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CASE NO.: Appeal (civil)  5948 of 2007

PETITIONER: SURESH ESTATES PVT. LTD. & ORS.

RESPONDENT: MUNICIPAL CORP. OF GREATER MUMBAI  & ORS.

DATE OF JUDGMENT: 14/12/2007

BENCH: CJI K.G. BALAKRISHNAN,LOKESHWAR SINGH PANTA & J.M. PANCHAL

JUDGMENT: J U D G M E N T  (Arising out of SLP(C) No.14578 of 2007

J.M. PANCHAL, J.                  1.              Leave granted.       2.              The instant appeal is directed against  judgment  dated August 13, 2007 rendered by the Division Bench of High  Court of Judicature at Bombay in Writ Petition No. 1627/2007  by which the prayers made by the appellants,  (1) to declare  that application submitted by them on December 26, 2005 to  the Municipal Corporation of Greater Mumbai to give  permission to develop land bearing CTS No. 2193 (P) of  Bhuleshwar Division at Dr. Babasaheb Jaykar Marg stands  granted in view of Section 45(5) of the Maharashtra Regional  and Town Planning Act, 1966, (2) in the alternative to direct  the respondents to grant forthwith their application for  permission to develop land referred to above with additional  FSI of 3.73 times the FSI permissible under Rule 10(2) of DC  Rules, 1967, and,  (3) to direct the respondents to allow them  to proceed with the development of their plot mentioned above  for construction of luxury hotel by utilization of additional FSI  of 3.73 times the FSI permissible on the said plot as per DC  Rules, 1967, are refused.

3.      The appellants No.1 and 2 are the Companies  incorporated under the provisions of the Companies Act, 1956.   The petitioner No. 2 holds/owns a plot of land bearing CTS No.  2193 (P) of Bhuleshwar Division at Dr. Babasaheb Jaykar  Marg, Thakurdwar.  The plot admeasures approximately 8983  square meters.  The respondent No. 1 is the Municipal  Corporation for Greater Mumbai, and the Planning Authority  under the provisions of Mumbai Municipal Corporation Act,  1888 as well as Maharashtra Regional and Town Planning Act,  1966 (\021The M.R.T.P. Act\022, for short).  The appellant No. 1,  obtained requisite rights in respect of plot referred to above.   The plot was reserved for play ground of Municipal Primary  School and Secondary School as well as for D.P. Road.  The  appellant No. 1 caused a purchase notice to be served to the  Municipal Authorities on June 16, 2005.  The Municipal  Corporation found that the land was encumbered with  residential as well as commercial structures and the cost of  purchase would be roughly about Rs. 13.6 crores which was  very high.  The Municipal Corporation, therefore, decided not  to purchase the said plot of land, as a result of which the  reservations on the plot lapsed on December 16, 2005 under  the relevant provisions of the M.R.T.P. Act. The appellants

