Page 1

1

REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1362  OF 2017 (arising out of SLP(C)No.25529 of 2014)

MGR INDUSTRIES ASSOCIATION AND ANR.   … APPELLANTS

VERSUS

STATE OF U.P. AND ORS.  … RESPONDENTS

J U D G M E N T

ASHOK BHUSHAN, J.

Leave granted.

2. This appeal has been filed against the

judgment and order dated 17th  July, 2014 of High

Court of Judicature at Allahabad by which judgment

Civil Misc.Writ (Tax) No.447 of 2014 filed by the

appellants has been dismissed.

3. The brief facts of the case are:

Appellant No.1 is an Industries Association

registered under the Societies Registration Act,

1860 whose members are running small industries.

Zila Panchayat, Hapur initiated proceedings for

Page 2

2

realisation of tax for members of the appellant

­Association which was objected to and a

representation was submitted to the District

Magistrate. Appellant also represented the matter

to the Upper Mukhya Adhikari, Zila Panchayat,

Bulandshehar and filed a Civil Misc. Writ Petition

(Tax) No.4 of 2013 which was disposed of by the

Allahabad High Court by order dated 6th  January,

2014, directing the State Government to consider

the appellant's representation. The representation

submitted by the appellant was rejected by the

Principal Secretary, Panchayat Raj vide its order

dated 23rd    June, 2014. The State Government held

that although the area has been declared as

industrial area under U.P. Indusrial Area

Development Act, 1976  but no notification having

been issued as industrial township within the

meaning of   Article 243­Q(1) proviso of the

Constitution, the Zila Panchayat/Nagar Panchayat

is entitled to realise tax and appellants cannot

claim exemption from taxation by local authority.

Aggrieved by the order of the State Government,

Page 3

3

appellants filed a Civil Misc. Writ (Tax) No.447

of 2014 claiming the following reliefs:

"A. Call for the records of the case; and issue writ, order or direction in the nature of certiorari quashing the order dated 23­6­2014 passed by respondent No.1 (Annexure 8 to this writ petition).

B. Issue  writ,  order  or direction in the nature of mandamus directing the respondent Nos.2, 3 and 4 not to realise any taxes from the members of petitioner No.1 (as mentioned in paragraph No.10 of the writ petition and other members of petitioner No.1).

C. Issue any other writ, order or direction the Hon'ble Court deems just and proper on the facts and circumstances of the case.

D. Award cost of this petition to the petitioner.”

4. The writ petition was heard by the High Court

and the same was dismissed by its judgment dated

17th  July, 2014. The Division Bench of the High

Court relying on an earlier Division Bench

judgment in  Rishipal & Ors. vs. State of U.P. &

Ors., 2006 (1) AWC 426,  dismissed the writ

petition. The Division Bench also held that the

area having not been declared as industrial

Page 4

4

township, exemption as sought to be claimed by the

appellants under Section 12­A of 1976 Act is

misconceived. Aggrieved by the judgment of the

High Court, the appellants have filed this appeal.

5. We have heard Ms. Meenakshi Arora, learned

senior counsel for the appellants, Mr. Aviral

Saxena has appeared on behalf of respondent No.5.

We have also heard learned  counsel appearing for

the State of U.P.

6. Learned counsel for the appellant contends

that area in question having been declared as

industrial area by issuing   a notification dated

5th  September, 2001 in exercise of power under

Section 2(d) of U.P. Indusrial Area Development

Act, 1976 (hereinafter referred to as '1976 Act').

The appellants are entitled for the benefit of

exemption as contemplated by Section 12­A of the

1976 Act and by virtue of Section 12­A no

Panchayat is to be constituted for the said area.

Hence, the Zila Panchayat is not entitled to

realise any tax under the Uttar Pradesh Kshetra

Panchayat and Zila Panchayat Adhiniyam, 1961.

Page 5

5

7. The Authority constituted under the 1976 Act

fully satisfied the condition under Section 12­A

of the 1976 Act, hence, there is no requirement of

issue of any separate notification as contemplated

by Article 243­Q of the Constitution of India. It

is submitted that once industries have been set up

under the notified industrial development area and

taxes under Section 11 of the 1976 Act are levied,

the industries are exempted from liability of any

tax under 1976 Act and the appellants are put on

double jeopardy.

8. Learned counsel appearing for the State of

U.P. refuting   the submission of learned counsel

for the appellants contended that the State

Government by its detailed order dated 23rd  June,

2014 after referring to all relevant provisions of

1976 Act has found that unless industrial township

is notified the provisions of Section 12­A are not

attracted. It has been stated by the State that no

notification notifying the area as industrial

township has yet been issued. Learned counsel

appearing for the U.P. State Industrial

Page 6

6

Development Corporation submits that in the writ

petition the appellants have only prayed for

mandamus restraining respondent Nos.2 to 4 from

realising any tax. No relief having been claimed

against respondent No.5 the writ petition has

rightly been dismissed by the High Court.

