Mumbai, August 21, 2026: The Bombay High Court has ruled that property tax demands raised by the Kulgaon-Badlapur Municipal Council (KBMC) against industrial units operating on MIDC-leased plots in the Badlapur Industrial Area cannot be sustained in the absence of an arrangement with the Maharashtra Industrial Development Corporation (MIDC) for facilities provided by the civic body.

A division bench of Justices G S Kulkarni and Aarti Sathe delivered the judgment on August 5, along with Contempt Petition of year 2026.

HC Relies On Supreme Court Ruling

The High Court, referring to the Supreme Court judgment, observed that where MIDC continues to provide infrastructure and recover service charges, the MIDC and its plot holders remain exempt from property tax.

The position can change when the responsibility for those facilities is handed over to the municipal authority. With this landmark judgment, relief is obtained for industrial units across the state operating in MIDC.

The court's ruling is significant for industrial units in the Badlapur MIDC area, where the municipal council had sought to levy property tax on the basis of capital value.

The petition was filed by the Badlapur Industrial Welfare Association, representing industrial plot allottees in the Badlapur Industrial Area. The petitioners said they had been paying service charges to MIDC for their industrial units but were also being subjected to property tax by KBMC.

According to the petition, the land in the Badlapur industrial area was acquired by MIDC in 1969 and industrial plots were subsequently allotted on 95-year leasehold terms. KBMC had been collecting property tax from the units since 1999, with the assessment dating back to 1993.

The dispute intensified after KBMC conducted a survey of the entire Badlapur MIDC area in August 2014 to assess properties on a capital-value basis. It subsequently issued special notices on November 28, 2015, under Sections 119 and 124 of the Maharashtra Municipal Council, Nagar Panchayat and Industrial Township Act, 1965.

The industrial units submitted objections to the proposed capital-value assessment. However, the petitioners told the court that despite hearings, their objections were not decided and KBMC proceeded to issue tax bills and take coercive recovery measures, including attachment of properties.

The High Court's decision turned substantially on a recent Supreme Court judgment in Small Scale Entrepreneurs Association & Ors. vs The State of Maharashtra & Ors., Civil Appeal on May 27, 2026.

The Supreme Court had examined the scope of Section 159A read with Clause 7(1) of the First Schedule of the Maharashtra Regional and Town Planning Act, 1966 (MRTP Act), in the context of taxation of industrial areas developed by MIDC.

The Bombay High Court noted that the Supreme Court had held that the exemption under Clause 7(1) was not restricted merely to MIDC but extended to those holding land within the authority's jurisdiction.

The Supreme Court had observed that land in an MIDC industrial area remains vested in MIDC, while individual industrial units are essentially lessees or plot holders. Consequently, buildings constructed on such land also fall within the scope of the exemption, subject to the statutory conditions.

However, the Supreme Court had also imposed an important qualification: the exemption operates only while MIDC continues to provide the infrastructure and amenities which would otherwise be provided by the local authority.

KBMC Cannot Directly Impose Tax

Applying the Supreme Court's ruling to the Badlapur case, the High Court said KBMC would have to establish that it was providing facilities and amenities in the MIDC area for which it could legally seek payment.

The bench observed that it would be "incumbent upon the KBMC to enter into an arrangement/agreement with the MIDC" regarding facilities provided by the municipal council within the MIDC area.

"In the absence of any such arrangement or agreement," the Supreme Court's observations supported the petitioners' contention that KBMC had no jurisdiction to levy taxes on the exempted land held by MIDC, including industrial plots allotted to the association's members, the High Court held.

The court consequently held that the property tax demands raised directly against the industrial units "cannot be sustained."

At the same time, the bench did not completely foreclose KBMC's ability to recover taxes in future. It permitted the civic body to undertake an exercise concerning facilities and amenities it provides in the Badlapur MIDC area and, if warranted, enter into an appropriate agreement with MIDC for levy of taxes in accordance with law.

The court also said that if MIDC and KBMC reach an impasse, they can approach the state government for appropriate directions.

Contempt Plea Also Disposed Of

The association had also filed a contempt petition alleging non-compliance with an earlier High Court order of October 10, 2019.

That order had directed the Secretary, Urban Development Department, to hear the parties and decide the association's representation concerning the taxation issue. Since the direction was allegedly not complied with, the contempt petition was filed in January 2026.

In view of the decision on the main writ petition, however, the High Court held that there was no warrant to proceed with the contempt petition and disposed of it as well.

Major Relief For Badlapur MSMEs

Shiv Kanodia, an affected industrial unit holder, member of the Badlapur Industrial Welfare Association and president of the Textile Association of Badlapur, said the judgment had brought significant relief to the industrial community.

"Exorbitant bills were imposed and many units were closed down for non-payment of arrears. With this landmark judgment, a major relief has been received," Kanodia said.

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