Supreme Court clarifies procedure for allotment and development charges in Okhla Enclave Plot Dispute: Okhla Enclave Plot Holders’ Welfare Association vs. Union of India and Others (2019)

Introduction

Date of the Judgment: 03 October 2019
Citation: (Not Available in Source)
Judges: R. Banumathi, J. and A.S. Bopanna, J.

What happens when a real estate project stalls, leaving hundreds of plot owners in limbo? The Supreme Court of India recently addressed this complex situation in the case of Okhla Enclave, where a large number of allottees were left without their promised plots due to disputes with the colonizer and the government. This judgment clarifies the steps for allotment and payment of development charges in a long-standing real estate dispute.

The Supreme Court bench, comprising Justices R. Banumathi and A.S. Bopanna, issued this order to provide directions to the learned Arbitrator, Justice Vikramajit Sen, a former Judge of the Supreme Court. The core issue revolved around the claims of numerous allottees who had not received their plots in the Okhla Enclave project in Faridabad, Haryana, and the associated financial obligations.

Case Background

In 1985, Respondent No. 6, a colonizer, purchased approximately 235 acres of land in Faridabad for a large-scale settlement. At the time, there was no state policy to regulate such colonization. The colonizer entered into agreements with numerous individuals who sought to purchase plots of land.

In 1991, Haryana enforced its colonization policy, and the colonizer obtained seven colonization licenses. However, disputes arose, and in 1996, members of the Petitioner-Association filed writ petitions before the Supreme Court, alleging that the colonizer had not adhered to the terms of the agreement in allotting plots.

Over the years, the Supreme Court passed several orders. In an order dated 02 December 1999, the Court noted a dispute regarding the amount payable by each allottee to the colonizer and the government. The Court directed each allottee to pay Rs. 50 per square yard towards development charges to the Director, Town and Country Planning (DTCP), Haryana, within four weeks, with the balance amount to be worked out later.

Many allottees complied with this order, but some did not. In 2013, the DTCP stated that the internal development work done had become defunct and that the cost of remaining work would have to be borne by the plot holders or the licensee, as the government could not use public funds for this purpose.

Timeline

Course of Proceedings

On 13 January 2015, the Supreme Court appointed Mr. Raju Ramachandran, a senior advocate, as amicus curiae to investigate the facts and prepare a report. Subsequently, on 27 January 2016, the Court referred the matter to arbitration, appointing Justice Vikramajit Sen, a former Judge of the Supreme Court, as the sole Arbitrator.

The Arbitrator held numerous hearings and identified three categories of allottees: General, Economically Weaker Sections (EWS), and No Profit No Loss (NPNL). A Scrutiny Committee was formed to identify the claimants in each category. The Committee included representatives from the Town Planner’s office, the Deputy Commissioner of Faridabad, the colonizer, and concerned associations.

The Scrutiny Committee identified 470 General category claimants, 350 EWS claimants (106 of whom applied for allotment), and 1932 NPNL claimants. The NPNL claimants were further divided into five sub-categories based on payments made before a cut-off date.

Legal Framework

The primary legal framework governing this case is the Haryana Development and Regulation of Urban Areas Act, 1975 (HDRA Act). This Act regulates the development of urban areas in Haryana and outlines the obligations of colonizers.

Section 3 of the HDRA Act allows the government to grant licenses for developing colonies. The colonizer in this case obtained seven such licenses.

Section 5 of the HDRA Act mandates that colonizers deposit 30% of the amount realized from plot holders into a separate account to be used for internal development works. The remaining amount is deemed to be retained by the colonizer for the cost of land and external development works.

Section 8 of the HDRA Act deals with the cancellation of licenses and the transfer of land to plot holders. Specifically, Section 8(4) states:

“Notwithstanding anything contained in this Act, after the colony has been fully developed under sub-section (2), the Director may with a view to enabling the colonizer, to transfer the possession of and the title to the land to the plot-holders within a specified time, authorise the colonizer by an order, to receive the balance amount, if any, due from the plot-holders, after adjustment of the amount which may have been recovered by the Director towards the cost of the development works and also transfer the possession of or the title to the land to the plot-holders within aforesaid time. If the colonizer fails to do so, the Director shall on behalf of the colonizer transfer the possession of and the title to the land to the plot-holders on receipt of the amount which was due from them.”

The Haryana Development and Regulation of Urban Areas Rules, 1976, also play a role, specifying requirements for maintaining separate ledger accounts for each plot holder and depositing funds for development works.

