Public Interest Of Panchayat Can't Be Left To Whims & Fancies At Ipse Dixit Of Sarpanch: Bombay HC Holds Grampanchayat Bound By Tax Settlement

The Bombay High Court has observed that larger public interest and village welfare cannot be left to the whims, fancies, or ipse dixit of a Sarpanch or elected officials.

It also held that local authorities and elected representatives cannot arbitrarily backtrack from a valid, subsisting settlement agreement. A public body cannot "sit on the fence" or speculate under the garb of pending litigation, it said.

The Division Bench of Justice GS Kulkarni and Justice Aarti Sathe observed, "In our opinion, the petitioner is correct in its contention that for almost a year, no attempt whatsoever was made by Grampanchayat or any of its responsible office bearers to revoke the acceptance of the settlement which is a composite settlement, which benefits the Grampanchayat also with a school building. The larger public interest of the Grampanchayat cannot be left to the whims and fancies or vary at the ipse dixit of the Sarpanch any other elected representative. Also, when the settlement has prevailed for over a year, it cannot be revoked at Respondent No.5’s mood, at the passing moment. This would amount to gross arbitrariness nay high-handedness and/or abuse of authority at the hands of such persons."

Advocate Dhananjay Bhanage appeared for the Petitioner, while Government Pleader Neha Bhide appeared for the Respondents.

Brief Facts

The petitioner, a company engaged in the cultivation of fresh mushrooms, filed a writ petition under Article 226 of the Constitution of India challenging the property tax levied and billed by the respondent-Grampanchayat. The Grampanchayat had assessed the petitioner's RCC and non-RCC civil structures located on agricultural land under the category of industrial properties. The petitioner contended that its activities were inherently agricultural, and thus, the structures were integral to such farming and did not attract building tax. Consequently, the petitioner sought the quashing of the adverse tax demands, attachment orders, and appellate resolutions passed by the local authorities.

During the pendency of the litigation, amicable settlement discussions took place between the parties. The petitioner initially proposed to clear the arrears of property tax for the disputed decades at a specific rate per square foot, on the condition that all penalties, notice fees, and interest were waived. To benefit the local community, the managing director of the petitioner company also committed to constructing a secondary school for the village children on land provided by the Grampanchayat.

The Grampanchayat countered the proposal by enhancing the property tax rate per square foot. The petitioner formally accepted this enhanced rate and agreed to settle the matter and withdraw the writ petition. However, when the matter finally came up for hearing before the High Court, the settlement had already remained in operation and unrevoked for nearly a year.

Contentions of the Parties

The Petitioner submitted that a final and binding compromise had been arrived at between the parties through a series of written correspondences. It was contended that the petitioner had fully accepted the enhanced tax rate proposed by the Grampanchayat, rendering the dispute amicably resolved. The petitioner argued that the settlement was highly favorable to the local body as it ensured the recovery of tax arrears and secured a public school for the village. Therefore, it was prayed that the compromise be officially recorded and the petition be disposed of in terms of the agreement.

Conversely, the Respondent-Grampanchayat surprisingly sought the permission of the Court to file a fresh affidavit to introduce new pleadings, effectively attempting to backtrack from the accepted settlement at the stage of final hearing.

Observations of the Court

The High Court observed that the amicable settlement between the parties had continued to operate, subsist, and remain unchallenged for almost an entire year without any revocation by the Grampanchayat or its office bearers. The Court sternly declined to permit any new pleadings or affidavits at such a belated stage, especially when the case was listed for final hearing after more than two decades.

It was held that the larger public interest of the Grampanchayat and the welfare of the villagers could not be left to the whims, fancies, or changing moods of elected representatives or the Sarpanch.

The Court noted that allowing a public body to arbitrarily resile from a valid compromise after a year would amount to gross high-handedness, abuse of authority, and speculation under the garb of pending litigation.

"Thus, such settlement (supra), as on date, is very much in subsistence and binding on such parties. We may also observe that any elected representative or the Sarpanch and for that matter the Grampanchayat cannot sit on the fence and/or speculate under the garb of the pending litigation. A consistent stand has been taken by the petitioner when the enhanced rate was offered by respondent No.5 to the petitioner and the petitioner accepted the same by its communication dated 4 July 2025 (supra) and such settlement continued to operate", the Court held.

The Court further observed that tax jurisprudence firmly recognizes the settlement of taxes in various forms. Since the composite settlement secured both the tax arrears and a beneficial school building for the children of the village, the Court ruled that the controversy must achieve quietus.

The Court observed, "Taking any other view of the matter would amount to permitting the Sarpanch or any other elected member of the Grampanchayat to speculate under the garb of this litigation. We find that the settlement forwarded by the Grampanchayat by a letter dated 16 June 2025 being accepted by the petitioner by its communication dated 4 July 2025 needs to be acted upon and the Grampanchayat receives all the taxes and the benefit of the school which cannot be deprived to the villagers."

Consequently, the Court held the settlement to be valid, subsisting, and legally binding on the parties, ordering the Grampanchayat to act upon it for the past disputed period while keeping the doors open for the lawful levy of future taxes.

Cause Title: Weikfield Agro Products Ltd. v. State of Maharashtra & Ors. [Neutral Citation: 2026:BHC-AS:24963-DB]

Appearances:

Petitioner: Advocate Dhananjay Bhanage

Respondents: Government Pleader Neha Bhide, Additional Government Pleader S. A. Prabhune, Advocate S. S. Panchpor, Advocate Swapnil R. Chopade.

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