: 1 : IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.72 OF 2009 M/s.Cresent Builders, a partnership firm registered under the Indian Partnership Act, having its Office at E-1/15, Bharat Nagar, Maulana Shaukatali Road, Grant Road, Mumbai – 400 007. ...Petitioners Versus 1.Municipal Corporation of Gr.Mumbai, a statutory Corporation established under the provisions of Mumbai Municipal Corporation Act, 1888, having its office at 2nd floor, Mata Ramabai Ambedkar Marg, Mahapalika Building, Mahapalika Marg, Opp.C.S.T. Terminus, MUMBAI-400 001. 2.Commissioner, Municipal Corporation of Gr.Mumbai, having his Office at 2nd floor, Mata Ramabai Ambedkar Marg, Mahapalika Building, Mahapalika Marg, Opp.C.S.T. Terminus, MUMBAI – 400 001. 3.Jt.Municipal Commissioner, Improvements, Municipal Corporation of Gr.Mumbai, having his Office at 2nd floor, Mata Ramabai Ambedkar Marg, Mahapalika Building, Mahapalika Marg, Opp.C.S.T. Terminus, MUMBAI – 400 001. 4.Executive Engineer, Building Proposals, Municipal Corporation of Gr.Mumbai, Ex.Engg.Building Proposals City, : 2 : Municipal `E’ Ward Office Building, 3rd Floor, 10, Shaikh Hafizuddin Marg, Byculla, MUMBAI-400 008. 5.The Deputy Chief Engineer, Office of the Executive Engineer, Building Proposals (I/II/III) City, (Repair & Reconstruction), Municipal `E’ Ward Office Building, 3rd Floor, 10, Shaikh Hafizuddin Marg, Byculla, MUMBAI 400 008. 6.The Assistant Commissioner (Estates), Municipal Corporation of Gr.Mumbai, Shree Chhatrapati Shivaji Maharaj Market Building, 2nd Floor, Palton Road, MUMBAI – 400 001. 7.Deputy Municipal Commissioner, (General Administration & Improvement) Municipal Corporation of Gr.Mumbai, Mahapalika Bhavan, Mahapalika Marg, MUMBAI – 400 001. ......... Mr.K.K.Singhvi, Sr.Counsel with Mr.S.A.Sawant, Mr.J.S.Chandnani & Mr.H.V.Kode for Petitioners. Mr.A.Y.Sakhare, Sr.Counsel with Ms.Geeta Joglekar for Respondents/ Corporation. .......... CORAM : SWATANTER KUMAR, C.J. AND A.M.KHANWILKAR, J. JUDGMENT RESERVED ON : 21st JULY 2009. JUDGMENT PRONOUNCED ON : 13th AUGUST 2009. : 3 : JUDGMENT (PER KHANWILKAR, J.) : 1. Heard Counsel for the parties. Rule. Ms.Joglekar waives notice for Respondents. Rule made returnable forthwith by consent. As short question is involved, Petition is finally heard at admission stage. 2. By this Petition under Article 226 of the Constitution of India, the Petitioners are questioning the demand of the Respondent Corporation calling upon the Petitioners to pay the balance amount of 90% of the capitalized value for utilisation of the surplus area as per the Scheme of redevelopment and more so, along with interest thereon at the rate of 18% per annum as condition precedent for considering their proposal to grant additional 0.5 FSI on the sale component of the Scheme. 3. Briefly stated, the tenants in the structure standing on the Corporation property known as Janata Nagar, M.P.Mill Compound on C.S.No.1/725 and 725 (Part) of Malabar Hill Division in D-Ward, formed a Co-operative Society in the name of Janata Nagar Co-operative Housing Society Limited. The said Society submitted a proposal for development of the said property to the Respondent No.1 Corporation under the provisions of Regulation : 4 : 33(7) of Development Control Regulations for Greater Bombay, 1991 in force at the relevant time. After scrutiny of the said proposal, Letter of Intent was issued by the Corporation on 5th August 1996. The Letter of Intent was to be valid for a period of one year from the date of issuance, which, however, could be extended for a maximum period of revalidation charges of Rs.1,000/- per year. The proposal was then considered by the Improvement Committee of the Corporation in its meeting dated 15th October 1996. The Improvement Committee, after considering the proposal and the recommendation of the Commissioner, accorded approval to the redevelopment scheme and leasing of the plot to the Society on certain terms and conditions. The proposal was considered on the basis of the then existing Regulation 33(7) of the D.C.Regulations which provided 2.0 FSI for such Schemes. For the time being, we may advert to two conditions specified by the Improvement Committee. Condition No.