M/S. SOBHA LIMITED v. THE STATE OF KARNATAKA

Heard the learned senior counsel Sri Vikram Huilgol appearing for petitioner in Writ Petition No.20016 of 2021; learned 9 counsel Sri Sammith S., appearing for the petitioners in Writ Petition No.10020 of 2020; learned senior counsel Sri M.N. Seshadri and learned senior counsel Sri Ravi B Naik appearing along with learned counsel Sri K.B.Monesh Kumar for the Board; learned Additional Government Advocate Sri Dhyan Chinnappa representing the State and learned counsel Sri A.Jagannath appearing for the BBMP.

The learned senior Counsel Sri Vikram Huilgol appearing for the petitioners, sphere-heading the submissions in these cases would raise the following contentions – (i) The impugned levies are unconstitutional, illegal for they are in violation of Article 265 of the Constitution of India. (ii) The impugned levies are in the nature of fee/charge which cannot be imposed upon the applicants in the absence of any quid pro quo. (iii) The Regulations which impose payment of several charges do not have the authority of law to impose those charges as a pre-requisite for grant of an NOC – both water and sewerage charges. Having no backing 10 under the Constitution, the imposition of fee or charge is on the face of it, without authority of law. He has placed reliance upon several judgments of the Apex court and that of this Court which would be considered at the appropriate stage in the course of the order qua its relevance.

The learned counsel Sri Sammith S. appearing for the petitioner in Writ Petition No.10020 of 2020 which raises a challenge to the very same imposition of charges, would take this Court through the circulars and documents appended to the petition or produced seeking to demonstrate that water supply connection is also not a guarantee for payment of advance pro rata charges. The order itself indicates that in the event there is an available connection, connection to the applicant would be given. Therefore, there is neither quid pro quo nor there is any definite assurance of water supply being given despite demand of such huge amount. He would contend that the entire demand is contrary to law.

On the other hand, learned senior counsel Sri M.N. Seshadri sphere-heading the submissions for the Board has contended that all the charges are the ones that are necessary to 11 be imposed. Power of imposition or otherwise is under the Act. The Act empowers demand of advance pro rata charges, treated water charges for construction and Greater Bangalore Water Supply and Sewerage project charges upon any person who would file an application seeking an NOC from the Board for construction of a project. He would submit that it is a great task for the Board to supply water to all the residents of the City and this supply should not be taken for granted by the residents of the City and not pay any charges for such supply of water. It is his contention that the Board is empowered to demand and receive expenses that may be incurred for water supply and sanitary charges. Further provisions of the Act are read through and taken through by the learned senior counsel.

The learned senior counsel has made his submissions on every levy. For pro rata charges he would contend that it is necessary to collect at the time of approval of plan, by the BBMP. This is collected towards the cost of improvement of water supply and sewerage system payable by the owner, occupier or developer to maintain and service the said system and to keep it in such 12 serviceable condition. The pro rata charges are leveled from time to time depending upon exigencies of development in order to mop up and generate funds for developmental purposes. Insofar as advance probable pro rata charges, the learned senior counsel would submit that what is demanded is 15% of the proposed built up area only for multistoried buildings. This is to augment resources and keep the system ready for supply of potable water and sanitation under respective building plans seeking NOC.

He would contend that advance pro rata charges are charged only for multistoried buildings and not to other persons. Insofar as Greater Bangalore Water and Sanitation project charges he would contend that multistoried buildings are coming up in the erstwhile 7 City Municipal Councils and one Town Municipal Council which got merged with the Bangalore Mahanagara Palike and, therefore 110 villages were added into the Corporation area for which water supply is to be done by the Board. Therefore, the aforesaid charges are appropriately imposed. He would justify contending that the levy has not been revised till date, from 2005 even after a lapse of 18 years. The same submission is made qua 13 beneficiary capital contribution charges and treated water charges for construction.

In all, his submission is that the Board has to keep the water ready for distribution. If they have to keep the water for distribution it is necessary for them to keep that water ready. Whether the developers who are constructing buildings want the water or not, it is ready to be taken. Once it is ready to be taken, charges will have to be paid. Usage is not the concern of the Board. Therefore, the petition be dismissed and all the impugned levies be upheld is his emphatic submission.

