Maharashtra Slum Areas Act | Land Can't Be Acquired Without Extinguishing Owner's Preferential Right To Propose Rehabilitation Scheme : Supreme Court

While dealing with acquisition of a parcel of land in Mumbai's Kurla for slum rehabilitation purposes, the Supreme Court recently held that Chapter I-A of the Slums Act gives preferential right to a landowner, vis-a-vis the State, Slum Rehabilitation Authority (SRA), occupiers, and other stakeholders, to redevelop land.

The SRA shall mandatorily issue notice to the landowner inviting its proposal for an SR Scheme and the landowner must submit the Slum Rehabilitation (SR) Scheme "within a reasonable period" , the Court said.

A bench of Justices Surya Kant and N Kotiswar Singh also held that acquisition by the State in terms of Section 14 of the Slums Act [that is, the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971] shall await extinguishment of the landowner's preferential right.

In passing, the Court also remarked that the framework for Slum Rehabilitation under the Slums Act is "poorly structured". However, as the impugned actions took place prior to the 2018 amendment of the Act, it did not delve further into the issue.

"There appears to be no cogent reason as to why, instead of enacting a self-contained code within Section I-A, the drafters of this legislation chose to incorporate an entirely distinct slum rehabilitation mechanism by amending the existing legislation through Section 3D. This approach to drafting inevitably blurs the boundaries between the two frameworks, creating confusion in the mind of a reader."

Factual Background

The subject land, owned by Indian Cork Mills Private Limited (ICM) since 1970, was encroached upon by hutment dwellers and portion of it declared as a 'Slum Area' under Section 4 of the Slums Act. Over the years, the slum expanded and its dwellers formed the petitioner-Society (Tarabai Nagar Housing Society) in 2002. Vide notification dated 11.03.2011, SRA declared the entire subject land as an SR Area. Subsequently, the Tarabai society requested the authorities to acquire the land for redevelopment.

In the absence of landowner-ICM's response, the concerned Additional Collector recommended that the subject land be acquired. In 2012, a report was forwarded to the Government of Maharashtra. Later, a notice was served to ICM, to which it responded, and expressed intention to redevelop the land itself through an SR scheme. In 2013, the CEO recommended acquisition of the land under Section 14 of the Act, noting that ICM had showed inclination to redevelop but not proposed any SR Scheme. The State Government issued a notification in 2016 to acquire the land.

Aggrieved, ICM approached the High Court which, vide the impugned judgment, set aside the acquisition and directed SRA to consider ICM's proposal expeditiously. It was observed that the State and SRA conducted the acquisition without giving a proper opportunity to ICM to submit its SR Scheme. Assailing the High Court decision, petitioner-Society, State of Maharashtra and SRA approached the Supreme Court.

Issues

(i) Whether the owner of the land in an SR Area has any preferential right to redevelop it under Chapter I-A of the Slums Act?

(ii) Whether such preferential right, if any, entails that the owner be specially notified and invited to redevelop the SR Area before the SRA takes a decision under Section 13 read with Section 3D(b)(iii) of the Slums Act?

(iii) Whether the power of the State Government to acquire land under Section 14 read with Section 3D(c)(i) of the Slums Act28 is subject to the preferential right, if any, of the owner?

Court Observations

- Landholders/owners have a preferential right to redevelop SR Area

On the first issue, the Court opined that the SRA has the responsibility to redevelop an SR Area only when the landholder or occupants do not come forward with a proposal for redevelopment. In this regard, the slum dwellers' rights are balanced by the caveat that owner must come up with its proposal within 'reasonable time'. "where landholders or occupants have submitted a proposal for redevelopment, it places a caveat against any claim by the SRA for its statutory right or preference to redevelop the SR Area on its own...Section 13 has its own measure to balance the rights of slum dwellers, by imposing the restriction of 'reasonable time' on the owner's right to redevelop."

Based on a conjunctive reading of Sections 3B(4)(e) and 13(1), it concluded that the owner's right to develop an SR Area holds preference over that of the SRA within Chapter I-A of the Slums Act.

Though it was argued that the right of occupiers of land (such as slum dwellers), if not SRA, cannot be subject to the landowners' right to redevelop land, the Court was not convinced. It was of the view that the occupiers cannot override the owner when the latter comes forward with a feasible redevelopment plan within reasonable time, as besides the Slums Act, the landowner also has constitutional and inherent rights attached to the property.

The Court opined that if landowners and occupiers are given equal rights to redevelop, a situation may arise where the landowner comes up with a feasible plan but the occupiers bring another proposal by a developer of their choice. Here, if the SRA is allowed discretion, it may lead to discriminatory and arbitrary results "motivated by extraneous considerations", as well as turn out to be disadvantageous to the occupiers/slum dwellers themselves.

"there is no tenable reason, in law or in equity, to allow the occupants to exercise primacy over and steamroll the landowner's proposal, especially when the latter is willing to implement the SR Scheme by itself...If the interpretation suggested by the Appellants is accepted, we would inevitably incentivise third-party developers and anti-social elements to prop up the poor slum dwellers so as to grab the land from the true owners. It would ultimately encourage mala-fide proposals to be filed, manipulating the inhabitants of these slums and stripping the owners of the fruits of their land."

