India: Supreme Court Decides The Fate Of Landholders Affected By The ULC Exemption Orders:

Last Updated: 14 August 2019
Article by Sudip Mullick, Abhiraj Gandhi and Aishwarya Wadhavkar

Most Read Contributor in India, August 2019

The Urban Land (Ceiling and Regulation) Act, 1976 ("ULC Act") was enacted to prevent concentration of urban properties in the hands of a few and to ensure equitable distribution / utilization of urban vacant lands. The ULC Act provided for ceiling on holding of vacant land in urban agglomerations of the State. Accordingly, possession of the surplus vacant land was taken over by the ULC Authorities after following the procedure laid down under the ULC Act.

On applications by landowners holding excess vacant land, the State Government granted exemptions under Section 20 of the ULC Act which provided for vacant lands to be utilised for specified purposes and the land holder to implement the terms and conditions of the exemption order.

Thereafter, the ULC Act was repealed by the Urban Land (Ceiling and Regulation) Act, 1999 ("Repeal Act"), and the Maharashtra State Legislature adopted the Repeal Act on 28 November 2007.

Section 3 of the Repeal Act provided that the repeal of the ULC Act shall not affect (i) the vacant lands, the possession of which was taken over by the State Government under Section 10 (3) of the ULC Act; and (ii) the validity of any order granting the exemption under Section 20 (1) of the ULC Act or any action taken thereunder, notwithstanding any judgment of the court to the contrary.

This provision of the Repeal Act was challenged by several writ petitions before the Bombay High Court which resulted in conflicting judgments. Finally a full bench of the Bombay High Court by its order and judgment dated 23 June 2014, upheld the validity of the exemption order granted under the ULC Act and clarified that Section 3 (1) (b) of the Repeal Act did not expressly bar or take away the rights and liabilities under the exemption order issued to people who sought and held surplus vacant land by virtue of such exemption order. The full bench judgement of the Bombay High Court was challenged in the Hon'ble Supreme Court of India ("Supreme Court") by the Maharashtra Chamber of Housing Industry ("MCHI") and several other affected parties.

During the pendency of the appeal, the State of Maharashtra constituted a Committee under the Chairmanship of Hon'ble Mr BN Srikrishna, retired judge of the Supreme Court ("Shikrishna Committee") (i) to explore the possibility of imposing onetime premium for completion of schemes under Section 20 of the ULC Act; (ii) to suggest measures to be taken with regards to the lands exempted from the ULC Act for agricultural and industrial purposes; and (iii) to suggest measures to be taken for redevelopment of the schemes under Section 20 of the ULC Act already completed.

Considering the ground realities, the Shikrishna Committee vide its report dated 9 August 2018 ("Report") gave inter alia the following recommendations:

  • Lands exempted for affordable housing purpose which are fully utilised: There are a lot of buildings on such lands which were exempted for affordable housing purpose, in a dilapidated condition which require redevelopment and were stuck due to the pending litigation. In such cases, the said redevelopment may be permitted by charging a onetime premium at the rate of 5% of the current annual scheduled rates for the total exempted land.
  • Lands exempted under Section 20 of the ULC Act:
    • Land under Housing and Talegaon Dabhade Plotting Scheme: There are a lot of incomplete housing schemes which if completed could generate about 7500 tenements for the Government. Such surplus vacant land can be released from the purview of the Repeal Act by levying a flat 10% premium of the current annual scheduled rates for the total exempted land and subject to the condition that the tenements to be constructed on such freehold land shall not exceed 80 Square Meters (Carpet Area).
    • Land exempted for industrial purpose: Such lands should be released from the conditions of the exemption order by charging a onetime premium at the rate of 15% of the current annual scheduled rates for the total exempted land.
    • Land exempted for agricultural purpose: Such lands shall be released from the conditions of the exemption order by charging a onetime premium at the rate of 10% of current annual scheduled rates for the total exempted land subject to the condition that the tenements to be constructed on such land shall not exceed 80 Square Meters (Carpet Area).
    • Land exempted for other purposes: Lands which have been exempted for other purposes such as gardens, open to the sky etc., shall be released from the purview of the Repeal Act by charging a onetime premium at the rate of 10% of current annual scheduled rates for the total exempted land. In the event the FSI of such lands has not be used, then the premium will be charged at the rate of 20% of the current annual scheduled rates for the total exempted land.
  • Deletion of entries of "State Government" from the revenue records:
    • There were instances where buildings were constructed before acquisition of the land under Section 10 (3) and 10 (5) of the ULC Act after obtaining prior approvals however entries were made on the revenue records that the land is vested with the State Government thus denying conveyance of the land to the societies. In such cases, the entries should be deleted.
    • If buildings have been constructed after the ULC Act coming into force and if no exemption order under Section 20 of the ULC Act has been made then such entries on the revenue records may be deleted by charging a premium at the rate of 5% of the current annual scheduled rates in respect of the total constructed area of the building as one time settlement.

In a nutshell, the Srikrishna Committee has recommended freeing up the lands from the purview of the Repeal Act by charging a onetime premium at the prescribed rates on the total exempted land which not only includes the surplus vacant land but also, the excess appurtenant land and areas of land required to be kept vacant as per statutory regulations, as opposed to levying a higher rate of premium on the unutilised surplus vacant land.

The suggestions made by the Srikrishna Committee in its Report were accepted by MCHI and the State of Maharashtra. Thereafter, consent terms were filed by the parties adopting the recommendations made in the Report. The consent terms were accepted by the Supreme Court on 2 July 2019 and thereby disposing of the appeal. The benefit of the consent terms is available to the persons affected by the exemption orders passed under Section 20 of the ULC Act, if such persons file an undertaking with the State Government to be bound by the consent terms. If any exemption holder is aggrieved with the classification of the case under the aforementioned categories, it is open for the exemption holder to take up such issue directly with the State Government and not be tied down by the consent terms. The Supreme Court also clarifies that if any of the categories of the exemption are not covered in the Report, then it is open to such exemption holders to make a representation to the State Government and it will be incumbent for the State Government to consider the same keeping in mind the recommendations made in the Report.

The Town Planning department of the Government of Maharashtra has passed a government order on 1 August 2011 giving effect to the recommendations made by the Srikrishna Committee and laying down the conditions for implementing the recommendations.

While the order passed by the Supreme Court will definitely ward away the ghost of ULC which has been for long looming over the lands of Maharashtra, what remains to be seen is the readiness of the land holder to bear the cost, which now requires the land holder to pay a onetime reduced premium on total exempted land as opposed to payment of higher percentage of premium only on the unutilised surplus vacant land, which by comparison would be a relatively smaller area.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

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