Supreme Court Addresses Slum Redevelopment Delays: Susme Builders vs. Slum Rehabilitation Authority (2018)

Date of the Judgment: 04 January 2018

Citation: (2018) INSC 1

Judges: Madan B. Lokur, J., Deepak Gupta, J.

Can a developer be removed from a slum rehabilitation project due to significant delays and failure to secure the consent of 70% of the slum dwellers? The Supreme Court of India recently grappled with this question in a complex case involving a decades-long dispute over a slum redevelopment project in Mumbai. The core issue revolved around the powers of the Slum Rehabilitation Authority (SRA) to intervene in stalled projects and the rights of slum dwellers to have their housing needs met. The judgment was authored by Justice Deepak Gupta, with Justice Madan B. Lokur concurring.

Case Background

The case revolves around a 23,018.50 square meter plot of land in Santa Cruz (East), Mumbai, initially owned by the Ardeshir Cursetji Pestonji Wadia Trust. A slum had developed on this land, and the slum dwellers formed the Shivaji Nagar Residents’ Association. In 1980, a consent decree was passed, agreeing to transfer the land to the slum dwellers if they formed a society. Subsequently, the Om Namo Sujlam Suflam Co-operative Housing Society was formed and registered under the Maharashtra Co-operative Societies Act, 1960, and the land was transferred to the Society on 20 February 1985. This made the slum dwellers the owners of the land.

The land was declared a slum under Section 4 of the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971, on 16 August 1977 and again on 7 December 1983.

On 15 September 1985, the Society decided to appoint Susme Builders Private Limited to develop the property. A development agreement was signed on 27 February 1986, with Susme agreeing to provide each of the approximately 800 slum dwellers with a 240 sq. ft. built-up area (190 sq. ft. carpet area) within five years. However, no construction took place. Later, the Development Control Regulations for Greater Bombay, 1991, were enforced, entitling each slum dweller to a 180 sq. ft. tenement free of cost. This led to modifications in the agreement, with a new agreement on 10 July 1995, where each slum dweller was entitled to 225 sq. ft., with 180 sq. ft. free and 45 sq. ft. at a cost. Susme was to construct 12 buildings for re-housing, with the remaining land for free sale. Only two buildings were constructed, rehabilitating 128 slum dwellers.

The Development Control Regulations (DCR) were amended in 1997, entitling each slum dweller to a 225 sq. ft. carpet area flat. A supplementary agreement was entered on 7 January 1998, stating that there were 867 occupants, with 825 residential, 27 shops, and 15 industrial units. The agreement provided 225 sq. ft. carpet area for residential occupants. Susme also moved the SRA for permission to convert the old scheme into a new slum rehabilitation scheme, which was granted on 27 January 1998.

Timeline:

Course of Proceedings

The Slum Rehabilitation Authority (SRA) issued a show cause notice to Susme on 11 August 2011, under Section 13(2) of the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971, citing failure to complete the work within the stipulated time and negligence. Susme’s appointment as developer was set aside by the SRA on 24 February 2012, primarily due to unexplained delays and failure to provide individual agreements with 70% of the slum dwellers. The SRA then allowed the Society to implement the scheme through J.G. Developers, with whom the Society had already entered into an agreement.

Susme’s appeal to the High Power Committee (HPC) was dismissed on 18 June 2012. This order was challenged in the Bombay High Court, which remanded the matter back to the HPC. The HPC again dismissed Susme’s appeal on 10 October 2012. Susme then filed a writ petition in the Bombay High Court, which was rejected on 11 June 2014. Concurrently, Susme had filed a civil suit in the Bombay High Court, which refused to grant any interim relief on 3 August 2012.

Legal Framework

The primary legal framework governing this case is the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971 (referred to as ‘the Slum Act’) and the Development Control Regulations for Greater Bombay, 1991 (referred to as ‘DCR’).

Section 13(2) of the Slum Act states:

“Where on declaration of any area as a Slum Rehabilitation Area the Slum Rehabilitation Authority, is satisfied that the land in the Slum Rehabilitation Area has been or is being developed by the owner in contravention of the plans duly approved, or any restrictions or conditions imposed under sub-section (10) of section 12, or has not been developed within the time, if any, specified under such conditions, it may, by order, determine to develop the land by entrusting it to any agency recognised by it for the purpose: Provided that, before passing such order, the owner shall be given a reasonable opportunity of showing cause why such order should not be passed.”

