Real Estate – December - 2013

Real Estate – December 2013

Supreme Court's Judgements

A.    Municipal Corporation of Greater Mumbai and Ors vs. Kohinoor CTNL Infrastructure Company Private Limited and another decided on December 17, 2013.

Facts:

The plans submitted by Respondent No. 1 for construction of Wings-‘A’, ‘B’ and ‘C’ of the building were sanctioned by the Municipal Corporation of Greater Mumbai (“the Corporation”). After the Ministry of Environment and Forests, Government of India granted clearance for the construction of commercial building, the Corporation issued commencement certificated. The Joint Commissioner of Police (Traffic) issued NOC for the development of a multi-storied Public Parking Lot (“PPL”) and videa letter the State government granted in-principle approval for construction of a multi-storied PPL. Thereafter, the Corporation issued the Letter of Intentfor the same. During the construction of the building, the Urban Development Department of the State Government sent a letter to the Municipal Commissioner requiring him to submit a proposal for amendment of Development Control Regulation (“DCR”) for limiting the height of parking towers to 4 floors and also for revocation of all sanctioned proposals, where the commencement certificates had not been issued. In view of thesaid letter, the Corporation issued a circular prescribing certain conditions under Clause the clauses of DCR and clarified that all proposals for public parking lots shall be considered subject to conditions prescribed therein. The new conditions sought to limit the height of public parking to ground plus 4 upper floors and 2 basements.

As a sequel to the above changes, the Corporation issued notice to Respondent No. 1 requiring it to show cause as to why the commencement certificate may not be revoked. Respondent No. 1 submitted detailed reply and pleaded that the amended of the DCR cannot be made applicable to its buildings because substantial construction had already been incurred. Thereafter, the concerned Executive Engineer issued stop work notice and directed Respondent No. 1 to restrict the work of public parking to 4 floors instead of 13 floors. After about six months, Additional Municipal Commissioner passed order wherein it held that as there is a substantial construction on core part of the plot, PPL done in this part will be allowed to the extent of already executed construction as per the present report. In the remaining portion of the plot, where there is no substantial construction, PPL will be limited to G + 4, and the developer was to be asked to modify his plans in consonance with modified DCR.

The Respondent then challenged the stop work notice and the Honourable High Court set aside the order passed by the Additional Municipal Commissioner. Aggrieved by the said High Court order, the Appellants approached the Supreme Court.

Although the dispute between the parties, was with respect to the height of the building consisting of the PPL, it was felt that the Appellants had not applied their mind to some of the issues which, in fact, did arise in the matter of the grant of permission to this complex on the said plot. It was noticed that as per the approved plan, the recreational space available at the ground level was reduced to only 7.7% of the area of the plot, as against the required minimum of 15%. In light of the above the Supreme Court framed further issues for consideration which were as follows:

1.   What should be the correlation between DCR 23 which provides for minimum recreational/ amenity open spaces and DCR 38(34) which deals with podium area regarding the recreational area? Was it permissible to reduce the minimum recreational area provided under DCR 23 on any ground?
2. Whether the exemption from DCR 31(1) under DCR Nos. 33(7), (8), and (9), concerning the impact on traffic is justified, valid and legal. If so, to what extent and in which context?
3. What is the impact of the addition of FSI in the island city on the traffic situation? How can it be controlled?
4. Whether the present mechanism for protection against the fire hazards is adequate and is being implemented effectively? If not, what should be the mechanism for enforcement with respect to the provisions concerning the fire safety?

Held:

The Supreme Court held that both the parties should act strictly in accordance with the memorandum of settlement concerning the PPL arrived at between the Appellant-Municipal Corporation of Greater Mumbai and the Respondents.It was further held that the minimum recreational space as laid down under Development Control Regulation (DCR) 23, cannot be reduced on the basis of DCR 38(34). The recreational space, if any, provided on the podium as per DCR 38(34)(iv), will be in addition to that provided as per DCR 23.

