Karnataka High Court Invalidates Amendment Acts on Retrospective Levies by Civic Bodies

BENGALURU: In a major setback for the Karnataka government and the Bruhat Bengaluru Mahanagara Palike (BBMP), the Karnataka High Court has struck down the Karnataka Municipal Corporations and Certain Other Law (Amendment) Acts of 2021 and 2023.

These laws were introduced to retrospectively validate a range of fees collected by the civic body from Bengaluru residents and developers.

The 2021 Amendment Act was enacted with the intention of overriding the High Court’s earlier ruling in the Sundaram Shetty case, which had declared the practice of linking civic levies to the property’s guidance value as illegal.

Even as legal proceedings against the amendment were ongoing, the government passed another amendment in August 2023. This second amendment attempted to reinforce the retrospective validation of levies by redefining terms such as “ground rent,” “guidance value,” and “scrutiny fee,” and by further modifying Section 240A of the BBMP Act.

The petitioners, which included builders and property owners, challenged the various levies imposed by BBMP and BDA during the approval process of building and layout plans.

These included scrutiny fees, ground rent, license fees, security deposits, lake rejuvenation charges, and compound wall charges under the BBMP Act 2020, as well as water supply cess, slum cess, administrative charges, surcharges for transport projects like mass rapid transit and ring roads, and betterment charges under the Karnataka Town and Country Planning Act, 1961.

In his judgment, Justice R Devdas noted that following the 2021 Sundaram Shetty verdict, which deemed these levies unenforceable, the authorities should have re-evaluated the fee structure.

Instead, they continued to impose similar fees through government circulars without providing any data-driven justification, contrary to the High Court’s earlier direction. The court found that the BBMP had not conducted any empirical assessment or provided adequate reasoning to support the levies.

The court also clarified that the provisions under Section 18A of the Karnataka Town and Country Planning Act and the related rules under the Karnataka Planning Authority Rules are applicable only to development plans for plots measuring more than 20,000 square meters.

These rules cannot be used to charge fees on smaller plots. Furthermore, if a fee had already been collected during the approval of a change in land use or layout, the authorities could not levy the same charges again during a subsequent development approval for the same land.

While the court acknowledged that the government and BBMP have the authority to set new fee structures, it emphasized that these must be based on empirical data and sound rationale.

Justice Devdas suggested that the government consider introducing a one-time settlement scheme to resolve the disputes around these retrospective charges.

He also observed that while the levies were intended for large-scale construction projects, they were being applied across the board without distinction, which led to widespread objections, especially after a circular issued on September 4, 2015, revised ground rents by linking them to the guidance value of properties.

The judge took particular issue with clause 3.8 of the BBMP’s building by-laws, which permitted the storage of construction materials on public roads, footpaths, and pavements.

He noted that this clause violated Section 229(2) of the BBMP Act, 2020, which empowers zonal commissioners to immediately remove any encroachments—temporary or permanent—on public streets.

He stressed that public safety and the maintenance of roads and pavements should take precedence, and such provisions allowing encroachments were against the statutory intent.

Justice Devdas also pointed out that the fees being collected should correspond to the actual services being delivered by the BBMP, in line with the principle of quid pro quo.

The petitioners had presented BBMP’s financial data to show that no proper analysis had been conducted before fixing the fees. The court agreed with their argument that service charges should be consistent across localities and must be determined by the size of the plot and the extent of construction, rather than the property’s market guidance value.

With this verdict, the court has reinforced the need for fair, legal, and data-backed fee collection practices by urban local bodies. The ruling highlights the importance of transparency and due process in public administration and makes it clear that retrospective validation of unlawful levies will not be tolerated.