(9) reads thus : “9) Society/Developer will also enter into agreement with Municipal Commissioner agreeing to pay 10% of the capitalized value before grant of commencement certificates and balance amount of 90% before final occupation of the sale buildings in one installment. Draft of the agreement will be prepared by legal Department.” : 5 : 4. In condition No.29, it is plainly provided that the construction work of redevelopment project shall be completed within two years from the demolition of the old structure. Indeed, it also provides that the period may be extended by the Municipal Commissioner wherever necessary. Besides the above said conditions, it may be relevant to refer to the recommendation of the Improvement Committee in its meeting on 30th September 1996, which in turn is founded on the opinion of the Municipal Commissioner in his letter dated 18th September 1996 (as reproduced at page 65 of the paper- book). It refers to the recovery of capitalized value of the surplus area from the Society/Developer. The relevant extract thereof reads thus: “.......(v) to recover from the Society/Developer the capitalized value of the surplus area, i.e. 33,860 sq.ft. (3145.67 sq.mtrs.) which comes to Rs. 18,62,30,000/- the final installment of 10% amount being recovered before commencement of the construction of rehabilitation building and balance 90% amount before final occupation of the saleable building as detailed in para 17 of letter, as proposed.” 5. The Society had initially appointed M/s.Mebsons Builders who, however, later on expressed inability to carry on the redevelopment work. The Society then appointed M/s.Shapoorji Palanji as Developers/Construction Contractors. On 3rd February 1997, the Corporation issued a continuation Letter of Intent in respect of the Redevelopment Scheme with certain conditions. The Ward Officer by his : 6 : communication dated 3rd February 1997 called upon the Secretary of the Society to comply with certain requirements before issuance of grant of N.O.C. for Commencement Certificate. The same reads thus: “You are now requested to comply with the following requirements after which, the matter will be processed further for grant of NOC for commencement certificate:- 1. To pay Rs.44,150/- (Rs.Forty four thousand one hundred fifty only) being non-refundable security deposit equal to 5 years lease rent of the land as required as per condition No.5. 2. To pay Rs.7000/- (Rs.Seven thousand only) as deposit towards cost of preparation of lease document as required as per condition No.4. 3. To pay an amount of Rs.1,86,23,000/- being 10% of the capitalized value of Rs.18,62,30,000/- of surplus tenements to be handed over to BMC before grant of Commencement Certificate and balance of 90% i.e. 16,76,07,000/- before final occupation in one installment. 4. To enter into tripartite agreement along with developer with Municipal Commissioner agreeing to various terms and conditions of redevelopment. 5. To submit Indemnity Bond indemnifying the Municipal Corporation from any charges, claims, damages, etc. jointly signed by the society and the developer. 6. To submit regular proposal through architect with two sets of plans and copy of the IOD issued by E.E.B.P. City) and to pay Rs.210/- as scrutiny fee for the proposal.” 6. The Petitioners came on the scene consequent to the Tripartite Agreement executed between the Corporation, the Society and the Petitioners on 16th July 1998. This Tripartite Agreement refers to the : 7 : obligation of the Society/Petitioners to comply with certain conditions referred to therein. In the recitals, it is mentioned that the redevelopment proposal was submitted by the Society of tenants which was considered by the Committee. It is further mentioned that the Developers (Petitioners) have agreed to comply with all the obligations of the Society under the Redevelopment Scheme. The broad features of the Scheme as sanctioned have been highlighted in Clause (1) of the Agreement. Sub-clause (d) thereof which is relevant, which reads thus: “(d) The developers is allowed to retain this surplus area on payment of aforesaid capitalized value of Rs.18,62,30,000/- payable to MCGM as under: i) Amount of Rs.86,23,000/- to be paid on or before