Bombay High Court: Default in Paying Rent Transit for SRA Project Forms Oppression

Bombay High Court: Default in Paying Rent Transit for SRA Project Forms Oppression

The Bombay High Court in the matter of Shree Sai Pawan SRA Chs Ltd. vs. Chief Executive Officer SRA and others observed that a builder’s default in payment of transit rent in a slum rehabilitation project is akin to a ‘form of oppression.’

The division bench of Justices Gautam Patel and Neela Gokhale ordered Afcons Developers Ltd and Ameya Housing Private Ltd to pay transit arrears of Rs. 11 crore to a suburban Slum Rehabilitation project and observed, that the city is not for developers and the Slum Rehabilitation Act (SRA) is intended to serve the purpose of public welfare and not the developers.

The Court was hearing a petition filed by Shree Sai Pawan SRA CHS Ltd claiming that the two developers appointed for redevelopment of their society had not paid them transit rent since 2019.

According to the petition, Afcons Developers Ltd and Ameya Housing Private Ltd were appointed as co-developers of the slum rehabilitation project at Jogeshwari in suburban Mumbai. More than 300 people, who were found to be eligible to get flats in the project, have not been getting any transit rent since 2019. Of these, 17 were not paid transit rent as they were put up in transit accommodations, however, these houses too were in a dilapidated condition.

The Court by its 27th February, 2023 order had noted that the two co-developers have arranged to lock themselves in a never-ending arbitration. There was no work being done at site. It further added that if they were serious about this project, they will bring the entire amount of transit rent due to those entitled to transit rent from 2019.

The bench had opined that developers were entitled to a free sale component provided by the incentive Floor Space Index (FSI), but this was a consideration for fulfilling their obligations under the contract.

“Those obligations include not only the rebuilding or building of rehabilitation structures and tenements both commercial and residential, but also the payment of transit rent in the meantime or the providing of habitable transit accommodation. A developer who does not pay transit rent, does not provide habitable transit accommodation or otherwise is in default of his obligations, all of which have to be performed on a schedule and within a time frame, is not entitled to any of the benefits of the slum rehabilitation project, i.e., the free sale component,” the Court had observed in its order.

Further the bench had remarked that this is the overall architecture of the Maharashtra Slum Areas (Improvement, Clearance, and Redevelopment) Act, 1971. As regards slum dwellers, only those who were found to be eligible were entitled to these benefits.

In its order, it had highlighted that a developer, who does not pay transit rent, does not provide habitable transit accommodation or otherwise is in default of his obligations, all of which have to be performed on a schedule and within a time frame, is not entitled to any of the benefits of the slum rehabilitation project, i.e., the free sale component.

Warning the developers, the bench had stated, “the developer can always be changed. The beneficiaries of a SRA project cannot. And let there be no mistaking this, that if our hand is forced, we will compel a change of developer.”

On 27th February, 2023, the High Court had ordered, the co-developers to pay Rs. 11 crore as arrears in transit rent and ‘prove their sincerity’ if they want to preserve the rights to continue as developers by 3rd March, 2023.

Subsequently, on 3 March, 2023 one of the co-developers said a substantial amount would be paid by March 8. On that day, Mr. Siddharth Mallya, one of the directors of Ameya Housing, appeared in Court and had instructed his Senior Counsel Mukesh Vashi to state that Rs 4 crore would be deposited in two days without prejudice to establish his bona fides and also as initial payment of transit rent arrears. The Court had accepted the statement as an ‘undertaking’ to Court.

Following which on 13 March, 2023 Advocate Jagdish Reddy for SRA informed that a letter of termination, dated 2 March, was ready and sought Court’s permission to serve it on the builders.

The Court permitted the CEO of SRA to terminate the builders and initiate the process of identifying a new developer.

The Court expressed its disappointment on violation of the undertaking and instituted suo motu civil contempt of court proceedings against Mr Siddharth Mallya, a director of Ameya Housing Pvt Ltd.

The Court further imposed cost of Rs 10 lakh on the co-developers to be paid to the Jogeshwari slum society in two weeks, failing which it would attract 6% interest per year.