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thereupon desired to develop the plot for construction of a  luxury hotel.  It may be mentioned that in exercise of rule- making power conferred by the M.R.T.P. Act, the State  Government had earlier framed Development Control Rules,  1967. According to the appellants, the Ministry of  Environment and Forests issued Notification I on February 19,  1991 under Section 3(1) and 3(2)(v) of the Environment  (Protection) Act, 1986 and Rule 5(3)(d) of the Environment  (Protection) Rules, 1986 declaring coastal stretches as Coastal  Regulation Zone (CRZ) and regulating activities in the CRZ, as  result of which the plot belonging to them falls within CRZ II.   What is claimed by  the appellants is that the buildings  permitted in CRZ II on the landward side of the existing and  proposed road would be subject to the existing local Town  Planning Regulations and therefore, the luxury hotel will have  to be constructed as per D.C. Rules of 1967 which were  existing local Town Planning Regulations.  The appellant,  therefore, submitted the plans to develop the land in question  by constructing a luxury hotel in terms of Rules of 1967 on  December 26, 2005.  The case of the appellants is that they  are entitled to additional FSI of 3.73 times the FSI in addition  to 1.33 FSI allowable on the said plot as per the provisions of  Rule 10(2) of DC Rules, 1967.  The appellants did not receive  any communication from the Municipal Authorities about  their application by which permission to develop the plot was  sought.  On December 31, 2005 the Municipal Corporation  submitted a proposal to the Principal Secretary, Urban  Development Department, Government of Maharashtra  recommending inter alia that in view of the provisions of CRZ  Notification and DC Rules, 1967, additional FSI as applied for  by the appellants be granted under Rule 10(2) of DC Rules,  1967.  On  August 2, 2006 a letter was addressed by the State  Government to the Ministry of  Environment and Forest,  Union of India requesting to examine the proposal of the  appellants and communicate to Government of Maharshtra  whether the stand taken by the appellants for additional FSI  was correct.  On August 18, 2006 a communication was  addressed by the Ministry of Environment and Forest to  Principal Secretary, Urban Development Department,  Government of Maharashtra clarifying that in view of earlier  clarification issued on September 8, 1998, the DC Rules as  existed on  February 19, 1991 would apply to the areas falling  within the CRZ Notification and further mentioning that \023The  word existing has been interpreted by the Ministry vide a letter  dated 8th September, 1998 to mean the Rules which prevailed  on 19th February, 1991\022\022.  It was also stated in the said  communication that the DCR Regulations which were in force  on December 19, 1991 i.e. the approved DC Rules of 1967  shall be considered and not the draft Regulations of 1989  which came into force on February 20, 1991 as the Draft  Development Plan of 1989 was still at a draft stage on  February 19, 1991.  On February 20, 2007 a letter was  addressed by the Government of Maharashtra to Municipal  Corporation of Greater Mumbai in which reference was invited  to the application submitted by the appellants for development  permission and remarks from the Municipal Corporation were  called for.  The Municipal Commissioner convened a meeting  of the personnel belonging to different Departments and at the  said meeting the matter was considered.  The Committee  decided to recommend the proposal for consideration of  Government in terms of the provisions of DC Rule 52(8)(vii).   On March 1, 2007 the Municipal Corporation recommended  for grant of additional FSI in terms of the DC Rules, 1967 as  demanded by the appellants.  On February 21, 2007 the  Ministry of Environment and Forest granted environmental

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clearance to the appellants for construction of a residential  hotel and commercial project subject to the terms and  conditions set out therein. The appellant No. 2, on April 30,  2007 created a registered mortgage of the land in favour of IL  and FS Trust Company Ltd. & Ors. for securing loan facilities  amounting to Rs. 550 crores for construction of the luxury  hotel.  The appellants did not receive any further  communication from the respondents.  The case of the  appellants was that the Planning Authority did not  communicate its decision to them as to whether the  permission sought for was granted or refused, within 60 days  from the date of the receipt of application and therefore they  were entitled to a declaration that the permission was deemed  to have been granted to them in terms of Section 45 (5) of the  M.R.T.P. Act.  In  the alternative it was their case that in terms  of the amended DC Rules of 1967 the competent authority,  with the previous approval of the Government, has authority  to permit the person who has applied for permission to exceed  floor space indices in respect of buildings of educational and  medical relief institution as well as Government and semi  Government offices and luxury hotels and as the Taj Mahal,  Oberoi, Sea Rock, President, Ambassdor amongst other hotels,  were granted benefit of additional FSI under Rule 10 (2) of DC  Rules, 1967, they were also entitled to additional FSI 3.73  times permissible FSI of 1.33 available under the relevant  Rule.  What was asserted by the appellants was that in view   of Division Bench decision of the Bombay High Court in  Overseas Chinese Cuisines India Pvt. Ltd. Vs. Municipal  Corporation of Greater Mumbai 2001 (1) BCR 341, the  provisions of DC Rules of 1967 would be applicable and  therefore the appellants were entitled to additional FSI.  Under  the circumstances the appellants invoked extra ordinary  jurisdiction of the High Court of Judicature of Bombay under  Article 226 of the Constitution by filing Writ Petition No.  1627/2007 and claimed  the reliefs referred to earlier.   4.      On service of notice a reply was filed by the Corporation  and State Government controverting the averments made in   the petition.  The Division Bench of Bombay High Court did  not go into the merits of the contentions raised by the Learned  Counsel for the parties.  The High Court noticed that the main  grievance of the appellants was that the Government had not  disposed of their application till the date of hearing of the  petition which was causing serious loss to them.  The Learned  Advocate General, appearing for the State submitted that the  Government would deal with the matter expeditiously and  pass appropriate orders which would be communicated to the  petitioners.  In view of this state of affairs, the Division Bench  by Judgment dated 13th August, 2007, directed the  Government to take a decision on the application filed by the  appellants within 6 weeks from the date of the order and  communicate the order so passed to them, which has given  rise to the instant appeal.