execution of this presents. (Receipt of which has acknowledged by MCGM). ii) Balance Amount so as to make 10% of the capitalized value i.e. Rs.1,00,00,000/- payable on or before 1998 along with simple interest at the rate of 15% till the date of payment. iii) And the balance amount of 90% amounting Rs.16,76,07,000/- to be paid on or before grant of Occupation Certificate of Last wing of Building for sale. It is expressly made clear that the aforesaid features are mentioned only to illustrate the salient features of the sanctioned scheme. The sanctioned scheme as modified by Municipal Commissioner shall prevail over for other details in respect of the development and reconstruction work.” (emphasis supplied) : 8 : Clause 23 of the Agreement envisages as to how the redevelopment work should be progressed in a phased manner and that the developer would become entitled to obtain Occupation Certificate for the proportionate sale area only on complying with the prescribed requirements. Clause 28 of the Agreement mandates that the Society/Developer shall not abandon the execution of the project and shall complete the project as approved. The same reads thus: “(28) The society/developer shall not abandon the execution of the project and shall complete the project as approved by the Municipal Commissioner. In case the project is abandoned before completion, Jt.Municipal Commissioner/Dy.Municipal Commissioner (I) shall give one month notice calling upon them to complete the project as per the schedule time and if the society fails to recommence the abandoned work within the stipulated period in the notice, the society/developer hereby agrees that the partly constructed structures shall vest in Corporation and the Corporation shall not be liable to pay any damages or cost to the society/developer and it will be open for the Corporation to complete the project in a manner as it deems fit and at the risk and cost of the society/developer.” Clause 43 of the Agreement stipulates that in all cases of dispute, the Municipal Commissioner’s decision shall be final and binding upon the Society. 7. Suffice it to observe that as per the Tripartite Agreement, the Petitioners/Developers were obliged to undertake development work as follows: : 9 : “1. Housing the municipal tenants in tenements admeasuring 225 sq.ft. each. 2. Provide Transit accommodation during the period of reconstruction. 3. Accommodating the three VLTs. 4. Construct 10 PAP tenements and hand them over to the Corporation. 5. Carryout essential repairs to two buildings in the neighbourhood. 6. Construct a Municipal Primary School of 20,000 sq.ft. 7. Demolish the existing two chawls on the plot admeasuring 2300 sq.yards area earmarked for the lessee Bhausaheb Hire Vidyalaya Nagrik Shikshan Sanstha after accommodating the 150 tenants in the rehab buildings. 8. Undertake the widening of the 40’ D.P. Road. 9. Construct a retaining wall on the west side of the plot along the hill slope. 10. Deposit a total capitalized value of Rs.18,62,30,000/- for surplus area of 33,807 sq.ft. (i.e. 3145.67 sq.m.) out of which 10% of the capitalized value was to be paid before grant of Commencement Certificate and balance 90% was to be paid before occupation of the Sale Building.” 8. Time period allowed for completion of the project was stipulated as two years as specified by the Improvement Committee. The project was sanctioned vide Resolution 259 of 11th October 1996 and No.752 of 15th October 1996 respectively. The Developers, however, completed the rehabilitation component on 20th November 2001 in respect of `B’, `C’ and `D’ Wings of A/Building and on 26th March 2003 in respect of `A’ wing of Building `A’. It is also noticed that the Occupation Certificate of rehabilitation component was issued vide B.P.Departments letter : 10 : No.EEBPR/5437/D/AR of 20th November 2001 in respect of `B’, `C’ and `D’ wings and 26th March 2003 in respect of `A’ Wing. The Petitioners have completed part of the project by providing : “1) Permanent accommodation has been provided to 308 tenants of the Corporation in the Rehab Building at a cost of about Rs.25 Crores. 2) 10 PAP tenements have been given to the Corporation. 