HC strikes down state’s forfeiture clause in land surrender cases
The Punjab and Haryana High Court has ruled that the State of Haryana cannot ask real estate developers to give up land and forfeit large amounts of money when they surrender their development licences. The court said these actions – allowed under a 2020 policy change – were unfair, went beyond the law and violated the developers’ basic rights.
The assertion came as the Bench of Justice Sureshwar Thakur and Justice Vikas Suri struck down the key portions of Haryana State’s 2020 policy mandating forfeiture of charges and land transfers. The Bench ruled re-demands under Rule 17-B of the Haryana Development and Regulation of Urban Areas Rules, 1976, were arbitrary, unjustified and ultra vires.
Allowing a petition, the court held that the State’s insistence on a developer transferring 4.4 acres of land without compensation and forfeiting Rs 31.76 crore in various charges, despite no construction having taken place, amounted to a penalty and not liquidated damages, as claimed by the State.
The court observed there was no contractual stipulation or Civil Court’s judgment to justify the re-claims as liquidated damages. The impugned action was an unjust enrichment at the petitioner’s costs and a violation of fundamental rights.
The ruling came in the case of a real estate company that was forced to surrender two licences issued in 2014 for a group housing project in Sohna after investing Rs 618 crore amid the state’s failure to provide external development works under the Sohna 2031 plan. The company had sought to exit due to rising liabilities, but was compelled to forfeit significant fees and transfer land under the amended Rule 17-B, introduced via a July 2020 notification.
The court rejected the State’s contention that the developer’s failure to initiate construction since 2014 was a breach of contract warranting forfeiture. It held that in the absence of State-developed infrastructure, the developer’s financial stress and inability to proceed was directly attributable to the authorities’ own inaction.
The Bench ruled that the re-demands were punitive in nature. Such forfeiture in cases where surrender was permitted without any construction – particularly when no development occurred due to State inaction – became wholly excessive and unreasonable.
Partially quashing the notification and related orders, the court clarified that the licensing authority would still be entitled to claim interest on certain fees but not the principal amounts already paid. The court also directed the respondents to take appropriate steps regarding timely infrastructure provision in licensed areas.
India