Unauthorised municipal levy on building permits was struck down, and collected drainage fees were held refundable with interest.

The Kolkata Municipal Corporation's demand for a one-time Drainage Development Fee as a condition for sanctioning building plans was found unsupported by the Kolkata Municipal Corporation Act, 1980 and the Building Rules. Article 265 required authority of law for the levy, and the cited provisions permitted only annual drainage and sewerage fees, not a separate fee on building applicants. The collected amounts were treated as recoverable money paid under mistake of law under section 72 of the Indian Contract Act, 1872, with limitation running from discovery of the mistake or judicial invalidation of the levy. The refund claim was held maintainable, and restitution with interest followed.

---

---

Issues: (i) Whether the Kolkata Municipal Corporation had statutory authority to levy Drainage Development Fees as a condition precedent for sanction of building plans. (ii) Whether the amounts collected pursuant to the impugned circular were liable to be refunded and whether the claim for refund was barred or otherwise not maintainable.

Issue (i): Whether the Kolkata Municipal Corporation had statutory authority to levy Drainage Development Fees as a condition precedent for sanction of building plans.

Analysis: The levy had to be tested against Article 265 of the Constitution of India, which permits levy and collection only by authority of law. The relevant provisions of the Kolkata Municipal Corporation Act, 1980 and the Building Rules were examined. Section 307 of the Kolkata Municipal Corporation Act, 1980 authorises an annual fee for drainage and sewerage as fixed under the regulations or budget estimate, and section 131 of the Kolkata Municipal Corporation Act, 1980 deals with the annual budget estimate and the rates of taxes, surcharges, cesses and fees. Those provisions did not authorise a one-time Drainage Development Fee imposed only on applicants for building permission. Section 543(2) of the Kolkata Municipal Corporation Act, 1980 also did not help, because the Act and the Rules already governed the building permission and did not require any separate permission for drainage development on which such a fee could be levied. The Court also reiterated that a statutory corporation cannot assume taxing or fee-levying power unless it is expressly conferred.

Conclusion: The levy of Drainage Development Fees was unauthorised and the impugned circular was ultra vires.

Issue (ii): Whether the amounts collected pursuant to the impugned circular were liable to be refunded and whether the claim for refund was barred or otherwise not maintainable.

Analysis: The Court applied the principle that money paid under a mistake of law may be recovered under section 72 of the Indian Contract Act, 1872, and that limitation in such cases runs from discovery of the mistake or from the judicial declaration that the levy is void, as reflected in section 17(1)(c) of the Limitation Act, 1963. Since the demand itself was held invalid, the writ-petitioners' right to seek refund arose upon that declaration. The fact that the Corporation had spent the amount did not defeat restitution. The plea of alternative remedy or delay was rejected in the facts, because the refund was sought as consequential relief after challenging the very legality of the levy, not as a standalone demand.

Conclusion: The collected Drainage Development Fees were directed to be refunded with interest, and the refund claim was held maintainable.

Final Conclusion: The appeals failed, the impugned levy was struck down, and restitution was ordered as a consequence of the invalid demand.

Ratio Decidendi: A municipal fee or levy affecting citizens cannot be imposed or retained unless the statute expressly authorises it, and money collected under an unauthorised levy is recoverable as a consequence of the declaration of invalidity.

---