Owner Has A Preferential Right Over Other Stakeholders To Develop Slum Rehabilitation Area: Supreme Court

The Supreme Court held that the owner has a preferential right over other stakeholders to develop a Slum Rehabilitation Area (SR Area).

The Court held thus in a batch of Civil Appeals pertaining to the validity of the acquisition of a land under the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971.

The two-Judge Bench of Justice Surya Kant and Justice N. Kotiswar Singh observed, “As already held, the owner has a preferential right over other stakeholders to develop an SR Area. If the owner then chooses to exercise this right by submitting and implementing a valid SR Scheme, issues involving rights over the property would not arise. It is, thus, not fathomable that when the landowner is implementing an SR Scheme on its own, a necessity to acquire the land could arise.”

The Bench said that a landowner has the first right among stakeholders to undertake redevelopment under an SR Scheme.

Facts of the Case

The Bombay High Court had allowed the Writ Petition filed by the landowner and held the acquisition of the subject land as void. It also directed the State of Maharashtra and the Slum Rehabilitation Authority (SRA) to invite the landowner and consider its proposal for redevelopment. Indian Cork Mills Private Limited (ICM) was the owner of the land since 1970. The said land was encroached upon by hutment dwellers, and thereupon, a portion of it admeasuring 3,045.03 sq. m. was declared as a ‘Slum Area’ under Section 4 of the Slums Act. Over time, the slum expanded, and its dwellers formed the Tarabai Nagar Co-operative Housing Society (Proposed) (Tarabai Society) i.e., the landowner. Being aggrieved by the decision of the High Court, Tarabai Society, State, and SRA filed independent Appeals against the same. Hence, the case was before the Apex Court.

Reasoning

The Supreme Court after hearing the arguments of the senior counsel, noted, “The peremptory right of redevelopment vested in the landowner does not militate against the rights of the slum dwellers. As explained earlier, if the landowner does not come up with a redevelopment proposal within a reasonable time, the occupants of the SR Area are entitled to submit their own proposal for redevelopment, empowering this marginalised section of our urban society. It enables them to forward an SR Scheme through a willing developer when the owner is not ready to support their endeavour to rehabilitate themselves.”

The Court said that there is no tenable reason, in law or in equity, to allow the occupants to exercise primacy over and steamroll the landowner’s proposal, especially when the latter is willing to implement the SR Scheme by itself, within the confines of the Slums Act.

“If the interpretation suggested by the Appellants is accepted, we would inevitably incentivise third-party developers and anti-social elements to prop up the poor slum dwellers so as to grab the land from the true owners. It would ultimately encourage mala-fide proposals to be filed, manipulating the inhabitants of these slums and stripping the owners of the fruits of their land”, it added.

Considering the dire consequences potentially suffered by the owner upon inadvertent failure to exercise its preferential right and the SRA’s previous notices, the Court was of the view that the requirement for a specific notice inviting the owner to submit an SR Scheme, as prescribed in the impugned Judgement, must be read as mandatory.

“When an SR Area has been notified under Section 3C(1) of Chapter I-A51 and its development through an SR Scheme is conceptualised, whereunder there is an inbuilt preferential right of an owner to carry out redevelopment, the power of acquisition under Section 14 would not operate in an independent silo; rather, it must derive meaning and effect from the principles prevailing throughout the legislative scheme of Chapter I-A”, it further observed.

The Court remarked that the conduct of the SRA is equally, if not more, troubling and warrants a closer scrutiny and its actions reflect a pattern of shifting positions and an approach that is arbitrary and unreasonable and lacks bona fides.

“To begin with, the SRA made no attempt to invite or facilitate the submission of an SR Scheme from ICM. Even when ICM, on its own initiative, expressed readiness to undertake surveys and demarcation and sought the SRA’s assistance in that process, the authority remained unresponsive, turning a deaf ear to the owner’s requests”, it also said.

Conclusion

Moreover, the Court noted that the record not only evidences an abrupt reversal of the CEO’s earlier position but also discloses a complete disregard for the directive of the Deputy Secretary and such conduct raises serious reservations as to the considerations underlying the CEO’s decisions.

“This part of the CEO’s opinion, even more curiously, found favour with the State, notwithstanding the previous letter dated 12.10.2015. The State’s readiness to accept the CEO’s report raises suspicions about the sanctity and integrity of the administrative process involved in this case. … Moreover, having observed the above-quoted communications, the bona fides of the SRA as well as the Government are called into question when they seek to challenge, through these appeals, an interpretation that they had themselves previously accepted”, it added.

The Court, therefore, concluded that such an anomalous situation does not speak well of the conduct of the private and the official actors and to permit the acquisition to stand, despite the dubious motives of Tarabai Society and its developer and the deeply suspect conduct of the SRA, would catalyse a travesty of justice.

Accordingly, the Apex Court dismissed the Appeals and upheld the impugned Judgment.

Cause Title- Tarabai Nagar Co-Op. Hog. Society (Proposed) v. The State of Maharashtra and others (Neutral Citation: 2025 INSC 1015)

Appearance:

Senior Advocates Sudhanshu S. Choudhari, Shyam Divan, Abhishek Manu Singhvi, Amar Dave, Shyam Mehta, AORs Amol Nirmalkumar Suryawanshi, Aviral Kashyap, Sunil Kumar Verma, Pranaya Goyal, P. V. Yogeswaran, Aaditya Aniruddha Pande, Sachin Patil, Abhikalp Pratap Singh, Aviral Kashyap, Advocates Gautami Yadav, Damini Vishwakarma, Arpit Rai, Sudipto Sircar, Srishty Pandey, Aman Raj Gandhi, Jasmine Seth, Aryan Srivastava, Parthasarathy Bose, Panchi Agarwal, Sonali Jaitley Bakhshi, Jaiyesh Bakhshi, Ravi Tyagi, Mayank Mishra, Manmilan Sidhu, Ankit Tyagi, Sudiksha Saina, Bhumika Bhatnagar, Shikhar Misra, Varad Kilor, Siddharth Dharmadhikari, Utkarsh Kumar, Shubhangi Agarwal, Aditya Krishna, Arpit Rai, and Sudipto Sircar.

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