9. We have considered the submission made by the

learned counsel for the parties and perused the

records.

10. The U.P. Industrial Area Development Act, 1976

has been enacted to provide for the constitution

of an authority for the development of certain

area in the State into industrial township and for

matters connected therewith. Section 2 sub­section

(d) defines industrial development area which is

to the following effect:

“Section 2(d)­ “industrial development area” means an area declared as such by the State Government by notification.”

11. Under Section 3, the State Government, by

notification, can constitute an Authority to be

called Industrial Development Authority for

Page 7

7

industrial development area. By notification dated

5th  September, 2001 which is in exercise of power

under Section 2(d) of the 1976 Act, various areas

as mentioned in the Schedule were declared as

industrial development areas. There is no dispute

that area in question has been declared as

industrial development area. The claim which has

been laid in the  writ petition before the High

Court by the appellants was for exemption from

taxation by Zila Panchayat, Hapur under Section

12­A. Section 12­A of 1976 Act which has been

added by U.P. Act 4 of 2001 is as under:

"Section 12­A.  NO panchayat for industrial township.­  Notwithstanding anything contained to the contrary inany Uttar Pradesh Act, where an industrial development area or any part thereof is specified to be an industrial township under the proviso to clause (1) of Article 243­Q of the Constitution, such industrial development area or part thereof, if included in a Panchayat area, shall, with effect from the date of notification made under the said proviso, stand excluded from such Panchayat area and no Panchayat shall be constituted for such industrial developmentarea or part thereof under the United Provinces Panchayat Raj Act, 1947 or the Uttar Pradesh Kshettra Panchayats and Zila Panchayats Adhiniyam, 1961, as the case may be, and may Panchayat constituted for

Page 8

8

such industrial development area or part thereof before the date of such notification shall cease to exist.”

12. Zila Panchayat, Hapur against whom reliefs

have been claimed by the appellants, is Zila

Panchayat constituted under the  Uttar Pradesh

Kshetra Panchayats and Zila Panchayats Adhiniyam,

1961 as amended from time to time.

13. Part IX  A was inserted by the Constitution

(Seventy­fourth Amendment) Act, 1992. Article

243­Q is contained in Part IX A of the

Constitution dealing with Municipalities which

provides as follows:

“243Q. Constitution of Municipalities.­ (1)There  shall be constituted in every State,­

(a) a Nagar Panchayat (by whatever name called) for a transitional area, that is to say, an area in transition from a rural area to an urban area;

(b) a Municipal Council for a smaller urban area; and

(c) a Municipal Corporation for a larger urban area, in accordance with the provisions of this Part:

      Provided that a Municipality under this clause may not be constituted in

Page 9

9

such urban area or part thereof as the Governor may, having regard to the size of the area and the municipal services being provided or proposed to be provided by an industrial establishment in that area and such other factors as he may deem fit by public notification, specify to be an industrial township.

2. In this article, "a transitional area", "a smaller urban area" or "a larger urban area" means such area as the Governor may, having regard to the population of the area, the density of the population therein, the revenue generated for local administration, the percentage of employment in non­agricultural activities, the economic importance or such other factors as he may deem fit, specify by public notification for the purposes of this Part.”

14. Article 243­Q mandates constitution of a

municipality in every State, constitution of Nagar

Panchayat, Municipal Council and Municipal

Corporation in every State respectively for a

transitional area, a smaller urban area and a

larger urban area respectively. The provisio to

Article 243­Q(1) contemplates a circumstance where

a Municipality under Article 243­Q(1) may not be

constituted in an urban area or part thereof, when

such area is specified by a notification having

Page 10

10

regard to the following circumstances:

 "(i) Having regard to the size of the area,

(ii) Municipal services being provided or proposed to be provided in that area, and

(iii) such other factors as may deem fit.”

Thus, exemption from non­constitution of

Municipality is dependent upon consideration of

aforesaid factors and a public notification

thereof.

15. Section 12­A has been inserted in the 1976 Act

in consonance with proviso to Article 243­Q(1).

