M. Chandru Vs.
Chennai Metropolitan Dev. Auth. & ANR.  INSC 345 (17 February 2009)
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. ...
CIVIL APPEAL NOS. 1080, 1081, 1083, 1082 & 1084 OF 2009 (Arising out of SLP
(C) Nos.12438, 16200, 16203, 16202 and 14359 of 2007)
S.B. Sinha, J.
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.
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.
L. Nageshwar Rao, learned counsel appearing on behalf of the appellants, would
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.
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.
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
of the 1971 Act read as under:
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 5
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
(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 6 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.
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
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
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 :
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;
(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
(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
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 :- 9 (a) to (j) ...
(jj) the manner of
and the basis on which the infrastructure development charges shall be
(k) to (p) ..."
(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 :
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.
building' means and block or buildings exceeding of 4 floors and/or 15 meters
building' means any block or buildings means not less than three floor but not
exceeding four floors.
Development' means any provision made by the Board regarding water supply and
sewerage services and matters connected therein.
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)."
or about 5.3.1998, the Sewerage Board in the 197th 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.
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
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.
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
is on the aforementioned premise, the writ petition was filed which by reason
of the impugned judgment has been dismissed.
OF THE HIGH COURT
(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
(c) It helps the
applicant to get processed the planning permission application at one location.
(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
(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
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
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.
as noticed hereinbefore, were framed as regards, `manner' and `basis' for
collection of charges.
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.
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.
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.
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 15 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.
for different reasons, we, thus, uphold that part of the order of the High
Court on this count.
QUID PRO QUO
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.
Sri Krishna Das v. Town Area Committee, Chirgaon [(1990) 3 SCC 645], this Court
"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
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."
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
"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
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-`-vis tax'
must be borne in mind.
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."
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
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.
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
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.
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.
[Dr. Mukundakam Sharma]
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