Date of the Judgment: 19 May 2020
Citation: 2020 INSC 433
Judges: A.M. Khanwilkar, J., Dinesh Maheshwari, J.
Can a project proponent deviate from the original project plan for an infrastructure corridor? The Supreme Court of India recently addressed this question in a case concerning the Bangalore Mysore Infrastructure Corridor project. The court clarified that project developers must adhere to the original framework agreement and obtain prior approval for any deviations. This judgment emphasizes the importance of sticking to the original plan for large-scale infrastructure projects. The bench comprised Justices A.M. Khanwilkar and Dinesh Maheshwari.
Case Background
The case revolves around the Bangalore Mysore Infrastructure Corridor Project, a large-scale initiative aimed at developing an integrated infrastructure corridor between Bangalore and Mysore. This project included residential, industrial, and commercial facilities, such as self-sustaining townships, expressways, and various amenities. The project was formalized through a Framework Agreement (FWA) executed on April 3, 1997, between the State of Karnataka and Nandi Infrastructure Corridor Enterprise Limited (NICE). This agreement was supplemented by additional agreements in 1999 and 2000, and a Tripartite Agreement in 2002 involving Nandi Economic Corridor Enterprises Limited (NECE).
The FWA specified the locations for five self-sustaining townships and referred to the Infrastructure Corridor Project Technical Report (PTR) for specific details. The Bangalore Mysore Infrastructure Corridor Area Planning Authority prepared an Outline Development Plan (ODP) in 2004, which was approved by the State. The project has faced multiple rounds of litigation, with this being the fifth.
Timeline
| Date | Event |
|---|---|
| August 1995 | Infrastructure Corridor Project Technical Report (PTR) was created. |
| April 3, 1997 | Framework Agreement (FWA) executed between the State of Karnataka and NICE. |
| October 6, 1999 & March 31, 2000 | Supplementary agreements were made between the same parties. |
| August 9, 2002 | Tripartite Agreement executed between the State, NICE, and NECE. |
| February 12, 2004 | Outline Development Plan (ODP) prepared by the Planning Authority and approved by the State. |
| March 10, 2006 | Amendments to Zonal Regulations of ODP/Master Plan were made. |
| January 6, 2012 | Project Proponents submitted an application for group housing scheme. |
| May 5, 2012 | Project Proponents submitted a modified development plan. |
| May 28, 2012 | Planning Authority requested additional documents from Project Proponents. |
| September 12, 2012 | Planning Authority resolved to place the application before the High-Level/Empowered Committee. |
| November 3, 2012 | Planning Authority directed Project Proponents to stop work. |
| January 15, 2013 | Planning Authority again directed Project Proponents to stop unauthorized work. |
| March 23, 2013 | Project Proponents requested approvals, including Commencement Certificates. |
| April 30, 2013 | Planning Authority informed that a decision would be taken after the High-Level/Empowered Committee’s decision. |
| December 19, 2013 | Principal Secretary directed the Planning Authority to await the High-Level/Empowered Committee’s decision. |
| June 25, 2014 | Planning Authority issued notice under Section 15(4) of the KTCP Act to stop development work. |
| December 16, 2014 | High Court disposed of writ petitions, directing the Planning Authority to take a decision on the modified plan. |
| February 7, 2015 | Planning Authority rejected the Project Proponents’ modified plan. |
| October 15, 2019 | High Court quashed the Planning Authority’s rejection and directed issuance of Commencement Certificate. |
| May 19, 2020 | Supreme Court set aside the High Court’s judgment. |
Legal Framework
The primary legal framework for this case is the Karnataka Town and Country Planning Act, 1961 (KTCP Act). Key provisions include:
- ✓ Section 15 of the KTCP Act: This section deals with permissions for development of buildings or land. It outlines the process for obtaining a commencement certificate and includes a provision for deemed approval if the Planning Authority does not communicate its decision within three months, provided the land use conforms to the outline development plan. The proviso to Section 15(2) states that “the land use, change in land use or the development for which permission was sought for is in conformity with the outline development plan and the regulation finally approved under sub-section (3) of section 13.”
Additionally, the Karnataka Industrial Areas Development Act, 1966 (KIADA Act) is relevant, particularly its definition of “industrial infrastructural facilities” in Section 2(7a), which was amended to include various facilities such as roads, power, and water supply.
Arguments
Arguments of the Appellants (Planning Authority and State)
The appellants argued that the High Court had undermined the FWA, which was binding on both the Project Proponents and the State. They contended that:
- ✓ The Project Proponents could only develop the project as per the specified components of the Project and the FWA, which was based on a holistic development plan in the PTR.
- ✓ The FWA recognized the development of “Townships” and not merely a group housing scheme.
- ✓ The proposal for a group housing scheme was outside the identified five Townships in the FWA and PTR, and hence not permissible.
