1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 3258 OF 2011 M/s. Shree Ambica Developers ] A sole proprietory concern of ] Mr. Madeva Patel, having its ] Registered Office at Building No. F2, ] Shop No. 5, Sector – 3 ] Navi Mumbai 400 706 ] ..Petitioners versus 1. State of Maharashtra, ] Through the Urban Development ] Department, Mantralaya, Mumbai ] 2. Shri Tanaji V. Satre ] Vice-Chairman & Managing Director, ] CIDCO Maharashtra Ltd., ] Having its Head Office at CIDCO Bhavan ] CBD Belapur, Navi Mumbai 400 614 ] And having its Registered Office at ] “NIRMAL”, 2nd floor, Nariman Point, ] Mumbai 400 021 ] 3. CIDCO Maharashtra Ltd. ] having its Head Office at CIDCO Bhavan, ] CBD Belapur, Navi Mumbai 400 614 ] And having its Registered Office at ] “NIRMAL”, 2nd floor, Nariman Point, ] Mumbai 400 021 ]..Respondents Mr. J. P. Cama – Sr. Advocate and Mr. Rohan Cama with Mr. Sanjay Udeshi i/b. M/s. Sanjay Udeshi & Co. for Petitioners. Mrs. M. P. Thakur, Assistant Government Pleader for Respondent No. 1. Mr. V. A. Thorat – Sr. Advocate with Mr. G. S. Hegde and Ms. P. M. Bhansali i/b. G. S. Hegde & Associates for Respondent Nos. 2 and 3. 2 CORAM : S. A. BOBDE AND SMT. V. K. TAHILRAMANI, JJ. Date of Reserving the Judgment : 18.11.2011 Date of Pronouncing the Judgment : 19.12.2011 JUDGMENT : (Per : S. A. Bobde, J.) 1. The petitioners have approached this Court against the order dated 17.3.2011 passed by the Vice Chairman and Managing Director, CIDCO revoking the permission granted to the petitioners for change of user of Plot No. 1 in Sector 1, Kharghar from commercial to commercial cum residential and directing restoration of the user of the plot for commercial purposes. The only question that arises is whether the respondents – CIDCO is entitled to cancel the permission granted earlier for change of user of Plot no. 1 at Kharghar from commercial to commercial cum residential use after the CIDCO having granted such permission and the petitioners having acted on it. 2. Respondents – CIDCO allotted plot no.1 to the petitioners for commercial use in pursuance of a tender in which the petitioners were the highest bidders. The petitioners were allotted plot after their bid of Rs. 40,00,00,000/- (Rupees Forty Crores) was accepted. The petitioners having 3 obtained the allotment duly applied for and was granted a change of user of the plot from commercial use to commercial cum residential use by the respondents – CIDCO on payment of necessary charges. The petitioners acted upon allotment and permission for change of user by making construction upto the plinth level and by entering into agreements to sell residential flats. The respondents – CIDCO issued a stop work notice to the petitioners on 14.9.2010. CIDCO issued show cause notice and after considering reply filed by the petitioners cancelled the permission and directed restoration of the user for commercial purposes interalia on the ground that the permission granted earlier was illegal and CIDCO had no power to grant such permission. The said revocation order has been challenged by the petitioners. 3. Intending to develop the property, the petitioners on 20.11.2009 applied for plot of land held by CIDCO in pursuance of a tender for allotment of plots floated by CIDCO in respect of plots at Navi Mumbai. They invited sealed offers for acquisition of commercial plots on lease under the General Terms and Conditions prescribed for Disposal of Plots. The offerers were to make offer in the prescribed form. The said Terms and Conditions for commercial plots stipulated that the building shall be constructed for the business, Mercantile / Commercial use only. Clause 17 of the General Terms and Conditions inviting offers however clearly 4 contemplated that any change in the use of the land shall not be made automatically but the intending lessee, if he so desires, may apply for the application to be modified and that the Corporation may at its sole discretion, apply the modification of such regulation on payment of development charges, additional premium and other charges as may be decided from time to time. 4. On 20.11.2009 the petitioners submitted its bid for allotment of plot No. 1 in Sector 1 admeasuring 5296.92 square meters at the rate of Rs. 75,515.61 per square meter and paid an amount of Rs.1,35,16,000/- by way of earnest money deposit. The petitioners bid at Rs.40,00,00,000/- was the highest bid and CIDCO allotted the plot to the petitioners by a Letter of Allotment dated 15.12.2009. Clause 18 of the Letter of Allotment reads as follows: “18. LAND USE : The plot of land will be used for commercial purpose only and for no other purpose.” The above clause restricted the user of the land for commercial purpose only. However clause 20 contained the power to relax and make modification of various aspects including the change of user of land. Clause 20 provided that the allotment of land would be governed by the General 5 Development Control Regulation for Navi Mumbai 1975, however, permitting the Corporation to exercise its own discretion and apply the modification of such Regulations on payment of certain charges or recovery of such additional lease premium as may be prescribed. Clause 20 reads as follows: “20. Application of General Development Control Regulations for Navi Mumbai, 1975. The allotment of land will be governed by the prevailing provision contained in the General Development Control Regulation for Navi Mumbai, 1975. Any modification to the said Regulation and in particular to the Floor Space Index and change of use of the land shall not be made automatically applicable but the intending lessee, if he so desires, may apply for the application of modified regulation of the General Development Control Regulation for Navi Mumbai, 1975 to the Corporation. The Corporation may at its sole discretion, apply the modification of such regulation on payment of (1) Development charges (2) Additional premium and (3) other charges if any as may be decided by the Corporation from time to time. Sub-division of plot shall not be permitted.” It may be noted at this stage that the General Development Control Regulations for Navi Mumbai issued under the Maharashtra Regional and Town Planning Act 1966 had been amended by the Notification dated 6 31.8.2009 i.e. before the allotment in the petitioners favour and even before the tender was floated and the petitioners had made any application. 5. Under the amendment a new clause 16.3 was inserted, which reads as follows: “16.3(1a) I change of use : Corporation may allow change of use on plots allotted exclusively for Residential use, Residential cum commercial use or commercial use on the following conditions:- a. From Residential use (FSI 1.0) to Residential cum business / mercantile use or business or mercantile use wholly (FSI 1.5) subject to the condition that all such business / mercantile plots wholly or in combination with residential shall not exceed the limits specified in clause 16.3 (1a) B of the G D C R. b. From business or mercantile use (FSI 1.5) to Residential cum business / mercantile use (FSI 1.5) and vice versa. c. To allow such change uses only for plots having a minimum area of 1000 sq. mt. and deriving access from road of 15.0 mt. width or more. Further the corporation may levy additional less premium for allowing such change of use 7 and/or grant of additional FSI. With due consideration of other provisions laid down under GDCR. d. After grant of change of use the allottee shall comply with all provisions of GDCR including the passing standards without seeking relaxation of any kind in GDCR provisions. e. Business / Mercantile use other than residential use allotted shall not be more than 30% subject to further condition that the principal land use should be segregated by separate entrance. f. Conversion from Residential to Residential cum business / Mercantile use shall not be permitted on the lands for educational institutional and public amenity purpose.” 6. Apparently looking to the slump in the real estate industry and a lower demand for commercial spaces, the petitioners made an application to the CIDCO for a change of use of the plot from commercial user to commercial cum residential use citing similar permissions given in the cases of other plots in other Sectors such as Sector Nos. 2, 4, 11 and 14 at Kharghar. The CIDCO granted this permission by letter dated 25.2.2010 and issued a letter in respect of the petitioners plot. The letter stated that the request for change of user of the plot from commercial to commercial cum 8 residential has been accepted by the Corporation subject to interalia keeping the commercial component upto 30% and asking for payment of sum of Rs. 10,000/- as administrative charges; which was apparently paid on the same day. 7. Acting upon the permission of change of user, the petitioners applied to The Cosmos Co-operative Bank Ltd. Pune for finance. The bank wrote to the CIDCO stating that the petitioners appear to have paid a sum of Rs. 19,32,420,73.00 towards premium and therefore requested CIDCO for a no objection to mortgage the said plot in favour of the Bank. The petitioners also made the same request to CIDCO. In turn, the CIDCO granted no objection for creation of a mortgage against the property subject to the condition that the lien of the Cosmos Co-operative Bank will be recorded with the CIDCO only after receiving the entire payment of lease premium etc. Cosmos Bank thus sanctioned the credit facilities for the petitioners project which is estimated at Rs.30,000 lacs for the construction of residential cum commercial complex at the rate of interest of 16.50%/ per annum. 