Arguments

The parties presented various arguments before the Supreme Court, which are summarized below:

• Petitioner-Association:
  • The members of the association contended that they had paid the amounts as directed by the Supreme Court’s orders dated 07 April 1997 and 02 December 1999. They stated that they are ready to pay any additional amount required for internal and external development as estimated by the Haryana government.
  • They argued that the cost of internal development was inclusive of the land cost, and they had already made the agreed payments.
  • They claimed that the colonizer had deposited Rs. 18.90 crores with the government for external development, out of which only Rs. 2.30 crores had been spent, leaving Rs. 16.70 crores with the government.
• State of Haryana:
  • The State of Haryana submitted that the colonizer had not renewed licenses after 1999 and owed Rs. 21,86,97,901 as license renewal fees.
  • The State also stated that the colonizer had not complied with the rules regarding maintaining separate ledger accounts and depositing funds for development works.
  • The State clarified that it had spent Rs. 1.25 crores on maintaining watch and ward of the property and this amount was also payable by the colonizer.
  • The State provided details of the amounts deposited towards external development charges, which included Rs. 17,17,72,000 by the colonizer and Rs. 1,75,00,000 by the petitioners, totaling Rs. 19,76,69,127.
  • The State also provided estimates for the internal and external development works, totaling Rs. 117 crores.
• Respondent No. 6-Colonizer:
  • The colonizer claimed that the development rate was Rs. 550 per sq. yard plus the cost of land in 1995.
  • The colonizer stated that of the 1708 eligible NPNL claimants, only 143 had paid the development charges as per the Supreme Court order dated 02 December 1999.
  • The colonizer also claimed that many plot claimants had defaulted on payments for the cost of land.
  • The colonizer submitted that it had collected Rs. 15,79,90,433 from NPNL and General Category plot claimants and had deposited Rs. 17,17,00,000 with the State for external development works.
  • The colonizer also stated that it had spent Rs. 21.39 crores on internal development works.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court addressed the following issues, which were originally raised by the learned Arbitrator:

1. In light of the fact that Durga Builders Private Limited is claiming succession only with respect to two licenses (out of total seven licenses), making it necessary to also determine which portions of the land compositely held by seven licenses falls to its share?
2. Given that the State of Haryana has categorically stated that it cannot take over the project and make allotments, even in view of the fact that the Colonizer has intentionally not paid the License Fee, who will undertake the development of the Project and subsequently make allotments?
3. In view of the fact that around 2690 claims were received in the NPNL category, the State of Haryana will have to devise a policy for relaxing density norms for the Project.
4. The Hon’ble Supreme Court may pass appropriate directions for converting these proceedings to that of a Special Committee.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

• Legal Provisions:
  • Section 3 of the Haryana Development and Regulation of Urban Areas Act, 1975: This section allows the government to grant licenses for developing colonies.
  • Section 5 of the Haryana Development and Regulation of Urban Areas Act, 1975: This section mandates that colonizers deposit 30% of the amount realized from plot holders into a separate account for internal development works.
  • Section 8(4) of the Haryana Development and Regulation of Urban Areas Act, 1975: This section enables the Director to transfer land to plot holders after the colony is fully developed.
  • Haryana Development and Regulation of Urban Areas Rules, 1976: These rules specify requirements for maintaining separate ledger accounts and depositing funds for development works.

Authorities Considered by the Court

Judgment

The Supreme Court addressed the issues raised by the Arbitrator by providing specific directions and clarifications. The court’s findings are summarized below:

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

How each authority was viewed by the Court?

• The Court explained the relevance of Section 3 of the Haryana Development and Regulation of Urban Areas Act, 1975* in granting licenses for developing colonies.
• The Court explained the relevance of Section 5 of the Haryana Development and Regulation of Urban Areas Act, 1975* in mandating colonizers to deposit 30% of the amount realized from plot holders for internal development works.
• The Court explained and applied Section 8(4) of the Haryana Development and Regulation of Urban Areas Act, 1975* to enable the Director to transfer land to plot holders after the colony is fully developed.
• The Court explained the relevance of Haryana Development and Regulation of Urban Areas Rules, 1976* in specifying requirements for maintaining separate ledger accounts and depositing funds for development works.

What weighed in the mind of the Court?

