Supreme Court Upholds Revised Premium FSI Charges, Rejects Increased I&A Charges in Chennai Development Case

Introduction

Date of the Judgment: July 29, 2019
Citation: 2019 INSC 776
Judges: Dr. Dhananjaya Y Chandrachud, J and Indira Banerjee, J. The judgment was authored by Dr. Dhananjaya Y Chandrachud, J.
Can a planning authority demand revised charges for infrastructure and premium floor space index (FSI) after initially raising a demand but before granting final planning permission? The Supreme Court of India recently addressed this question, clarifying the timing for applying revised charges in development projects. This case revolves around a dispute between the Chennai Metropolitan Development Authority and Prestige Estates Project Ltd., concerning the applicability of revised charges for Infrastructure and Amenities (I&A) and Premium FSI.

Case Background

On March 22, 2011, Prestige Estates Project Ltd. (the respondent) applied for planning permission to construct a multi-story building complex in Ayyappan Thangal Village. The Tamil Nadu Housing and Urban Development Department approved the recommendation of the Multi-storeyed Building Panel. On January 5, 2012, the State government approved the project subject to certain conditions, including gifting road widening portions and obtaining a No Objection Certificate (NOC) from the Chennai Metropolitan Water Supply and Sewerage Board (the Sewerage Board). The Sewerage Board issued its NOC on March 30, 2012, with a condition to execute a gift deed for a piece of land, which was complied with on April 27, 2012.

On March 27, 2012, the Chennai Metropolitan Development Authority (the appellant) issued a demand notice to the respondent for various charges, including I&A charges of Rs. 8,34,40,000 and Premium FSI charges of Rs. 44,75,88,000. The respondent paid these charges on March 28, 2012. However, on March 28, 2012, the government revised the guideline values effective from April 1, 2012, and also increased I&A charges by 50%. Consequently, on August 22, 2012, the appellant issued a revised demand notice seeking additional I&A charges of Rs. 4,17,15,000 and Premium FSI charges of Rs. 90,76,75,000. The respondent challenged this revised demand in writ proceedings before the High Court.

Timeline

Course of Proceedings

The respondent challenged the revised demand notice in writ proceedings before the High Court of Judicature at Madras. A Single Judge allowed the writ petition, ruling that the respondent had a right to obtain planning permission based on the charges applicable before the revision. The Division Bench of the High Court upheld this decision, stating that no amendment had been made to the Tamil Nadu Town and Country Planning (Levy of Infrastructure and Amenities Charges) Rules 2008 to justify the increased I&A charges. The High Court also ruled that the revised Premium FSI charges could not be applied to the respondent.

Legal Framework

The case is governed by the following legal provisions:

