Introduction

In a project being developed under a slum rehabilitation scheme, the eligible slum dwellers are to be paid transit rent, till the date of their new rehab tenement is handed over possession to them by the developer. However, there have been several instances in the past where the slum dwellers have been living in transit accommodation for years and the developers have stopped paying the rent for the same.

Over the years, the complaints regarding non-payment of rent have drastically increased.

Background

Keeping in view the increasing instances of defaults by developers, a Public Interest Litigation being PIL No. 109 of 2019 by Vijendra Kumar Rai against the State of Maharashtra [1] (“PIL”) was filed before the Hon’ble Bombay High Court for non-payment of transit rent to eligible slum dwellers. The PIL highlighted that the substantial dues had not been paid to the eligible slum dwellers by the respective developers.

The Hon’ble Bombay High Court vide its Order dated 19th July 2023 in the PIL took into consideration the difficulties faced by the slum dwellers due to non-payment of transit rent and considered it as a serious concern. The Hon’ble Court was of the opinion that if each slum dweller would need to resort to court process for non-payment of dues, it would give rise to substantial litigations. In view thereof, the Hon’ble Court issued various directions inter alia directing the Slum Rehabilitation Authority (“SRA”) to take proactive measures to ascertain whether transit rent is being paid to the slum dwellers.

Directions by the SRA

In pursuance of this order of the Hon’ble Bombay High Court, the SRA issued a Circular (“SRA Circular”) on 01st August 2023 with various directions as under:

1. The developer shall deposit advance rent of two years and a post-dated cheque for the remaining period of completion at the stage of Annexure III and the Letter of Intent in favor of the Developer shall be issued only pursuant to depositing the advance rent.
2. No new proposals of defaulting developer/firms and its partners/directors to be accepted unless all dues are cleared in respect of payment of transit rent.
3. The defaulting developer/firm and its partners/directors shall not be entitled to be appointed as developers irrespective of the consent of society, in the existing SRA proposals wherein the previous developers are terminated.
4. The developers of the Slum Rehabilitation Scheme who have failed to handover the PAP/PTC tenements to the SRA shall not be entitled to submit any new proposal.

The directions set out in the SRA Circular were to be adhered to strictly.

Does this SRA Circular apply to ongoing projects?

Prima facie, the SRA Circular seemed to apply only to new projects as it directed deposit of advance rent at the stage of Annexure III and also stipulated such deposit as a pre-requisite for issuing the Letter of Intent. There was no mention of approvals post the LOI stage. This was a convenient interpretation to take for developers of ongoing projects, but was it really in line with the intent of the SRA Circular? Existing delays in payments of transit rent, which the Bombay High Court was dealing with, were obviously made in ongoing projects.

An opportunity to address this gap came up before the Bombay High Court in the PIL.

By its Order dated 30th August 2023, the Bombay High Court recorded that the SRA has, by its affidavit filed in the PIL, admitted that the SRA Circular is applicable to ongoing projects as well. The Bombay High Court also noted that despite this, the SRA was not taking enough steps to implement the SRA Circular in letter and spirit.

To this, the SRA submitted to the Court that even for issuance of permissions in ongoing projects, the condition of deposit of advance rent is being strictly adhered to.

The Bombay High Court has therefore issued directions that no permissions shall be granted to developers unless the conditions of the SRA Circular are fulfilled. Any breaches would be viewed seriously by the Court.

In view of this, and the submission of the SRA in Court, developers would need to pre-deposit rent for 2 years and PDCs for rent for 1 year, before expecting any approvals in all SRA projects, ongoing or otherwise.

Authors: Manisha Paranjape, Partner and Binkal Mehta, Associate

Footnotes

[1] Public Interest Litigation 109 of 2019