Levy of Beneficiary Capital Contribution Charges Held as Illegal

In an order dated April 5, 2024, the Karnataka High Court held that the imposition of Beneficiary Capital Contribution (BCC) charges, as a pre-requisite for issuance of NOC under the Bruhat Bengaluru Mahanagara Palike Building Bye-laws, was illegal.[1]

As per the Bye-laws, the application for obtaining a building licence has to be accompanied by a copy of the title deed, up-to-date tax paid receipts, site plan, and other such documents and information as prescribed. When it comes to high-rise buildings, NOC from authorities including the Bangalore Water Supply and Sewerage Board (BWSSB), Bangalore Electricity Supply Company Limited (BESCOM), Fire Services Department, etc. is required to be submitted with the said application.

In the instant case, the petitioners were asked to pay certain amounts towards BCC charges, advance probable pro rata charges and treated water charges for construction, before the said NOC could be issued by BWSSB. Aggrieved, the petitioners approached the Karnataka High Court challenging the levy of said charges.

The Court noted that there was no specific provision in the Bangalore Water Supply and Sewerage Act, 1964, defining what BCC charges were and how they were to be imposed. Further, although Section 16 of said Act empowered the Board to levy and vary rates, fees, rentals and other charges, it was held that the term “other charges” couldn’t “clothe the Board with the power to charge BCC at any rate it deems fit”.  

Regulation 89-A of the Bangalore Water Supply Regulations, 1965, was also extracted which provided for the collection of capital contribution from beneficiaries in respect of any water supply and sanitation project. It was pointed out that the noticees in the present case were yet to become beneficiaries of any project.

Stating that fees could not be collected to meet the costs of laying pipelines for supplying water, which was a general duty of the Board, the Cout reasoned that “the element of quid pro quo being absent, collection of the charges at the time of issuance of NOC for approving a plan becomes contrary to law, as there is no such charging section or no such provision in the Act or the Regulations to define what would be BCC and the manner of its imposition”. With this, the demand of BCC charges was held to be illegal. Likewise, the demand of Greater Water Sewerage project charges was also held to be illegal.

It was made clear that the State or the Board will not be prevented from bringing in the charges held illegal under this order, through amendments to the Act, Rules or the Regulations.

As to advance probable pro rata charges and treated water charges for construction, the demand was upheld by the Court in light of statutory foundation for the same.

[1] M/s. Sobha Limited v. State of Karnataka and Ors. (WP No.20016 of 2021) and N Surekha and Ors. v. State of Karnataka and Ors. (WP No.10020 of 2020)\

Date: April 11, 2024