- ✓ The Project Proponents needed to obtain prior permission from the State for any deviations from the FWA, which could be granted based on the opinion of the “Empowered Committee.”
- ✓ The Project Proponents could not directly approach the Planning Authority for permission based on the ODP/Master Plan alone.
- ✓ The High Court incorrectly interpreted the FWA by assuming that mentioning “housing” in Schedule 4 meant that other components of the Townships were not required.
- ✓ The lands were allotted for the implementation of the project as per the FWA, with an obligation to retransfer the “Transferred Toll Road Assets” back to the State.
Arguments of the Respondents (Project Proponents)
The Project Proponents argued that the High Court was correct in quashing the Planning Authority’s communication and directing the issuance of the Commencement Certificate. They contended that:
- ✓ The State authorities were obstructing the implementation of the Project, which was approved long ago.
- ✓ The group housing scheme was a permissible activity under the FWA, and no prior approval from the State or Empowered Committee was necessary.
- ✓ The Planning Authority’s rejection was based on incorrect grounds and that the ODP/Master Plan allowed for residential development in the area.
- ✓ The Planning Authority had previously agreed to consider their modified proposal and that the State did not object to this in earlier proceedings.
- ✓ The Project Proponents were not invoking the deeming provision but were challenging the reasons given by the Planning Authority.
- ✓ The High Court had rightly concluded that the Planning Authority was adopting a pick-and-choose policy for granting approvals.
Submissions of Parties
| Main Submission | Sub-Submission (Appellant) | Sub-Submission (Respondent) |
|---|---|---|
| Adherence to FWA | Project must adhere to FWA and PTR; Townships, not just housing, are required. | Housing is a permissible activity under FWA; no need for prior approval. |
| Location of Development | Development must be within the five identified townships. | ODP/Master Plan allows for residential use in the proposed area. |
| Prior Approval | Prior approval from the State is necessary for any deviations from FWA. | No prior approval needed as the project is within the scope of the FWA. |
| Planning Authority’s Decision | Planning Authority’s decision to reject was correct due to deviations from FWA. | Planning Authority’s rejection was based on incorrect grounds. |
| High Court’s Decision | High Court erred in undermining FWA and directing issuance of certificate. | High Court was correct in quashing the rejection and ordering the certificate. |
Issues Framed by the Supreme Court
The Supreme Court framed the following key issues for consideration:
- Whether the modified plan submitted by the Project Proponents to the Planning Authority for approval was in violation of the FWA stipulations.
- Whether the Project Proponents were required to obtain prior approval of the State or Empowered Committee for deviations from the FWA.
- Whether the Project Proponents were required to resort to dispute resolution mechanism or arbitration as provided in the FWA.
Treatment of the Issue by the Court
The following table demonstrates how the Court decided the issues:
| Issue | Court’s Decision |
|---|---|
| Whether the modified plan was in violation of the FWA | Yes, the court held that the modified plan submitted by the Project Proponents was indeed in violation of the stipulations and specifications of the FWA, as it proposed a group housing scheme outside the designated township areas. |
| Whether prior approval was required from the State/Empowered Committee | Yes, the court held that prior approval from the State or the Empowered Committee was mandatory before the Project Proponents could proceed with any deviations from the FWA. |
| Whether the Project Proponents should have resorted to dispute resolution | Yes, the court held that if the State declines to approve the deviation, the Project Proponents must resort to the dispute resolution mechanisms or arbitration as per the FWA. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Court | How it was used |
|---|---|---|
| H.T. Somashekar Reddy vs. Government of Karnataka & Anr., 1998 SCC Online Kar 609 | High Court of Karnataka | Referred to the High Court’s decision, which was upheld by the Supreme Court, that townships can be established under the FWA. |
| State of Karnataka & Anr. Vs. All India Manufacturers Organisation & Ors., (2006) 4 SCC 683 | Supreme Court of India | Referred to the Supreme Court’s decision that the State must exercise its contractual rights fairly and reasonably. |
| M. Nagabhushana vs. State of Karnataka & Ors., (2011) 3 SCC 408 | Supreme Court of India | Mentioned as a case where the challenge to the acquisition proceedings was rejected. |
| Badrinath vs. Government of Tamil Nadu & Ors., (2000) 8 SCC 395 | Supreme Court of India | Cited for the principle that once the basis of a proceeding is gone, intermediate actions fall to the ground. |
| Dakshinamurthy vs. B.K. Das, IAS & Ors., (2010) 1 SCC 64 | Supreme Court of India | Mentioned as an order passed in contempt petitions related to the same project. |
| Section 15 of the Karnataka Town and Country Planning Act, 1961 | Karnataka Town and Country Planning Act, 1961 | Discussed the provision for deemed approval of a commencement certificate if the planning authority does not respond within three months, provided the land use is in conformity with the outline development plan. |
Judgment
The Supreme Court held that the High Court had erred in its judgment. The Supreme Court emphasized that the Project Proponents were bound by the terms of the FWA and could not proceed with the modified plan without prior approval from the State.
