Dispute Resolution & Arbitration | September 2024

• Before the SC of India, Yash Developers (Appellant) V. Harihar Krupa Cooperative Housing Society Limited and Others (Respondents)
• Before the Hon'ble High Court of Calcutta, Kakali Khasnobis (Petitioner) V. Mrs Reeta Paul and Anr. (Respondent)
• In The Supreme Court of India, M/S D. Khosla and Company (Petitioner) V. The Union of India (Respondent)
• In The High Court of Delhi, M/S Bksons Infrastructure Pvt. Ltd. (Petitioner) V. Managing Director, National Highways And Infrastructure Development Corporation (Respondent)
• In the High Court of Gujarat at Ahmedabad, Commissioner of Income Tax (International Taxation and Transfer Pricing) – (Opponent No. 1) V. Joshi Technologies International Inc. (Appellant No. 1)

DISPUTE RESOLUTION AND ARBITRATION UPDATE

Before the SC of India, Yash Developers (Appellant) V. Harihar Krupa Co-operative Housing Society Limited and Others (Respondents)

Civil Appeal No. 8127 of 2024

Background facts

• The case above referred to involves a dispute between a competing real estate developer under the guise of rehabilitating slum dwellers, as governed by the Maharashtra Slum Areas (Improvement, Clearance, and Redevelopment) Act, 1971. Yash Developers ("Appellant") is a real estate developer appointed by a cooperative housing society of slum dwellers and Harihar Krupa Co-operative Housing Society Limited ("Respondent No. 1") is a cooperative housing society consisting of slum dwellers in Borivali, Mumbai.
• In 2003, the Appellant was appointed as the developer by the cooperative housing society to redevelop the land where the slum dwellers had their hutments. This land was declared a "slum area" under the Maharashtra Slum Areas (Improvement, Clearance, and Redevelopment) Act, 1971 ("The Act").
• The development project was significantly delayed, stretching over two decades i.e., 18 years without completion. This prolonged delay led to dissatisfaction among the slum dwellers and raised questions about the Appellant's ability to fulfill the obligations under the redevelopment agreement.
• Due to the extensive delay, the Apex Grievance Redressal Committee ("AGRC") terminated the development agreement in favor of the Appellant on 04.08.2021. The AGRC exercised its power under Section 13 of the Maharashtra Slum Areas (Improvement, Clearance, and Redevelopment) Act, which allows the competent authority to redevelop the land at its own cost if the original developer fails to commence or complete the project within the stipulated time.
• The Appellant challenged the AGRC's termination order before the Hon'ble HC of Bombay. The Hon'ble HC of Bombay, however, upheld the AGRC's decision, noting that the Appellant had failed to meet the basic requirement of commencing construction within a reasonable time. The Hon'ble HC of Bombay also emphasized that the right to shelter of the slum dwellers, which is part of their right to livelihood under Article 21 of the Constitution, should not be nullified by such undue delays.
• The Hon'ble HC of Bombay further held that the developer's removal for failing to commence construction within a reasonable time is not fatal to the statutory intent behind a Slum Rehabilitation Scheme. This means that the purpose of the scheme is not defeated by removing a developer who fails to act within a reasonable time.
• The slum dwellers' right to shelter under Article 21 of the Constitution cannot be nullified by the developer's unconscionable delay in commencing construction. The HC also emphasized the limited scope of judicial review under Article 226 of the Constitution against the decision of the statutory authority-AGRC.
• The Appellant aggrieved by the order of the HC and the AGRC filed the present Civil Appeal before the Supreme Court.

Issue(s) at hand

• Whether the removal of a developer for non-fulfilment of the basic requirement to commence construction of a slum rehabilitation building for a long period of 18 years is fatal to the object and intention of a statutory intent behind a Slum Rehabilitation Scheme.
• Whether the right to shelter, which is part of the slum dwellers' right to livelihood guaranteed under Article 21 of the Constitution, can be continued to be nullified by such actions of unconscionable delay on the part of the developer, in not commencing construction of the slum project even by an inch more particularly when the nature of such work awarded to a developer for him is purely a commercial venture, for profit.

Arguments of the Parties

• Arguments by the Appellant
• Delay between 2003 and 2011 - The Appellant argued that the delay during this period was inevitable and caused by prolonged litigation between the Appellant and Omkareshwar Cooperative Housing Society, as well as Siddhivinayak Developers. The Appellant had no role in this delay, and was beyond its control.
• The Appellant claimed that it had the required 70% consent from slum dwellers and was legally entitled to develop the property. The issue was settled only on 07.06.2011, after which the Letter of Intent ("LOI") could be issued.
• Delay between 2011 and 2014- Further, the Appellant stated that the delay was due to the time required to obtain necessary permissions, approvals, and Environmental Clearances ("EC"). The Appellant applied for ECs in 2011 and received it in 2014, which was necessary before commencing construction.
• Delay between 2014 and 2019 - The Appellant contended that the delay during this period was due to the non-cooperation of certain slum dwellers, which led to the stalling of the project. The Appellant had to initiate eviction proceedings, which were not decided until 2021.
• Delay between 2015-2017) - The Appellant argued that the delay from 2015 to 2017 was justified due to the draft development plan ("DP") published by the Municipal Corporation, which proposed a road passing through the property. This plan was eventually deleted, but the delay was unavoidable during that period.
• The Appellant was of the view that the financial capacity to complete the project, as evidenced by agreements with third parties for financial assistance. The agreements were made to secure the necessary funds to continue the project.
• The Appellant stated that many complaints filed against it by the Managing Committee members of the Respondent No. 1, were withdrawn, and thus proceedings should have been dropped. Although the managing committee of Respondent No. 1 had initially terminated the development agreement, this termination was revoked on 28.02.2021. The revocation of termination was because the agreement was terminated by Mr. Rai, who did not have the requisite authorisation.
• The Respondent No. 1 did not object to the withdrawal of the termination of the development agreement of the Appellant, and in fact, wanted the appellant to continue as the developer. Further submitted that Mr. Rai was acting without the authorisation of the other members, and hence, he also could not have filed an appeal before the AGRC on behalf of Respondent No. 1 against the order of the CEO of the Slum Rehabilitation Authority ("SRA").

Arguments by the Respondents-

• Delay between 2003 and 2011- The Respondents argued that the Appellant was responsible for the delay between 2003 and 2011, as it failed to take timely action to obtain the LOI. The HC upheld the view that the Appellant was not diligent in procuring the LOI, and the litigation with Omkareshwar did not prevent the Appellant from starting the project.
• Delay between 2011 and 2014- The Respondents contended that the delay was attributable to the Appellant, as the EC was not required for the commencement of certain parts of the project, like the rehabilitation building. The Appellant's inaction was unjustified.
• Delay between 2014-2019- The Respondents argued that the delay from 2014 to 2019 was due to the Appellant's failure to take active steps to resolve the eviction proceedings.
• Delay between 2015-2017- The Respondents contended that the DP could justify a delay of only 2 months and not the extended period claimed by the Appellant.
• The Respondents argued that the Appellant did not have the financial capacity to complete the project and relied on financial agreements with third parties, which indicated its inability to execute the scheme.
• The Respondents argued that even if some complaints were withdrawn, the complaint filed by Mr. Rai and others still survived, and the appeal before the AGRC was maintainable. They also contended that the SRA had the power to proceed against the Appellant suo moto, and the withdrawal of complaints did not preclude the AGRC from deciding the appeal.

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