Kiran Raj

The Supreme Court of India Division Bench of Justice Vikram Nath and Justice Sandeep Mehta on Monday, December 8, upheld the authority of municipal bodies to revise property tax rates, holding that such revisions may be questioned only when the procedure adopted is arbitrary or in clear breach of the governing statutory scheme. Allowing an appeal by a municipal corporation, the Court set aside a High Court judgment that had annulled a property tax revision undertaken after nearly sixteen years at the instance of a local corporator invoking public interest jurisdiction. The Bench restored the resolutions revising property tax for a five-year block and held that decisions on tax revision fall squarely within the policy domain of civic authorities and are not to be reassessed as if in appeal.

After the formation of the municipal corporation on 1 October 2001, property tax assessments in Akola were not revised for over 15 years. To strengthen revenue, the corporation requested the Assistant Director of Town Planning in December 2015 to propose expected annual letting values and ratable values for different categories of properties, leading to a note and a general body resolution dated 3 April 2017 revising taxable values for the period 2017–18 to 2021–22. An e-tender dated 18 February 2016 was issued to appoint a technical consultant to conduct a door-to-door survey, create a GIS-based property database, and implement assessment software.

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A public interest litigation was thereafter filed by a city resident and corporator challenging the revision of property tax for 2017–18 to 2021–22 as illegal, alleging arbitrary increase, non-compliance with Sections 99, 127, 129 and 406 of the Maharashtra Municipal Corporations Act, 1949, and improper use of private contractors for assessments. The petition also questioned the tender and work order issued to the consultancy firm. The corporation, in response, asserted that only ratable values were revised, that the 2002 tax rates remained unchanged, that statutory procedure had been followed, and that an alternative appellate remedy under Section 406 was available.

The Court explained the functional and financial framework of local bodies, stating: “Municipal bodies, being autonomous institutions constituted under statutes, are entrusted with extensive and multifaceted responsibilities that bear a direct and immediate nexus to the daily lives, welfare and safety of the citizens residing within their territorial limits. Their functional efficacy, financial stability and administrative independence are integral to the discharge of these statutory obligations. It is therefore imperative that such municipal bodies possess adequate and independent sources of revenue to sustain and strengthen their operational capacities. A municipal administration that is compelled to depend upon the State for grants, doles or other forms of financial largesse would be structurally weakened and rendered incapable of performing its statutory duties in a timely and efficient manner. The scheme of municipal governance envisages financial autonomy as a necessary concomitant of administrative autonomy; without such independent revenue-generation mechanisms, including periodic revision of taxes and charges as permissible in law, the very purpose for which these bodies are constituted would stand frustrated.”

On the statutory scheme and the long delay in revision, the Court recorded: “It is in these facts and circumstances, the respective Municipal Legislations and the Rules framed thereunder give powers/authorize the municipal bodies to take steps for revision in the rates of property taxes so that adequate revenue may be generated and the functioning of the municipal bodies may not be adversely affected for lack of funds. The fact that the tax structure in respect of properties falling within the jurisdiction of the appellant-Corporation had not been revised and the verification of the properties situated within its jurisdiction, had not been done from the year 2001-2017, by itself, depicts gross laxity on part of the authorities concerned.”

Regarding the limits of judicial review, the Bench held that, in the absence of any challenge to the corporation’s substantive authority, “the scope of scrutiny before the High Court stood confined solely to examining whether the statutory procedure had been complied with. We are of the considered view that the High Court ought not to have embarked upon a roving inquiry into the merits or wisdom of the decision to revise the tax rates unless it was demonstrated that the procedure adopted by the appellant-Corporation was ex-facie arbitrary, perverse, unreasonable or in blatant derogation of the governing statutory provisions. No such material was placed before the Court, nor does the record disclose any such infirmity. In these circumstances, the High Court transgressed the permissible limits of judicial review in interfering with the decision of the appellant-Corporation to revise the rate of property taxes.”

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The Court directed: “In this background, we are of the opinion that the impugned judgment dated 9th October, 2019 in Public Interest Litigation No. 42 of 2018 and order dated 24th January, 2020 in MCA (Review) No. 42 of 2020 passed by the High Court is unsustainable in the eyes of law. Hence, the same deserves to be and are hereby set aside.”

“The appeals are allowed in the aforesaid terms. No order as to costs. Pending application(s), if any, shall stand disposed of.”

Advocates Representing the Parties

For the Petitioners: Mr. Vinay Navare, Sr. Adv. Mr. Suhaskumar Kadam, Adv. M/S. Black & White Solicitors, AOR

For the Respondents: Mr. A.I.S. Cheema, Sr. Adv. Mr. Kunal Cheema, AOR Ms. Kritika Gakhar, Adv. Mr. Rushabh Tripathi, Adv. Mr. Shubham Chandankhede, Adv. Ms. Aarti Gupta, Adv. Mr. Aaditya Aniruddha Pande, AOR Ms. Anagha S. Desai, AOR Mr. Aaditya Aniruddha Pande, AOR Mr. Siddharth Dharmadhikari, Adv. Mr. Shrirang B. Varma, Adv. Mr. Bharat Bagla, Adv. Mr. Sourav Singh, Adv. Mr. Aditya Krishna, Adv. Mr. Adarsh Dubey, Adv. Ms. Chitransha Singh Sikarwar, Adv. Mr. Satyajit A Desai, Adv. Mr. Sachin Singh, Adv. Mr. Pratik Kumar Singh, Adv. Ms. Anagha S. Desai, AOR Mr. Sanchit Agrahari, Adv.

Case Title: Akola Municipal Corporation and Anr. v. Zishan Hussain Azhar Hussain and Anr.
Neutral Citation: 2025 INSC 1398
Case Number: Civil Appeal No(s). 12488-12489 of 2024
Bench: Justice Vikram Nath, Justice Sandeep Mehta