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 243-Q sub-clause (1) in the context of Gujarat Industrial Development Act, 1962. After insertion of Part IX-A in the Constitution, the Gujarat Municipalities Act, 1962 was also amended by adding Section 264-A. It was provided under Section 264-A that notified area means an urban area or part thereof specified to be an industrial township area under the proviso to Article 243-Q(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 20-8-1993 in view of the insertion of Part IX-A in the Constitution. Section 264-A was substantially amended. It now provided: “264-A. 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 243-Q of the Constitution of India.” 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 264-A of the Gujarat Municipalities Act and would mean an industrial township area under the proviso to clause(1) of Article 243-Q of the Constitution of India. 11. On 7-9-1993, 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 264-A of the Gujarat Municipalities Act. By another notification of the same date 7-9-1993, 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 243-Q(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 12-A of the 1976 Act was not available in the facts of the above case. The appellants were not entitled for the reliefs claimed in the writ petition. In the result, the appeal is dismissed.

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 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 243-Q(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, 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 23-6-2014 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 township, exemption as sought to be claimed by the appellants
under Section 12-A 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 12-A of the 1976 Act and by virtue of Section 12-A
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.
7. The Authority constituted under the 1976 Act fully satisfied the
condition under Section 12-A of the 1976 Act, hence, there is no
requirement of issue of any separate notification as contemplated by
Article 243-Q 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 12-A 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 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 sub-section (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
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 12-A. Section 12-A of 1976
Act which has been added by U.P. Act 4 of 2001 is as under:
“Section 12-A. 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 243-Q 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 such industrial development
area or part thereof before the date of such notification shall cease to
exist.”

1

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 (Seventy-fourth Amendment)
Act, 1992. Article 243-Q 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 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
non-agricultural 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 243-Q 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
243-Q(1) contemplates a circumstance where a Municipality under Article 243-
Q(1) may not be constituted in an urban area or part thereof, when such
area is specified by a notification having 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 non-constitution of Municipality is dependent upon
consideration of aforesaid factors and a public notification thereof.
15. Section 12-A has been inserted in the 1976 Act in consonance with
proviso to Article 243-Q(1). Section 12-A 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 243-
Q 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 or part thereof…….”. Section 12-A thus, specifically
contemplates issuance of notification under proviso to clause (1) of
Article 243-Q and exclusion from Panchayat area is consequent and dependent
upon such notification. Notification under proviso to clause (1) of
Article 243-Q 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
243-Q(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 with condition as contained in Article
243-Q. 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 243-Q(1) has been issued. The
Division Bench of the High Court referring to Section 12-A 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
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.”

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 243-Q sub-clause
(1) in the context of Gujarat Industrial Development Act, 1962. After
insertion of Part IX-A in the Constitution, the Gujarat Municipalities Act,
1962 was also amended by adding Section 264-A. It was provided under
Section 264-A that notified area means an urban area or part thereof
specified to be an industrial township area under the proviso to Article
243-Q(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 20-8-1993 in view
of the insertion of Part IX-A in the Constitution. Section 264-A was
substantially amended. It now provided:

“264-A. 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 243-Q of the Constitution of India.”

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 264-A of the Gujarat
Municipalities Act and would mean an industrial township area under the
proviso to clause(1) of Article 243-Q of the Constitution of India.

11. On 7-9-1993, 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 264-A of the Gujarat
Municipalities Act. By another notification of the same date 7-9-1993, 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 243-Q(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 12-A of the
1976 Act was not available in the facts of the 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.