- 1 - HC-KAR NC: 2025:KHC:52753 WP No. 26399 of 2018 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11TH DAY OF DECEMBER, 2025 BEFORE THE HON'BLE MR. JUSTICE R. NATARAJ WRIT PETITION NO. 26399 OF 2018 (LB-RES) BETWEEN: M/S BIOPHARMA LABORATORIES A PARTNERSHIP FIRM REGISTERED UNDER THE COMPANIES ACT, NO.14/2, N.S. IYENGAR STREET, SHESHADRIPURAM, BENGALURU-560 020. REPRESENTED BY ITS PARTNER SRI. ASHOK KUMAR C …PETITIONER (BY SRI. VENKATESH R BHAGAT, ADVOCATE) AND: 1. THE STATE OF KARNATAKA REPRESENTED BY ITS PRINCIPAL SECRETARY, DEPARTMENT OF VILLAGE DEVELOPMENT AND PANCHAYATH RAJ, GOVERNMENT OF KARNATAKA, VIKASA SOUDHA, BENGALURU - 560001. 2. THE PANCHAYATH DEVELOPMENT OFFICER SOMPURA GRAMA PANCHAYATH, NELAMANGALA TALUK, BENGALURU RURAL-562111. 3. KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD NO.14/3, 2ND FLOOR, R.P. BUILDING, NRUPATHUNGA ROAD, Digitally signed by SACHIN Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:52753 WP No. 26399 of 2018 BENGALURU - 560001. REPRESENTED BY ITS COMMISSION. …RESPONDENTS (BY SRI. B. BOPANNA, ADDITIONAL GOVERNMENT ADVOCATE FOR RESPONDENT NO.1; SRI. M.S.DEVARAJU, ADVOCATE FOR RESPONDENT NO.2; SRI. H.L.PRADEEP KUMAR, ADVOCATE FOR RESPONDENT NO.3) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE DEMAND NOTICE DATED 18.08.2017 IN NO.NIL ISSUED BY THE 2ND RESPONDENT AT ANNEXURE-A AND ETC. THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE R. NATARAJ ORAL ORDER The petitioner has challenged a demand notice dated 18.08.2017 issued by respondent No.2. It has also sought for a declaration that the aforesaid notice is not in accordance with law and to direct the respondent No.2 to return the seized articles belonging to the petitioner. 2.(i) The petitioner claims that the Karnataka Industrial Areas Development Board (for short, 'the KIADB') executed a - 3 - HC-KAR NC: 2025:KHC:52753 WP No. 26399 of 2018 lease-cum-sale agreement dated 03.03.2008 in its favour in respect of plot No.4-J and 4-K of Dobaspet I Phase Industrial Area, situate in Sy. No. parts of 97 and 102 of Yedehally village, Somapura Hobli, Nelamangala Taluk, Bengaluru Rural District, measuring 4321.41 Sq. m. (henceforth referred to as 'the subject property'). Subsequently, sale deed was executed by the KIADB in its favour in respect of the subject property on 09.02.2015. Pursuant to the allotment, the petitioner has obtained approval from the KIADB to put up an industrial shed. The petitioner claims that it has set up a small scale industry and manufacturing pharmaceutical products. (ii). The petitioner further claims that as per the Karnataka New Industrial Policy-2009, KIADB is bound to provide all basic amenities in industrial areas and the maintenance of these industrial areas would be transferred to local bodies / industry associations. Wherever, these arrangements could not be provided, KIADB itself took up the responsibilities of maintaining the basic amenities. (iii). The petitioner further claims that it had paid the building tax as demanded by the Sompura Gram Panchayat - 4 - HC-KAR NC: 2025:KHC:52753 WP No. 26399 of 2018 and obtained no due certificates. Despite the same, respondent No.2 - Panchayat Development Officer of the said Panchayat has issued the impugned notice demanding from the petitioner an amount of Rs.7,64,167/- including trade (general) licence cost at the rate of Rs.5,000/- every year amounting to Rs.55,000/- without deducting the amount already paid by the petitioner. (iv). The petitioner contends that it is a Pharmaceutical manufacturer and has employed about 65 workers to run the industry. The respondent No.2 is not providing any facilities or services for the industries situate at Dobaspet including the industry run by the petitioner and such facilities are provided to it by the KIADB. The respondent No.2 has irrationally fixed the tax rates and has been selective in raising demands from the industries. Hence, the impugned demand notice issued by the respondent No.2 is arbitrary, unscientific and unsustainable in law. (v). The petitioner further claims that on 09.03.2018, the respondent No.2 illegally entered into the subject industrial unit and seized five machineries belonging to it. The petitioner - 5 - HC-KAR NC: 2025:KHC:52753 WP No. 26399 of 2018 has addressed a letter dated 10.03.2018 to the Additional Chief Secretary, Department of Industries and Commerce, Government of Karnataka and submitted a representation to the Chief Executive Officer, Zilla Panchayat, Government of Karnataka, on 02.04.2018 narrating the above facts. Notwithstanding the same, no action has been taken by the respondents. (vi). The petitioner is therefore, before this Court seeking quashing of the demand notice issued by the respondent No.2 and to declare that the said notice is not in accordance with law and for a direction to the respondent No.2 to return the seized articles belonging to it. 3. When this petition was taken up for 'Preliminary Hearing in B Group', the learned counsel for the petitioner brought to the notice of this Court that similar question arose for consideration in W.P.No.26031/2017 and connected petitions and the said petitions were allowed by a coordinate Bench of this Court in terms of the order dated 01.07.2025 and it was declared that Panchayat has no authority to demand and collect the property tax for the properties, which lay in - 6 - HC-KAR NC: 2025:KHC:52753 WP No. 26399 of 2018 industrial areas formed by the KIADB unless those areas are withdrawn and handed over to the Panchayat. He, therefore, submitted that notwithstanding the fact that the calculation of the property tax was not in accordance with the Schedule IV of the Karnataka Gram Swaraj and Panchayat Raj Act, 1993 (henceforth referred to as 'the Act, 1993'), the writ petition itself could be disposed off in view of the law declared by a Coordinate Bench of this Court in W.P. No.26031/2017 and connected cases, referred supra. 