3) Work of construction of Primary School is going on at a cost of Rs.3.0 Crores and will be completed very soon. 4) Retaining Wall has been constructed as per the I.O.D. condition at a cost of Rs.3.0 crores. 5) Capitalized value of Rs.1,86,23,000/- has already been paid to the Corporation being 10% of the total capitalized value of Rs. 18,62,30,000/-.” 9. However, in relation to sale component of the Scheme, the Petitioners applied for N.O.C. to the Corporation only in 2006. By letter dated 24th February 2006, the Architects of the Petitioners requested the Assistant Commissioner (Estates) to issue N.O.C. for Commencement Certificate. The N.O.C. and Commencement Certificate in respect of sale component was issued by the Assistant Commissioner (Estates) vide letter no: AC/Estates/3448/AO (SOC) dated 26th June 2006 and Commencement Certificate to commence sale component was issued by the Deputy Chief Engineer (B.P.) (City) vide letter No.EEBP/7160/D/AR dated 24th January 2006. : 11 : 10. Notwithstanding issuance of N.O.C. and Commencement Certificate in relation to the sale component in 2006, the work thereof was not completed by the Petitioners in time. In the meantime, however, the State of Maharashtra issued Notification, whereby, Regulation 33(7) of DC Regulations, 1991 came to be modified vide Notification dated 25th January 1999. By the said Notification, it is provided that in respect of new projects to be undertaken and in relation to ongoing projects where Occupation Certificate has not been granted so far, the FSI would be to the extent of 2.5 FSI. Consequent to the said Government Notification, the Respondent No.1 Corporation issued Circular dated 14th June 2000 regarding guidelines for grant of additional 0.5 FSI in respect of ongoing projects. It is noticed that the amended plan which covered the sale component of the Scheme submitted by the Petitioners was sanctioned by the Corporation on 27th July 2006. Relying on the amendment to Regulation 33(7), the Petitioners submitted proposal for grant of total 2.5 FSI in respect of sale component building as they intended to build a high rise building to go up to 36 floors. The said amended plan was sanctioned. The Architect of the Petitioners then submitted representation on 3rd November 2006 to Respondent No.3 Joint Municipal Commissioner requesting for permission to the Petitioners : 12 : to consume 2.5 FSI. However, the Petitioners received notice from the Assistant Commissioner (Estates) dated 17th April 2008 which reads thus : “BRIHANMUMBAI MAHANAGARPALIKA No.AC/Estates/20414/AO (SOC) – 17-4-2008 SHOW CAUSE NOTICE To, Office of the M/s.Crescent Builders, Asstt.Commissioner (Estate) E1/15, Bharat Nagar , Municipal Corporation of Greater Maulana Shaukatali Rd., Mumbai, Shree Chhatrapati Shivaji Grant Road, Maharaj Market Building, 2nd floor, Mumbai – 400 007. Palton Road, Mumbai-400 001. Sub : Redevelopment scheme of Municipal properties known as Janata Nagar, M.P. Mill compound on C.S.No.1/725 and 725(pt) of Malbar Hill Division Tardeo under D.C.R. 33(7) Delay in implementation of project thereby delaying 90% capitalized value. Sir, Whereas the Janata Nagar Co.op.Housing Society formed by the tenants on the under subject property have appointed you as the developer for redevelopment of the property. Whereas your Architect has submitted the proposal for redevelopment of above property has been approved by Improvement Committee/Corporation under their Resolution No.269 dtd. 11/10/96 & No.752 dtd. 15/10/96 respective. As per sanction total capitalized value amounting to Rs.18,62,30,000/- in the scheme is required to be paid by you to M.C.G.M. Whereas the Letter of Intent has been issued to you on 5/8/96 & after paying 10% of capitalized value amounting to Rs.18,62,3000/- C.C. Has been issued to you on 20/1/98. Whereas as per conditions of Letter of Intent, you were required to complete the project within 3 years & also to pay remaining 90% capitalized value to M.C.G.M. Before O.C. To sale component. : 13 : Whereas you have failed to complete the project as the project completion period is already over on 20/1/2001 & caused delay for payment of 90% capitalized value till this date. Whereas it is the failure on your part to complete the project within stipulated period you are liable to pay 90% capitalized value Rs.167607000/- with interest as decided by M.C.G.M. You are hereby directed to show cause within 7 days on receipt hereof why the 90% capitalized value amounting to Rs.16,76,07,000/- should not be recovered from you with interest for your failure to complete schemes. Yours faithfully, Sd/- Asstt.Commissioner (Estates)”. 