Setback to MMRDA: HC quashes ‘illegal’ penalty notices for BKC, orders Rs. 700 crore refund to RIL, others

A division bench of Chief Justice Shree Chandrashekhar and Justice Suman Shyam allowed pleas by four entities argued through senior advocate Vikram Nankani and advocates Ankit Lohia and Sujay Kantawala, and quashed and set aside demand notices in question issued by the MMRDA with respect to their respective leased properties.

After MMRDA’s lawyer sought a stay on the operation and implementation of the judgement, the bench declined the request, observing that it had already held the MMRDA’s action to be “arbitrary,” and it “cannot perpetuate illegality”

In the case involving Reliance Industries Ltd (RIL), the MMRDA in 2006 leased a “G” block plot to the company for 80 years to develop a “Convention and Exhibition Centre and Commercial Complex”.

As per lease terms, construction was to be completed within four years. However, in a September 12, 2017 notice, MMRDA alleged a delay of over seven years and sought penalty for the entire period.

RIL moved the Bombay High Court, which in December 2017 granted protection from coercive action.

In February 2019, RIL deposited Rs 646.77 crore with MMRDA — backed by a Rs 1,312 crore bank guarantee — towards alleged delay from September 2010 to February 2019. The authority subsequently issued a part Occupation Certificate (OC) for 44,621 sq m.

In June 2019, MMRDA raised a fresh demand of nearly Rs 1,116 crore as additional premium for delays in completing extra built-up area under a supplementary lease.

The authority also refused to process RIL’s application for further OC for 1.24 lakh sq m until the dues were paid. However, in 2020, the High Court directed MMRDA to process the application without insisting on payment.

Allowing the pleas, the bench noted on April 8, “We are of the unhesitant opinion that the demand for payment of the penalty/additional premium for alleged delay in completing the construction was not maintainable under the Lease Deed. Moreover, such amount was realised by the MMRDA in a most arbitrary, high handed, unfair, and unreasonable manner by subjecting the petitioner to undue pressure and threat of termination of the Lease, thus putting its business interest in peril.”

The bench observed the petitioners were made to deposit the amount of penalty “under coercion” without proper Show-cause notice against the principles of natural justice, therefore, “consequences under the law on such counts must follow”.