A verdict for Mumbai

The Bombay High Court's significant ruling on the sale of mill lands may give the city a reprieve from large-scale, unplanned development.

in Mumbai

MUMBAI may have just been given a fresh lease of life. Thanks to a significant ruling by the Bombay High Court, the city may soon get back 600 acres (240 hectares) of public land that was close to being plundered by real estate sharks. On October 17, after months of hearings, the High Court reinstated the Development Control Rule (DCR) 58 of 1991, which was altered in 2001 to allow large-scale development on mill land. In addition, the court struck down this year's sale of five pieces of mill land belonging to the National Textile Corporation (NTC).

Quoting from Aldous Huxley's Brave New World while passing their judgment, Justices S. Radhakrishnan and S.C. Dharmadhikar said: "If a foetus gets only 33 per cent oxygen it will be born an idiot. If Mumbai is deprived of green lungs, the city may get a next generation full of idiots and morons." Essentially, the Judges upheld a public interest petition filed by the Bombay Environment and Action Group (BEAG) that challenged the State government's amendment of DCR-58, which they said only benefited mill owners and the builders' lobby. The court accepted the BEAG's plea that the modified rule was arbitrary, illegal and unconstitutional. "By changing the definition of the open land, it deprived the city of much needed green space," said the court.

The DCR 58 - better known as the "one-third formula" - issue goes back to 1991, when the State government, in an effort to do something about the defunct textile mills that dotted Central Mumbai's landscape, decided that if mill owners wanted to restructure and reuse the mill land, they would have to carve it up using a "one-third sharing formula": A third of the land could be kept by the mill owner for redeveloping or reviving the mill, a third would have to be given to the Maharashtra Housing and Area Development Authority (MHADA) to provide housing to families of workers who lost their livelihoods when the mills closed, and the remaining third would be given to the Brihanmumbai Municipal Corporation (BMC) for creating green areas. Not many mill owners made use of the DCR.

In 2001, the Vilasrao Deshmukh government, using a loophole in the Maharashtra Town and Planning Act, 1966, amended DCR-58 to DCR 58 (I), which stated: "Only land that is vacant on mill properties - that is with no built-up structure - would be divided by the one-third formula." Suddenly, mill owners got to keep a bulk of the land and the area to be given to the city and workers was reduced to just 6 per cent of the total 600 acres on which the mills stand. Until 2003 there was little activity in the Central Mumbai area where a major portion of these mills are located. When real estate prices in the city started rising, the mill owners decided it would be the right time to sell the lands. Since DCR 58 (I) was in force, they were well protected and stood to make huge profits from the sale.

By 2005, plenty of construction activity was taking place on various mill properties. Residential towers, plush high-tech office complexes and shopping malls began mushrooming across the area. Chancing on the opportunity to make a good sale, the NTC put up five of its properties for sale. Each sold for prices never heard of before: Elphinston Mill sold for Rs.441.8 crores, Jupiter Mills for Rs.276 crores and Apollo Mills for Rs.180 crores. Kohinoor Mill No. 3 was bought for Rs.421 crores by a company allegedly promoted by some Shiv Sena leaders. The sale of Mumbai Mills to the Delhi-based DLF group for Rs.702 crores was perhaps the biggest real estate deal ever in the country. Given the dearth of land in Mumbai, construction companies realised that the returns on the heavy investment would be huge.

THE ramifications of the judgment have been felt worst by the sinking NTC. In its 367-page order, the court effectively scuppered any further development on mill lands and any sale of land. The NTC had planned to raise approximately Rs.1,800 crores through property sales. According to the court, the NTC violated a Supreme Court ruling that ordered it to follow a mill revival scheme sanctioned by the Board of Industrial and Financial Reconstruction (BIFR). The sales were not in accordance with BIFR regulations and were nullified.

According to the High Court, the NTC was in the dock because the BIFR scheme provides for the "surrender of land for open spaces and low cost housing out of the `land for each mill' and not out of the land of another mill". The NTC said it would give land for open space from properties in the suburbs or from areas where land was not as valuable as in the city. Moreover, the court held that the NTC violated environmental norms. It said: "All construction carried out by various developers are clearly in violation of the Environment Impact Assessment (EIA) notification as amended on July 7, 2004, as admittedly none of them have obtained clearances from the Ministry of Environment and Forests." The court instructed the Ministry to conduct public hearings as per the EIA, which calls for public hearings and a detailed study before development can take place on public land.