This section empowers the SRA to take action if a land is not developed according to approved plans, conditions, or within the specified time. The SRA can then entrust the development to another agency.

Section 3A (3)(c) and (d) of the Slum Act outlines the powers of the SRA:

“(3) The powers, duties and functions of the Slum Rehabilitation Authority shall be, – (c) to get the Slum Rehabilitation Scheme implemented; (d) to do all such other acts and things as may be necessary for achieving the objects of rehabilitation of slums.”

These provisions empower the SRA to ensure the implementation of slum rehabilitation schemes and take necessary actions to achieve the rehabilitation of slums.

The Development Control Regulations (DCR) of 1991 and the amended DCR of 1997, particularly Regulation 33(10), outline the requirements for slum redevelopment. Initially, the 1991 DCR required that more than 70% of the eligible hutment dwellers on the land agree to join the redevelopment scheme and become members of a cooperative society. The amended DCR of 1997 required that 70% or more of the eligible hutment dwellers agree to join a rehabilitation scheme, and the developer had to enter into individual agreements with each of these dwellers. The DCR also provided that even those who do not willingly join the scheme, the developer is duty bound to make adequate arrangements for their rehabilitation under the scheme.

Arguments

Susme Builders’ Arguments:

• The Supreme Court’s order dated 27 March 2015, was passed under Article 136 or 142 of the Constitution of India, and is binding on all parties. This order was to settle all disputes, and the Court cannot go behind it, especially since there was no recall application and a modification application by J.G. Developers was rejected.

• Since Justice B.N. Srikrishna found that the majority of slum dwellers support Susme, the appeal should be allowed, and Susme should be permitted to continue the project.

• Section 13(2) of the Slum Act is not applicable, as it only applies to owners, not developers. The notice under Section 13(2) was only regarding delay, not lack of 70% consent. When the scheme migrated from redevelopment to slum rehabilitation, 70% consent was not necessary.

• The direction in the Supreme Court order dated 27 March 2015, did not explicitly mention 70%, and only required ascertaining consent of the slum dwellers in praesenti. As such, since a majority supported Susme, they should be allowed to continue the project.

J.G. Developers’ Arguments:

• The intention of the Supreme Court’s order was to find out whether any party had the support of 70% of the slum dwellers, not to bypass legal provisions. The order is not binding, and the matter should be decided on merits.

• The exercise by Justice B.N. Srikrishna only shows that more people support Susme as of that date. The Bombay High Court has consistently held that there should be no competitive voting between developers, as it leads to malpractices.

• Once slum dwellers give consent to a developer, they cannot withdraw it, as it would lead to chaos and prevent the implementation of any slum rehabilitation scheme. Susme is guilty of unexplained delays, and the Society rightly decided to enter into a fresh agreement with J.G. Developers.

• Susme never obtained the mandatory 70% consent and took advantage of trading development rights by assuring the SRA that it would obtain the consent. Susme never contested the issue of 70% consent earlier.

Society’s Arguments:

• The Society has two factions: one supporting Susme and the other supporting J.G. Developers. The faction supporting Susme states that it has terminated the agreement with J.G. Developers and cannot be forced to get the development done through J.G. Developers. The other faction alleges that there is no valid agreement with Susme.

Submissions by Parties

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. What is the scope, ambit, and effect of the order of this Court dated 27.03.2015?
2. What is the scope of powers under Section 13(2) of the Slum Act?
3. Whether the SRA has any power to remove the developer?
4. Whether in the notice issued under Section 13(2) of the Slum Act, the issue of 70% consent was raised?
5. Whether support of 70% of the slum dwellers is mandatory and whether slum dwellers are entitled to withdraw their consent?
6. Whether Susme delayed the construction of the Scheme, and is, therefore, not entitled to any relief?
7. Whether Susme is entitled to continue with the Scheme?
8. In case Susme is not entitled to continue with the scheme, whether respondent no. 4 J.G. Developers is entitled to continue with the rehabilitation scheme?

Treatment of the Issue by the Court

Authorities

The Court considered the following authorities:

Legal Provisions:

• Section 4 of the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971: Declaration of an area as a slum.
• Section 12(10) of the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971: Conditions for clearance orders.
• Section 13(2) of the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971: Power of SRA to take action against owners/developers.
• Section 3A (3)(c) and (d) of the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971: Powers of the SRA to implement slum rehabilitation schemes.
• Development Control Regulations for Greater Bombay, 1991: Initial regulations for slum redevelopment.
• Amended Development Control Regulations for Greater Bombay, 1997, Regulation 33(10) and Appendix IV: Requirements for slum rehabilitation schemes, including 70% consent.