5.      The matter was placed for preliminary hearing before the  Court on 17th August, 2007 and after hearing the Learned  Counsel for the appellants, the Court issued notice to the  respondents. On service of notice the respondents have filed  the reply.   According to the State Government, Development  Control Regulations for Greater Bombay, 1991 are applicable,  which do not provide for higher FSI to the proposed hotel  project of the appellants located in \021C\022 ward.  What is pointed  out in the alternative by the State is that under Section 46 of  the M.R.T.P. Act, the Planning Authority has to give due  regard to draft Regulations of 1989, which do not permit grant

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of additional FSI to the appellants.  It is further stated in the  reply that CRZ Notification of 1991 provides that in CRZ area,  the construction shall be subject to existing Local Town and  Country Planning Regulations including existing norms of FSI  and as existing norm is to give FSI of only 1.33 the appellants  are not entitled to additional FSI claimed by them.  According  to the State Government, even if it is assumed that the  appellants are entitled to higher FSI, they cannot use the  property  for construction of a hotel as the land was reserved  for public purpose on the date when the CRZ Notification was  issued.  What is asserted in the reply is that since it is  prerogative of State to grant discretionary additional FSI under  Rule 10(2) of DC Rules of 1967, the prayers made by the  appellants to grant additional FSI should be refused.

6.      This Court has heard the Learned Counsel for the parties  at length and in great detail.  This Court has also considered  the documents forming part of the appeal.   

7.      The contention advanced by the Learned Counsel for the  respondents that the DC Rules, 1967 would not apply to the  development permission sought for by the appellants, but the  Development Control Regulations of 1991 would apply, cannot  be accepted.  It is not in dispute that on February 19, 1991  the Ministry of Environment and Forest issued a notification  under the provisions of the Environment Protection Act, 1986  regulating building activities in Coastal Zones which is known  as Coastal Regulation Zone Notification.  The said Notification  classifies the areas within 500 meters of high tide land, into  CRZ I, CRZ II, CRZ III and  CRZ IV categories.  It is also not in  dispute that the plot belonging to the appellants falls within  CRZ II category.  The Notification inter alia  provides that  buildings shall be permitted only on the landward side of the  existing road and buildings permitted at landward side of the  existing and proposed roads shall be subject to the existing  local Town and Country Planning Regulations including the  existing norms of floor space index/floor area ration.  It is true  that DC Regulations for Greater Bombay, 1991 were notified  on February 20, 1991 and came into force with effect from  March 25, 1991.  However, a doubt was raised whether the  existing DC Regulations for Coastal Regulation Zone II  (CRZ  II) would mean the DC Rules, 1967 or Draft Development  Control  Regulations, 1989 which ultimately culminated into  D.C. Regulations, 1991 and, therefore, the Ministry of  Environment and Forest was consulted.  The Ministry of  Environment and Forest issued a clarification on September 8,  1998 stating that the DC Regulations as existing on February  19, 1991 would apply for all developmental activities in  Coastal Regulation Zone including CRZ II.  The Ministry of  Environment and Forest also issued clarification on August  18, 2006 reiterating that the existing DC Regulations  applicable to CRZ II areas in Mumbai would mean the DC  Rules, 1967.  Even the Municipal Corporation in its letter  dated December 31, 2005 addressed to the Principal  Secretary, Urban Development Department, Government of  Maharashtra, had expressed the view that the application  made by the appellants for construction of a luxury hotel with  additional FSI under DC Rules, 1967 be granted under Rule  10(2) of the Rules.  As observed earlier a letter dated February  20, 2007 was addressed by the Government of Maharashtra to  the Municipal Commissioner of Greater Mumbai in which  reference was invited to the application submitted by the  appellants for development permission and remarks from the  Municipal Corporation were called for.  The Municipal  Commissioner had convened a meeting of Officials belonging

