PUBLIC INTEREST LITIGATIONS. A DOUBLE EDGED SWORD

BY Realty Plus

There is no denying that the Public Interest Litigations (PIL) are for the benefit of poor and needy. It is the power given to the public by courts through judicial activism. But, lately many cases of dodgy PILs have been observed by the courts that are either immature or are filed in bad faith. Real estate especially has been the target of many such PILs filed with malafide intent of extracting money from the realty firms.

N G Khaitan, Senior Partner, Khaitan & Co. concurred that recently, there has been an alarming trend of PILs being filed with a vested interest in the real estate sector. "If looked into closely, it appears that majority of such PILs are meant to settle business scores or to cripple opponents. The Courts have also recently voiced that when a dispute arising at any stage of the project is taken to the courts, it creates further delays in completion of the project because of stay on construction granted by the court or because developers may be unable to proceed for other reasons, until the dispute is resolved. A high incidence of litigation in real estate projects may, therefore, be a cause for concern,” he said.

Shourya Mandal, Co-Managing Partner, Fox Mandal & Associates added, “PIL can be filed under the writ jurisdiction either before the Supreme Court under Article 32 or before the High Courts under Article 226 of the Indian Constitution. In recent times, PILs have lost their original purpose of coming to the aid of the underprivileged or the environmental activities and are slowly turning into instruments to blackmail and harass people. In the real estate sector nowadays, PILs are being lodged against builders by the society/association of the home-buyers, if they are not satisfied with the quality of material provided or policies of the builder. Another reason for filing these frivolous PILs is to delay the progress of projects for defaming the builder by individual/NGOs/ societies on various grounds including environmental issues etc."

Sonam Chandwani, Founder & Managing Partner, KS Legal & Associates shared her perspective, “The commercial real estate market in India has seen extensive growth in the recent years. According to the Indian Real Estate Industry Analysis Report (2022) by the India Brand Equity Foundation, the sector is expected to reach a market size of US$ 1 trillion by the year 2030. This growth is fuelled by a multiplicity of factors including increasing population, rising incomes and urbanization among others. The rapid growth within the sector has also given rise to a flurry of regulatory hurdles and disputes between real-estate developers and home-buyers. These disputes often relate to the violation of rights which may be fundamental to the homebuyers. Therefore, homebuyers and activists are increasingly opting for PILs as a mechanism to address their grievances.”

As per Malcolm & Malcom Advocates vested interests, low filing fees, no punitive damages for baseless PILs are some of the obvious reasons for rising trend of PILs in the real estate sector. “Also, on many occasions, builders themselves file collusive suits in order to avoid their commitments in the garb of litigation. The real estate sector has its own Mr. 10 Per Cents who invest as little as 10 % of the outlay and then create snarls. These may also take the form of a litigation. As to vested interests, government tenders and slum projects are typical grounds where they play out. This deters the big names from entering the fray. Till date slum projects do not attract the best of builders. The Hon'ble Bombay High Court was once inundated with PILs arising from slum rehabilitation projects. Ultimately, a High-Powered Committee was set up. In any case, we believe that effective drafting can bring home thumping orders,” they commented.

THE IMPACT ON THE SECTOR

The impact of PILs can be far-reaching on various stakeholders within the sector- the developers, buyers and the public at large. PILs provide honest plaintiffs with a bona-fide and cost-effective mechanism to exercise and avail their fundamental rights which may have been violated by the developers. The lack of such a mechanism may deprive many from availing and seeking relief owing to reasons such as cost and time.

However, a study on Litigations and Real estate market in Mumbai by the Property Rights Research consortium, estimates that it takes 46% longer to complete a project under litigation than a project without any such hurdles. Further, the data predicts that this increases the costs of the project by at least 27% more than the original estimate.

Sonam Chandwani added, “Frivolous and baseless claims as against the developers only add to the massive backlog of cases pending before the lower and higher courts. The developers are often forced to delay or stall the projects which causes mental and financial trauma to home-buyers. Honest homebuyers are, in extreme circumstances, compelled to relocate to slums in the lack of a better housing facility.”

Shourya Mandal said, “The use of PILs to fulfil someone’s ulterior motives against builders has a negative impact on the real estate industry. It stagnates under construction projects, thereby delaying their progress. This ultimately harms the home-buyers as they are unable to get their possession in time, and when this happens, there arises another round of litigation between the home-buyers and the builders, thereby leaving both parties in unnecessary difficulty with respect to time as well as monetary resources. Also, the real estate sector is a major contributor to the Indian economy and putting the builders through these unnecessary PILs will harm the economy and discourage the investment into this sector,”

Malcolm & Malcom Advocates expressed that litigation invariably leads to delays and delayed projects have not only crippled the real estate sector but also the banking and finance sectors. Finance for real estate players is no longer as easily available as for manufacturers. This also jacks up the prices of homes. Landowners insist upon upfront payment instead of a share in constructed area. Thus, every step of the way roadblocks are created.

WHAT CAN BE DONE TO DISCOURAGE FRIVOLOUS PILS?

The courts play the most important role in discouraging the practice of filing frivolous PILs against builders. “Firstly, the imposition of exemplary costs on vested interests who file such petitions is important in order to deter other such potential mischievous litigants. Also, other methods such as verification of the petitioner’s credentials, ascertaining the correctness of facts, ascertaining whether sufficient public interest is involved or not is required to be determined by the courts while admitting PILs may discourage for filing frivolous PILs. The courts should examine the genuineness of the PIL at the stage of admission and dismiss them if appropriate at this stage," explained Shourya Mandal.