Authorities Considered by the Court

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Section 13(2) of the Slum Act: The Court interpreted this section to allow the SRA to take action against both owners and developers, especially in cases where the slum dwellers are also the owners.
• Section 3A (3)(c) and (d) of the Slum Act: The Court relied on these provisions to emphasize the SRA’s duty to get the slum rehabilitation scheme implemented.
• DCR of 1991: The Court used this to explain the initial requirement of 70% of the slum dwellers forming a society.
• Amended DCR of 1997: The Court used this to explain the requirement of 70% consent of slum dwellers and individual agreements with each of them.

The Court held that the order of 27 March 2015, was to find out which builder had the support of 70% of the slum dwellers, not just a majority. Neither Susme nor J.G. Developers met this requirement. The Court also found that Susme was responsible for the delay in the project and had failed to obtain the necessary 70% consent from the slum dwellers. The Court held that J.G. Developers was also not entitled to continue the project as it had obtained consent of the slum dwellers by misrepresentation of facts. The Court also agreed with the Bombay High Court that consent once given should not be permitted to be withdrawn, but this does not apply in cases where consent is obtained by misrepresentation.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the following factors:

• Delay in Project Completion: The court emphasized the significant delays caused by Susme, noting that the project had been stalled for decades, causing immense hardship to the slum dwellers.
• Failure to Obtain 70% Consent: The court highlighted that Susme had failed to secure the mandatory 70% consent from the slum dwellers, even after repeated opportunities and undertakings.
• Misrepresentation of Facts by J.G. Developers: The court noted that J.G. Developers had made false promises to the slum dwellers, misleading them about the size of the flats they would receive.
• Equity and Justice for Slum Dwellers: The court stressed the need to protect the rights and interests of the slum dwellers, who were also the owners of the land. The court emphasized that the slum dwellers should not live in sub-human conditions for eternity.
• Unique Circumstances of the Case: The court acknowledged that the case was unique because the slum dwellers were also the owners of the land, which required a different approach.

Final Order

The Supreme Court, after considering all facts and circumstances, passed the following final order:

1. The appeals filed by Susme Builders and J.G. Developers were dismissed.
2. The order of the High Court was upheld, and the SRA was directed to take over the project.
3. The SRA was directed to appoint a new developer to complete the project, ensuring the rehabilitation of all eligible slum dwellers.
4. The SRA was directed to ensure that the new developer enters into individual agreements with each of the slum dwellers and that the new developer has the support of 70% of the slum dwellers.
5. The SRA was directed to ensure that the new developer completes the project within a reasonable time frame.

Flowchart of the Slum Redevelopment Process as per the Supreme Court Judgment

Key Takeaways

• Mandatory 70% Consent: The judgment reinforces that obtaining the consent of at least 70% of slum dwellers is a mandatory requirement for slum rehabilitation projects under the amended DCR of 1997.
• Individual Agreements: Developers must enter into individual agreements with each of the consenting slum dwellers.
• Timely Project Completion: Developers must complete the project within a reasonable time frame and cannot delay the project indefinitely.
• SRA’s Powers and Responsibilities: The judgment clarifies the powers and responsibilities of the SRA to take action against developers who fail to comply with the law or cause undue delays. The SRA is duty bound to get the slum rehabilitation scheme implemented.
• Protection of Slum Dwellers’ Rights: The judgment underscores the need to protect the rights and interests of slum dwellers, who are often vulnerable and marginalized.
• Consent cannot be withdrawn: Consent once given cannot be withdrawn, unless it was obtained by misrepresentation of facts.

Conclusion

The Supreme Court’s judgment in the case of Susme Builders vs. Slum Rehabilitation Authority is a landmark decision that clarifies the legal framework governing slum redevelopment projects in Maharashtra. The court’s emphasis on the need for 70% consent, individual agreements, and timely project completion sends a strong message to developers that they must adhere to the law and protect the rights of slum dwellers. The judgment also underscores the crucial role of the Slum Rehabilitation Authority in ensuring that slum redevelopment projects are implemented effectively and efficiently. This case serves as a reminder that slum redevelopment is not just about constructing buildings; it is about ensuring justice and equity for those who have been living in sub-human conditions for years. The judgment has far reaching implications for how slum rehabilitation projects will be implemented in the future.