HC tells MMRDA to refund ₹731.13 cr in penalties to four entities

The Bombay High Court on Wednesday directed the Mumbai Metropolitan Region Development Authority (MMRDA) to refund ₹731.13 crore forcibly recovered as additional premium or penalty from four entities for failing to complete construction work within the stipulated time on plots they had leased at the Bandra Kurla Complex (BKC)

MUMBAI: The Bombay High Court on Wednesday directed the Mumbai Metropolitan Region Development Authority (MMRDA) to refund ₹731.13 crore forcibly recovered as additional premium or penalty from four entities for failing to complete construction work within the stipulated time on plots they had leased at the Bandra Kurla Complex (BKC).

HC tells MMRDA to refund ₹731.13 cr in penalties to four entities. (Shutterstock)

A division bench of Chief Justice Shree Chandrashekhar and Justice Suman Shyam struck down the demand notices and ordered MMRDA to refund the sum to Reliance Industries Limited (RIL) ( ₹646.77 crore), Sunteck Realty Limited ( ₹52.80 crore), Indian Newspaper Society ( ₹22.63 crore) and Shree Naman Hotels ( ₹8.93 crore) within 90 days, after noticing that the delay in completing the projects was mainly due to delays in obtaining statutory permissions without which work could not have commenced.

In four separate orders, the judges said these were not cases where construction delays resulted from the lesses’ negligence. “On the contrary, it appears from the material on record that the construction was delayed due to delay in issuance of statutory approvals including environment clearances,” the judges said.

According to the terms of the lease deed, construction cannot commence without plan approval and issuance of the Commencement Certificate, the judges noted. “Therefore, by a reasonable and harmonious construction of the articles of the Lease Deed, the time for completing construction ought to start from the date of issuance of the Commencement Certificate, not from the date of the lease deed,” the order stated.

In RIL’s case, MMRDA had leased a 75,000-sq m plot in BKC’s G-Block in September 2006, for construction of a convention and exhibition centre and commercial complex. Under the lease terms, the company was to start construction work within three months of plan approval and complete the project within four years from the lease date. The company was to pay an additional premium for failure to keep to the schedule.

Subsequently, as the FSI for the plots in G-Block increased from 2 to 4, MMRDA increased the built-up area to an aggregate of 3,12,500 sq m, for which RIL paid an aggregate premium of ₹4,005 crore.

In September 2017, MMRDA issued a demand notice claiming a delay of over 7 years in completing the project. Although the notice did not mention the penalty amount, the company was coerced into depositing ₹646.77 crore when it sought an occupancy certificate for an area of 44,621 sq m. In June 2019, when its architect applied for a further occupancy certificate, MMRDA demanded an additional ₹1,116.83 crore, even though earlier demands were already under review before the high court.

The other three entities had also filed separate petitions, challenging the recovery of a penalty from them. The bench allowed all the petitions on Wednesday, struck down the demand notices, and ordered a refund of the recovered penalties.