Section 12­A specifically provides that “....where

an industrial development area or any part thereof

is specified to be an industrial township under

the proviso to clause (1) of Article 243­Q of the

Constitution, such industrial development area or

part thereof, if included in a Panchayat area,

shall, with effect from the date of notification

made under the said proviso, stand excluded from

such Panchayat area and no Panchayat shall be

constituted for such industrial development area

Page 11

11

or part thereof.......”. Section 12­A thus,

specifically contemplates issuance of notification

under proviso to clause (1) of Article 243­Q and

exclusion from Panchayat area is consequent and

dependent upon such notification. Notification

under proviso to clause (1) of Article 243­Q has

to be subsequent to declaration of an area as

industrial development area, which itself

indicates that declaration of development area

under 1976 Act is not sufficient to treat an area

as an industrial township. As noted above,

industrial township as contemplated by Article

243­Q(1) proviso has to be specifically a public

notification after consideration of relevant

statutory ingredients referred therein. The

exclusion of industrial development area from

Panchayat has a serious consequence since persons

residing within the industrial development area

are immediately deprived of facilities and

benefits extended to them by the respective

Panchayats. The deprivation of the said benefits

has to be thus a conscious decision in accordance

Page 12

12

with condition as contained in Article 243­Q. In

the case before us, it has not been pleaded that

any notification referable to proviso to Article

243(Q)(1) has yet been issued. The Division Bench

of the High Court has also referred to and relied

upon an earlier judgment of the Allahabad High

Court in Rishipal (supra). In the above case, the

appellants who were residents of industrial

development area prayed for direction that no

election for constituting Panchayat in various

villages including the said industrial development

area should be allowed since, notification under

Section 2(d) of the 1976 Act has already been

issued on 11th  July, 1989. The State Government

categorically stated that no notification under

proviso to Article 243­Q(1) has been issued. The

Division Bench of the High Court referring to

Section 12­A has rejected the contention and

dismissed the writ petition. In paragraphs 6,7 and

8 following was stated:

“6. From a plain reading of Section 12A of the Act it is clear that after

Page 13

13

declaration of any industrial development area u/s. 2 (d) of the Act two things are required for excluding them from existing panchayat area. First is, specification to be an industrial township and secondly a notification under Proviso to Article 243Q of the Constitution of India.

7. From Section 12A it further reveals that if the said area is included in panchayat area, such area with effect from the date of notification made under proviso (proviso to Article 243Q) stands excluded from such panchayat. Thus, specification to be an industrial township as well as a notification under proviso to Article 243Q are condition precedent for excluding from any panchayat area. There is nothing on the record to come to conclusion that the area in question has been specified as an industrial township. Further no notification, as stated by Chief Standing Counsel, has been issued under proviso to Article 243Q by the State Government, hence, question of exclusion of the area from panchayat area does not arise.

8. Merely because the villages in question are covered u/s. 2 (d) does not ipso fActo exclude them from panchayat area. As noted above neither it has been specified as Industrial Township nor a notification under Article 243Q has been issued. The relief claimed by the writ petitioner in the writ petition cannot be granted.”

Page 14

14

16. It shall also be relevant to refer the

judgment of this Court in Saij Gram Panchayat vs.

State of Gujarat and others, 1999 (2) SCC 366,

where this Court had occasion to consider the

proviso to Article 243­Q sub­clause (1) in the

context of Gujarat Industrial Development Act,

1962. After insertion of Part IX­A in the

Constitution, the Gujarat Municipalities Act, 1962

was also amended by adding Section 264­A. It was

provided under Section 264­A  that notified area

means an urban area or part thereof specified to

be an industrial township area under the proviso

to Article 243­Q(1) of the Constitution of India.

Paragraphs 10 and 11 of the judgment are extracted

below:

"10. The Gujarat Municipalities Act, 1962 was amended on 20­8­1993 in view of the insertion of Part IX­A in the Constitution. Section 264­A was substantially amended. It now provided:

“264­A. For the purpose of this chapter, notified area means an urban area or part thereof specified to be an industrial township area under the proviso to clause (1) to Article 243­Q of the Constitution of India.”

Page 15

15

Thus, as a result of this amendment in the Gujarat Municipalities Act, as industrial area under the Gujarat Industiral Development Act, which is notified under Section 16 of the Gujarat Industrial Development Act, would become a notified area under the new Section 264­A of the Gujarat Municipalities Act and would mean an industrial township area under the proviso to clause(1) of Article 243­Q of the Constitution of India.

11. On 7­9­1993, the Government of Gujarat issued a notification under Section 16 of the Gujarat Industrial Development Act declaring Kalol Industrial Area as a notified area under Section 264­A of the Gujarat Municipalities Act. By another notification of the same date 7­9­1993, the Government of Gujarat excluded the notified area from Saij Gram Panchayat under Section 9(2) of the Gujarat Panchayats Act, 1961.”

Thus, for treating industrial area as industrial

township notification under proviso to Article

243­Q(1) was contemplated which is also the

statutory scheme under the 1976 Act.

17. In view of the aforegoing discussion, we are

of the view that it was rightly held by the High

Court that exemption under Article 12­A of the

1976 Act was not available in the facts of the

Page 16

16

above case. The appellants were not entitled for

the reliefs claimed in the writ petition. In the

result, the appeal is dismissed.

 ……………………………………………J                                     [Ranjan Gogoi]

……………………………………………J       [Ashok Bhushan]

New Delhi February 03, 2017.