Bombay High Court Ruling on Developer’s Obligation to Pay Transit Rent

In a landmark judgment, the Bombay High Court has ruled that developers engaged in slum rehabilitation projects have a statutory obligation to pay transit rent to displaced slum dwellers, even if they are undergoing insolvency proceedings. The ruling reinforces the principle that developers must ensure temporary accommodation or rental compensation for slum dwellers awaiting permanent rehabilitation.

The decision was delivered by Justice Amit Borkar, who upheld the termination of Anudan Properties Private Ltd., a developer responsible for a slum rehabilitation project in Thane. The court noted that the developer had failed to pay transit rent to slum dwellers since 2019, despite taking on the responsibility of rehabilitating them.

Court’s Observations on Developer’s Responsibilities

"This Court views such continued non-payment of transit rent with utmost seriousness. Under the SRA's own circulars and policy guidelines, consistent failure to pay transit rent is a well-recognized ground for removing a developer under Section 13(2) of the Slum Act. This is not a punitive measure but a corrective action to ensure that the project does not remain in limbo and that slum dwellers are not made to suffer unnecessarily. Transit rent is not a mere contractual commitment—it is an integral part of the developer's public duty under a welfare-driven statutory framework," observed Justice Borkar in the judgment delivered on March 25.

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The court emphasized that slum rehabilitation projects are not merely private arrangements but statutory schemes governed by public welfare laws. Developers, upon assuming responsibility, must ensure that displaced residents receive proper compensation or accommodation during the construction period.

Failure to Fulfill Obligation Undermines Public Interest

"This duty cannot be taken lightly or reduced to a question of administrative formality. In the present case, the petitioner's failure to fulfill this obligation, even after corporate revival, has undermined the confidence of the Slum Rehabilitation Authority (SRA) and the beneficiaries. The persistent default, coupled with an absence of credible corrective action, justifies the SRA's view that the petitioner cannot be relied upon to carry forward the scheme in a manner consistent with public interest," the judgment stated.

Legal Basis for Transit Rent Payments

The court clarified that transit rent is a statutory obligation under the Maharashtra Slum Areas (Improvement, Clearance, and Redevelopment) Act, 1971 (Slum Act). The law mandates that developers either provide alternate transit accommodation or monthly rent to eligible slum dwellers from the time they vacate their homes until they are permanently resettled.

"A critical condition of such schemes is that the developer must provide either alternate transit accommodation or monthly transit rent to every eligible slum dweller from the date of vacating their hutments until permanent rehabilitation units are handed over. This is not an optional or negotiable term that can be bargained away. It is a mandatory requirement, forming part of the very structure of the slum redevelopment scheme, and is intended to ensure that slum dwellers are not left without shelter during the construction phase," the court noted.

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Impact of Insolvency Proceedings on Transit Rent Payments

The developer argued that since it was undergoing insolvency proceedings, its financial obligations, including transit rent, should be addressed under the approved resolution plan under the Insolvency and Bankruptcy Code (IBC). However, the court dismissed this argument, stating that transit rent is not a mere financial liability but a continuing statutory obligation.

"The insolvency framework was not designed to handle such public welfare claims in this fragmented manner. More importantly, transit rent is not a one-time debt. It is a continuing performance obligation, which accrues monthly until the permanent housing is delivered. Even if unpaid transit rent for the pre-CIRP period is extinguished by the resolution plan, the developer's statutory obligation to continue paying rent post-CIRP remains intact. This is because resolution plans under the IBC only deal with liabilities that existed before the insolvency commencement date. They do not and cannot relieve the corporate debtor from ongoing duties imposed by other statutes," the judge opined.

Transit Rent as a Public Welfare Obligation

The court further clarified that transit rent obligations cannot be categorized as mere contractual liabilities. "In administrative law, it is well-recognized that some obligations, although implemented contractually, are statutory in origin. Transit rent is one such obligation. Even if a slum dweller were to sue the developer for breach of contract in a civil court, the Court would ultimately be enforcing a duty that arises from public law. The developer cannot ignore or belittle this obligation merely because it appears in a contract. It is a duty owed not just to an individual, but to a class of beneficiaries protected by a welfare law."

The ruling highlights that failure to comply with these obligations does not just constitute a civil breach but violates statutory provisions, which can result in regulatory actions, including the developer's removal from the project.

Conclusion: Upholding Public Welfare

With these strong observations, the Bombay High Court upheld the SRA’s decision to remove the defaulting developer. This ruling underscores the court’s commitment to ensuring that slum dwellers are not left without support due to the failures of developers.

Case Details: Case Title: Anudan Properties Private Ltd. vs Mumbai Metropolitan Region, Slum Rehabilitation Authority (Writ Petition 2065 of 2025)

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Legal Representation:

• For the Developer: Senior Advocate Pravin Samdani with Advocates Mayur Khandeparkar and Arun Panickar
• For the Slum Rehabilitation Authority (SRA): Senior Advocate Girish Godbole with Advocates Manisha Gawde and Uma Palsuledesai
• For the Proposed Society: Senior Advocate Aspi Chinoy with Chirag Balsara and Sagar Gharat
• For the Promoters: Senior Advocate Prateek Seksaria with Advocates Anuj Desai, Nishant Chotani, Siraj Salelkar, and Samiksha Rajput
• For the Apex Grievance Redressal Committee: Senior Advocate Dinyar Madon assisted by Advocate Dhruti Kapadia
• For the State: Assistant Government Pleader Dhruti Kapadia
• For the New Developer: Advocate Abhishek Khare