--S D Ghaisas

It is the prerogative ofthe state legislatures to enact the laws and the courts to interpret them. It would be improper to comment on these developments particularly as you rightly state the matter is sub judice.

The question of legalisation of `pugree' should be examined in its true perspective. Given a scenario in which the rents have remained frozen for the past four decades and the fact that the property owners of Mumbai were debarred from securing vacancy of their premises even from the tenants who though not requiring them for their own use chose to keep them locked in the hope of earning a bonanza ink profits from the sale of their tenancy.

The landlords, though in receipt of pittance rents, were meanwhile forced to incur escalating maintenance costs on their properties because the tenants who were not residing there did not bother about maintaining them. As was imminent these properties soon reached the point of no return where in the annual maintenance expenses exceeded the rent receipt and the landlords also lostinterest in maintaining them. It was at times such as these that the tenants approached their landlords with an offer to find them an alternate tenant provided they agreed to let them retain two thirds of the `pugree' that they may arrange to secure from the new tenant. In other words, the landlord was allowed to retain one third of the `pugree' only in consideration of his having agreed to accept a new tenant at the old rent.

It would be wrong to presume that all rent transactions in Mumbai were on the basis of `pugree'. Furthermore the colour of the money that changed hands in most cases was indeed black and none of the beneficiaries declared the same to the income tax authorities nor were any receipts either given or sought.

Therefore, the question that needs to be answered is how is the present tenant going to prove that he actually paid an `X' amount of money to a `Y' landlord and a `Z' previous tenant as `pugree'. As this is going to be extremely difficult to prove and may even open a pandora's boxon grounds of tax evasion not only for the recipients but also the giver, the parties concerned will have to tread with extreme caution and in the final analysis it could well become an edict that is just not enforceable in so far as the old tenancies are concerned.

As far as the tenancies that are created hereinafter are concerned it would be open to the parties concerned to pay and receive `pugree' legally by cheque and pay tax on it as the income would be treated as income from other sources. There is, however, no guarantee that the past practice of paying such amounts in cash would stand completely obviated. The modality for future transactions for `pugree' payments would be to enter into a tripartite agreement in which the landlord would receive the entire amount of `pugree' and pay the existing tenant his share of the `pugree' as a consideration for surrender of his tenancy rights.

It is rather unfortunate that the government's decision to legalise the `pugree' is just another attempt to placate thetenants vote bank in utter disregard of the Supreme Court directive to come up with a balanced rent control law. The new pugree law is not the ultimate panacea for curing the ills of the subsisting rent control legislation.

A property developer had purchased approximately five acres of land (20,000 sq. metres) at Bandra in Mumbai in the late '70s ostensibly of the purpose of establishing a residential club. He subsequently secured approval of his site development plans from the Municipal Corporation of Bombay in 1982 but instead of going ahead with the construction of the Club, he decided to sell the land along with the approved project to another builder-developer of Mumbai in 1984 that is after the promulgation of coastal area development guidelines by the ministry of environment of the government of India which stipulated that no development in coastal areas be permitted within 90 metres of the high-tide line.

This stipulation had grave implications for the project as it indeed proposed to build onlyafter providing a 25-five metre set off from the high tide line. Furthermore, the proposal to build a residential club at site was also in contravention of the city's Master Plan in which the area in question was shown as green belt in which no construction could be permitted. However, the BMC struck a compromise with the developer and it was mutually agreed that the builder-developer would leave half the plot area as an open area and this would be developed as a park for the area residents by the BMC.

The BMC, however, omitted to identify the area in which park would be developed and the builder-developer decided to build his club in the area closest to the `high tide line' and to give access to his club he decided to cut out a motorable public access road through the park thus utilising 2,000 sq. m of the intended park land. This was objected to both by the BMC and the area residents welfare group who have succeeded in securing an order from the Bombay High Court restraining the developer from carvingout a motorable access to their remaining property through the park land that had been agreed to be handed over to the BMC.

The residents now contend that since the coastal development regulations are currently in force and build his club in the area closest to the `high tide line' and to give access to his club he decided to carve out a motorable public road through the park thus utilising 2,000 square m to the area under development. Also, that the government should cancel the development licence and convert the entire area into a park. This is naturally being resisted by the developer on grounds that the development plans were approved by the BMC before the coastal area development restrictions came into force and were indeed a consideration for the developer in purchasing the property from the previous owners.

What is the correct position? Are development licences granted by the BMC valid in perpetuity or does the Corporation have the right to revoke them; also can approvals be superseded by masterplan guidelines or any other government notifications on the subject? Is there any other precedence on the subject?

-- S V Lele

Any approval of building plans as also the building license granted by the Municipal Corporation under the BMC Act is valid for two years in the first instance and thereafter extendible on a year to year basis upon payment of requisite licence renewal fees. It is not clear from your narration of facts whether such extension of the approved building plans was in fact sought by the developer and acceded to by the BMC.

In case site development had not commenced and the new coastal regulations had been promulgated in the mean time then under normal circumstances the BMC ought not to have automatically extended the validity of construction plans and the building license also should have been allowed to lapse upon expiry of the previous validity period.

Similar situation also arose in Goa where subsequent to the promulgation of the new coastal development guidelines in 1988,the central government decided to extend the no development zone to 200 metres from the high tide line instead of 90 metres notified previously. The state government directed all entrepreneurs whose projects were still in the pipeline to revise their projects in conformity with the subsisting costal guidelines and resubmit their proposals through the chief town planner for re-evaluation and consideration. The only dispensation given was in respect of projects where construction had already commenced and relocation away from the high tide line was not considered feasible; even in such cases the government placed on record the stipulation that all future expansion shall have to conform with the coastal control guidelines subsisting at the time the request for expansion is considered for approval by the government.

In the light of the foregoing and not being aware of the stand taken by BMC and the government and also the fact that some of the issues involved may be sub-judice, it would be inappropriate totender any advice. However, your friends/associates could discuss the issue with any lawyer conversant with environmental issues and the environmental law and thereafter determine their future line of action.

G P Khungar is a real estate consultant and a former director (corporate affairs) of Ansals Ltd

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