Development authorities lack statutory power to levy impact fees or open-area penalties.

The petitioners, a sole proprietorship operating an Indian Oil Corporation retail outlet, challenged the Prayagraj Development Authority’s (PDA) demand dated 22 May 2007, including ₹15,04,238 as impact charges and ₹6,01,695 as open-area penalty.

The demand used the circle rate effective from 24 June 2006; the petitioners contended that the lower rate in force when the site-plan application was made on 27 September 2004 should apply, as subsequent delay was attributable to the PDA.

The petitioners had made deposits towards the demand and, during the hearing, also argued that the two impugned levies were beyond the PDA’s authority under the governing statute, relying on Smt. Rekha Rani and Mathura Vrindavan Development Authority v. Rajesh Sharma.

The PDA did not file a counter-affidavit despite being given an opportunity.

Whether the PDA could demand impact charges and an open-area penalty under the Uttar Pradesh Urban Planning and Development Act, 1973.

Whether the impugned amounts, if lawfully chargeable, should be calculated using the circle rate in force when the site-plan application was made or the later rate effective from 24 June 2006.

Section 15(2-A) of the Uttar Pradesh Urban Planning and Development Act, 1973 permits a Development Authority to levy only the charges specified there, identified in Mathura Vrindavan Development Authority v. Rajesh Sharma, (2025) 11 SCC 577, as development fees, mutation charges, stacking fees and water fees; other charges not authorised by the Act are impermissible under Article 265 of the Constitution.

The Supreme Court in Rajesh Sharma affirmed the invalidity of levies including impact fees, while distinguishing development charges/fees that are authorised by the statute.

A court’s declaration of the law ordinarily states what the law has always been, unless the court expressly limits its operation prospectively.

Although the petitioners’ pleaded case principally sought calculation of the charges at the 2004 circle rate, they also challenged the levies’ legality at the hearing.

Applying Section 15(2-A) and Rajesh Sharma, the Court held that neither impact charges nor an open-area penalty was among the charges the PDA was authorised to impose.

The demand was therefore unlawful regardless of which circle rate applied, making it unnecessary to decide the rate-calculation dispute.

The Court treated the asserted deposits as requiring verification and made the refund subject to adjustment of other charges in the demand notice.

The demand dated 22 May 2007 was quashed insofar as it sought ₹15,04,238 in impact charges and ₹6,01,695 in open-area penalty.

The PDA was directed to refund the aggregate ₹21,05,933, after setting off other charges, fees or levies in the notice, within one month of receipt of the order; the refund is to carry simple interest at 6% per annum from 12 June 2007 until payment.

No order as to costs was made.