'Land Meant For Poor Can't Be Commercially Exploited' : Supreme Court Sets Aside HC Direction To Convey Mumbai Plot To Pvt Company

The Supreme Court on Tuesday (January 7) set aside Bombay High Court's order directing the Municipal Corporation of Greater Mumbai (MCGM) to execute a formal conveyance deed in favour of Century Textiles and Industries Limited granting it ownership rights over approximately five acres land in Lower Parel.

A bench of Justice Vikram Nath and Justice Prasanna B Varale allowed MCGM's appeal noting that the High Court should have rejected Century Mills' petition due to its inordinate delay in seeking conveyance over six decades after the expiry of its lease executed for constructing homes under the Poorer Classes Accommodation Scheme (PCAS).

The Court further observed that request made by Century Textiles in 2009 for altering the use of the land for commercial purposes represented a breach of the lease conditions and a subversion of the statutory policy aimed at uplifting marginalized groups.

“The statutory and contractual framework is not merely concerned with property rights and transactions in the abstract; it aims to harness urban development to serve the pressing social needs of the community. By seeking to redirect the property towards commercial exploitation, Respondent No.1 (Century Textiles) threatens to erode the very foundation upon which the original agreement stood. The contractual language and statutory purpose are both premised on ensuring that the “demised premises” remain dedicated to providing adequate housing to those otherwise struggling to find decent living conditions in a rapidly expanding metropolis. To ignore or circumvent these conditions would nullify the intended social function of the property and transform a carefully crafted scheme of public welfare into a mere instrument of private profit”, the Court observed.

The Court observed that the arrangement was based on a quid pro quo—low rent and favorable terms in exchange for tangible social benefits—which the lessee's conduct violated. Allowing this would erode the legislative intent, betraying the public trust and harming the targeted beneficiaries, the Court said.

“Allowing Respondent No.1 to disregard these obligations would open the door to hollowing out the protections and advantages established by the statute. It would set a precedent where statutory schemes designed to uplift vulnerable groups could be co-opted for purely commercial ends, undermining the trust and faith that must exist between public authorities, private actors, and the most vulnerable segments of the population”, the Court said.

The Court added, “When the lessee attempts to convert this arrangement into a vehicle for commercial gain, it repudiates the fundamental bargain. The public trust reposed in the private entity to serve a greater good is thus betrayed. This not only harms the class of beneficiaries whom the legislation and agreement were designed to protect, but also imperils the broader public interest by allowing beneficial legislative frameworks to be distorted and exploited contrary to their genuine purpose.”

The Supreme Court emphasized that the lease explicitly mandated its use for providing housing to poorer classes, strictly prohibited commercial use and outlined the purpose of the demised premises as dwellings for economically weaker sections, particularly employees of the lessee. The preamble of the Bombay Improvement Trust Transfer Act, 1925, reinforced the protective and welfare-oriented objective of improving living conditions for certain classes of inhabitants through initiatives like the PCAS.

“Such a departure from the intended purpose is not only a breach of the lease conditions but also a subversion of the policy that animated the entire statutory regime. The legislation and the contract work in tandem to ensure that urban improvement aligns with the welfare of weaker segments. When land allocated under a special scheme, particularly one centred on “poorer classes” accommodation, is sought to be commercially exploited, it represents a direct affront to the spirit of the enactment. Rather than addressing housing inadequacies and improving urban life for those in need, the resource would be diverted to profit-making ventures that do nothing to alleviate the conditions of the underserved”, the Court held.

The Court observed that while commercial use of the property might have been permissible had the land been duly conveyed, no such conveyance occurred, nor was any cost paid for the transfer. The lease deed alone conferred no rights to alter the property's use, the Court held.

Factual Background

In 1918, Century Textiles and Industries Limited, then operating a cotton mill, applied to the Improvement Trust under the PCAS to construct 44 blocks with 980 rooms and 20 shops for economically weaker sections. The land, measuring 50,000 square yards, was divided into three plots—A, B, and C, with the present dispute concerning Plot A (23,000 square yards). Scheme No. 51 was notified on May 1, 1918 approving the request. Century Textiles built 476 dwellings and 10 shops by 1925. In 1927, the company sought and obtained approval to modify the scheme to reflect the reduced construction.

Block B was conveyed outright, and a 28-year lease for Block A, commencing April 1, 1927, was executed on October 3, 1928, with nominal rent. The lease expired on March 31, 1955, but Century Textiles continued to occupy the property. In 2006, it issued a notice under Section 527 of the Mumbai Municipal Corporation Act, 1888, claiming entitlement to the land. Subsequent requests in 2009 and 2014 yielded no action, prompting a writ petition in 2016.

The Bombay High Court ruled in favor of Century Textiles, directing MCGM to execute the conveyance deed. MCGM appealed this decision before the Supreme Court.

Supreme Court's Decision

The Supreme Court concluded that the High Court's decision was erroneous. The Court observed that while Section 51(2) of the Bombay Improvement Trust Transfer Act, 1925 mandated conveyance upon the expiration of the lease term, such an obligation was conditional on strict compliance with the terms of the lease. The Court interpreted “shall convey” in Section 51(2) as conditional, requiring statutory compliance. “rather than insisting that “shall convey” invariably means an unconditional obligation, it is more appropriate to understand that it calls for conveyance only where the arrangement and compliance align with the statutory prerequisites”, the Court held.

The Supreme Court held that the High Court failed to consider the mandatory obligations of the lessee under Section 48(a) of the 1925 Act, which required the lessee to leave the premises in good repair and condition. “The reference in Section 48(a) of the 1925 Act leaving the premises in good repair is not a mere formality but a substantive condition governing the lessee's obligations”, the Court observed.

Thus, the Court held that the statutory provisions under the 1925 Act did not provide for automatic vesting of land ownership.

The Court noted that the Board Resolution No. 325 and the lease agreement did not provide that MCGM would be bound to execute the conveyance upon lease termination. The lease and the resolution only outlined specific terms for the duration of the lease, and there was a “clear misreading by the High Court”, the Supreme Court observed.

The Supreme Court also pointed out that Century Textiles' inaction for 61 years after the lease expired constituted extraordinary delay. The Court noted that the statutory remedies available under Section 527 of the 1888 Act, including filing a suit within six months, were not pursued. Additionally, the legal notice issued in 2006 and the subsequent writ petition in 2016 did not justify such prolonged inaction.

The Supreme Court set aside the Bombay High Court's order.

Case no. – Civil Appeal No. 6667 of 2023

Case Title – The Municipal Corporation of Greater Mumbai & Ors. v. Century Textiles and Industries Limited & Ors.

Citation : 2025 LiveLaw (SC) 34