Learned senior counsel Sri Ravi B. Naik would toe the lines of the learned senior counsel Sri M.N. Seshadri to contend that all these imposts are in accordance with law and never contrary to law. He would contend that this Court in the case of MUNISWAMY AND OTHERS v. BANGALORE WATER SUPPLY AND SEWERAGE BOARD1 has upheld imposition of pro rata charges and, therefore, 1 W.A.No.3657 of 2000 & connected cases decided on 02-07-2004. 14 the petitions be dismissed as the issue is already considered by this Court and the charge is upheld.

I have given my anxious consideration to the respective submissions made by the learned senior counsel appearing for the respective parties and have perused the material on record. In furtherance whereof, the issue that falls for consideration is: “Whether the impugned impost/fee/charge suffers from want of legal sanction?”

To answer the said issue, it is germane to notice, a notice of demand issued upon these petitioners. It is as follows: “BANGALORE WATER SUPPLY AND SEWERAGE BOARD DEMAND NOTE FOR NO OBJECTION CERTIFICATE TO Smt. Gowramma D. K. Suresh and M/S, Sobha Developers Limited Sobha, No.51/5, Devarabeesanahalli Village Sarjapur – Marathahalli Outer Ring Road ORR, Bellandur Post, Near SAKRA World Hospital 560 103. Sir, Sub: Issue of No Objection Certificate for the proposed Residential Building at Katha 15 No.989/sy. No.35/3, 35/4, 37/1, 37/2, 38/1, 38/2, 38/3, 38/4, 38/5, 79, 80/1, 801/2, 80/3, V Legacy Road, Hosakerehalli Village, Uttarahalli Hobli, Bangalore South Taluk, Bangalore-560085 in f/o Smt. Gowramma D. K, Suresh and Sobha Developers Limited. Ref: 1. Application number: BWSSB-NOC-2021-8- 114-081610544691.

Date of Application: 2021-08-16.

Demand Note Generation Date:2021-10-16. **** With reference to the above, you are requested to make the following payments for issue of “No Objection certificate” from BWSSB for the above said proposed project Residential Building at Katha No. 989/ sy. No.35/3, 35/4, 37/1, 37/2, 38/1, 38/2, 38/3, 38/4, 38/5, 79, 80/1, 801/2,and 80/3, V Legacy Road, Hosakerehalli Village, Uttarahalli Hobli, Bangalore South Taluk, Bangalore – 560 085. The proposed project is Residential Project consist of 2 BF+GF,FF,SF,TF (Parking level 1,2,3,4)+28 UF and Terrace floor for 363 flats. The sital area is 282181.68 sqft with a total build up area is 83092.46 Smt. The premises comes under CMC Area

NOC Fees Sl.No. Proposed Building (Built Up Area in Smt) 1

83092.46 Total Rate (in Rs. Per Smt) / minimum Rs.1,50,000 /- Rs.25/- Amount (in Rs.) Rs.20,77,312/- Rs.20,77,312/-

1. Advance Portable Prorata Charges Sl. No. Proposed Building Built Up Area (Smt) Amount (in Rs.) 16

1. Advance Portable Prorata Charges @15% of Rs.400/- Residential Portion Total

2. GBWASP/ BCC Charges

83092.46 Rs.49,85,548/- Rs.49,85,548/- Sl.No Proposed Building 1 2 3 Upto 600 Sqft 1201 Sft upto 2400 Sqft Above 2401 Sqft No of Flats/ Built up Area in Sft 34 Rate Amount Rs.4,000/- Rs.1,36,000/- 323 6 Rs.16,000/ - Rs.24,000/ - Rs.51,68,000/- Rs.1,44,000/- Total Rs.54,48,000/-

