NO PENALTY IF THE TIME MENTIONED IN THE CONTRACT IS EXCEEDED DUE TO CHANGE TO CONSTRUCTION AREA

RAGHULEELA BUILDERS PRIVATE LIMITED VS. THE MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY,WRIT   PETITION   NO.   586 OF 2018 – November 20, 2019

The Hon’ble Justice BHARATI  H. DANGRE and Justice RANJIT MORE of Bombay High Court pronounced the judgment related to failure in fulfilling the contract based on a construction of a commercial complex of and a public car parking. The High Court discussed the  issue of whether to pay any penalty if the time mentioned in the contract is exceeded due to the change in the area of construction ?

The petitioner made the contention that the impugned demand and recovery notice is per se illegal, arbitrary, unreasonable, discriminatory and violative of Article 14 of the Constitution of India. It was submitted that such distinction purported to be made by MMRDA between leases granted by it before August 2015 and leases granted by it after August 2015, is ex facie arbitrary, irrational and discriminatory and has no basis. The Respondents failed to resolve the issue, properly demarcate the boundary and put the Petitioners into possession of the entire plot of the land for which reasons, the Petitioners were constrained, after waiting for two years, to initiate construction on the basis of the open spaces being computed from the plot boundary, without taking into account the encroachment / actual occupation of almost 1110 square feet area of the said land by the MCGM Sewage Station. The Respondents did not dispute this position and have wrongly contended that in their internal notes obtained under the RTI Act that no prejudice was caused to the Petitioners, as the Petitioners had been able to consume the full buildable FSI/area stipulated in the lease-deed on the said plot/ land, notwithstanding that the demarcation / boundary issue remained unresolved by MMRDA.

The Respondents has raised preliminary objections on the maintainability of petition. And submitted that the petition raises several disputed questions of fact which are complex in character and are incapable of being determined in a summary manner in writ jurisdiction.  Respondents  placed reliance on judgment of Hon’ble Supreme Court in State of Kerala Vs Mk Jose [(2015) 9 SCC 433] .  The petition is a mere contractual lis between the parties and does not involve any serious constitutional or legal challenges.Stated that the to resolve the disputes raised in the petition, the Petitioners have an alternative remedy under the MMRD Act, for which relied on judgment in Joshi Technologies vs Union of India [(2015) 7 SCC 728] .

MMRDA is a statutory authority under the MMRD Act 1974.  The land disposal regulation, a statutory regulation stipulates the condition of lease which is statutory in character, being framed by the State under the MMRD Act 1974 and is binding. Clause 2(c), (d) and (e) of the supplementary lease-deed cannot override Regulations 11 and 10 read with Form D of Land Disposal Regulation.

The original lease deed dated 15th July 2008 is a statutory lease and statutory dues cannot be waived or discounted by the authorities.  Relied on judgment in Goetze Vs esic (2008) 8 SCC 705.

It was argued by the respondent that the Petitioners cannot be permitted to go back on their own interpretation at this belated stage, relying on the judgment of Hon’ble Supreme Court in Godhra Electricity Company Vs. State of Gujarat (1975) 1 SCC 199 and Transmission Corporation Vs. GMR (2018) 3 SCC 716 .  Also the Petitioners have accepted benefit under the orders of extension of time for completion, which was granted on the basis of undertakings to pay the additional premium in construction; the Petitioners have given several undertakings and assurances to make payments. Therefore, the Petitioners cannot resile from their promises. Relied upon the decision of the apex Court in State of Punjab v. Dhanjit Singh [(2014) 15 SCC 144] and Chief Administrator v. Shabnam Virk [(2006) 4 SCC 74] .

The writ petition pertains to a patently time barred claim, barred by limitation and if a suit were to be filed by the petitioners to challenge the cause of action, the same would be barred by law of limitation. The petition seeks to challenge the policy decision of MMRDA on the basis of regulation 10 and 11 read with form D of the MMRDA (Disposal of Land) Regulation 1977 and the decision to alter the time limit from 4 to 6 years only for new leases. The lease dated 15th July 2008 is a policy decision. The writ remedy including challenge under Article 14 of the Constitution of India cannot be invoked to interfere with the policy decisions of the State which are otherwise bona fide .

The High Court admitted that the position of the  Respondent No.1 is an instrumentality of State under Article 12 of the Constitution of India.  It is settled law that in an appropriate petition against the State or against the instrumentality of State, arising out of contractual obligation is maintainable.

The Honorable High Court held that

The MMRDA being “State” within the meaning of Article 12 of the Constitution of India, is required to act in a just, fair and reasonable manner in all spheres of its activities including the contractual matters and its dealings with the citizens and has to be informed by the reasons, failing which the such action or decision are liable to be treated as arbitrary and unreasonable. The MMRDA’s actions must be founded on sound, transparent, discernible and well-defined policy which should not be discriminatory or arbitrary.  The same is the settled position of law as held in numerous judgments, namely, R. D. Shetty v. International Airport Authority of India [(1979) 3 SCC 489], M/s. Dwarkadas Marfataia & Sons v. Board of Trustees of the port of Bombay [(1989) 3 SCC 293] and Jamshed Hasmukhji Wadia v. Board of Trustees, Port of Bombay [(2004) 3 SCC 214] .

In the instant case, the action of the officers of MMRDA are manifestly arbitrary.  Such arbitrary actions and inactions do not help the development and growth but would have adverse impact on the same. The MMRDA has sought to treat equals as unequal. The lessees of plots are being discriminated on the basis of their date of execution of their leases.  The lessees who are placed in similar circumstances prevailing for construction in Bandra Kurla area are entitled to equal treatment guaranteed under Article 14 of the Constitution of India.

As the case enters the high court of Bombay it considers the facts of the case and states that the object is though the delay was on the side of the respondent regarding the issue of overlapping of the boundaries with the Municipal Corporation of Greater Mumbai, is the petitioner held liable to pay the penalty amount for the delay in handing over the furnished building?

The court  concluded that the impugned demand of penalty in the form of premium and interest thereon is untenable.  Therefore the court quashed and set aside the petition as void ab initio.

– Akshyan

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