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to different Departments of the State Government and the  Committee after discussion had decided to recommend to  grant the application made by the appellants pursuant to  which on March 1, 2007 the Municipal Corporation submitted  its Report to the State Government and recommended for  grant of additional FSI in terms of DC Rules, 1967. The word  \021existing\022 as employed in the CRZ Notification means Town and  Country Planning Regulations in force as on February 19,  1991.  If it had been the intention that Town and Country  Planning Regulations as in force on the date of the grant of  permission for building would apply to the building activity, it  would have been so specified.  It is well to remember that CRZ  Notification refers also to structures which were in existence  on the date of the notification.  What is stressed by the  notification is that irrespective of what Local Town and  Country Planning Regulations may provide in future the  building activity permitted under the notification shall be  frozen to the laws and norms existing on the date of the  notification.  On February 2, 1991 when the CRZ Notification  was issued, the only building Regulations that were existing in  city of Mumbai, were the DC Rules, 1967.  In view of the  contents of CRZ II Notification issued under the provisions of  Environment Protection Act which has the effect of prevailing  over the provisions of other Acts, the application submitted by  the appellants to develop the plot belonging to them would be  governed by the provisions of DC Rules, 1967 and not by the  Draft Development Rules of 1989 which came into force on  February 20, 1991 in the form of Development Control  Regulations for Greater Bombay 1991.  

8.              The argument that in view of the provisions of  Section 46 of the Town Planning Act, 1966, the Planning  Authority has to take into consideration the Draft Regulations  of 1989 and, therefore, the appellants would not be entitled to  additional FSI is devoid of merits.

9.              Section 3 of the Environment (Protection) Act, 1986  inter alia provides that the provisions of the Act and any Order  or Notification issued under the said Act will prevail over the  provisions of any other law.          The phrase \023any other law\022\022 will also include the M.R.T.P.  Act, 1966.  As noticed earlier the Notification dated February  19, 1991 issued under the provisions of Environment  (Protection) Act, 1986 freezes the building activity in an area  falling within CRZ- II to the law which was prevalent and in  force as on February 19, 1991.  The Draft Rules of 1989 would  not therefore apply as they were not existing law in force and  prevalent as on February 19, 1991.  In view of the peculiar  circumstances obtaining in the instant case, the Court is of  the opinion that Section 46 of the M.R.T.P Act, 1966 would not  apply to the facts of the instant case.  Further, when the  sanctioned D.C. Regulations for Greater Bombay, 1991 do not  apply to areas covered within CRZ-II, since those regulations  came into force with effect from March 20, 1991, its previous  draft also cannot apply.  The draft published is to be taken  into consideration so that the development plan is advanced  and not thwarted.  The draft development plan was capable of  being sanctioned, but when the final development plan is not  applicable, its draft would equally not apply as there is no  question of that plan being thwarted at all.  As far as  development in the area covered by CRZ-II is concerned one  will have to proceed on the footing that the draft plan after  CRZ Notification never existed.  Even otherwise what is  envisaged under Section 46 of the M.R.T.P. Act is due regard  to draft plan only if there is no final plan.  The DC Rules of

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1967 were in existence as on February 19, 1991 and therefore  the plan prepared thereunder would govern the case.  It is  relevant to the notice at this stage that the State Government  had sought a clarification from Ministry of Environment and  Forest on August 2, 2006 as to whether DC Rules, 1967 or the  DC Regulations 1991 will apply to the areas covered by CRZ-II.   The Ministry of Environment and Forest on August 18, 2006  clarified that the Development Control Rules of 1967 would  apply.  The assertion made by the appellants that the  clarification issued by the Ministry of Environment and Forest  is binding on the State Government in view of the salutary  provisions of Section 3, 5 and 24 of the Environment  (Protection) Act, 1986 deserves consideration.  The clarification  issued by the Central Government in respect of the CRZ  Notification on September 8, 1998 states that the existing  rules would be those, which were in force as on February 19,  1991.  The Draft Regulations of 1989 were not in force as on  February 19, 1991 and, therefore, would not apply to the plot  in question.  What is emphasized in Section 46 of the M.R.T.P.  Act, 1966 is that the Planning Authority should have due  regard to the Draft Rules.  The legislature has not used the  phrase \021must have regard\022 or \021shall have regard\022.  The  Municipal Corporation of Greater Mumbai which is the  Planning Authority had given due regard to the draft DC  Regulations of 1989 in the light of CRZ Notification and  recommended to the Government to grant additional FSI of  3.73 times permissible as per Development Control Rules,  1967 over and above 1.33 permissible, to the appellants.   Having regard to the facts of the case this Court is of the  opinion that the contention that the Planning Authority has to  take into consideration the Draft Regulations of 1989 and,  therefore, the appellants would not be entitled to additional  FSI, cannot be accepted and is hereby rejected.

