Litigation Update: Surrender Of Reserved Land In Exchange For Development Rights Constitutes Valid Acquisition Under The MRTP Act

The Bombay High Court, in Milan CHSL v. Pune Municipal Corporation & Ors. held that surrender of land reserved under a sanctioned development plan in exchange for development benefits such as waiver of compulsory open space requirements and grant of higher FSI constitutes a valid acquisition by agreement under Section 126(1)(a) and (b) of the Maharashtra Regional and Town Planning Act, 1966 ("MRTP"). Such development rights and FSI have measurable monetary value and amount to valid consideration, even if no monetary compensation is paid. Once possession is handed over pursuant to a concluded agreement and the landowner has availed the benefits of the sanctioned layout, title validly vests in the planning authority, and the landowner is estopped from challenging the acquisition or seeking declaratory and injunctive relief after an inordinate delay. Click here to read the Order of the Hon'ble High Court of Bombay.

Background:

The Appellant, Milan Cooperative Housing Society Ltd. ("the Society"), purchased a land in Pune, in 1967. The Society developed a housing layout for its members, which was sanctioned by the Pune Municipal Corporation ("PMC"). Under the development regulations prevailing at the time, 10% of the plot area was required to be kept as compulsory open space. As the Society was unable to accommodate all its members within the permissible FSI, it requested a waiver of the 10% open space requirement. In lieu thereof, the Society agreed to surrender land admeasuring 12,741 sq. ft., equivalent to 10% of the compulsory open space, which was reserved in the development plan for a shopping centre. A possession receipt dated 9 October 1970 was executed in favour of PMC, and construction permission was granted to the Society without insisting on the 10% open space. Nearly 28 years later, in 1998, the Society filed a suit seeking a declaration that it retained title, possession and development rights over the surrendered land, contending that no valid acquisition had taken place and that physical possession had never been handed over to PMC.

Issues Before the Court:

1. Whether, in the absence of acquisition under Section 77 and 78 of the Bombay Provincial Municipal Corporation Act, 1949, or an agreement under Section 77(1), the Society's title stood divested merely on the basis of a possession receipt.
2. Whether the courts below were justified in dismissing the suit despite the Society's contention that its title had not been lawfully extinguished.

Contentions of the Parties

Appellant (Society):

No acquisition proceedings under the MRTP Act or the Land Acquisition Act were undertaken. The possession receipt was executed under coercion and only for securing plan sanction. Transfer of reserved land free of cost was illegal and void ab initio. In the absence of valid acquisition, title continued to vest with the Society.

Respondent (PMC):

The Society voluntarily surrendered the land in lieu of waiver of the 10% open space condition. The surrender constituted a concluded agreement supported by valid consideration in the form of additional FSI/development permission. Physical possession was handed over as recorded in the possession receipt. After availing benefits under the sanctioned layout, the Society was estopped from challenging the surrender after an inordinate delay

Key Findings of the Court

The Trial Court held that:

The Society failed to prove that physical possession of the surrendered land remained with it. The Possession receipt and surrounding circumstances established voluntary surrender. The Society has taken advantage of the development permission and waiver of open space. The suit was liable to be dismissed, inter alia, on merits and limitation.

The High Court upheld the findings of the trial court and held:

Section 126 of the Maharashtra Regional and Town Planning Act, 1966 permits acquisition of reserved land by agreement, including by granting FSI or development rights as consideration. FSI and development permissions have measurable monetary value and constitute valid consideration. The surrender of land by the Society in exchange for waiver of the open space requirement amounted to a valid and concluded agreement under Section 126(1)(a) and (b) of the MRTP Act. Once possession was handed over pursuant to such agreement, the land validly vested in PMC. The Society, having enjoyed the benefits of the sanctioned layout for decades, could not seek declaratory or injunctive relief after 28 years. Reliefs of declaration and injunction being discretionary, no case was made out for their grant.

The Second Appeal was dismissed. The High Court affirmed that the surrender of land in lieu of FSI/development benefits constituted a valid acquisition, and the Society had no subsisting right, title or interest in the land reserved for the shopping centre.

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