Supreme Court Rules on Premium FSI Charges: Chennai Metropolitan Development Authority vs. D. Rajan Dev

The Supreme Court of India, in Chennai Metropolitan Development Authority (CMDA) vs. D. Rajan Dev & Others, delivered a significant judgment on the applicability of Premium Floor Space Index (FSI) charges. The ruling determined whether the Premium FSI charges should be calculated based on the guideline value prevailing at the time of application or at the time of approval.

Background of the Case

The case arose from a dispute between CMDA and the respondent, D. Rajan Dev, regarding the levy of Premium FSI charges. The respondent, a real estate developer, had applied for planning permission to construct a residential-cum-shopping complex in Chennai. While the application was under process, the Tamil Nadu government introduced the Premium FSI Scheme, allowing developers to build additional floors by paying Premium FSI charges based on land value.

The respondent applied for additional FSI under this scheme in May 2011. However, the approval process extended until May 2012, during which the government revised the land guideline value, increasing it from Rs. 1,650 per sq.ft. to Rs. 5,000 per sq.ft. CMDA calculated the Premium FSI charges based on the revised value, leading to a significant increase in the amount payable.

The respondent contested this calculation and argued that the charges should be based on the land value prevailing at the time of application, not at the time of approval. The matter escalated to the High Court of Madras, which ruled in favor of the respondent, directing CMDA to calculate charges based on the lower land value at the time of application. CMDA subsequently appealed to the Supreme Court.

Legal Issues Before the Supreme Court

Whether Premium FSI charges should be calculated based on the land guideline value at the time of application or approval.
Whether the respondent acquired a legal right to a lower rate of Premium FSI charges merely by submitting an application.
Whether CMDA was justified in levying charges based on the revised land value.

Arguments by the Appellant (CMDA)

CMDA argued that the right to avail Premium FSI arises only upon approval of the application, not at the time of submission.
The Premium FSI Scheme clearly states that charges should be levied at the prevailing land value at the time of granting approval.
The process of granting approval involves various stages, including verification and compliance checks, and mere submission of an application does not create an automatic right to a lower charge.
CMDA cited the Supreme Court’s ruling in Chennai Metropolitan Development Authority vs. Prestige Estates Project Ltd., where it was held that the date of approval is the relevant date for determining applicable charges.

Arguments by the Respondent (D. Rajan Dev)

The respondent argued that he applied for additional FSI in May 2011, before the guideline value revision, and thus should be charged based on the lower value prevailing at the time of application.
He contended that delays in approval were caused by CMDA’s bureaucratic processes and that developers should not be penalized for such delays.
He relied on Union of India vs. Mahajan Industries Ltd., where the Supreme Court ruled that conversion charges should be calculated based on the date of application.
The respondent also pointed out that he had deposited a significant amount based on the earlier land value and that an increase in charges would impose an undue financial burden.

Supreme Court’s Judgment

The Supreme Court ruled in favor of CMDA, setting aside the Madras High Court’s decision. The Court held that the right to avail Premium FSI does not accrue at the time of application but only upon approval.

The Court observed:

“Mere submission of an application does not create a vested right in favor of the applicant. The right to Premium FSI arises only upon the grant of approval by the competent authority.”

It further held:

“The approval process involves various regulatory checks and scrutiny, and an application cannot be deemed accepted merely because it was submitted before the guideline value revision.”

The Court also referred to the principle laid down in Usman Gani J. Khatri vs. Cantonment Board, where it was ruled that no legal right is conferred upon an applicant until formal approval is granted.

Key Takeaways from the Judgment

Premium FSI charges should be calculated based on the guideline value prevailing at the time of approval, not at the time of application.
The mere submission of an application does not create a legal right to a lower rate of charges.
Government agencies are entitled to update charges based on revised land values to reflect current market conditions.
The judgment ensures uniformity and prevents potential revenue losses to public authorities due to delays in the approval process.

Final Decision

The Supreme Court set aside the Madras High Court’s ruling.
CMDA was permitted to recover the revised Premium FSI charges from the respondent.
The Court directed CMDA to allow reasonable time for the respondent to pay the revised charges.

Implications of the Judgment

This ruling has significant implications for the real estate sector, especially for developers applying for Premium FSI in Chennai and other metropolitan areas. It clarifies that developers must be prepared to pay charges based on the prevailing land value at the time of approval, not at the time of application. The judgment also strengthens the authority of planning agencies in regulating urban development and ensuring compliance with revised land valuation policies.

Petitioner Name: Chennai Metropolitan Development Authority.
Respondent Name: D. Rajan Dev & Others.
Judgment By: Justice R. Banumathi, Justice A.S. Bopanna, Justice Hrishikesh Roy.
Place Of Incident: Chennai.
Judgment Date: 11-12-2019.

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