“New Limitations on Regulatory Fees for Unnotified Land Development: Clarifying the Scope of the Kerala Conservation of Paddy Land and Wetland Act”: Kerala High Court

1. Introduction

The Kerala High Court’s decision in the consolidated case lead by ABAD Builders Private Limited v. State of Kerala (dated January 9, 2025), addresses the scope of the Kerala Conservation of Paddy Land and Wetland Act, 2008 (hereinafter “the Act”) and its corresponding Rules. At issue was the legality of levying an additional fee of Rs.100 per square foot for buildings with an area exceeding 3,000 sq. ft. when constructed on lands receiving “unnotified land” status under Section 27A of the Act. Numerous property owners and entities challenged the validity of Note 1 to Rule 12(9) of the Kerala Conservation of Paddy Land and Wetland Rules, alleging it was ultra vires the parent legislation and contrary to constitutional provisions.

The Petitioners, a consortium of real estate developers, educational institutions, private landowners, and charitable trusts, contended that the Act did not empower the government to impose a levy based on the area of proposed buildings. The State argued that these fees would discourage conversion of land and funnel resources into a relief fund for paddy cultivators. The High Court’s judgment resolves key issues regarding the validity, constitutionality, and enforceability of such charges, thereby clarifying the boundaries of the government’s rule-making powers under the Act.

2. Summary of the Judgment

In its extensive and detailed ruling, the High Court declared the portion of the Rules that demanded fees solely on the basis of building area (beyond 3,000 sq. ft.) to be ultra vires the Act. Specifically, the Court struck down Note 1 to Rule 12(9) on grounds that:

The Act does not empower or contemplate collecting such additional fees for construction of large buildings on unnotified lands.
The charge violated Article 265 of the Constitution, requiring that all taxes and fees must have legislative sanction.
No clear quid pro quo or regulatory justification was aligned with the statutory objectives of the Act, which is primarily intended to conserve paddy lands and wetlands.

Consequently, the Court directed that no further demands could be raised under that impugned Note, and that any amounts already collected be refunded. Pending permit applications were to be decided without insisting on the controversial levy.

3. Analysis

(a) Precedents Cited

The Court’s reasoning was informed by a rich tapestry of Supreme Court and High Court decisions clarifying the nature of regulatory fees versus taxes, the doctrine of delegated legislation, and the boundaries of rule-making power:

Indian Express Newspapers (Bombay) Ltd. v. Union of India: Clarified that subordinate legislation must conform strictly to the parent statute’s powers and object.
Tata Iron and Steel Co. Ltd. v. State of Bihar: Explained how “fee” under Article 265 must have statutory basis and cannot be imposed simply through executive instructions or subordinate rules beyond the scope of the enabling Act.
Jindal Stainless Ltd. v. State of Haryana: Reiterated that any “impost” (whether fee or tax) must be supported by legislative authority under the Constitution.
Kunj Behari Lal Butail v. State of H.P.: Established that rules that exceed or contradict clear statutory terms are ultra vires the parent enactment.

In addition to these rulings, the Court cited numerous Kerala High Court decisions on the distinction between “paddy lands” and “unnotified lands,” and the limited powers of authorities under the Act.

(b) Legal Reasoning

The fundamental logic was that the Kerala Conservation of Paddy Land and Wetland Act does not regulate or restrict building construction once valid conversion of the land is permitted under Section 27A. Thus, adding a further “building area fee” for structures exceeding 3,000 sq. ft. fell outside the scope and object of the Act. The Court underscored:

Delegated Legislation Doctrine:
Rule 12(9) must derive its authority from the parent statute. As the Act only allows for a fee based on the extent of land and remodeling its records (Section 27A(3)), it neither contemplates nor authorizes a separate levy on buildings exceeding 3,000 sq. ft.
Article 265 Violation:
No tax or fee can be imposed without express authority in the parent statute. The impugned levy was introduced through subordinate rule-making, lacking direct legislative sanction.
Absence of Quid Pro Quo:
The collectable fee must correlate to a regulatory or service component. The Court found no substantial “service” or “regulatory measure” conferring direct benefits to builders for the sum demanded.
Property Rights under Article 300A:
The levy was seen as an unjustifiable restraint on an owner’s right to develop property. Once land is validly converted, imposing further unforeseen fees amounts to a deprivation of property rights not grounded in statutory authority.

(c) Impact

The ruling not only grants relief to the petitioners but also sets a significant precedent for future land development in Kerala:

Clarifies Enforcement Boundaries: Authorities must align fee impositions strictly within the text of the parent Act, limiting any additional or inventive levies absent legislative amendments.
Fortifies Rights of Developers & Landowners: Once land has been legally converted via Section 27A(3), no extra “construction area-based” levy can be demanded. This reduces unpredictability for investors and property developers.
Reaffirms Constitutional Principles: By aligning with Articles 265 and 300A, it underscores the necessity for legislative clarity before imposing fees, enhancing the rule of law in regulatory processes.

4. Complex Concepts Simplified

Several legal and constitutional doctrines shaped the Court’s conclusion. Key concepts include:

Delegated Legislation: Government agencies, via rules or regulations, cannot exceed the enabling Act’s authority. Any additional demands or restrictions must be within the parent statute’s ambit.
Quid Pro Quo (Fee-Tax Distinction): A “fee” typically requires a compensatory or service element, while a “tax” is purely a revenue-raising measure. Here, the impugned levy was neither a justifiable “regulatory fee” nor a recognized tax duly authorized by the statute.
Article 265 & Article 300A: • Article 265 forbids collecting taxes or fees without a valid law. • Article 300A protects property rights, ensuring they are only curtailed by specific legislative authorizations.
Unnotified Land: Land which has not been recorded as paddy land or wetland in the official data bank, allowing for conversion upon compliance with Section 27A of the Act.

5. Conclusion

The Kerala High Court’s judgment constitutes a definitive statement on the limits of subordinate rule-making under the Kerala Conservation of Paddy Land and Wetland Act, 2008. By striking down the additional levy for buildings exceeding 3,000 sq. ft. of construction, the Court maintained that legislative clarity and intent are paramount when restricting property rights. Landowners who have already completed or legally initiated the process under Section 27A of the Act cannot be subject to further unforeseeable and unauthorized charges.

This decision not only brings long-awaited relief to petitioners and real estate developers but also reinforces foundational principles of fair governance: no rewrites of statutory schemes through rule-making, no veiled taxation outside the legislature’s sanction, and unwavering respect for constitutional protections around property rights. If the State wishes to impose new or additional fees based on building dimensions, it must seek proper legislative amendments rather than expanding the scope of existing rules beyond the Act’s original framework.

“New Limitations on Regulatory Fees for Unnotified Land Development: Clarifying the Scope of the Kerala Conservation of Paddy Land and Wetland Act”