Bombay High Court Quashes ₹1116 Crore MMRDA Demand Against Reliance Industries Over BKC Project Delay

In a major relief to Reliance Industries Limited, the Bombay High Court on Wednesday quashed a 2017 show-cause-cum-demand notice and a subsequent 2019 demand of Rs 1,116 crore raised by the Mumbai Metropolitan Region Development Authority (MMRDA) as additional premium for an alleged delay in completing its Bandra Kurla Complex project, calling the action arbitrary and high handed.

A Division Bench of Chief Justice Shree Chandrashekhar and Justice Suman Shyam held that the demand was not maintainable under the lease, observing:

“In view of the foregoing discussion, we are of the unhesitant opinion that the demand for payment of the penalty/additional premium for alleged delay in completing the construction was not maintainable under Article 2(d) & (e) of the Lease Deed. Moreover, such amount was realized by the Respondent No. 1 in a most arbitrary, high handed, unfair, and unreasonable manner by subjecting the Petitioner to undue pressure and threat of termination of the Lease, thus putting its business interest in peril."

The Court also found that Reliance had deposited Rs 646.77 crore under coercion, noting:

“The Petitioner was made to deposit the amount of penalty under coercion. The imposition of the penalty was also not preceded by proper Show Cause notice thus, acting in clear contravention of the principle of natural justice.”

The dispute arose from a Lease Deed dated September 1, 2006, under which Reliance was required to complete construction of a Convention and Exhibition Centre and Commercial Complex within four years.

However, after the lease, MMRDA granted additional built-up area in phases, requiring revision of plans and multiple statutory approvals, effectively turning the project into a composite development with a common foundation and infrastructure.

Reliance argued that the delay was caused by factors beyond its control, including a subsisting court stay on part of the additional FSI, delays in obtaining environmental and other statutory approvals, and the integrated nature of the project, which made phased construction impossible.

MMRDA, on the other hand, contended that the delay violated lease conditions and that payment of additional premium for extension of time was mandatory.

Rejecting MMRDA's stand, the Court held that the project was a composite development that could not be executed in parts and that a single timeline had to apply.

It ruled that the four-year construction period could not be counted from the date of the lease, but only from the date of issuance of the effective commencement certificate, which in this case was granted in April 2014.

The Court also made it clear that the period during which the court-ordered stay remained in force would have to be excluded while calculating the construction timeline.

On the issue of MMRDA's prior assurances, the Bench invoked the doctrine of promissory estoppel. It noted that through its communications, the authority had indicated there would be no time limit for completing the additional built-up area and that the duration of the stay would stand excluded. In these circumstances, the Court held that MMRDA could not turn around and impose additional premiums contrary to those assurances.

The court went on to observe that the delay was not the result of any lapse on Reliance's part. Instead, it stemmed from the time taken to secure statutory clearances and the nature of the project itself. They also pointed out that the demand notice lacked clarity, failing to explain how the alleged delay had been worked out.

With these findings, the High Court set aside both the 2017 notice and the subsequent 2019 demand of over Rs 1,116 crore as unsustainable in law.

It directed MMRDA to refund approximately Rs 646 crore deposited by Reliance while allowing the authority to retain the amount for 90 days. The bank guarantee of about Rs. 1,312 crore furnished by Reliance Industries Limited will also remain valid for the same period.