Bombay HC Sets Aside Rs.432 Cr Penalty Imposed On Reliance Industries & Raghuleela Builders

Division bench of Justice Ranjit More and Justice Bharati Dangre while hearing a petition filed by Reliance Industries Limited (RIL)and Raghuleela Builders held that for construction of any building in Bandra Kurla Complex, several permissions are required from the various different authorities and each of these authorities is required to be approached separately. Thus, the "delay" in construction was beyond the control of the lessee, Court said.

Case Background

On November 1, 2007, MMRDA issued a tender inviting bids for a piece of land admeasuring 10,183.18 square meters at Bandra Kurla Complex, for the construction of a commercial complex of 30,550 sq.mtrs and a public car parking of 20,366 sq.mtrs.

Thereafter, on November 26, 2007 RIL submitted its bid of Rs.918.03 crore for the plot. MMRDA had accepted the offer and had issued a letter of allotment dated December 28, 2007 to RIL, who then paid the entire premium amount of Rs.918.03 crores.

The lease deed dated July 15, 2008 provided for the completion of built up area of 30,550 sq. meters and car parking area of 20,366 sq. meters within four years, comprising of nine floors.

By letter dated September 8, 2011, MMRDA itself offered the additional built up area to RIL for use on the very same plot and by the letter dated March 20, 2012, MMRDA allotted the additional built up area of 67,000 sq. meters against the payment of additional premium of Rs.984 crore. This allotment resulted into raising additional 11 floors on the earlier proposed building of 9 floors.

However, MMRDA issued letters/orders dated February 11, 2014 and December 23, 2014 demanding payment of penalty premium at 10% per year on account of alleged delay in completion of construction of the built up area (BUA) as per the lease agreement and on September 12, 2017 a demand notice was issued by the MMRDA, demanding recovery of penalty in the form of additional premium and interest thereon aggregating Rs.432 crore i.e. Rs.273 crore as penalty upto August 2015, and interest thereon of Rs.159 crore in respect of the same building.

Submissions

Senior Advocate Aspi Chinoy appeared on behalf of RIL and Raghuleela Builders. He submitted that once the additional built up area of 67,000 square meters was allotted for construction of additional 11 floors on the same building, it became impossible to obtain Completion or Occupation Certificates for the building up to 9 floors only.

Chinoy said that since 2012, MMRDA had been considering extension of the period for completion of construction from the existing four to six years, in view of the delays involved in securing permissions from the Ministry of Environment & Forest (MoEF), the High-Rise Committee and other departments.

Moreover, referring to MMRDA's minutes of 131st Meeting held in 2012, Chinoy said that the Metropolitan Commissioner had in fact expressed the view that it was not possible to complete the construction within 4 years and finally in August 2015 MMRDA extended the time limit stipulated in Clause 2(d) of the lease, from four years to six years, but only in respect of leases executed thereafter. This distinction between lease granted before August 2015 and after, is irrational and arbitrary, Chinoy argued.

MMRDA's counsel Senior Advocate Prasad Dhakephalkar argued that Clause 2(d) of the lease-deed gave petitioners period of 4 years to complete construction of BUA and public car parking, which is a public amenity. The occupation of the public car parking ought to precede that of commercial complex. Clause 2(e) which is in statutory form does not confer any power to grant unconditional extension without payment of premium. All extensions are subject to imposition of additional premium for delay, Dhakephalkar submitted.

Judgement

After going through the material on record, the bench noted-

"It was not possible for the Petitioner to separately complete the original 9 floor building, fit for occupation with OC. Diverse NoCs/approvals which were required for the petitioner to apply for OC/part OC, i.e., the Fire NOC from Chief Fire Officer, Mumbai Fire Brigade, MCGM, the storm water drainage completion certificate from the Executive Engineer, MCGM, service lift/fire lift approval from the Executive Engineer, MCGM; and all these approvals could not be applied for and obtained without completing the construction of building of entire 20 floors.

It is wholly unreasonable and arbitrary action on the part of the officers of MMRDA to insist on the completion of construction of built up area within the period stipulated under the lease deed dated 15th July 2008 and to penalise the Petitioner on that count. Therefore, in view of specifying "no time limit for construction of the entire building by utilising additional built up area" while allotment of additional built up area, the same would prevail over the previously stipulated time limit for construction under the lease deed dated 15th July 2008 and the condition of the time limit for construction of initial built up area would no longer be enforced or acted upon.

The MMRDA has itself granted and allotted additional built up area for further monetary consideration during the period of four years under the lease deed dated 15th July 2008. Therefore, MMRDA has itself waived the condition of completion of construction of original built up area within the stipulated period of lease deed."

The bench accepted Aspi Chinoy's submissions and observed-

"The resolution passed by MMRDA for extending the time period for completing construction from 4 years to 6 years only for leases executed after 26th August 2015 also appears to be arbitrary, discriminatory, without basis and justification. The said set of circumstances are prevailing for the construction being carried out under the leases executed prior to 26th August 2015. Therefore, not extending this benefit of this extension of time from 4 years to 6 years to the prior leases in respect of other plots in the BKC, is completely arbitrary, discriminatory, capricious and violative of Article 14 of the Constitution of India.

The classification sought to be made between the leases prior and subsequent to 26th August 2015 is not founded on intelligible differentia and neither does this differentia has any logic, rational, nexus to the object sought to be achieved. The MMRDA has sought to treat equals as unequal. The lessees of plots are being discriminated on the basis of their date of execution of their leases. The lessees who are placed in similar circumstances prevailing for construction in Bandra Kurla area are entitled to equal treatment guaranteed under Article 14."

Thus, the writ petition was allowed.