4. The learned counsel for respondent No.2 submitted that under Schedule IV of the 'Act, 1993', the Panchayat is entitled to levy tax even on industrial units established in the industrial areas. He also submitted that under Article 243-H of the Constitution of India, the Panchayat being a local authority is entitled to impose and collect tax on properties and therefore, the authority of the respondent No.2 / Sompura Gram Panchayat cannot be doubted. 5. The learned counsel for respondent No.3 submitted that a coordinate Bench of this Court in its order dated 01.07.2025 passed in W.P. No.26031/2017 and connected - 7 - HC-KAR NC: 2025:KHC:52753 WP No. 26399 of 2018 cases has gone through the entire controversy in great detail and has held that the Panchayat has no power to levy tax on buildings lying outside its jurisdiction. 6. I have considered the submissions of the learned counsel for the petitioner as well as the learned counsel for the respondent No.2 and the learned counsel for respondent No.3. 7(i). A coordinate Bench of this Court while considering similar issue in W.P. No.26031/2017 and connected petitions in its order dated 01.07.2025 has held as follows:- "20. Upon careful examination of the additional documents produced by the learned counsel for the Gram Panchayat, this Court is of the clear view that none of the materials placed on record confer any statutory authority on the Panchayat to levy or collect taxes in respect of industrial establishments located within areas notified and developed by the KIADB under the provisions of the KIAD Act. Mere execution of a lease- cum-sale agreement or any administrative communication cannot vest such power in the Gram Panchayat in the absence of express delegation or statutory backing. 21. In this backdrop, any reliance on previous circulars is misplaced and unsustainable in law. Consequently, the power to regulate and approve - 8 - HC-KAR NC: 2025:KHC:52753 WP No. 26399 of 2018 development activities, including the right to levy and collect tax within such industrial estates, vests exclusively with the KIADB. The Gram Panchayat cannot usurp such authority in the absence of a specific statutory conferment. 22. In light of the binding circular dated 16.07.2024 issued by the State Government, which places the responsibility for planning and development approval solely with the KIADB, the claim of the Panchayat to continue exercising fiscal powers over such areas is clearly misconceived and without legal foundation. 23. The impugned demand notices, therefore, do not pass the test of legality and are clearly unsustainable in law. In the absence of jurisdiction vested by a valid notification under Section 37 of the KIAD Act, the levy amounts to arbitrary exercise of power and is liable to be set aside. Accordingly, point Nos.1 and 2 framed for consideration are answered in the negative and affirmative, respectively." (ii) While dealing with the contention of the Panchayat that it is authorized to levy tax on the industrial units in the industrial areas, the coordinate Bench of this Court held as follows: "13. The amended Schedule-IV to the Karnataka Panchayat Raj Act, 1993, introduced by Act No.44 of - 9 - HC-KAR NC: 2025:KHC:52753 WP No. 26399 of 2018 2015, recognizes the authority of Gram Panchayats to levy property tax, including on buildings situated within industrial areas such as KIADB industrial estates. However, a critical reading of the Schedule shows that such power is not absolute or automatic. The language used in the Schedule is clear: the power to impose tax on properties within KIADB or other notified industrial areas is subject to Government notification. The phrase "subject to notification" is a legislative condition precedent and must be interpreted harmoniously with the provisions of the KIAD Act, particularly Section 37. In the absence of a statutory notification by the State Government withdrawing such area from KIADB and conferring jurisdiction upon the Gram Panchayat, the latter cannot unilaterally impose property tax. Any such exercise would be ultra vires and without authority of law." 8. Therefore, the issues that arise in this writ petition are squarely covered by the order dated 01.07.2025 passed by a coordinate Bench of this Court in W.P. No.26031/2017 and connected petitions (supra). There is no reason why the petitioner should not be given similar benefit. 9. Consequently, this petition is allowed. The impugned demand notice dated 18.08.2017 issued by the respondent No.2 is quashed. It is open for the Sompura Gram - 10 - HC-KAR NC: 2025:KHC:52753 WP No. 26399 of 2018 Panchayat - respondent No.2 to take necessary steps once a notification is issued by the State Government authorizing them to collect tax. Sd/- (R. NATARAJ) JUDGE SMA List No.: 1 Sl No.: 45