Supreme Court settles the date for calculation of Premium FSI Charges in building plan approvals: Chennai Metropolitan Development Authority vs. D. Rajan Dev (2019) INSC 1128 (11 December 2019)

Date of the Judgment: 11 December 2019
Citation: (2019) INSC 1128
Judges: R. Banumathi, J., A.S. Bopanna, J., Hrishikesh Roy, J.
Can a builder be charged Premium FSI rates based on the date of application or the date of approval? The Supreme Court of India recently addressed this question, clarifying when revised guideline values should apply to Premium Floor Space Index (FSI) charges. This judgment clarifies the date on which the Premium FSI charges are to be calculated, which is a crucial point for builders and developers. The bench consisted of Justices R. Banumathi, A.S. Bopanna, and Hrishikesh Roy, with the judgment authored by Justice R. Banumathi.

Case Background

The case revolves around D. Rajan Dev, a developer operating under the name M/s. Ben Foundation. On May 7, 2009, he applied for planning permission to construct a residential-cum-shopping building in Chennai. The Chennai Metropolitan Development Authority (CMDA) granted the initial permission on July 1, 2009. Subsequently, on September 9, 2009, the Government of Tamil Nadu introduced the “Premium FSI Scheme,” allowing builders to increase their FSI by paying a premium.

On May 4, 2011, Rajan Dev applied for additional FSI under the Premium FSI Scheme. This application was returned by CMDA on February 10, 2012, for rectifications. After resubmitting the revised plan on February 24, 2012, CMDA forwarded it to the government for approval on March 30, 2012. In the meantime, the government revised the guideline value of the land effective from April 1, 2012, significantly increasing it from Rs. 1,650/- per sq.ft. to Rs. 5,000/- per sq.ft.

The government approved the Premium FSI on May 29, 2012. Consequently, CMDA demanded Rs. 7,96,50,000/- as Premium FSI charges, based on the revised guideline value. Rajan Dev objected, arguing that the charges should be based on the guideline value at the time of his application in May 2011. CMDA rejected his objections, leading to a legal battle.

Timeline

Course of Proceedings

Initially, the Single Judge of the High Court dismissed the writ petition filed by Rajan Dev, ruling that the Premium FSI charges should be calculated based on the guideline value prevailing on the date of plan approval. The Single Judge held that no right accrues to the builder merely by submitting an application.

Rajan Dev appealed to the Division Bench of the High Court, which reversed the Single Judge’s decision. The Division Bench, relying on Union of India and another v. Mahajan Industries Ltd. and another (2005) 10 SCC 203, held that the relevant date for calculating Premium FSI charges should be the date of application, not the date of approval. The Division Bench directed CMDA to calculate the charges based on the guideline value as of May 4, 2011.

Aggrieved by the Division Bench’s decision, CMDA appealed to the Supreme Court.

Legal Framework

The core legal framework in this case is Regulation 36 of the Chennai Metropolitan Development Authority Regulations, which deals with “Premium FSI”. It states:

“36. Premium FSI:- The Authority may allow Premium FSI over and above the normally allowable FSI subject to a maximum of 1 (one) relating the same to the road width parameters as follows:-
Serial Number Road width Premium FSI (% of normally allowable FSI)
(i) 18 meters and above (60’ and above) 40%
(ii) 12 meters – below 18 meters (40’ – below 60’) 30%
(iii) 9 meters – below 12 meters (30’ – below 40’) 20%
The premium FSI shall be allowed in specific areas as may be notified, subject to Guidelines and on collection of charge at the rates as may be prescribed by the Authority with the approval of the Government. The amount so collected towards the award of Premium FSI shall be remitted into the Government account to be allotted separately for the purpose for utilizing it for infrastructure development in that area as may be directed by the Government.”

This regulation allows CMDA to grant additional FSI for a premium, with the charges to be determined by the authority and approved by the government. The collected amount is to be used for infrastructure development. The key point of contention is the date on which these charges should be calculated, which is not explicitly mentioned in the regulation.

Arguments

Appellant (CMDA) Arguments:

• The crucial date for determining the applicable rate for Premium FSI Charges is the date on which the authority grants planning permission, as per Chennai Metropolitan Development Authority represented by its Member-Secretary and another v. Prestige Estates Project Ltd. 2019 (10) SCALE 78.

• Mere pendency of the application or any payment made does not create any right under law in favor of the applicant until the application is considered and sanction is granted, as per Usman Gani J. Khatri of Bombay v. Cantonment Board and others (1992) 3 SCC 455.

• The judgments relied upon by the Division Bench, Union of India and others v. Dev Raj Gupta and others (1991) 1 SCC 63 and Union of India and another v. Mahajan Industries Ltd. and another (2005) 10 SCC 203, are not applicable as they deal with applications for conversion and not building permission.

• The first respondent, being an experienced builder, deliberately filed a defective application and cannot claim delay on CMDA’s part.

Respondent (D. Rajan Dev) Arguments:

• The crucial date for determining Premium FSI charges should be the date of receipt of the application, as held by the Division Bench.

