Delhi High Court upholds Municipal Corporation of Delhi (MCD) authority to impose conversion charges on industrial plots used for commercial purposes, reinforcing regulatory control over land-use changes in Delhi.
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NEW DELHI: In an important ruling with far-reaching implications for land use regulation in the capital, the Delhi High Court upheld the jurisdiction of the Municipal Corporation of Delhi (MCD) to issue show cause notices and demand conversion charges from industrial plot owners misusing premises for commercial activities, including banquet halls and office spaces.
This decision clarifies the power struggle between MCD and the Delhi State Industrial and Infrastructure Development Corporation (DSIIDC) under the Delhi Industrial Development, Operation and Management Act, 2010 (DIDOMA Act) and the Delhi Municipal Corporation Act, 1957, against the backdrop of the Master Plan for Delhi (MPD) 2021.
Background of the Case
The case arose from a series of show cause notices issued by the Municipal Corporation of Delhi (MCD) to various factory owners, IT/ITES companies, and banquet hall operators functioning within designated industrial areas across Delhi.
These notices demanded payment of conversion charges for alleged unauthorised use of industrial plots for commercial activities. The petitioners challenged these notices, contending that with the enactment of the Delhi Industrial Development, Operation and Management Act, 2010 (DIDOMA Act), the authority to manage industrial areas and levy associated charges had shifted to the Delhi State Industrial and Infrastructure Development Corporation (DSIIDC).
They relied on specific provisions of the DIDOMA Act and cited inter-agency arrangements and communications, including those involving the Delhi Development Authority (DDA), to argue that MCD lacked jurisdiction in the matter.
Additionally, petitioners involved in IT and knowledge-based services claimed that their activities fell within the definition of “industrial use” and therefore should not attract conversion charges.
This jurisdictional conflict and definitional dispute formed the core of the legal challenge addressed by the Delhi High Court.
Arguments by the Parties
Petitioner:
The petitioners, including factory owners, banquet hall operators, and IT/ITES companies operating within industrial areas of Delhi, challenged the show cause notices issued by the Municipal Corporation of Delhi (MCD).
They contended that the MCD lacked the jurisdiction to levy conversion charges, especially after the enactment of the Delhi Industrial Development, Operation and Management Act, 2010 (DIDOMA Act).
According to them, the Delhi State Industrial and Infrastructure Development Corporation (DSIIDC), being entrusted with the development and management of industrial areas, had exclusive authority to collect development and service-related charges under Sections 5, 6, and 8 of the Act.
The petitioners relied on a joint meeting between DDA and DSIIDC, as well as certain counter affidavits, to argue that DDA had delegated relevant powers to DSIIDC.
Furthermore, entities engaged in IT-enabled and knowledge-based services submitted that their activities constituted industrial use, not commercial, and hence should not attract any conversion levy.
Respondent:
In response, the MCD, represented by Senior Advocate Sanjay Poddar, argued that DSIIDC was a company incorporated under the Companies Act and did not qualify as a statutory municipal body.
As such, it lacked the legal authority to levy conversion charges or regularise unauthorised commercial use of industrial plots.
MCD maintained that under the Delhi Municipal Corporation Act, 1957 and Clause 7.8 of the Master Plan for Delhi (MPD) 2021), it was the local municipal authority that was legally empowered to impose such levies.
It further referred to a 2018 notification issued by the Delhi Development Authority (DDA), which explicitly authorised local bodies like MCD to collect conversion charges in industrial areas not specifically designated under DDA.
MCD also pointed out that the DIDOMA Act provides only for penalties under Section 18, and does not contain any provision allowing DSIIDC to regularise unauthorised use through payment of charges.
Therefore, it was argued, the show cause notices issued by MCD were lawful and within its jurisdiction.
Observation and Judgment of the Court
The Delhi High Court, presided over by Justice Purushaindra Kumar Kaurav, upheld the jurisdiction of the Municipal Corporation of Delhi (MCD) to issue show cause notices and demand conversion charges for commercial use of industrial plots. The Court ruled,
“The jurisdictional challenge to the impugned show cause notices stands failed. The issuance of show cause notices by the MCD seeking to levy conversion charges for commercial use of industrial plots is not an action bereft of jurisdiction.”
The Court observed that the DIDOMA Act, 2010, does not contain any provision that empowers the DSIIDC to levy conversion charges or regularise unauthorised commercial use of industrial premises.
It clarified that any administrative arrangement or understanding between DDA and DSIIDC could not override the statutory provisions of the Delhi Municipal Corporation Act, 1957 or the Master Plan for Delhi (MPD) 2021, which clearly entrust the authority to levy such charges upon the municipal corporations.
The Court gave particular emphasis to Clause 7.8 of MPD 2021, which has statutory force and explicitly permits the imposition of conversion charges for non-industrial use of industrial land.
On the issue raised by IT/ITES petitioners, the Court referred to its earlier ruling in SDMC v. Moon Steel & General Industries Ltd, and acknowledged that activities involving the transformation of data or digital content may fall within the scope of industrial use.
However, it directed the MCD to examine such cases individually based on the nature of operations. Ultimately, the Court dismissed the petitioners’ challenge, holding that the MCD had valid jurisdiction.
It directed the petitioners to submit revised responses to the show cause notices within two months, and further instructed the MCD to pass reasoned, speaking orders within four months after affording the petitioners an opportunity of hearing.
The Court also ordered that interim protections granted earlier would remain in force until final orders are passed by the MCD.
Case Title: Delhi Factory owners federation Vs SDMC
W.P.(C) 5340/2016, CM APPLs. 22256/2016 & 24198/2019
READ JUDGMENT HERE
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