The Supreme Court has held that civic bodies cannot function or meet their legal duties without steady revenue, stressing that regular tax revisions are essential. The Court warned that without adequate funds, municipalities risk becoming defunct, causing chaos and harming public health.
New Delhi: The Supreme Court on Monday made it clear that municipal bodies cannot function properly unless they have enough money to run essential city services.
The court warned that if these bodies do not generate adequate revenue, especially through property tax, it could lead to serious problems for citizens, including poor sanitation, spread of diseases, and a decline in overall quality of life.
A bench of Justices Vikram Nath and Sandeep Mehta set aside the Nagpur bench of the Bombay High Court’s order, which had quashed the Akola Municipal Corporation’s decision to increase property tax after 16 years.
The Supreme Court said the High Court should not have interfered because municipal bodies must regularly revise taxes to meet growing costs.
The bench explained that
“without the generation of revenue, the municipal bodies cannot be expected to sustain all these functions and perform their statutory obligations.”
The court added that
“it cannot be denied that the cost of all these activities/functions rises with the passage of time and hence, revision in the tax structure on a regular basis to match the rising costs is unexceptionable.”
The judges warned that
“if the taxes are not revised in keeping with the rise in cost of infrastructure, human resources, etc., it would make the municipal bodies defunct and nonfunctional.”
The court stressed that every municipal corporation is responsible for important duties such as urban planning, sanitation, public health, waste management, and maintaining basic services and infrastructure. These services directly affect everyday life and are essential for a dignified and healthy living environment.
The bench noted that
“these activities are vital for public welfare and for maintaining the standard of life of the citizens in every city or town, which are fundamental to ensuring health and dignified living, the core requirements of the constitutional obligations owed to the citizens.”
It further warned that
“any lapse in these duties/activities may cause chaos, spread of diseases and in general, adversely affect the quality of life of the citizens, for the welfare whereof the municipal bodies are formed to work.”
The Supreme Court highlighted that municipal bodies are autonomous authorities created under law and they handle many responsibilities that directly affect citizens’ daily lives. Their efficiency and independence depend heavily on strong financial stability.
The bench said,
“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.”
The court also criticised the idea of municipal bodies depending on state governments for grants or financial support.
According to the judges,
“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.”
They added that effective municipal governance requires financial freedom, saying,
“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.”
The court concluded that municipal laws clearly allow corporations to revise property tax rates whenever necessary. According to the bench, this power ensures that adequate revenue is generated and the functioning of municipal bodies does not suffer due to shortage of funds.
This judgment reinforces the importance of regular tax revision by municipal bodies so they can continue providing essential services and maintain the health, cleanliness, and infrastructure of Indian cities.
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