The Supreme Court further held that the Government of Maharashtra, the Development Plan Drafting Committee, and the Appellant- Municipal Corporation will consider the suggestions given by the Supreme Court while framing the Development Plan for Greater Mumbai.

In relation to the fire protection requirements, the Supreme Court held that for the reconstruction proposals ofplots upto the size of 600 sq. mts., open space of the width of 6 meters at least on one side at ground level within the plot, accessible from the road side will have to be maintained for the maneuverability of a fire engine.

The Supreme Court further held that the decision as stated above, will apply to those constructions where plans are still not approved, or where the Commencement Certificate has not yet been issued. All authorities concerned were directed to ensure strict compliance accordingly. Further, the Government of Maharashtra was directed to issue necessary notification within four weeks of this order, reconstituting the ‘Technical Committee for the High-Rise Buildings’.

B.            The DLF Limited vs. Manmohan Lowe and others decided on December 10, 2013.

Facts:

An appeal arising from the judgment of the division bench of Punjab and Haryana High Court was filed before the Hon’ble Supreme Court. The appeal was filed by the Apartment owners of Silver Oaks Apartments, DLF Qutub, Gurgaon seeking a writ of certiorari to quash the deed of declaration filed by the appellant on the ground that the same is not in conformity with Section 3(f) of the Haryana Apartment Ownership Act, 1983 (“Apartment Act”). In the present case the colonizer had failed to include certain areas of the complex, suchas primary schools, shops or community centeras “common areas and facilities” within the deed of declaration, thereby depriving the apartment owners of their rights over such areas.

The Colonizer had purchased large extent of lands to develop a residential colony in Gurgaon to be known as DLF Qutab Enclave Complex. In 1981, the then concerned authorities had approved license to the colonizer to develop group complex to be known as Silver Oaks. The agreement entered between the apartment owners of the DLF complex and the colonizer, provided for sale of a quantified ‘super area’ against the sale consideration specified in the agreement. This super area comprised of an exclusive right to use the common area within the building in which the apartment was situated. The completion certificate filed by the colonizer provided that the responsibility of the ownership of common areas and common facilities as well as their management and maintenance should continue to vest with the Colonizer, till such time the responsibility was transferred to the statutory condominium association under the Apartment Act. Subsequently, the Colonizer asked the Silver Oaks Condominium Association to take over the responsibility of maintaining common areas and facilities and the request was confirmed by the association. A Writ petition was filed before the Punjab & Haryana High Court, seeking that the common area and facilities should also include shops or parking areas, community centers, nursery school and other common facilities. The High Court  held that the Competent Authorities under the Apartment Act can decided as to whether primary schools, shops or community center are common areas or not. Also, the High Court, inter-alia, held that the Colonizer cannot be conferred with an absolute power to declare or not to declare areas normally in common use, to be common areas.

Held:

Section 3(3)(a)(iv) of Haryana Development and Regulation of Urban Areas Act, 1975(‘Development Act’) casts an obligation on the colonizer to construct “at its own cost” or get constructed by any other institution or an individual at its own cost, schools, hospitals, community centers and other community buildings on the land set apart for the said purpose.The Supreme Court, while determining the scope ofthe said section held that cost incurred in discharging the obligations under this section cannot be passed on or recovered from the plot holders/apartment owners in the colony. With regard to this section, the Court further held that Community and other facilities like schools, hospitals, community centers, shops etc. provided in the land set apart under Section 3(3)(a)(iv) are meant for the benefit of the entire colony and not for the apartment owners in one part of the colony.

Further, interpreting various sections of the Apartment Act, the Supreme Court held that each apartment owner shall be entitled to an undivided interest in the common areas and facilities in the percentage expressed in the declaration and such percentage will be computed by taking as a basis the value of the apartment in relation to the value of the property. The Supreme Court while allowing the appeal held that common passages, staircases, lifts etc. are the examples of common areas and facilities. Likewise, stilt parking area may be treated as part of common areas and facilities, in certain circumstances.The nursery schools, shops and community centre are meant for the development of the entire colony and are not confined only to apartment owners.