10.             The argument that even if it is assumed that the  provisions of DC Rules, 1967 would be applicable to the  application submitted by the appellants seeking permission to  develop their plot, they would be entitled to FSI of only 1.33  which is the existing norm set out in the Rules and would not  be entitled to additional FSI, has no substance at all.  It is true  that in DC Rules, 1967 the norm of permissible FSI is laid  down to be 1.33.  However, there is no manner of doubt that  under Rule 10 (2) Rules of 1967, the floor space indices  specified may be permitted to be exceeded in respect of  buildings of educational and medical relief institution as well  as Government and semi-Government offices and luxury  hotels with the previous approval of the Government.  The  respondents could not lay factual data before the Court to  indicate that there was no norm of giving higher FSI over and  above 1.33 to hotels to the buildings contemplated under Rule  10(2) of DC Rules, 1967.  On the contrary the appellants have  placed material on record of the appeal which would indicate  that the norm adopted by the Government in case of Taj Hotel  and Hotel Oberoi was to grant FSI of 5.32.   The norm of FSI  specified in Rule 10(1) of the Rules of 1967 would be subject to  the discretion to be exercised by the Government under Rule  10(2) of the Rules.   The norm as set out regarding FSI in DC  rules on 1967 will have to be construed to mean also the norm  of FSI which can be granted by the Government in exercise of  discretion vested in it under Rule 10(2) of the Rules of 1967.   The case of the appellants is that normally all luxury hotels  which had applied for additional FSI under rule 10(2) of DC  Rules, 1967 were allowed additional FSI.  Having regard to the  intention of the legislature the prevalent norm of FSI under  Rule 10(1) of the Rules, 1967 will have to be construed to

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mean also the norm of FSI which can be granted in exercise of  discretion under Rule 10(2) of the Rules.  Therefore, the stand  taken by the respondents that the appellants would not be  entitled to more than 1.33 FSI in view of norm set out in DC  Rules of 1967 cannot be upheld and it is held that the  question of grant of FSI would be subject to the discretion to  be exercised by the Competent Authority under Rule 10(2) of  the Rules on analysis of objective facts placed before it.

11.             The contention that even if it is assumed that the  appellants are entitled to higher FSI, they cannot use the plot  in question for construction of a hotel as the land was  reserved for public purpose on the date when CRZ Notification  was issued, cannot be accepted.  As noticed earlier the plot  was reserved as play ground for secondary school as well as  for primary school and also for DP road.  The appellants had  caused the purchase notice dated June 16, 2005 served to the  Competent Authority under Section 127 of the M.R.T.P. Act,  1966.  After following the procedure the State Government  decided not to acquire the plot which is quite evident from the  contents of letter dated July 18, 2006, addressed by the  Government of Maharashtra to Municipal Corporation of  Greater Mumbai.  By the said letter the Municipal Corporation  of Greater Mumbai was informed that the procedure for  acquisition of the land in question had not been commenced  within the prescribed period by the Municipal Corporation and  therefore there was no objection for presuming that the  reservation had lapsed.  The CRZ Notification has only frozen  the FSI/FAR norms but not the operation of Section 127 of the  Act.  In terms of the provisions of Section 127 of the M.R.T.P.  Act, 1966, the reservations lapsed.  If the argument of the  respondent is accepted, it is likely to result into a piquant  situation not contemplated by the Act, because the  respondents do not want to acquire land whereas the  appellants would not be entitled to use the land for any  purpose for all time to come.  The argument advanced by the  respondent is misconceived in as much as the State  Government in one breath asserts that the appellants are  entitled to FSI of 1.33 for construction of hotel whereas in the  same breath it asserts that the property is reserved and  cannot be used for hotel project.   The underlying principle  envisaged by Section 127 of the M.R.T.P. Act, 1966 is either to  utilize the land for the purpose it is reserved in the plan or let  the owner utilize  the land for the purpose it is permissible  under the Town Planning Scheme.  Therefore, the plea that the  appellants would not be entitled to use the plot in question for  hotel project in view of the reservations which were earlier  prevalent cannot be accepted.

