In a landmark ruling on deemed conveyance in multi-building layouts, the Bombay High Court has held that developers cannot use successive plan revisions and Transferrable Development Rights (TDR) loading to dilute the crystallised land rights of societies formed first, and remands three conveyance applications for fresh adjudication on the basis of the original sanctioned plan.
The Court observed that the right of a housing society to secure conveyance of its proportionate share in layout land crystallises and stands frozen upon expiry of four months from the date of formation of the society, as prescribed under Section 11 of MOFA read with Rule 9 of MOF Rules. Essentially, the Court said that proportionate land division in a layout must be based on the first sanctioned plan or the plan existing as on the date of freezing, and not on the last revised plan that incorporates additional TDR or incentive FSI loaded by the developer mid-way through the layout development.
The High Court also clarified that TDR, once detached from the originating land, constitute a transferable and negotiable instrument with no connection to the receiving plot, and buildings constructed using TDR cannot claim parity with buildings constructed on base FSI for the purpose of land entitlement. At the same time, mere failure of a society to file a suit under Section 7/7A of MOFA to injunct additional construction, or its tolerance of such construction, does not result in reduction of its crystallised land entitlement. In short, equitable considerations cannot prevail over the statutory scheme of MOFA.
A Single Judge Bench of Justice Sandeep V. Marne observed that the difficulty in proportionate land division arises primarily where buildings in a layout are not constructed using the same parameters, i.e., different FSI regimes, mixed development, and uneven loading of TDR create imbalance. The Court noted that developers routinely commit mischief by delaying conveyance of land to societies of completed buildings, getting layout plans revised mid-way, and loading additional TDR or incentive FSI on subsequent buildings to milk the development potential of the entire plot. The planning authorities unfortunately sanction revised permissions by computing FSI on the entire plot area, ignoring the fact that part of the land has already been developed and is entitled to be conveyed.
The Court emphasized that TDR is a movable, transferable, and negotiable instrument that has no connection with the land on which it is loaded, and once detached from the originating land, it ceases to be immovable property. The Court also observed that MOFA obligations give rise to a continuing cause of action, and mere delay by a society in applying for conveyance does not result in reduction of its land entitlement.
Accordingly, the High Court laid down the principle of freezing/crystallisation of land entitlement. It said that the right of an organisation of flat purchasers to secure conveyance of its proportionate share in the layout land crystallises and stands frozen upon expiry of the period of four months prescribed under Section 11 of MOFA read with Rule 9 of MOF Rules, counted from the date of formation of the society. Once this right crystallises, it cannot be reduced merely on account of subsequent revision of the layout plan by the developer.
The Court held that conveyance or deemed conveyance in a layout must be on the basis of either the first sanctioned plan or the sanctioned plan existing as on the date when freezing occurs, and not on the basis of the last revised plan. The Court further held that a later sanctioned plan may be relevant but cannot supersede statutory obligations owed at an earlier stage unless three elements are clearly established, clear disclosure to purchasers, informed written consent, and proper sanctioned basis.
The Court ruled that equitable considerations cannot prevail over the statutory scheme of MOFA, and that buildings constructed by revision of plans using TDR or incentive FSI without consent cannot be placed on the same pedestal as buildings constructed as per the originally sanctioned plan. The Court also held that mere failure of a society to file a suit under Section 7/7A of MOFA to injunct additional construction does not result in loss of its crystallised entitlement in the land.
Briefly, the petitions arising from a layout development at A.K. Vaidya Marg, Goregaon (East), Mumbai. The original land belonged to the Kadam family, and development rights were granted to Satellite Developers Ltd. (formerly BPM Industries). Five buildings were sanctioned in the layout, of which four have been constructed and one remains unbuilt. The four constructed buildings belong to Satellite Garden I CHSL (Building A-1), Sadguru Complex 1 (AB) CHSL (Building A-2), Sadguru Complex 1 (CD) CHSL (Building A-4), and Satellite Tower CHSL (Building A-5).
The Competent Authority passed three different deemed conveyance orders using three different yardsticks, wherein Satellite Tower CHSL received only its plinth area, Sadguru Complex 1 (AB) CHSL received even less than its plinth, and Sadguru Complex 1 (CD) CHSL received land proportionate to its Built-Up Area (BUA). Satellite Garden I CHSL has a pending suit since 2010 seeking conveyance of the original Sub-Plot A of 16,855.47 sq.m. The core complication is that Satellite Tower CHSL’s building was constructed using massive TDR of 14,949.6 sq.m. on a base FSI of only 5,778 sq.m., meaning that if proportionate land division is done strictly on total BUA, Satellite Tower would walk away with more than 50% of the layout land despite using only 25% of the base FSI.