The Supreme Court’s decision was influenced by several factors, which can be categorized as follows:

• Protecting the Allottees: The primary concern of the Court was to ensure that the allottees, who had invested in the project, would receive their plots. The Court emphasized the need for a time-bound process to complete the development and allotment of plots.
• Financial Accountability: The Court held the colonizer accountable for the outstanding license fees and other dues. The Court also clarified the financial obligations of the allottees, ensuring that they would bear the cost of development.
• Legal Compliance: The Court emphasized the importance of adhering to the provisions of the Haryana Development and Regulation of Urban Areas Act, 1975, and the associated rules. The Court ensured that allottees who had not complied with previous orders would be brought into compliance.
• Practical Resolution: The Court sought a practical resolution to the dispute, recognizing that the State of Haryana could not take over the project. The Court directed the allottees to pay the development charges and the Arbitrator to oversee the process.

Sentiment Analysis of Reasons Given by the Supreme Court

Fact:Law Ratio

Logical Reasoning

The Court’s logical reasoning for each issue is presented below:

Key Takeaways

• Allottees’ Rights: The judgment reaffirms the rights of the allottees to receive their plots. The Court prioritized the interests of the allottees over the colonizer’s claims.
• Financial Obligations: The judgment clarifies the financial obligations of both the allottees and the colonizer. Allottees are required to pay the development charges, while the colonizer is liable for the outstanding license fees and other dues.
• Time-Bound Process: The Court emphasized the need for a time-bound process to complete the development and allotment of plots. The Arbitrator was given the responsibility to oversee this process.
• Special Committee: The Court clarified that the proceedings are not a typical arbitration but a Special Committee constituted by the Supreme Court. This distinction is important for the procedural aspects of the case.
• Future Impact: This judgment may serve as a precedent for similar cases involving stalled real estate projects. It highlights the importance of legal compliance and the need for a fair and transparent process to protect the rights of allottees.

Directions

The Supreme Court provided the following directions:

• The Arbitrator is to determine the final list of eligible plot owners in all categories (NPNL, EWS, General, and commercial).
• Once the allottees are identified and pay the apportioned development charges, the Arbitrator shall direct the Director to execute the necessary documents in favor of the allottees as per Section 8(4) of the HDRA Act.
• The colonizer is liable to pay the license renewal fee of Rs. 21,86,97,901 (as on 28.02.2019) with interest @ 6% per annum from 28.02.2019, and Rs. 1.25 crores spent by DTCP for security.
• The total amount of Rs. 128,70,00,000 is payable by the members of the Petitioner-Association and eligible plot owners to the Director General, Town and Country Planning (DGTCP), Haryana for undertaking and completing the internal and external development works.
• The Arbitrator shall determine the cost per square meter and apportion the total cost among eligible plot owners.
• If any plot owner fails to pay the apportioned development charges within the stipulated time, they will forfeit the right over the plot.
• The State of Haryana shall cooperate in adjusting the plot sizes in conformity with the existing rules and governing sanction of the scheme.

Specific Amendments Analysis

(Not Applicable in this Judgement)

Development of Law

The ratio decidendi of this case is that in cases of stalled real estate projects, the allottees have a right to receive their plots, and they are liable to pay the development charges. The colonizer is accountable for the outstanding dues. The State cannot take over the project, but it must oversee the development process.

This judgment clarifies the procedure for resolving disputes related to land allotment and development charges, especially in cases where the colonizer has not fulfilled its obligations. It also emphasizes the importance of adhering to the provisions of the Haryana Development and Regulation of Urban Areas Act, 1975.

Conclusion

In conclusion, the Supreme Court’s judgment in the Okhla Enclave case provides a comprehensive framework for resolving the complex issues related to land allotment and development charges. The Court prioritized the rights of the allottees and held the colonizer accountable for its financial obligations. The judgment also clarified the role of the State in overseeing the development process. The Court has directed the Arbitrator to finalize the list of eligible allottees and apportion the development costs, ensuring a time-bound and transparent process. This judgment serves as a significant step towards resolving the long-standing dispute and ensuring that the allottees receive their promised plots.

Category

• Real Estate Law
  • Land Allotment
  • Real Estate Disputes
  • Development Charges
• Haryana Development and Regulation of Urban Areas Act, 1975
  • Section 3, Haryana Development and Regulation of Urban Areas Act, 1975
  • Section 5, Haryana Development and Regulation of Urban Areas Act, 1975
  • Section 8(4), Haryana Development and Regulation of Urban Areas Act, 1975
• Supreme Court Judgments
  • Property Law Cases
  • Land Dispute Rulings
• Arbitration
  • Arbitration Process
  • Special Committee