In a major relief to real estate developers, the Punjab and Haryana High Court has partially quashed the 2020 amendment to the Haryana Development and Regulation of Urban Areas Rules, terming the forfeiture of fees such as licence fees, scrutiny fees, conversion charges, and infrastructure development charges as "unjust enrichment" by the State.
A division bench of Justice Sureshwar Thakur and Justice Vikas Suri held that the impugned annexures were ultra vires, as they caused unjust expropriation of previously deposited amounts and resulted in an unjust enrichment of the licensor.
"The impugned annexures are quashed and set aside to the extent that therebys unjust enrichments are ill endowed to the licensor, besides therebys unjust expropriations qua the sums of moneys earlier deposited are made against the licencee," the Court observed.
The matter came before the Court in a petition filed by M/s CHD Developers Limited, a real estate company, which had been issued licences in 2014 for a group housing project in Sohna under the Sohna Development Plan-2031. The company invested around Rs. 618 crores, but the State failed to develop the necessary infrastructure. Due to this inaction and rising liabilities, the petitioner decided to surrender two licences.
However, under a policy dated 24.07.2020 (Rule 17-B), the petitioner had to forfeit Rs. 31.76 crores and transfer 4.40 acres of land without any compensation. The company argued that this was arbitrary and violated its right to carry on business and profession under the Constitution.
The Court noted:
"The impugned notification when has unilaterally made the said re-claims... becomes declared to be ultra vires the fundamental rights of practice, business and profession..."
The petitioner's counsel contended that Rule 17-B(3) of the 1976 Rules, which allowed such forfeiture, was unconstitutional, arbitrary, and imposed punitive penalties. Since no development had occurred and the State had not fulfilled its own obligations, the forfeiture of paid fees was unjustifiable.
The petitioner also pointed out that as per the policy, a developer could surrender a licence and obtain a new one without completing any construction, which made the forfeiture even more excessive.
On the other hand, the State Government argued that the petitioner failed to develop the project since 2014 and had breached the agreement. It claimed that the charges were imposed as liquidated damages under the Indian Contract Act and were lawful.
However, the Court found the State's arguments flawed and observed that the State had acted without jurisdiction, assuming the powers of a civil court in deciding damages.
"When therebys the respondent concerned has arrogated onto itself the jurisdiction of a Civil Court of competent jurisdiction, which otherwise alone has the powers to determine the liquidated damages or damages of some other genre," the Court added.
The Court partly allowed the writ petition, setting aside Paragraph 3 of Rule 17-B of the amended Rules. However, it clarified that the interest accrued on the deposited licence fee, conversion charges, and infrastructure development charges can still be forfeited or surrendered to the licensing authority.
Mr. Puneet Bali, Senior Advocate with Mr. Prateek Rathee, Advocate,
Ms. Niharika Mittal, Advocate, Mr. Asutosh Singh, Advocate and Mr. Shwas Bajaj, Advocate for the petitioner.
Ms. Svaneel Jaswal, Addl. A.G., Haryana.
Mr. Kunal Soni, Advocate for Mr. Prateek Mahajan, Advocate for respondent No. 4-HSVP.
Title: Faith Buildtech Private Limited v. State of Haryana and others