• Section 48 of the Tamil Nadu Town & Country Planning Act, 1971: This section restricts construction or material change in the use of land without written permission from the planning authority.
  “On or after the date of the publication of the resolution under sub -section (2) of section 19 or of the notice in the Tamil Nadu Government Gazette under section 26, no person other than any State Government or the Central Government or any local authority, shall, erect any building or make or extend any excavation or carry out any mining or other operation, in, on, over or under any land or make any material change in the use of land or construct, form or layout any work except with the written permission of the appropriate planning authority and in accordance with the conditions, if any, specified therein.”
• Section 49 of the Tamil Nadu Town & Country Planning Act, 1971: This section outlines the process for applying for planning permission.
  “(1) Except as otherwise provided by rules made in this behalf, any person not being any State Government or the Central Government or any local authority intending to carry out any development on any land or building on or after the date of the publication of the resolution under sub -section (2) of section 19 or of the notice in the Tamil Nadu Government Gazette under section 26, shall make an application in writing to the appropriate planning authority for permission in such form and containing such particulars and accompanied by such documents as may be prescribed.”
• Section 63B of the Tamil Nadu Town & Country Planning Act, 1971: This section provides for the levy of Infrastructure and Amenities (I&A) charges.
  “(1) Every local authority or the planning authority, as the case may be, while according building permit under the relevant laws or according permission under this Act, as the case may be, shall levy charges on the institution of use or change of use of land or building or development of any land or building in the whole area or any part of the planning area so as to meet the impact of development and for ensuring sustainable development of urban and rural areas by providing adequate infrastructure and basic amenities at the rates as determined in accordance with such procedure as may be prescribed which shall not be less than minimum and not more than the maximum as may be prescribed, and different rates may be prescribed for different parts of the planning area and for different uses.”
• Rule 4 of the Tamil Nadu Town and Country Planning (Levy of Infrastructure and Amenities Charges) Rules, 2008: This rule specifies the minimum and maximum rates for I&A charges.
  “The infrastructure and amenities charges shall be collected for new construction, additions to existing constructions and change of use of existing buildings at the rates not exceeding the maximum rate and not less than the minimum rates indicated in the Table below, in case of different categories of buildings referred to in the Table:”
• Rule 5(2) of the Tamil Nadu Town and Country Planning (Levy of Infrastructure and Amenities Charges) Rules, 2008: Empowers the Vice-Chairman of the Chennai Metropolitan Development Authority to fix rates for I&A charges within the prescribed minimum and maximum limits.
  “In respect of the Chennai Metropolitan Planning Area, the Vice Chairman, Chennai Metropolitan Development Authority shall fix the rates of such charges for each of the above categories of buildings which shall not be less than the minimum and not more than the maximum as prescribed in Rule 4, taking into account the various aspects of developments including infrastructure needs. He may fix different rates for different categories of buildings or for different areas.”
• Regulation 36 of the Second Master Plan for Chennai Metropolitan Area 2006: This regulation allows for Premium FSI over and above the normally allowable FSI, subject to a charge.
  “The Authority may allow premium FSI over and above the normally allowable FSI, in any case not exceeding 0.5 for special building and group developments, and not exceeding 1.0 for multistoreyed buildings in specific areas which may be notified, on collection of a charge at the rates as may be prescribed with the approval of the Government. The amount collected shall be kept in an escrow amount for utilizing it for infrastructure development in that area as may be decided by the Government.”

Arguments

Appellant’s Arguments:

• The appellant argued that the applicable rates for I&A and Premium FSI charges should be those prevailing on the date of granting planning permission, not the date of application or initial payment.
• The appellant contended that the deposit of charges does not create a vested right for the applicant, and if planning permission is not granted, the deposited amount would be refunded.
• The appellant stated that the High Court erroneously relied on the office order dated April 16, 2012, which was in conflict with the Government Order (GO) dated March 28, 2012, that increased I&A charges by 50%.
• The appellant submitted that an amendment to the Rules was not necessary since the charges are determined and are leviable under an order issued pursuant to Section 63B of the Tamil Nadu Town & Country Planning Act 1971 while according building permission.

Respondent’s Arguments:

• The respondent argued that the revised I&A charges were not applicable because no amendment was made to the Rules of 2008, as required by Clause 6 of G.O.Ms No. 86.
• The respondent contended that the office order dated April 16, 2012, stated that revised I&A charges would apply only to demands made on or after March 28, 2012, and their demand was raised on March 27, 2012.
• The respondent argued that all payment obligations were completed on March 29, 2012, before the revision of guideline values on April 1, 2012. Therefore, the revised rates should not apply.
• The respondent relied on the principle in Union of India v Mahajan Industries Ltd., arguing that the cut-off date should be the date of payment.
• The respondent argued that the subject matter of the demand pertains to payment levied by the respondent and not a change in the development control rules such as involving a change in floors, setbacks etc.
• The respondent argued that the planning permission was granted on May 30, 2012, and the revised demand was an afterthought.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issues:

1. Whether charges namely Infrastructure & Amenities charges and Premium FSI charges are required to be collected as per rates prevailing as on the date of submission of planning permission application or on the date of granting approval of planning permission;
2. Whether the respondent herein has accrued any vested right before granting approval of planning permission merely because they remitted the charges as per demand notice dated 27-03-2012.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court allowed the appeals in part.

How each authority was viewed by the Court?

