Realtors have to pay compounding charges under MRTP Act

The statement comes in the wake of the Bombay HC’s recent judgement that quashed and set aside the PMC general body (GB) resolution of May 24, 2011, and a subsequent circular of June 16, 2011, which had prescribed compounding charges for different acts of violation of norms under the MRTP Act.


Civic officials said the property developers, who had approached the Pune Municipal Corporation (PMC) for regularization of unauthorized constructions under its amnesty scheme, will have to pay compounding charges as per the Maharashtra Regional Town Planning (MRTP) Act amended in 2017.

The statement comes in the wake of the Bombay high court’s recent judgment that quashed and set aside the PMC general body (GB) resolution of May 24, 2011, and a subsequent circular of June 16, 2011, which had prescribed compounding charges for different acts of violation of norms under the MRTP Act.

The bench of Justice S C Dharmadhikari and Justice B P Colabawalla — while disposing of petitions filed, among others, by the Promoters and Builders Association of Pune (PBAP) — held on April 3 that the impugned (under challenge) GB resolution and circular had “no legal backing” and, therefore, were “unsustainable in law”. The PMC could not have imposed compounding charges merely on the basis of a GB resolution and circular unless the MRTP Act provided for the same, it ruled. 

In the same ruling, the bench set aside the PMC’s demand notice of over Rs 3.61 crore issued (on basis of impugned GB resolution and circular) to another petitioner, Divgi Metal Wares Private Limited, towards compounding fees for three violations viz. unauthorized occupation of unauthorized construction in Erandwane; unauthorized usage of authorized construction and unauthorized usage beyond the sanction construction. 

This has led to the question on what happens to the compounding charges the PMC may have collected from developers during the period after the 2011 GB resolution and circular till the amendment to the MRTP Act in 2017. 

Ravindra Thorat, head of PMC’s legal department, told TOI, “We will move an appeal against the latest HC ruling. We are awaiting certified copies of the HC judgment. After that, permission will be sought at civic administration level and then we will move the SC.” 

Prashant Waghmare, the PMC city engineer, said, “The compounding charges have been set up to make sure that discipline is maintained while carrying out construction. A system must be followed while compounding structures. We will explore legal options in the matter of the HC’s judgment.” 

For now, lawyers, builders as well as PMC officials pointed out that the effect of the latest HC ruling is restricted only to the GB resolution and circular of 2011. The MRTP Act, which empowers a planning authority like the municipal corporation to collect compounding charges, was amended in 2017 with the incorporation of Section 52-A, which now prescribes for such charges. 

They, however, pointed out that even in the case of the amendment, the high court has read down a part of the provision that would have enabled the state government to en bloc regularize all unauthorized constructions irrespective of gross violation, that is, those which violate the reservations (constructions that have come up on plots set aside for civic aminities etc.) and that which are in violation of development control rules regarding side margins etc. However, the HC had upheld the other part, which allows regularization of unauthorized constructions that fall within the parameters of the MRTP Act but were termed unauthorised as due permissions were not sought and where the violation is not outside the perview of the Act — for example, additional floors constructed which can be regularised by loading Transfer of Development Rights (TDR) or a construction which has been made as per the DC rules but without seeking the mandetory prior approval. 

“The PMC won’t collect compounding charges as per the rates which were prescribed in the GB resolution and circular of 2011. However, the same does not mean that compounding charges have been abolished altogether,” a senior PMC official from the building permission department said. 

Those who have already submitted the applications will have to pay the compounding charges as stipulated by the MRTP in section 52 (A) amedment. And, these charges too are significant, though lesser than those stipulated by the PMC in the impugned circular of 2011. Without payment of charges the civic body won’t regularize constructions and has the power to send a one month notice to the developer to get the construction regularized by making the payment or else face demolition process.

The officer, however, said that this process of regularization can be undertaken only in case of those developers who have applied for regularization under the amnesty scheme. The civic body will be required to get the state’s approval for extension of the amnesty scheme for accepting new applications for regularization of unauthorized constructions. 

Meanwhile, the civic body is also planning to revive its own compounding charges rate card, though the same had been struck down by the HC. 

“One of the key objections to the GB resolution and circular was that a policy was not framed and approved before implementing the compounding charges. The civic body will soon start a process to make sure that a policy is framed. The basic framework is ready and has been approved by the GB. Now, we will have to get it cleared by the state government. The process can only be started with due consent from all the stake holders after the Election Commission’s model code of conduct ends,” said the PMC official.