SUPREME COURT HOLDS RESERVATION OF PLOT CAN LAPSE BY EFFLUX OF TIME

A two Judge Bench of the Hon’ble Supreme Court of India comprising of Justice J. B. Pardiwala and Justice R. Mahadevan passed a judgement dated 25.02.2025 in the matter of Nirmiti Developers through its Partners and Anr. Vs The State of Maharashtra and Ors. The Hon’ble Supreme Court of India, on 25.02.2025, allowed the Special Leave Petition (SLP) and held that a landowner cannot be deprived of the use of the land for years together. Once an embargo has been put on a landowner not to use the land in a particular manner, the said restriction cannot be kept open-ended for an indefinite period.

Facts

Nirmiti Developers (Company), a private real estate development company, entered into a contract with the State of Maharashtra, specifically its Department of Urban Development, for the construction of a housing project under the Government’s initiative to promote affordable housing. The dispute revolves around a vacant plot of land measuring 50,138 Sq. ft. (45.6 R) in survey No. 81/3 (New) 3 (old) Mauza Rajapeth, Amravati, Maharashtra. The said land was previously owned by Smt. Akhtar Bano Rashid, Abdul Majid A. Samad and Mohammad Sajid A. Samad forming a larger part of the plot measuring 2.47 Hectare. The previous owners submitted a lay-out plan for the development of the plot measuring 2.47 Hectare to the Respondent No. 3, The Municipal Corporation of City of Amravati. The Respondent No. 3 approved and sanctioned the development plan for the purpose of building a residential area and the remaining area, measuring 50,128 Sq. ft. was reserved for a Government School.

On 25.02.1993, under The Maharashtra Regional and Town Planning Act, 1966 (MRTP Act, 1966) a revised development plan for Amravati came into effect which showed that the property had been reserved for the purpose of building a private school in favour of the Respondent No. 5 (Bharatiya Vidhalaya Shikshan Sanstha) through Reservation No. 195. For almost 13 years, till 2006, no steps were taken to acquire the property.

The original owners, served the purchase notice under Section 149 MRTP Act, 1966 (Finality of orders) on 04.07.2006 calling upon the Respondent No. 5 either to acquire the property or to release it from reservation. The Respondent No. 1 directed the Respondent No. 5 on 02.01.2007, to go ahead and complete all the necessary acquisition proceedings within a period of 1 year, failing which the reservation in favour of the Respondent No. 5 would relapse. Further, the Respondent No. 5 requested the Respondent No. 7, the Sub Divisional Officer Amravati acting as Special and Acquisition Officer to complete the process.

The Respondent No. 5 took no action till 02.01.2008 to commence the acquisition proceedings within one year of the confirmation of the purchase notice. The previous owners issued a purchase notice to Respondents No. 1,3,4 and 6 on 13.08.2014, under section 127 of the MRTP Act, 1966 (Lapsing of Reservations) requesting them to acquire the land. On 12.06.2015 the Respondent No. 6 received the proposal from the Respondent No. 5 to acquire the land. On 30.12.2015 the Petitioner purchased the property from the erstwhile owners for Rs. 1.26 crore.

Issues

Several core legal issues arose out of the above facts:
Has there been a breach of contract?

What was the statutory compliance of the State?

What is the extent of the power of the Government in contractual matters?

First Round of Litigation

On 16.03.2016, the Appellants filed a Writ Petition before the Hon’ble Bombay High Court, seeking directions to direct the Respondent No. 5 to deposit the amount of compensation to be paid to the Appellants for acquisition under the New Land Acquisition Act, 2017 and complete the acquisition and to also declare that the reservation had lapsed under Section 49(7) (Acquisition of Part of House or Building) of the Act. Both parties presented their arguments. The Company argued that it had followed the terms of the agreement and had complied with all regulatory requirements within its control. They further submitted that any delays were due to the State’s failure to provide timely approvals and facilitate the smooth progression of the project.
The State of Maharashtra, in its defense, argued that the delays were unavoidable due to complex bureaucratic procedures and that the State had the responsibility to ensure that developments adhered to urban planning standards, safety regulations, and environmental concerns. They also contended that the State was not bound by all terms of the contract if fulfilling those terms would jeopardize public welfare or violate statutory norms.
The Hon’ble Bombay High Court disposed of the Petition stating that even after the lapse of six years, the owners neither developed the property nor sold it out. The property was lying as it is and hence, the recourse to Section 49 itself is not found proper. It was held that the purchaser from the previous owner has not taken necessary steps either under Section 49 or under Section 127 of the New Land Acquisition Act, 2017.

What The Hon’ble Supreme Court Held

The Hon’ble Supreme Court allowed both the Appeals and held that the landowner cannot be deprived of the use of the land for years together. Once an embargo has been put on a landowner not to use the land in a particular manner, the said restriction cannot be kept open-ended for indefinite period. The Hon’ble Supreme Court further declared that under Sections 126 and Section 127 of the MRTP Act, 1966 the reservation of the plot can lapse by efflux of time.

Conclusion

The Nirmiti Developers vs. State of Maharashtra case is a landmark judgment that highlights the intersection of contractual law, government accountability, and regulatory compliance in the real estate sector. The Court’s decision strikes a balance between ensuring that private developers uphold their obligations while holding the State accountable for its delays and failures. This judgment is likely to shape future public-private collaborations, reinforcing the need for efficiency, transparency, and fairness in the execution of urban development projects.

KAUSTUBH PUNJ
SENIOR LEGAL ASSOCIATE
THE INDIAN LAWYER AND ALLIED SERVICES

Please log on to our YouTube channel, The Indian Lawyer Legal Tips, to learn about various aspects of the law. Our latest video, titled ‘LAWS FOR WOMEN IN INDIA’, can be viewed at the link below: