Covid Rebate On Premium FSI Applicable Till Completion Of Project For Builders Who Availed 2021 GR & Fulfilled Conditions: Bombay High Court

In a relief for numerous developers and flat purchasers, the Bombay High Court has held that the 50% rebate for purchasing additional floor space index (FSI) granted by the Maharashtra Government to developers during the Covid-19 pandemic would be applicable till completion of the project and the difference amount couldn’t be recovered subsequently.

A division bench comprising Justices GS Patel and Kamal Khata has directed the Municipal Corporation of Greater Mumbai (MCGM) to re-issue Intimations of Disapproval (IoDs) and Commencement Certificates (CC) to petitioner developers without any additional payment.

“We dispose of all these Petitions by directing the MCGM to revalidate or renew the IoDs in question without insisting upon payment of an additional or differential premium but only in respect of those developers/projects that have met the conditions of the 14th January 2021 GR (including payment of the full amount of the premium within the time stipulated, submission of the undertakings etc.)”

Facts

Floor Space Index (FSI) is the ratio of plot area to the built-up area and decides the area a developer can build on a particular plot. Usually, the FSI for Greater Mumbai is 1.33 while for the suburbs it is 1.

Over and above this limit a builder is allowed to buy space after paying a premium to the civic body. In the GR issued on January 14, 2021, the Urban Development Department granted 50% rebate on premium to be paid for additional FSI if the builder paid 100% stamp duty for the flat purchasers. This was applicable till December 31, 2021.

Accordingly, several builders were granted building permissions like IoDs on discounted rates. However, when the IoDs lapsed after a year, the MCGM asked the builders to pay the remaining premium at an increased market rate.

“What the State Government giveth, the Municipal Corporation taketh away,” is the complaint of these nine Petitioners…claiming that they were terribly hard-hit by the lockdown during the Covid-19 pandemic. Money is the developers’ oxygen, and during that unanticipated upheaval, developers’ oxygen levels plummeted,” the court observed about the situation.

Senior Advocate Aspi Chinoy, appearing for the MCGM, contended that if the IoD lapses after a year as construction hasn’t commenced, it becomes a fresh IoD and a fresh proposal. Since it was a new proposal, concessional rates applicable only for a limited period could not be availed. If benefits were given, it would necessarily carve out an exception for Section 347(2) of the MRTP Act.

However, the petitioners said the demand for a premium for the second time (albeit with an adjustment) is contrary to law and wholly defeats the purpose of the relief-oriented and relief giving GR in question.

Hence, they sought the court’s intervention under Article 226 of the Constitution of India.

At the outset, the bench noted the additional FSI was an entitlement, not a ‘property’ to be protected under Article 300-A of the Constitution, as claimed by the petitioners. In fact, according to the new Development Control & Promotion Regulation 2034 (DCPR) everything could be bought on payment of a premium.

“Open space deficiencies can be cured on payment of a fee, never mind that these open spaces are required for general health and well-being of those people for whom these projects are apparently being undertaken,” the court said on a side note.

It further noted that the GR came with certain stringent conditions and it was only after the fulfilment of these conditions that builders could avail of the rebate. This included paying 100% stamp duty. So the idea was not just to give the developers a bonanza but also ease the burden on flat purchasers.

The purpose of the GR was to provide a fillip to the real estate sector at a time when it was perceived to be in the doldrums. The GR came not abruptly, but six months after the receipt of an expert report commissioned by the State Government, the bench said.

It further noted that sometimes developers aren’t able to begin construction on projects for reasons completely beyond their control. Many times it is owing to delays on part of the MCGM. “The MCGM wears many hats in this development, planning and permission giving process. It only takes one officer to withhold or delay a required NOC with a resultant lapsing of an otherwise valid IoD compelling the developer to pay the differential premium in the following year.”

Ultimately, the court said that MCGM decisions follow from the UD Department’s GR, therefore it is not independent of it nor could it control the GR.

Every single project that benefits from the concessions in the GR in question must continue to absorb the stamp duty burden until that area for which the benefit has been obtained has been sold, the court said, adding, there could not be a situation where the developer goes back and asks the flat purchaser that since the IoD has lapsed he now won’t pay the entire stamp duty.

“The rebate granted cannot possibly be made illusory…. If the argument by the MCGM is to be accepted, then the resultant situation would be that the so called rebate would be all but wiped out and in addition the developers would necessarily have to continue to bear 100% of the stamp duty burden. That could not have been the intention of the GR at all.”

"It follows, therefore, that the additional FSI by paying the rebated premium would necessarily have to continue without being required to pay additional premium until completion of the project so long as the undertaking to pay stamp duty continued. The two go hand in hand. They cannot be separated. This applies only to those projects that took the benefit of the GR and abided by its conditions," the Court held.

The developers who approached the HC include, Prestige Estate Projects Ltd through their shareholder Faiz Rezwan, Sugee Two Developers LLP through Nitin Varadkar, Sugee Nine Developers LLP through Jitendra Rawal, Sugee Fifteen Developers LLP through Anand Gandhi, Ankur Premises Developers LLP, Relcon Infraprojects ltd, Mayfair Housing Pvt Ltd, and Evershine Builders Pvt Ltd.

Appearances - Sr Adv Milind Sathe, Mr. Cyrus Ardeshir instructed by Adv Shriya Mehta, Adv Pravin Samdani, Adv Simil Purohit, Sr Adv Zubin Behramkamdin, Adv Saurish Shetye, Adv Pranit Kulkarni, Dr. Abhinav Chandrachud for the petitioners

Sr Adv Aspi Chinoy, Advs Joel Carlos and Pooja Yadav for MCGM

Adv Abhay Patki AGP

Case Title - Prestige Estate Projects Ltd vs The State of Maharashtra

Case No- WRIT PETITION (L) NO. 17993 OF 2023

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