11. The Petitioners through their Architects made representation to the concerned Officials of the Corporation on 9/5/2008, 16/9/2008, 14/10/2008, 23/10/2008, 3/11/2008, 7/11/2008 and 17/11/2008. It is the case of the Petitioners that they have completed the sale component building up to 19 floors, which consumes up to 2.0 FSI. According to the Petitioners, the work of the construction of building, however, has come to standstill awaiting the decision of the Corporation with regard to grant of additional 0.5 FSI in terms of the amended Regulation. 12. Besides the above said show-cause notice, Assistant Engineer (B.P.) City-II issued notice on 17th May 2008 under Section 354A of the Mumbai : 14 : Municipal Corporation Act on the ground that he was satisfied that the Petitioners had unlawfully commenced/been unlawfully carrying on erection of building/execution of work described in the Schedule to the said notice. However, the subsequent notice issued on 17th May 2008 was withdrawn in the context of the demand made by the Corporation calling upon the Petitioners to pay balance 90% capitalized value of Rs. 16,76,07,000/- with interest as may be decided by the Municipal Commissioner. The Petitioners have filed the present Petition essentially challenging the said demand. 13. This Court on 4th May 2009, called upon the Competent Officer of the Corporation to consider the grievance of the Petitioners and pass a speaking order. Consequent to the said directions, the Deputy Municipal Commissioner (General Administration and Improvement) after giving opportunity to the Petitioners has now passed a speaking order on 8th June 2009. He proceeded to examine two points. Firstly, whether Petitioners were eligible to get additional FSI of 0.5. Secondly, can the additional FSI of 0.5 be granted to the Petitioners without payment of remaining 90% capitalized value amounting to Rs.16,76,07,000/- as well as completing the other formalities. The first point has been answered in favour of the : 15 : Petitioners. With regard to the second point, the same is answered against the Petitioners. The Deputy Municipal Commissioner has found that the Petitioners were expected to complete the “entire project” within two years from 1996. That has not happened. The Petitioners, however, were able to complete only the rehabilitation component up to November 2001 in respect of which Occupation Certificate has been issued in March 2003. Whereas, the Scheme obliged the Petitioners to complete even the construction of sale component within two years from the sanction of the Scheme. But N.O.C. for the sale component was obtained only in June 2006. The Commencement Certificate to start the construction of sale component was issued by the Deputy Chief Engineer (B.P.) City on 24th January 2006. The sale component was still not fully complete. It is, however, noted that the Petitioners have almost completed the construction of sale component, i.e. up to 19 floors which would exhaust the 2.0 FSI granted as per the sanctioned Scheme in terms of the then existing provisions. He then found that the Petitioners want to take advantage of the amended Regulation 33(7) without fulfilling their obligation of completing the construction as per the old proposal within time nor have shown willingness to pay the balance capitalized value. On the other hand, the Petitioners were insisting for grant of further FSI of 0.5 in relation to sale component relying on the : 16 : amended provision. It is also noticed in the said order that any variance in the FSI and built up area of the Scheme is a matter which will have to be decided only by the Improvement Committee. The Competent Authority has found that the Petitioners were obliged to complete the construction within two years from August 1996. Indeed, the Petitioners