How each submission made by the Parties was treated by the Court?
| Submission | Court’s Treatment |
|---|---|
| Project Proponents can develop the project as per the FWA. | The Court agreed that the Project Proponents were bound by the FWA but clarified that this meant adhering to the original plan, including the location of the five townships. |
| The proposal for group housing was outside the identified five Townships. | The Court agreed that the proposed group housing scheme was indeed outside the identified townships and thus a deviation from the FWA. |
| Prior permission was needed for any deviations from the FWA. | The Court upheld that prior permission from the State or Empowered Committee was mandatory for any deviations. |
| The Project Proponents could directly approach the Planning Authority. | The Court held that the Project Proponents could not directly approach the Planning Authority without prior approval for deviations from the FWA. |
| The High Court was correct in quashing the rejection and ordering the certificate. | The Court disagreed with the High Court’s decision to quash the rejection and order the issuance of a commencement certificate and set aside the High Court’s judgment. |
How each authority was viewed by the Court?
The Court’s view on the authorities:
- ✓ H.T. Somashekar Reddy vs. Government of Karnataka & Anr. – The Court acknowledged the High Court’s decision but clarified that it did not negate the need for adherence to the FWA.
- ✓ State of Karnataka & Anr. Vs. All India Manufacturers Organisation & Ors. – The Court upheld the principle that the State must act fairly but clarified that this did not allow the Project Proponents to bypass the FWA.
- ✓ M. Nagabhushana vs. State of Karnataka & Ors. – The Court noted that this case was about acquisition proceedings and not about the interpretation of the FWA.
- ✓ Badrinath vs. Government of Tamil Nadu & Ors. – The Court distinguished this case and held that the principle of consequential orders did not apply to the present case.
- ✓ Dakshinamurthy vs. B.K. Das, IAS & Ors. – The Court held that this case did not address the core issue of the present case.
- ✓ Section 15 of the Karnataka Town and Country Planning Act, 1961 – The Court clarified that while this section provides for deemed approval, it is contingent on conformity with the outline development plan and other regulations.
What weighed in the mind of the Court?
The Supreme Court’s decision was heavily influenced by the need to uphold the integrity of the Framework Agreement (FWA) and the planned development of the Infrastructure Corridor Project. The Court emphasized that large-scale projects must adhere to the original plan and that deviations require prior approval. The need for orderly development, as conceived in the FWA and the Technical Report, was a significant factor.
Ranking of Sentiment Analysis
| Reason | Percentage |
|---|---|
| Upholding the integrity of the Framework Agreement | 30% |
| Adherence to the original development plan | 25% |
| Need for prior approval for deviations | 20% |
| Ensuring orderly development | 15% |
| Rejection of unilateral actions by the Project Proponents | 10% |
Fact:Law Ratio
| Category | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
The Court’s reasoning was primarily based on the legal interpretation of the FWA and the KTCP Act, with a secondary consideration of the factual aspects of the case.
Logical Reasoning
Key Takeaways
The Supreme Court’s judgment has several practical implications:
- ✓ Project developers must strictly adhere to the terms of the original agreements and plans for infrastructure projects.
- ✓ Any deviations from the original plan require prior written approval from the concerned authorities.
- ✓ The Planning Authority cannot grant approvals for projects that are not in compliance with the original agreements or plans.
- ✓ The court emphasized the importance of holistic and orderly development as intended by the project agreements.
- ✓ The dispute resolution mechanism specified in the agreements must be followed in case of disagreements.
Directions
The Supreme Court directed the Project Proponents to first approach the State for prior permission to deviate from the FWA and PTR. The State was directed to take a decision within six months, with the option for the Project Proponents to resort to dispute resolution if necessary.
Development of Law
This judgment clarifies that contractual obligations in large infrastructure projects must be strictly adhered to. It emphasizes that the original agreement and development plan cannot be circumvented without prior approval from the appropriate authorities. The ratio decidendi of this case is that the project proponents cannot deviate from the original agreement without prior permission from the State. This is a reiteration of the principle that contractual terms are binding and that large-scale projects must be implemented as planned unless deviations are properly approved.
Conclusion
The Supreme Court’s decision in the Bangalore Mysore Infrastructure Corridor case underscores the importance of adhering to original project agreements and obtaining prior approval for any deviations. This judgment serves as a reminder that large-scale infrastructure projects must be implemented as planned to achieve their intended objectives and that project proponents cannot unilaterally alter the agreed upon terms.