Siddhartha Co-operative Housing Society Ltd. vs The State of West Bengal & Ors.

The question to be answered in this case is whether the Kolkata

Metropolitan Development Authority (KMDA), the respondent no.2 can, as

the lessor of the subject land demand any penal charges for delayed

construction by the lessee Siddhartha Co-operative Housing Society Ltd.

the petitioner and for the extension of time granted by them to it, to

complete it.

The facts are these.

On 8th March, 2001 the said respondent by a lease deed granted a 99

year''s lease to the petitioner of the subject land with a condition that they

had to complete the construction on it within three years. There is no doubt that the petitioner made considerable delay in submitting the

building plan for sanction. In fact, it was submitted for sanction in 2006

and sanctioned in September of the same year. Although in May, 2009 the

respondent authority was contemplating determination of the lease by

issuing a show cause notice dated 5th May, 2009 asking the petitioner why

the lease should not be determined, it took no steps in that direction. It

extended the time to complete the construction upto 31st December, 2011.

On 5th January, 2012 they wrote to the petitioner stating that since the

time period for completion of the work had been extended from 8th March,

2004 till 31st December, 2011, they were required to pay Rs. 37,53,974 to

the authority as penal charge for delayed construction. Again by a letter

dated 5th October, 2012 time was extended till 30th September, 2012,

subject to payment of Rs. 42,48,216/- as penal charges. Again by the letter

dated 19th October, 2012 time to make construction was extended till 31st

March, 2013 upon making payment of Rs. 45,87,258 as penal charges.

On 20th January, 2016 another notice was issued by the respondent

authority demanding Rs. 1,95,14,488 from the petitioner as penal charges

from 8th March, 2004 to 29th February, 2016.

The idea of claiming penal charges has its genesis in the 9th meeting of the

Land and Flat Allotment Committee of the authority held on 21st January,

2009 in Kolkata. Agenda-6 noted that often, the lessees ask for extension

of time to complete the construction. Imposition of penal interest would

compel them to complete it within time. The committee felt that suitable modifications in the Land and Flat Allotment Policy should be made,

approved by the Pricing Committee. The meeting of the Pricing Committee

was held on 12th February, 2009. It resolved that if construction was not

started within time or completed within time, penal charges would be

imposed at the rates mentioned in the table. On 27th March, 2009 the

decision was ratified at the 159th meeting of the authority. Significantly,

the decision included penalty in "past cases".

The writ petitioners have challenged in this writ application the successive

notices claiming penal charges.

Now, the question is: was this demand justified? Now, what is the nature of

this penal charge imposed and demanded by the respondent authority? It

is more in the nature of a tax than anything else because the state

machinery, the respondent authority is asking for money from the

petitioner without rendering any service. If they had rendered service and

asked for compensation it would more appropriately be termed as a fee.

Article 265 of the Constitution of India enacts that no tax shall be levied or

collected except by authority of law. Under Schedule-VII List-II, of our

Constitution being the State List, the state legislature has got the power to

impose taxes on lands and buildings (Entry-49). Under Entry-5 it has the

power to create local authorities like the respondent and delineate its

powers. Entry-66 empowers the State legislature to prescribe fees in

respect of any matter in the list excluding court fees. If you consider the

respondent to be falling under the description of the Municipalities in Article-243 of the Constitution, under that Article the legislature of a State

may by law authorise, a municipality to, levy collect and appropriate inter

alia taxes and fees.

Learned Counsel for the respondent referred to Section-18 of the said Act

which provides that the powers and functions of the Kolkata Metropolitan

Development Authority shall be as provided in Section 13 of the Act.

Thereafter, he cited Section-13 (1) (ii) (h) and (l) of the Act which empowers

the authority to manage such property as felt necessary by it and to inter

alia lease or transfer such property. Section 13 (1) (ii) (l) empowers the

authority to perform any other function which was connected to the

functions entrusted with it under the above sub-section 13(1) (ii) of the Act.

In my opinion, these are only the general powers granted to the

development authority to acquire and manage properties under its control.

It does not authorise it to impose any tax or penal charges.

As discussed earlier, tax and penal charges can only be imposed by

sanction of the legislature. The power to tax or to realise a charge akin to a

tax or fee must be expressly conferred by the legislature. The above

provisions, in no manner authorise the development authority to levy penal

charges.

It follows and it goes without saying that the authority had no power to

issue any kind of tax or charge retrospectively.

Now, the other question which falls for consideration of this court is

whether by virtue of the lease deed or the contract between the parties the said authority had the power to levy penal charges. Learned Counsel for

the authority relied on 2 (b) of the lease deed which said that the lessee

would be liable to pay to the authority "charges as may be imposed by the

authority from time to time in respect of demised land". This clause of the

agreement, in my view, related to charges that may be payable by the

lessee for enjoyment of the property like maintenance charges, facility

usage charges so on. This clause did not in my opinion authorise the lessor

to impose penal charges of substantial sums of money for delay in

completing the construction envisaged in the lease deed. The authority

could have specifically mentioned that those penal charges would be

payable and realisable, in the lease deed. For that no legislative sanction

was necessary. It would have been a condition of the contract. Due to

inadvertence or oversight this contingency was not in the mind of the

authority when this lease was drawn up. Now, unilaterally, without the

consent of the lessee, charges cannot be imposed by the lessor.

The authority has to seek a legislative mandate for this purpose or

modification of the lease deed or enter into an independent contract with

the petitioner.

For all those reasons, this writ application succeeds. The demand notices

mentioned in the prayers of the petition are quashed. The respondents are

restrained from enforcing against the petitioner the demand of Rs.

1,95,14,488 mentioned in prayer (a) of the petition. This writ application is

allowed to the above extent.

Certified photocopy of this Judgment and order, if applied for, be supplied

to the parties upon compliance with all requisite formalities.