8. CIDCO thereupon executed on 12.3.2010 an Agreement to Lease the plot specifically for residential cum commercial purposes. The recitals and the clauses of the said Agreement clearly stipulate that the petitioner shall 9 have a licence to enter the land for the purpose of erecting a building for a residential purpose except that the ground floor will be permitted to be used for shopping and for no other purpose. Clause 14 of the Agreement to Lease stipulated as follows: “14. LAND USE The plot of land will be used for commercial cum residential purpose only and for no other purpose.” 9. On 12.3.2010 the petitioners executed a Possession Receipt for having received possession of the said plot earmarked for residential cum commercial purposes. 10. Acting on the licence and having obtained possession, the petitioners have apparently executed Agreements to sell to several persons for consideration. We are informed that the total value of the Agreements to Sale entered into by the petitioner are in the region of : Total Sale Value Rs.30,14,34,200/- Received payment Rs.11,50,75,325/- Balance payment Rs.18,63,57,875/- Till 10.12.2010 The petitioners have stated that they have entered into agreement to sell 10 flats in the said premises to about 55 persons and have received amounts as above. 11. On 15.12.2010 the Vice Chairman and Managing Director of CIDCO issued a show cause notice stating interalia that the Principal Secretary in the Urban Development Department of the Government of Maharashtra has in an enquiry recorded findings about the illegality in the change of user of the plot and recommended revocation of the change of user and restoration of the residential use of the plot. The notice further stated that it was specified in the general terms and conditions of the letter of allotment that the land will be used only for commercial purpose and for no other purpose; the petitioners though aware of this have deliberately and intentionally applied for change of user which was approved by the then Managing Director and therefore called upon the petitioners as to why permission for change of user should not be revoked. The petitioners submitted reply pointing out that they had applied for change of user from commercial to commercial cum residential purposes even though the rates for commercial premises in the vicinity were higher than those of residential premises and that their application had been duly granted; after the grant they had obtained project finance to the tune of Rs.30 Crores; that the commencement certificate permitted construction of 100 residential units, 28 commercial and 8 office units; that third party rights had been created by 11 registered sale agreements and in pursuance of which they have received part payments in the sum of Rs.11,50,75,325/-. They claimed that they were not aware of any enquiry report submitted by the Principal Secretary, Urban Development Department of the State of Maharashtra; in these circumstances the stop work notice and show cause notice were illegal. After hearing the petitioners, the respondents passed the impugned order on 17.3.2011. 12. The said order is mainly based on the fact that the invitation to offer referred to plot no. 1 Kharghar as a commercial plot; that its use was meant to be for commercial purposes; the petitioners made an application for change of user though they were aware that the plot was for a commercial purpose. The CIDCO was prohibited from granting change of user of this plot from commercial to commercial cum residential. The permission granted to the petitioners therefore was without considering the express terms and conditions of the concluded agreement; the permission was ultra vires and contrary to public interest. The petitioners submission that they were protected by the principle of promissory estoppel was rejected on the ground that there was no valid representation made by the respondents – CIDCO and that the petitioners ought to have established that the subordinate officer who made the representation is competent to make a binding promise on behalf of the public authority or government and the act 12 of the subordinate officer is ultra vires. The order finally stated that the agreement to lease itself is vitiated since it is made with a malafide intention. 