N G Khaitan was of the view that it is important to understand that the global powers will face the effect of land division, with projections showing that world population has surpassed eight billion and more than 60% of it will be in urban areas. If India is to grow and create more jobs, it is imperative that the courts review and analyse the causes for failure to curb frivolous PILs despite clear guidelines having been laid by the Supreme Court of India.”

According to Sonam Chandwani, as frivolous PILs have jammed and disturbed India's judicial system, resulting in a massive backlog of litigation that affects honest plaintiffs, it is critical, at this juncture for the court to take effective cognizance and devise a mechanism to penalise and discourage the rise of such frivolous claims.

“These mala fide claims can be tackled through two ways. Firstly, the courts must impose an exemplary penalty on claimants who file cases on frivolous grounds so, as to act as an effective deterrent against such claims.

The Delhi High Court employed a similar mechanism when it imposed a penalty of Rs.10 Lakhs on a Non-Governmental Organization (“NGO”) which alleged that the infrastructural project was illegal in nature. The court did not find any merit in the argument and dismissed the case with an effective penalty on the claimant NGO.

Secondly, there should be an additional stage of stage of verification to admit PILs This can greatly reduce and minimise frivolous by rejecting cases with vested interests at the first instant.

Additionally, lawyers can play a major role in minimising the rise of frivolous litigation with regards to PILs. They should ideally deny to take up and represent malicious petitioners.”

Malcolm & Malcom Advocates believe that attorneys in defence must make it a point to go for the jugular. Destroy the credentials of the plaintiff, disclose the vested interests to the bench, bring out the irreparable loss to innocent third parties - lender, financial institutions, and home buyers. Indifferent defence cannot elicit winning orders. The pen can indeed be more powerful than the sword.

“Under costs regime, judges can impose a heavy fine on the Petitioner and give relief to the Defendant commensurate with the losses sustained by him. Here we are not talking about just the costs of litigation but the business losses. Indirect and consequential damages under the extant laws may be a complete no-no. But what about direct damages- cancelled bookings, stalling of cash flows? Often, the defence is so lacking in its presentation that even direct damages are not properly quantified, logically rationalized, and presented before the judge. The result of undigested thought is the same as that of undigested food," they added.

SOME RECENT JUDGEMENTS

The Supreme Court of India recently in the case of Sarthi Seva Sangh & Anr. vs Mumbai Municipal Corporation, while refusing to entertain a plea concerning the re-development of a plot of land in Mumbai, observed that Public Interest Litigations (“PILs”) were becoming an instrument of blackmail where infrastructural and building projects were concerned. The Apex Court further observed that a PIL is a mode to bring to court’s notice the violation of rights of the poor and the needy, who cannot access the justice delivery system, but is unfortunately being used to stall projects and as a tool for extortion from builders/developers.

The Bombay High Court dismissed the PIL and imposed Rs. 1 lakh costs on the petitioner who had approached the court, challenging the grant of additional FSI in respect of a plot at Worli. When the petitioners, aggrieved by this order, approached the Supreme Court in an appeal, the Supreme Court upheld the order of the Bombay High Court.

The Supreme Court while dealing with the Central Vista Re-development Project has urged to introspect vis-a-vis the frivolity of the PIL, so as to prevent misappropriation of the Court’s time. The judgment pronounced by the Court goes on to bemoan, about how PILs are being misused to transform a constitutional Court as a superlative authority over day-to-day governance whereas the tool of a PIL was devised to open the doors of constitutional Courts for remedying glaring injustices.

Further, in the case of New Rise Foundation Regd. Charitable Trust vs. Municipal Corporation Delhi and Ors., the Delhi High Court dismissed the PIL at the admission stage and imposed costs amounting to Rs. 10 lakhs on the petitioner who challenged the alleged unauthorised structure in Neb Sarai and observed that this is how the doctrine of PIL is being abused and used to blackmail others. This sets an example for such other people/ organization who are misusing the forum of PIL against the bonafide builders.

Around 3,000 slum dwellers of a project being developed on PPP (Public Private Partnership) basis took the winning bidder along with the government instrumentalities to Gujarat High Court. The Hon'ble High Court refused to grant any interim relief citing that encroachers cannot seek such reliefs. The challenge reached the Hon'ble Supreme Court which refused interfere with the High Court's Order.

In an attempt to curb PILs from being hijacked by vested interests, the Supreme Court in the State of Uttaranchal v. Balwant Singh Chaufal & Ors., has laid down 10-point stringent guidelines for all High Courts, including imposing exemplary costs on busybodies and frivolous PIL petitioners. Some of the highlights of the guidelines include verifying credentials of the petitioners before entertaining the PIL, ascertaining correctness of facts, checking whether substantial public interest is involved and there is no personal gain, private motive, or oblique motives behind the same. N G Khaitan

As has been rightly recognized by Chief Justice of India (“CJI”) D.Y Chandrachud in the judgment, Sarthi Seva Sangh & Anr V. Mumbai Municipal Corporation and Ors. PILs have become an instrument of blackmail against infrastructure projects. Furthermore, the rising competition within the market has led many developers to file baseless petitions only to harass and cause losses to their counterparts so as to eradicate competition within the market. Sonam Chandwani

Sometimes PILs are also being filed to further personal agenda and to settle business scores, camouflaging them as public issues and to attract the attention of the media. The Supreme Court has referred to these as “publicity interest” litigation or “personal interest” litigation.Shourya Mandal

Just as diamond cuts diamond, the bar needs to give a fitting response to such PILs. The bench cannot be blamed if the pleadings before it are lame. Malcolm & Malcom Advocates

Tags : public interest litigations N G Khaitan Senior Partner Khaitan & Co Shourya Mandal Co-Managing Partner Fox Mandal & Associates Sonam Chandwani Founder & Managing Partner KS Legal & Associates Malcolm & Malcom Advocates