C.            Oswal Agro Mills Ltd. v Hindustan Petroleum Corporation Ltd. decided on December 10,               2013.

Facts:

The Appellants had proposed construction of the residential cum commercial complex in the vicinity of the refineries and other storage tanks of Hindustan Petroleum Corporation Limited. The Appellant had obtained all the mandatory approvals required from the various departments and ministries. The Respondents had opposed such proposal and had filed a petition against the same before the High Court of Bombay, which had subsequently upheld the objections and had directed the Municipal Corporation to reconsider the approvals granted. Hence, Appellants appealed against the High Court’s orderbefore the Honourable Supreme Court of India.

Held:

The Apex Court found that the High Court had rightly takeninto consideration the safety and public interest, while pronouncing their order. The Supreme Court while taking into consideration the reports submitted by the Intelligence Bureau found that constructing high rise building within 800 meters of the Respondent’s refineries, which is located in an industrial area with many other industries, as wellis a threat to the security and safety of the Respondent. The court also noted that the high rise buildings would overlook the storage tanks containing highly inflammable substances and may serve as a launching ground for any external object towards it by terrorists and the kind. In addition to that the fumes emitted in regular course of industrial activities are carcinogenic, which poses health hazards to the nearby residents and thereforeis against the public interest.

The Supreme Court last observed that merely because there were already other buildings in the vicinity, it cannot be a ground for allowing the Appellant to do the same. The said buildings although constructed are not yet functional as the same has been stayed, pursuant to the above mentioned concerns.

D.           KN AswathnarayanaSetty (D) Tr. Lrs. & ORS VS. State of Karnataka &Ors. decided on                  December 2, 2013.

Facts:

Theappeal was filed against the judgment of High Court of Karnataka, wherein the court had quashed the order passed by the Revenue Minister, Government of Karnataka de-notifying the suit land from acquisition. A preliminary notification was issued with respect to a land for the benefit of the State Government Houseless Harijan Employees Association (‘Society’) and subsequently a declaration was issued under Section 6 of the LA  Act. Subsequently at the request of the owners of the plot, the Government de-notified the land from acquisition. Aggrieved by this order, the Society challenged the order unsuccessfully in the High Court. However, on appeal, the Supreme Court quashed the order of de-notifying the suit land from acquisition. During the pendency of the appeal in the Supreme Court, the Appellants purchased the suit land and approached the Government of Karnataka to de-notify the said land from acquisition. Since the application was not considered by the government, the Appellant filed Writ Petitions before the High Court for directions to the Government to release the land. Subsequently, an order was passed by the government to denotify the land from acquisition. This order was not complied with as the Deputy Secretary to the Government of Karnataka stated that the matter had attained finality after being decided by this Court and possession of the land had already been taken and handed over to the Respondent-society prior to the order passed by the government.

This endorsement made by Deputy Secretary was challenged by the Appellant which was dismissed by the High Court. Aggrieved by this order, the Appellant has preferred an Appeal to the Supreme Court.

Held:

The Supreme Court while dismissing the appeal held that during the purchase of the suit property by the Appellants, the matter was sub-judice and the land acquisition proceedings revived soon after Court quashed the order of de-notifying the suit land from acquisition. The Court while stating Doctrine of lispendens which is based on legal maxim ‘utlitependentenihilinnovetur’ (during a litigation nothing new should be introduced), stated that a person who purchased land subsequent to the issuance of a Section 4 notification with respect to it is not competent to challenge the validity of the acquisition proceedings on any ground whatsoever, for the reason that the sale deed executed in his favour does not confer upon him, any title and at the most he can claim compensation on the basis of his vendor’s title.