• The Supreme Court followed the principles laid down in State of Tamil Nadu v Hind Stone [ (1981) 2 SCC 205 ]*, Howrah Municipal Corporation v Ganges Rope Co. Ltd. [(2004) 1 SCC 663]*, Usman Gani J. Khatri of Bombay v Cantonment Board [(1992) 3 SCC 455]*, Commissioner of Municipal Corporation, Shimla v Prem Lata Sood [(2007) 11 SCC 40]*, and New Delhi Municipal Council v Tanvi Trading and Credit Private Limited [(2008) 8 SCC 765]*, which stated that there is no vested right to have an application disposed of based on rules at the time of application and that the building rules at the time of sanction govern, not the date of application.
• The court distinguished the case of Union of India v Mahajan Industries Ltd. [(2005) 10 SCC 203]* as the factual situation was different.
• The Court considered Section 48, Section 49 and Section 63B of the Tamil Nadu Town & Country Planning Act, 1971 to determine the legal framework for the case.
• The court considered Rule 4 and Rule 5(2) of the Tamil Nadu Town and Country Planning (Levy of Infrastructure and Amenities Charges) Rules, 2008 to determine the procedure for fixing I&A charges.
• The Court also considered Regulation 36 of the Second Master Plan for Chennai Metropolitan Area 2006 to understand the provisions relating to Premium FSI.

The court set aside the High Court’s judgment regarding the Premium FSI charges, holding that the appellant was justified in demanding the revised charges. However, the court upheld the High Court’s decision regarding the I&A charges, stating that the revised charges could not be enforced due to the lack of amendment to the Rules 2008 and the office order dated 16 April 2012.

What weighed in the mind of the Court?

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

• The absence of a vested right to planning permission merely upon application or payment of initial charges.
• The principle that the applicable rules and charges are those in effect at the time of granting planning permission, not at the time of application or initial payment.
• The specific requirement for an amendment to the Rules of 2008 to increase the I&A charges, as per Clause 6 of G.O.Ms No. 86.
• The internal office order of the appellant itself stating that revised I&A charges would apply only to demands made on or after March 28, 2012.
• The fact that planning permission was granted after the revision of Premium FSI charges.

The court emphasized that the planning authority’s role is to ensure compliance with development regulations and that the process of granting permission involves scrutiny and adherence to applicable laws and rules.

Logical Reasoning:

The Court considered the arguments for and against the applicability of revised charges. It rejected the argument that the date of payment should be the cut-off date, emphasizing that the planning permission is the crucial factor. The court also noted that the government had intended to amend the rules to increase I&A charges, but this amendment was not completed. The court relied on its own precedents to establish that no vested right is created merely by the submission of an application for sanction to construct a building.

The Supreme Court held that the planning authority was justified in demanding Premium FSI charges at the revised rates because the planning permission was granted after the revision came into effect. However, the demand for revised I&A charges was not justified due to the lack of an amendment to the Rules 2008 and the internal office order of the appellant.

“The mere filing of an application does not entitle the applicant to permission. Nor is there a vested right to the grant of permission.”

“The statutory provisions regulating sanction for construction within the municipal area are intended to ensure proper administration of the area and provide proper civic amenities to it. The paramount considerations of regulatory provisions for construction activities are public interest and convenience. On the subject of seeking sanction for construction, no vested right can be claimed by any citizen divorced from public interest or public convenience.”

“It is well settled that the law for approval of the building plan would be the date on which the approval is granted and not the date on which the plans are submitted.”

Key Takeaways

• No vested right accrues to an applicant merely by submitting an application for planning permission or paying initial charges.
• The applicable rates for Premium FSI charges are those prevailing at the time of granting planning permission.
• Revised I&A charges cannot be levied without a proper amendment to the relevant rules and in contravention of the planning authority’s own office orders.
• Planning authorities must adhere to their own internal guidelines and procedures when implementing changes in charges.
• The case emphasizes the importance of a clear legal framework and adherence to due process in development projects.

Directions

There were no specific directions given by the Supreme Court in this judgment.

Development of Law

The Supreme Court clarified that the date of granting planning permission is the crucial date for determining the applicable charges, particularly for Premium FSI. The judgment also highlighted that revised I&A charges cannot be levied without a proper amendment to the relevant rules, reinforcing the principle that subordinate legislation must be in conformity with parent legislation. The ratio decidendi of the case is that no vested right accrues merely from submitting an application or paying initial charges, and the applicable rates are those in effect at the time of granting planning permission.

Conclusion

The Supreme Court’s decision in Chennai Metropolitan Development Authority vs. Prestige Estates Project Ltd. provides clarity on the timing for applying revised charges in development projects. While the court upheld the revised Premium FSI charges, it rejected the increased I&A charges due to procedural deficiencies and the planning authority’s own internal office order. This judgment reinforces the principle that planning authorities must adhere to due process and that no vested right accrues merely from submitting an application or paying initial charges.