What will happen in the wake of the High Court order is still unclear. NTC officials said they were studying the order and would decide whether to appeal to the apex court. A top official said: "A lot of money is at stake. Although we need the money to settle many dues, it is lying in an escrow account and developers can be paid back."

Rajen Shirodkar, head of Matoshree Realtors who bought Kohinoor Mill No. 3, said his company was misled by the NTC. "How were we to know they had not got the necessary BIFR clearances?" Shirodkar said his company planned to get the NTC to secure permission from the BIFR and a final approval from the Supreme Court so that the sale will be valid. "We had big plans for the land. It was meant mainly for commercial use as this was a strategic area in the city. It is in the centre of the city so it is accessible from both the suburbs and south Mumbai," he said.

The financial world too is beginning to feel the repercussions of the judgment. "A lot of money has been paid out, major financial institutions and banks are involved in the land sale. They are all feeling jittery. Everyone thought this was a great investment because land in Mumbai is so valuable and will always have resale value," said an investment banker. A real estate broker said as property developers began taking bookings, residential apartments were being sold at upwards of Rs.1 crore.

In fact, HDFC chairman Deepak Parekh termed the judgment "a disaster". For whom? That HDFC has lent vast sums of money for the purchase of land and, as an informed source says, has recently been too willing to provide loans to purchase property perhaps is a little-known yet important bit of information. Incidentally, Parekh is part of a committee for the "redevelopment of Mumbai".

If the Supreme Court does not reverse the judgment, several buildings that have come up or are coming up could be knocked down. "That does not seem practical. But neither does paying a fine and continuing construction. We will have to wait and see what the next step will be," said Datta Iswalkar, leader of the Girni Kamgar Sangharsh Samiti, a trade union in the textile industry. "We have been demanding a holistic solution for years. This has given the government a second chance at creating a comprehensive plan for the mill area - they must make use of it," he said. Iswalkar said for years the union had been raising the issue of unemployment among mill workers, but as the years went by, revival of the mills seemed bleak. "They must at least provide housing. This is a good chance for the government to ensure that the workers get a roof over their heads," he said.

Debi Goenka of the BEAG said: "This victory is significant not just for environment conservation but for people who have lost their livelihoods and continue to suffer because of the closure of mills. The High Court's judgment is a landmark order. It comes as a life-saver for Mumbai." Goenka pointed out that every bit of land was crucial for the city.

Meanwhile, Chief Minister Vilasrao Deshmukh dismissed the judgment saying the government had only the best intentions in amending DCR-58. "The amendment was a conscious effort to assist workers. The workers got compensation, which was not possible earlier," he said. Deshmukh said the government would not appeal to the Supreme Court and would follow the High Court's directives.

WHILE the High Court has handed down a far-reaching judgment, which goes in favour of the city, it once again brings to the surface the need to address several larger issues that plague Mumbai, such as housing for the poor and low-income groups, open and green spaces for public use, and basic infrastructure to support the burgeoning metropolis. Urban planners, non-governmental organisations, concerned citizens and even a few lawmakers have pleaded with successive governments to work out a holistic plan for Mumbai. Several plans were presented to various governments. Yet all they do is collect dust.

"Government policy is extremely short-sighted. It is heavily biased in favour of builders. If you see this unplanned development you cannot expect much from them. What happened on July 26 [the flooding of Mumbai following heavy rain] is a clear sign of what is going to happen if they continue to favour the builders' lobby," said Debi Goenka. Clearly, something has to be done with the land. But the city's real estate is among the most valuable in the world. The mill lands are located in prime areas of the city, which is why there is so much interest in these properties.

Mumbai's mill lands have been mired in controversy for years. For instance, many of the so-called privately owned properties are actually on long-term lease. Several lessees have not renewed the agreements but believe they are the real owners and have begun to develop the lands. Since the 1980s, when the mills closed owing to a prolonged workers' strike, issues such as workers' dues have been part of the ongoing struggle. At one time, Mumbai's mills employed more than two and a half lakh people. But a decline in imports due to stiff competition from other countries led the mills to ruin. Today there are 58 mills employing a mere 20,000 people. Of these 32 are privately owned, 25 are owned by the NTC and one is owned by the State government. After being declared sick by the BIFR, 29 private mills were shut down.