In this regard, the Court also referred to SRA's own circulars and notices which gave preferential rights to the landowners.

- Notice inviting landowner to submit SR Scheme mandatory

On the second issue, it was held that the requirement for a specific notice inviting the owner to submit an SR Scheme shall be read as mandatory. The Court opined that expecting a landowner to remain vigilant about declaration of his land as SR Area through a Gazette Notification, and filing an SR scheme without the same being invited by the SRA, would be preposterous.

"It cannot be overlooked that in the absence of a prior notice, the owner may not even become aware that the Subject Land has been declared an SR Area. Unaware that it is required to submit an SR Scheme to exercise its preferential right, the owner could lose a substantial part of its rights over the land. This is despite being willing to submit an SR Scheme and undertake redevelopment."

On equity as well, the Court held that there shall not be any issue in issuing prior notice to the landowner. "We fail to understand the SRA's admonishable conduct in assuming that an owner, whose rights, in no uncertain terms, would be adversely impacted, does not deserve to be heard before it is deprived of its preferential right for redeveloping the SR Area...Mere declaration of an area as an SR Area does not amount to inviting the landowner to redevelop the land, and the publication of the former cannot attract the consequences attributable to the latter."

In this regard, the Court referred to two prior notices/invites issued by SRA to landowners (in other cases) and found merit in ICM's contention that without a notice from the SRA inviting to conduct survey, etc. of the SR Area, a landowner may not be in a position to file an SR Scheme.

"SRA's Circular No. 144 mandates that an SR Scheme must be complete in all respects, including the required Annexures. Generally, this would entail that the promoter of an SR Scheme undertakes a complete survey and feasibility study for the project. The 1997 Guidelines also stipulate specific requirements for the SR Scheme, including the details of the plot area (required to be mapped by government officials), existing hutments and their type, tenement density, extent and type of reservations, amenities, and available FSI, as well as number, details, identification, and consent of the slum dwellers. There is no doubt in our minds that an owner would be unable to obtain this information without the involvement of the SRA in conducting surveys and demarcation. This is especially important if the slum dwellers are not in favour of the owner's proposal."

- State cannot acquire land until landowners' preferential right extinguished

On the third issue, the Court said that under Section 14 of the Act, the State can acquire a land for implementation of a SR scheme. This can particularly become important in cases where landowner does not grant no-objection certificate and stalls redevelopment. Nonetheless, State acquisition cannot proceed as long as the owner is willing to redevelop in exercise of its preferential right.

"any process to acquire the land shall have to be kept in abeyance till such time as the owner's preferential right to develop it stands extinguished. Since it is open to the owner to file its own SR Scheme within a reasonable time and the proposal of the owner, if valid and complete, would take primacy, it cannot be said that there is any legal necessity to acquire the land. If acquisition is allowed to take place at this stage, it will jeopardise the preferential right of the landowner. It is only when the owner declines to undertake development or to support any third-party development, thereby foregoing its preferential right, that such a necessity would actually arise."

Insofar as the petitioners relied on the decision in Murlidhar Teckchand Gandhi v. State of Maharashtra, the Court noted that the bench in the said case did not have a chance to consider Chapter I-A of the Act, with which the present case was concerned. It further observed that the scope of acquisition under Section 14 (Chapter V) is broader than that of Chapter I-A and there exists a definite primacy of the owner's right under the latter.

"When an SR Area has been notified under Section 3C(1) of Chapter I-A and its development through an SR Scheme is conceptualised, whereunder there is an inbuilt preferential right of an owner to carry out redevelopment, the power of acquisition under Section 14 would not operate in an independent silo; rather, it must derive meaning and effect When an SR Area has been notified under Section 3C(1) of Chapter I-A and its development through an SR Scheme is conceptualised, whereunder there is an inbuilt preferential right of an owner to carry out redevelopment, the power of acquisition under Section 14 would not operate in an independent silo; rather, it must derive meaning and effect", the Court said.

In the facts of the case, it was noted that ICM was not issued notice by the SRA inviting it to submit an SR Scheme, and therefore, its preferential right was not extinguished. Further, ICM was willing to prepare and submit an SR Scheme, but neither the petitioner-Society nor the SRA extended the necessary cooperation. 

"It naturally follows from the above that the SRA and the State exceeded their power, apparently to pre-empt the owner from undertaking redevelopment. The acquisition of land, in such circumstances, being a colourable exercise of power, cannot be sustained."

The Court further doubted the conduct of the State and the SRA. It observed, "The conduct of the SRA is equally, if not more, troubling and warrants a closer scrutiny. Its actions reflect a pattern of shifting positions and an approach that is arbitrary and unreasonable and lacks bona fides...The State's readiness to accept the CEO's report raises suspicions about the sanctity and integrity of the administrative process involved in this case."

Conclusion

As a result, the Court dismissed the appeals and vacated a status quo order passed in 2017. It granted ICM time of 120 days to submit an SR Scheme for redevelopment of the subject land.

Case Title: Tarabai Nagar Co-Op. Hog. Society (Proposed) versus The State of Maharashtra and others, SLP(C) No.19774/2018

Citation : 2025 LiveLaw (SC) 832

Click here to read the judgment