could have requested for extension, however, no formal request for extension of time has been made. The Commissioner has also noted that although the time period can be extended upon submission of an application, the payment of the remaining 90% of the capitalized value cannot be further delayed because of the inordinate delay in construction of the sale component. That would result in depriving public exchequer of the remaining capitalized value to the extent of Rs.16,76,07,000/-, notwithstanding the fact that the construction of the sale component as per the sanctioned scheme was almost complete. Having recorded this finding, the Deputy Municipal Commissioner then proceeded to determine the period from which the Petitioners would become liable to pay interest on the outstanding payment of capitalized value and the rate of interest therefor. He has held that even if benefit is given to the Petitioners for the period up to January 2006 when the Commencement Certificate for the sale component was issued on 24th January 2006, the Petitioners were expected to complete the said project : 17 : within two years therefrom i.e. up to 25th January 2008. For that reason, the liability of the Petitioners to pay the balance capitalized value would commence from 25th January 2008 and having failed to pay the amount inspite of such demand, the Petitioners were liable to pay interest on the outstanding amount at the rate of 18% with effect from 25th January 2008. On this finding, the Deputy Municipal Commissioner proceeded to pass the following operative order. The same reads thus: “ORDER I hereby direct the Petitioners/Developers viz.M/s.Crescent Builders to pay the remaining 90% of the Capitalized value amounting to Rs.16,76,07,000/- along with 18% interest thereon with effect from 25th January 2008 to the A.C. (Estates). The issuance of N.O.C. for granting of extra F.S.I. To the Developers can be considered only after the capitalized value has been paid as above.” 14. The Petitioners have now challenged even the speaking order dated 8th June 2009 passed by Respondent No.7. The reliefs claimed in the amended Petition read thus: “(a) That this Honorable Court may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ order or direction directing the respondents to grant to the petitioner the benefit of 0.5 FSI more as per the Notification dated 25th January 1999 issued by the Urban Development Department of Govt. of Maharashtra and the Circular of the Respondent no.1 Corporation dated 14th June 2000 in respect of redevelopment scheme at Plot No.C.S.No.1/725 and 725 (Part) of Malabar Hill Division, M.P.Mills Compound, Tardeo, Mumbai 400 034 on payment of 10% of the capitalized value on grant of commencement certificate in respect of o.5 FSI and balance 90% on grant of occupation certificate. : 18 : (a-i) That this Honourable Court be pleased to issue appropriate writ, order and direction calling for the records and proceedings of the impugned order passed by the respondent No.7 received by the Petitioners on 8th June 2009 being Ex.Q hereto and after examining the legality, validity and propriety thereof be pleased to quash and set aside the impugned order.” (b) That pending the hearing and final disposal of the present petition this Honorable Court may be pleased to issue a mandatory order and direction directing the respondents to grant permission/commencement certificate to the petitioner for construction beyond 19th Floors of the Sale Building situate on Plot bearing City Survey No.1/725 and 725 (Part) of Malabar Hill Division, M.P. Mills Compound, Tardeo, Mumbai 400 034 on payment of 10% of the capitalized value on grant of commencement certificate in respect of 0.5 FSI and balance 90% on grant of occupation certificate, or on such terms and conditions as this Honorable Court deem fit and proper in the circumstances of the case; (c) Ad interim reliefs in terms of prayer (b) above; (d) For costs of the present petition; (e) For such other and further reliefs as the nature and circumstances of the case may require.” 15. The principal submission of the Petitioners is that, there is no legal provision either in the Act or the Regulations which empowers the Corporation