Landowner Who Enjoyed Planning Benefits For Decades Barred From Reclaiming Land Surrendered Under Development Plan: Bombay High Court

The Bombay High Court has held that where a landowner voluntarily agrees to surrender land reserved for a public purpose under a sanctioned Development Plan, free of cost but in consideration of tangible planning benefits such as waiver of compulsory open space requirements or grant of higher Floor Space Index (FSI), such surrender constitutes a valid acquisition by agreement under Section 126(1)(a) and (b) of the Maharashtra Regional and Town Planning Act, 1966. The Court observed that consideration under Section 126 need not be monetary and that FSI and development rights have definite monetary value.

Justice Gauri Godse was hearing a Second Appeal filed by Milan Cooperative Housing Society Limited, challenging the judgments dismissing the Society's suit for declaration and injunction. The Society had purchased land in 1967 and developed a housing layout for its members. Under the sanctioned Development Plan, part of the land was reserved for a shopping centre and compulsory open space. As the Society was unable to accommodate all its members while retaining 10% open space, it agreed in 1970 to surrender an area equivalent to the reserved shopping centre to the Pune Municipal Corporation free of cost, in lieu of waiver of the condition requiring retention of 10% open space. A possession receipt was executed on 9 October 1970, and construction permission was granted accordingly. Nearly 28 years later, the Society filed a suit contending that the surrender was invalid.

The Court noted that the Society had fully taken advantage of the benefits arising from the agreement. The Court examined Section 126 of the MRTP Act and held that it provides for acquisition by agreement for payment of an agreed amount or grant of FSI/development rights. It observed:

“… an agreement between the corporation and an owner to surrender the land reserved for public purposes in the development plan, free of cost but in lieu of the benefit of a higher FSI (Floor Space Index) or development rights, would constitute a valid acquisition of the land by an agreement in terms of Section 126 of the MRTP Act.”

The Court observed that without the waiver of the condition requiring the 10% area to remain open, the society would not have been able to obtain construction permission to accommodate all its members. Therefore, it cannot be said that the surrender of the area was without any consideration, though the consideration may not be in the form of money.

The Court also rejected the argument that Sections 77 and 78 of the Bombay Provincial Municipal Corporation Act, 1949, were applicable, holding that those provisions operate when the Commissioner acquires land necessary for any of the purposes of the said Act.

Accordingly, the High Court held that the surrender of land by the Society was a valid acquisition under Section 126 of the MRTP Act, that the land had validly vested in the Pune Municipal Corporation, and that the Society had no subsisting right to develop the reserved land. The Second Appeal was dismissed.

Case Title: Milan Cooperative Housing Society Limited v. Pune Municipal Corporation & Ors. [SECOND APPEAL NO. 1400 OF 2005]