The Bombay High Court has ruled that the Indian state of Maharashtra cannot charge a premium on the entire freehold land of a property owner in order to lift development restrictions but can only do so on surplus vacant land under the repealed Urban Land (Ceiling and Regulation) Act. The court's decision came after a landowner filed a petition after the state sought a premium on almost one acre, he was permitted to hold under ULCA.
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The Bombay High Court has recently ruled that the state government can charge a premium only on surplus vacant land under the repealed Urban Land (Ceiling and Regulation) Act, and not on the entire freehold land of the owner. This decision has come as a relief to big landowners and developers in the state.
In 2019, the government had issued a GR (government order) seeking to close all pending issues regarding surplus land under ULCA by accepting a one-time premium based on market value to release it for regular development. The premium was 10% for residential land and 15% for commercial land.
However, a bench of Justices Gautam Patel and Neela Gokhale ruled that seeking a premium on the entire freehold land could render the GR unconstitutional. The court made this decision while hearing a petition filed by Salim Porbanderwalla, who had been asked to pay a premium not only on 1.3 acres of surplus land in Andheri but also on the almost one acre he was permitted to hold under ULCA. Porbanderwalla had paid a premium of over Rs 5 crore.
The court held that there are two parcels of land, and a premium cannot be charged on the parcel the owner is entitled to hold. "The other parcel is the surplus vacant land, for which the petitioners have paid the full premium. Against that, they are entitled to have the revenue entry deleted," said the HC, adding that the land is now free of all conditions imposed in 2008 by the state for grant of exemption.
The court also noted that to release the surplus land from all restrictions, the landowner must pay a premium even on land already retained under the law. Senior counsel Pravin Samdhani, with advocates Amogh Singh and Nivit Srivastava, argued that the state's stand would make the GR an unconstitutional restriction on development and run afoul of Article 300-A of the Constitution (right to land).
The HC agreed with Samdhani's argument and stated that if the government's interpretation of the GR is to be accepted, this would be nothing but a reintroduction of Section 27(1) (of ULCA) - restriction on transfer of urban land with building on it in a different form although this has already been held to be unconstitutional. The court added that it understood the state's concerns since "quite sizable amounts" of premiums are involved but made it clear that the government should not venture into an area that would render the GR itself vulnerable.
The court also said that the GR uses the words 'entire land' but this has to be read in a context. It cannot be an elastic term and cannot be unreasonably expanded to include land that under no process of logic or law could be subjected to a premium. This decision is expected to have a significant impact on big landowners and developers who were facing uncertainty regarding the premiums they would have to pay for their land. The ruling provides clarity on the issue and will help them plan their development projects accordingly.
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