13. Mr. Cama, the learned counsel for the petitioners submitted that after the respondents allotted the plot to the petitioners for commercial purpose, the petitioners looking to the slump in the market and economic viability of the project, applied for change of user from commercial to commercial cum residential purposes in accordance with the general terms and conditions which specifically permitted such a change of user; that this permission was duly considered and granted by the appropriate authority of the respondents – CIDCO i.e. Vice Chairman and Managing Director, that after such change of user the CIDCO approved the execution of a mortgage of the plot to the bank on the basis that it is a commercial cum residential plot; agreement to lease was executed on the basis that the plot was for a residential cum commercial use and the licence was also for commercial cum residential purpose. The CIDCO took residential development charges separately for commercial component and the residential component and granted a commencement certificate specifically for the work of the proposed residential cum commercial building. It was submitted on behalf of the petitioners that apart from spending a sum of Rs.42 Crores on land costs and duty, the petitioners have spent about Rs.10 Crores in constructing the same 13 upto the plinth level. They have sold 35 residential units and 20 commercial units. The petitioners have taken a loan from the Cosmos Bank which is repayable between April 2011 to March 2012 in monthly installments of Rs. 250 lacs plus interest. In the circumstances the action of the respondents – CIDCO is highly prejudicial to the petitioners besides being illegal. The submission on behalf of the petitioners is that the CIDCO permitted the change of user upon an application made to it under the terms and conditions of allotment and granted it in exercise of the powers it has for allowing change of user. According to the petitioners there was nothing illegal about the change of user. Even otherwise the respondents are not entitled to the principles of promissory estoppel to revoke such change especially after the petitioners have acted on the permission, made construction upto the plinth level and also entered into agreements to sell residential flats to people. According to the petitioners they are not aware of any departmental enquiry which may have been conducted by the government on the basis of which the respondents – CIDCO appear to have initiated the action. 14. Mr. Thorat, the learned counsel for the respondents – CIDCO submitted that the petitioners could not have applied for change of user since general terms specifically stipulate that the plot was for commercial purpose. The CIDCO as a planning authority under the Maharashtra 14 Regional and Town Planning Act, 1966 had intended the area to be developed for commercial purposes only and the Vice Chairman and Managing Director had no authority to grant change of user from commercial to commercial cum residential. According to the learned counsel the grant of permission for change of user is vitiated by the illegality and malafides which were discovered by the government in a general enquiry relating to illegalities committed by the CIDCO in granting change of user in the area and that the petitioners ought not to get any relief from this court because of illegal permission obtained by them. According to the learned counsel the permissions have been revoked in larger public interest and it would be inequitable to hold the public authority to the promise or representation made by it. In any case the act of the officers of the respondents are ultra vires and do not bind the CIDCO. 15. Upon hearing the parties, it seems that the main contention raised on behalf of the CIDCO is that the plot was meant specifically for commercial purposes and the permission to change the user to commercial cum residential purpose is illegal; there being no power to do so. This submission cannot be accepted. On 31.8.2009 the General Development Control Regulations (GDCR) for Navi Mumbai were specifically amended in regard to change of user. By notification issued under the Maharashtra Regional and Town Planning Act a new clause, 16.3 (1a) was introduced as 15 reproduced in para 5 above. This clause specifically permitted a change in user. The tender for allotment of the plot was floated in November 2009 after the aforesaid amendment. Thus clause 20 reproduced in para 4 supra and the new clause 16.3 (1a) reproduced in para 5 above clearly informed the CIDCO to permit a change of user. We thus find that the CIDCO was in fact vested with the power to permit change of user and there is no basis for the reasons stated in the impugned order that no permission for change of user could have been granted since there was no provision for allowing such change. The CIDCO as a planning authority was undoubtedly vested with the power to permit change of user of the land even though the land was allotted for commercial purposes. The power having been clearly contemplated by the invitation