High Court's Judgements

A.            NandkumarGanpatPatankarv. Municipal Corporation of Greater Mumbai & Another before          the High Court of Judicature at Mumbai, decided on December 9, 2013.

Facts:

The Appellants were in possession of premises on the land of the Municipal Corporation (“Corporation”) for more than 20 years. By a notice, the Respondents recognized their rights and sought to acquire the land for beautification of the area and offered to provide for alternate accommodation to the Appellants. The offer so made was not acceptable to the Appellants and the validity of the policy of project affected person was challenged.

Held:

While disposing the present appeal, it was held that the concept of project affected person is wide enough to include cases where the Corporation in the process providing alternate accommodation to the Appellants/owners of the commercial structures on the Corporation land. The Court further stated that it is difficult to restrict the Corporation from taking possession of their own land when the question is about a beautification and/or development of the area. The Court suggested that a balance is required to be struck by the occupants on the Corporation land and the Corporation is required to provide them with alternate commercial structures.

News

1.    Higher stamp duty on luxury flats in Maharashtra

Buyers of super luxury flats with ceilings higher than nine feet, with amenities like in-house swimming pools and helipads will have to pay up to 50% higher stamp duty than regular flats. Buyers of flats in luxury properties that exceed 4,000 square metre or one acre of plot with a common gymnasium, club house and swimming pool, would have to shell out an additional 15%. This figure is over and above the up to 20% increase in the ready reckoner (“RR”) rates with effect from January 2014. An RR rate is an annual statement of rates based on which stamp duty is collected from property buyers. The new RR rates will also have a bearing on redevelopment of housing societies. The state government has increased the RR rates for residential and commercial properties by up to 20% in municipal corporation areas of Pune, Thane, Navi Mumbai and Mumbai. The increase in rates mostly affects selected areas like Worli, Napeansea Road, Altamount Road and Carter Road.

2.    Mixed land use approved by Noida Authority

The Nodia authority has approved mixed land use policy for specific areas within industrial and residential sectors. As per the decision, allottees owning residential and industrial property will be able to convert it into mixed land use by paying 50% of the cost difference between the prevailing residential or industrial sector rate and the reserve price of the commercial rate of the area, where the property is located. The same formula will be applicable for allottees wishing to convert mixed land use for both residential and industrial properties. Also, certain support facilities will be provided to allottees after conversion. The concept of mixed land-use has been incorporated in the Master Plan-2031 of Noida and after inviting objections and suggestions, it will be forwarded to the UP government for approval. This decision has received mixed reaction from various stakeholders.

3.    Government allows Limitless to exit JV with DLF

The government allowed Dubai-based Limitless to exit its joint venture with realty major DLF and repatriate capital of about Rs. 200 crore.  DLF and Limitless had formed the JV in 2007 to develop a township at Bidadi in Karnataka, but the project did not take off as the state government could not initiate land acquisition. In the year 2009, the Karnataka government has returned Rs. 400 crore to the joint venture and subsequently DLF Limitless Developers had approached FIPB to allow transfer of shares held by Limitless to DLF subsidiary, DLF Home Developers.

4.    Information panel wants NRIs who own industrial plots named

A number of RTI applications were filed by a Gurgaon-based activist seeking information on allotment of plots under the NRI category by Haryana State Industrial and Infrastructure Development Corporation Limited (“HSIIDC”). In lieu of the applications, the Chief information commissioner of Haryana has ordered the HSIIDC to upload details of all allotments made under the NRI quota on its official portal and submit a compliance report to the commission.

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Disclaimer

This newsletter is being provided to the recipient solely for the purpose of his/her/its information. It is meant to be merely an informative summary and should not be treated as a substitute for considered legal advice. This update covers significant legal developments in the field of real estate for the month of December, 2013. If you wish to receive more information about any item in this newsletter, please feel free to contact:

Sarthak Advocates & Solicitors

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