results
from the government action, the same is not
measurable. Under the principle of equivalence, as
applicable to a fee or a compensatory tax, there is
an indication of a quantifiable data, namely, a
benefit which is measurable.”
In Mumbai Agricultural Produce Market Committee & Anr. v.
Hindustan Lever Ltd. & Ors. [(2008) SCC 575], this Court observed :
“ 14. The quantum of recovery, however, need not
be based on mathematical exactitude as such cost
is levied having regard to the liability of all the
licensees or a section of them. It would, however,
require some calculation.”
19
It was further stated :
“ 18. Cost of supervision, if borne by the State has
to be recovered by it. The burden was, therefore,
on the State to justify the levy. Even the general
or special order, if any, purported to have been
issued by the State has not been brought on record.
On what basis, the supervision charges were being
calculated is not known. The premise for levy or
recovery of the amount of supervisory charges is
not founded on any factual matrix. Only the
source of the power has been stated but the basis
for exercise of the power has not been disclosed.”
Recently, in Mohan Meakin Ltd. v. State of H.P. & Ors. [2009 (1)
SCALE 510], this Court opined that the jurisdiction of the State to impose
such a levy is limited. When a fee is levied, the question as regards ‘aspects
of power to levy fee vis-à-vis tax’ must be borne in mind.
25. Furthermore, it was held in A.P. Paper Mills Ltd. v. Govt. of A.P. and
Another [(2000) 8 SCC 167] that even if a fee is levied for issuance of
permit, it was only for the purpose of recovering the administrative charges.
[See also Ashok Lanka and Another v. Rishi Dixit and Others (2005) 5
SCC 598].
This Court in Kerala Samsthana Chethu Thozhilali Union v. State of
Kerala and Others [(2006) 4 SCC 327], upon noticing State of Kerala and
20
Others v. Maharashtra Distilleries Ltd. and Others [(2005) 11 SCC 1],
opined:
“39. In State of Kerala v. Maharashtra
Distilleries Ltd. this Court took notice of the
provisions of Section 18-A of the Act. It was held
that the State had no jurisdiction to realise the
turnover tax from the manufacturers in the garb of
exercising its monopoly power. It was held that
turnover tax cannot be directed to be paid either by
way of excise duty or as a price of privilege.”
26. Even while levying a fee, a quantum jump is deprecated.
In Indian Mica Micanite Industries v. The State of Bihar and Others
[(1971) 2 SCC 236], it has been held:
“17… There cannot be a double levy in that
regard. In the opinion of the High Court the
subsequent transfer of denatured spirit and
possession of the same in the hands of various
persons such as wholesale dealer, retail dealer or
other manufacturers also requires close and
effective supervision because of the risk of the
denatured spirit being converted into palatable
liquor and thus evading heavy duty. Assuming this
conclusion to be correct, by doing so, the State is
rendering no service to the consumer. It is merely
protecting its own rights. Further in this case, the
State which was in a position to place material
before the Court to show what services had been
rendered by it to the appellant and other similar
licensees, the costs or at any rate the probable
costs that can be said to have been incurred for
rendering those services and the amount realised
21
as fees has failed to do so. On the side of the
appellant, it is alleged that the State is collecting
huge amount as fees and that it is rendering little
or no service in return. The co-relationship
between the services rendered and the fee levied is
essentially a question of fact. Prima facie, the levy
appears to be excessive even if the State can be
said to be rendering some service to the licensees.
The State ought to be in possession of the material
from which the co-relationship between the levy
and the services rendered can be established at
least in a general way. But the State has not
chosen to place those materials before the Court.
Therefore the levy under the impugned Rule
cannot be justified.”
In this case, the State in fact has not produced any material
whatsoever before the High Court, which it was required for meeting the
challenge on imposition of fee by it.
27. As in the case of Mohan Meakin Ltd., in this case also no justification
for levy of fee has been placed before the High Court, we are of the opinion
that the matter should be remitted to the High Court for consideration of the
matter afresh.
In the writ petition, State of Tamil Nadu may be impleaded as a party.
The parties shall be at liberty to produce such material before the High
Court for justification for levy of fee. The State of Tamil Nadu is directed
22
to file an affidavit before the High Court to justify the levy of fee. The
affidavit should be filed within four weeks.
28. The impugned order is set aside. The appeals are allowed. The High
Court is requested to dispose of the matter as expeditiously as possible. No
costs.
………………………….J.
[S.B. Sinha]
..…………………………J.
[Dr. Mukundakam Sharma]
New Delhi;
February 17, 2009