to offer itself. There is thus no merit in the contention that the CIDCO officials were prohibited from granting permission in change of user of the plot and the change was granted in contravention of the terms and conditions of the concluded agreement. At this juncture it may be noted that it was argued on behalf of the petitioners that the petitioners did not gain any financial advantage by having the user changed from commercial to commercial cum residential user since the rate at which residential accommodation was being sold in the vicinity was lower than the rate at which the commercial accommodation was being sold. There is no material to accept this contention nor is it germane to the point raised. 16 16. Equally there is no merit in the contention that the subordinate officer of CIDCO had no authority to make a representation on its behalf that the user can be and is being permitted to be changed from commercial to commercial cum residential. It is not possible to accept the description of the Vice Chairman and Managing Director of CIDCO as a subordinate officer and a subordinate officer who was not entitled to make any representation. We have noted above that the rules permitted such change of user and the act of converting the change of user cannot be called ultra vires. 17. Mr. Thorat, the learned counsel for the respondents – CIDCO has fairly accepted that it is not the case of the CIDCO that the act of permitting change of user by the Vice Chairman and Managing Director is vitiated by fraud but that according to the respondents it is only illegal. It is thus not necessary for us to decide whether in the present case on the principle that fraud does not bind the Corporation and vitiates everything. According to Mr. Thorat the earlier permission was granted by the Vice Chairman and Managing Director who was an IAS Officer and by the Marketing Manager who signed the documents. According to Mr. Thorat the officers who granted permission earlier i.e. Vice Chairman and Marketing Manager who signed the permission misconducted themselves and some action has been 17 taken against the said officers. We however find that there is no mention of this in the impugned order and, as we have noted, it is not their case that the permission is vitiated by fraud. 18. We are thus of the view that it is not permissible for CIDCO on the principle of promissory estoppel to revoke the permission either on the ground of public interest which is not shown to have been attracted having regard to various actions which the petitioners have taken on the basis of the representation and the considerable investment and indebtedness which they have incurred. The said actions are referred to earlier and there is no dispute on behalf of the CIDCO that the petitioners have in fact made the aforesaid investments and taken the aforesaid loans. 19. It was at this stage urged on behalf of CIDCO by Mr. Hegde that no prejudice can be said to be caused by the CIDCO merely because permission to the change of user has been revoked when the allotment itself has not been cancelled. According to the learned counsel the construction has only reached the plinth level and no prejudice would be caused to the petitioners. It is not possible to accept this contention particularly since the aforesaid investments etc. made by the petitioners have not been effectively controverted by CIDCO. Moreover a similar argument has been rejected by a Division Bench of this Court in an earlier case considered in Popcorn 18 Entertainment Corporation & Anr. vs. The City Industrial Development Corporation [2009(6) ALL MR 133] where it was observed as follows: “31. But there is one distinguishing factor on which CIDCO has laid stress. In Banthia’s case (supra) considerable construction was made on the allotted plots and, therefore, the Supreme Court observed that having acted and held out assurances to the appellants, which caused the appellants to alter their position to their prejudice, it was not open to CIDCO to take a unilateral decision to cancel the allotment on the ground that it had acted without jurisdiction. On behalf of CIDCO, it is argued that since the petitioners have not made any construction on the said lands, it cannot be said that they have altered their position to their prejudice on account of assurances held out by CIDCO. 32. We are unable to accept this submission. Though it is true that the petitioners have not made any construction on the said lands, it is their case that they have expended large sums on preparation of building plans by engaging architects. Moreover, the entire lease premium is paid by them in the year 1986 and the money is lying with CIDCO since then. In such a situation, it is not possible to say that there