3. Treated Water Charges for Construction Sl.No. 1 Total Buildup Area Smt 83092.46 Total Rate (in Rs. Per Smt) Rs.10/- Amount (in Rs.) Rs.8,30,925/- Rs.8,30,925/- The Grand Total Charges Towards this Demand Note for No Objection Certificate is Rs.1,33,41,785/- (Rupees One Crore Thirty-Three Lakh Forty-one Thousand Seven Hundred and Eighty - Five Only) Further No Objection Certificate will be issued after the above said charges remitted to BWSSB.” (Emphasis added) 17 What is under challenge is what is demanded in the afore-quoted notice. Therefore, it is the imposition of those fee/charge that forms the fulcrum, of this lis and the kernel of the conundrum. Thus, the challenge is to the following charges as found in the demand notice: (i) Advance probable pro rata charges (hereinafter referred to as ‘pro rata’); (ii) Beneficiary Capital Contribution charges (hereinafter referred to as the ‘BCC charges’); (iii) Greater Bangalore Water Sewerage Project charges (hereinafter referred to as the ‘GBWSP charges’) and (iv) Treated Water Charges construction (hereinafter referred to as the ‘TWCC’). Before embarking upon consideration of respective submissions qua the aforesaid charges, I deem it appropriate to notice the position law with regard to imposition of impost/fee/charge, as enunciated by the Apex Court and various other High Courts.

The source of power for imposition of any impost is under Article 265 of the Constitution of India. Article 265 reads as follows: 18 “265. Taxes not to be imposed save by authority of law.—No tax shall be levied or collected except by authority of law.” Article 265 mandates that no tax shall be levied or collected except by authority of law. Therefore, the State cannot collect tax except by authority of law authorized by any legislation. Article 265 in effect ensures that any extraction of money from the citizen of the country should only be on such express authorization by law. Tax or fee or even a charge has been the subject matter of interpretation by the Apex Court in plethora of judgments wherein the Apex Court has considered several imposts, imposed by respective authorities of the State. I deem it appropriate to notice a few.

The Apex Court in the case of COMMISSIONER, HINDU RELIGIOUS ENDOWMENTS, MADRAS v. SRI LAKSHMINDRA THIRTHA SWAMIAR OF SRI SHIRUR MUTT2 has held as follows: …. “…. …. 45. A neat definition of what “tax” means has been given by Latham, C.J. of the High Court of Australia in Matthews v. Chicory Marketing Board [60 CLR 263, 276] “A tax”, according to the learned Chief Justice, “is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered”. This definition brings out, in our tax as the essential characteristics of a opinion, 2 AIR 1954 SC 282 19 distinguished from other forms of imposition which, in a general sense, are included within it. It is said that the essence of taxation is compulsion, that is to say, it is imposed under statutory power without the taxpayer's consent and the payment is enforced by law [ Vide Lower Mainland Dairy v. Crystal Dairy Ltd., 1933 AC 168] . The second characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax. This is expressed by saying that the levy of tax is for the purposes of general revenue, which when collected forms part of the public revenues of the State. As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the taxpayer and the public authority [ See Findlay Shirras on Science of Public Finance, Vol. I, p. 203] . Another feature of the taxation is that as it is a part of the common burden, the quantum of imposition upon the taxpayer depends generally upon his capacity to pay.

Coming now to fees, a “fee” is generally defined to be a charge for a special service rendered to individuals by some governmental agency. The amount of fee levied is supposed to be based on the expenses incurred by the Government in rendering the service, though in many cases the costs are arbitrarily assessed. Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to pay [ Vide Lutz on Public Finance, p. 215] . These are undoubtedly some of the general characteristics, but as there may be various kinds of fees, it is not possible to formulate a definition that would be applicable to all cases.

As regards the distinction between a tax and a fee, it is argued in the first place on behalf of the respondent that a fee is something voluntary which a person has got to pay if he wants certain services from the Government; but there is no obligation on his part to seek such services and if he does not want the services, he can avoid the obligation. The example given is of a licence fee. If 20 a man wants a licence that is entirely his own choice and then only he has to pay the fees, but not otherwise. We think that a careful examination will reveal the element of compulsion or coerciveness is present in all kinds of imposition, though in different degrees and that it is not totally absent in fees. This, therefore, cannot be made the sole or even a material criterion for distinguishing a tax from fees. It is difficult, we think, to conceive of a tax except, it be something like a poll tax, the incidence of which falls on all persons within a State.