12.             Similarly, the assertion made by the respondents in  the reply that since it is prerogative of the State Government to  exercise discretion for grant of additional FSI, the prayer made  by the appellants to direct the State Government to grant  additional FSI should be turned down, cannot be accepted.  It  is true that under Rule 10(2) of the DC Rules, 1967 a  discretion is vested in the Government to grant additional FSI  in respect of the buildings of education and medical relief as  well as Government and semi-Government offices and luxury  hotels.  However, it is well-settled by catena on reported  decisions that the discretion vested in an Authority has to be  exercised judiciously.  The discretion vested under Rule 10(2)  of the DC Rules, 1967 cannot be exercised arbitrarily of  capriciously or as per the whims of the Authority concerned.  The exercise of the discretion must be in consonance with the  principles incorporated in Article 14 of the Constitution so

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that it does not suffer from the vice of the arbitrariness.   Therefore, the assertion made by the State Government that it  is prerogative of the State Government to grant additional FSI  and, therefore, the reliefs claimed in the appeal should be  refused, cannot be accepted.

13.             The contention of the appellants that in view of the  provisions of sub-Section 5 of Section 45 of the M.R.T.P. Act,  1966, the application submitted by them for seeking  permission to develop their plot should be deemed to have  been granted to them as the Planning Authority had failed to  communicate its decision whether to grant or refuse  permission within 60 days from the date of receipt of their  application, cannot be upheld.  The facts of the case would  indicate that the matter of grant of permission was under  active consideration of different authorities.  The question  whether the appellants were entitled to additional FSI as  claimed by them was considered and contested by the  respondents.  Further, the proviso to Section 45(5) of the  M.R.T.P. Act, 1966 makes it clear that the deeming provision  would apply only if the permission applied for is strictly in  conformity with relevant DC Regulations.  The competent  authority had no occasion to consider whether the plans  submitted by the appellants for development of their plot were  in accordance with DC Rules, 1967.  On the facts and in the  circumstances of the case this Court is of the opinion that the  appellants are not entitled to a declaration that the permission  applied for was deemed to have been granted to them as the  Planning Authority had failed to communicate its decision  whether to grant or refuse permission within 60 days from the  date of receipt of their application

14.             Similarly, the claim made by the appellants that the  respondents should be directed by this Court to grant  permission to the appellants to develop their plot with  demanded FSI cannot be accepted.  As noticed earlier Rule  10(2) of the Rules of 1967 confers discretion upon the  competent authority to grant additional FSI to the buildings  mentioned therein including luxury hotels.  When a statute  confers a discretionary power to be exercised by competent  authority, the Court cannot direct the competent authority to  exercise discretion in a particular manner. The Court can  always direct the competent authority to exercise discretion  vested in it in accordance with law.  Therefore, the prayer  made by the appellants to direct the State Government to  grant additional FSI as was granted to other hotels or to grant  them FSI of 5.32 cannot be accepted.  However, this Court is  of the opinion that having regard to the facts of the case  interest of justice should be served if the respondent State is  directed to exercise discretion vested in it under rule 10(2) of  the DC Rules, 1967 after taking into consideration the relevant  material including the fact that other hotels, were in past  granted additional FSI.

15.             For foregoing reasons the appeal partly succeeds.   The Judgment dated August 13, 2007 rendered by the  Division Bench of High Court of Judicature at Bombay in Writ  Petition No. 1627/2007 is modified.  The State Government is  directed to take a decision on the application submitted by the  appellants seeking permission to develop their plot on the  basis that the provisions of DC Rules, 1967 with discretion  available to the competent authority under Rule 10(2) of the  said Rules would be applicable and decide the said application  in the light of recommendations made by the competent  authority as well as the fact that other hotels as pointed out

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by the appellants were also granted more FSI than 1.33  permissible under Rule 10(1) of the DC Rules, 1967.  The  application submitted by the appellants shall be considered by  the respondents in the light of observations made in this  Judgment as early as possible and preferably within six weeks  from today.  The decision taken on the application of the  appellants shall be communicated to them.   

16.             The appeal accordingly stands disposed of.  The  parties to bear their own cost.