• The application was submitted on May 4, 2011, and was returned after a delay of nine months on February 10, 2012, for rectifying defects.

• The application was pending for a long time, with the Multi-Storeyed Building Panel forwarding the proposal to the Government with recommendations on March 30, 2012.

• The FSI charges should be payable on the date of filing the application for conversion, not on the date of approval.

Submissions Table

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

✓ Whether the High Court was correct in holding that the Premium FSI charges are payable only as per the pre-revised guideline value as on 04.05.2011 i.e. the date of filing of application with revised plan, by the first respondent?

Treatment of the Issue by the Court

Authorities

Cases

• Usman Gani J. Khatri of Bombay v. Cantonment Board and others (1992) 3 SCC 455: The Supreme Court held that no legal right is acquired until building plans are sanctioned after payment of conversion charges.
• Chennai Metropolitan Development Authority represented by its Member-Secretary and another v. Prestige Estates Project Ltd. 2019 (10) SCALE 78: The Supreme Court held that the crucial date for determining Premium FSI charges is the date of planning permission grant.
• Union of India and others v. Dev Raj Gupta and others (1991) 1 SCC 63: This case was distinguished by the court as it related to land conversion and not building permission.
• Union of India and another v. Mahajan Industries Ltd. and another (2005) 10 SCC 203: This case was distinguished by the court as it related to land conversion and not building permission.

Regulations

• Regulation 36 of the Chennai Metropolitan Development Authority Regulations: This regulation deals with the grant of Premium FSI and the collection of charges.

Authority Table

Judgment

How Submissions were Treated

How Authorities were Viewed

✓ Usman Gani J. Khatri of Bombay v. Cantonment Board and others (1992) 3 SCC 455: The Court cited this case to support the principle that no legal right is acquired until building plans are sanctioned.

✓ Chennai Metropolitan Development Authority represented by its Member-Secretary and another v. Prestige Estates Project Ltd. 2019 (10) SCALE 78: The Court relied on this case to reiterate that the demand for Premium FSI charges arises only upon the grant of approval by the Government.

✓ Union of India and others v. Dev Raj Gupta and others (1991) 1 SCC 63: The Court distinguished this case, stating it related to land conversion and not building permission.

✓ Union of India and another v. Mahajan Industries Ltd. and another (2005) 10 SCC 203: The Court distinguished this case, stating it related to land conversion and not building permission.

What weighed in the mind of the Court?

The Supreme Court emphasized that no right accrues to an applicant until the application for approval is considered and sanctioned. The court stressed the mandatory nature of government approval for Premium FSI. The court also noted that the builder, being experienced, should be aware of the process and cannot claim benefit of the delay of the authorities. The court also noted that the builder had sought for extension of time to pay the charges, and then filed the writ petition.

Sentiment Analysis of Reasons

Fact:Law Ratio

Logical Reasoning

The Supreme Court’s reasoning was that the right to avail Premium FSI accrues only upon the grant of approval by the Government. The Court emphasized that the approval of the Government is mandatory for Premium FSI. The Court rejected the argument that the charges should be based on the date of application, stating that no right accrues to the applicant until the application is sanctioned.

The Court also rejected the argument that there was undue delay on the part of the CMDA or the Government in processing the application. The Court noted that the builder had sought for extension of time to pay the charges, and then filed the writ petition, which was not appreciated by the Court.

The Court stated, “It is well settled that no right accrues to an applicant until the application for approval is considered and sanctioned.” The Court further added, “Regulation 36 clearly provides that the Premium FSI shall be allowed in specific areas only with the approval of the Government. Unless and until the Government grants approval, no right accrued to the first respondent.” The Court concluded, “The impugned judgment is contrary to the well settled principle that the applicant does not acquire any right under law till his application is considered and sanctioned.”

Key Takeaways

• ✓ Premium FSI charges are to be calculated based on the guideline value prevailing on the date of government approval, not the date of application.
• ✓ Mere submission of an application for Premium FSI does not create any vested right in favor of the applicant.
• ✓ Builders must be aware that the right to avail Premium FSI accrues only after the government grants approval.
• ✓ Authorities are not obligated to calculate charges based on the guideline value at the time of application.

Directions

The Supreme Court set aside the judgment of the Division Bench of the High Court and allowed the appeal of CMDA. The Court directed that CMDA is at liberty to recover the balance Premium FSI charges from the first respondent in accordance with its regulations and rules.

Development of Law

The ratio decidendi of this case is that the date for calculating Premium FSI charges is the date of government approval, not the date of application. This judgment reinforces the principle that no right accrues to an applicant until the application is sanctioned. This clarifies the position of law on the date of applicability of Premium FSI charges.

Conclusion

In conclusion, the Supreme Court’s judgment in Chennai Metropolitan Development Authority vs. D. Rajan Dev settles the issue of when Premium FSI charges should be calculated. The Court held that the relevant date is the date of government approval, not the date of application. This decision clarifies the legal position and has significant implications for builders and developers.