Conversion fee must be paid to MCD to run shop from residential floor of mixed use building: Supreme Court

The Supreme Court on Friday ruled that an owner of a shop-cum-residential (SCR) plot in Delhi cannot commercially use floors designated for residential use without paying conversion charges to the Municipal Corporation of Delhi (MCD) under the Master Plan for Delhi, 2021 [MC Mehta vs. Union of India & Ors].

A Bench of Chief Justice of India BR Gavai and Justice K Vinod Chandran refused to de-seal a property in New Rajinder Nagar, Delhi, which had faced the sealing action on the ground that the upper floors were used commercially even though it was earmarked for residential use.

The Court, in its October 31 ruling, held,

"The upper (residential) floors though eligible for conversion (to commercial space), it can happen only with payment of the conversion charge."

The Court passed the order while dismissing an application filed by an individual seeking to de-seal his property at Plot No. 106 in the New Rajinder Nagar Market.

The applicant relied on a 2023 order of a Judicial Committee, appointed in the long-running MC Mehta v. Union of India case concerning environmental issues, to claim that the market was intended to be entirely commercial.

Rejecting the plea, the Court held that the Judicial Committee’s order dealt with general categories of markets rather than individual properties. It said the applicant’s plot fell within a “shop-cum-residential” complex, not a fully commercial one, and that conversion of the upper floors would require compliance with prescribed procedures and payment of conversion charges.

The Court also noted that commercial shops are permitted to have a Floor Area Ration (FAR) of only 100 square meters under the applicable Master Plan, while residential properties are permitted to have an FAR of up to 300 square meters. The upper floor of the property in question had an FAR of about 162 square meters. The Court, therefore, added that the applicant would also have to pay a penalty to regularise the excess FAR before he may be permitted to convert the upper floor into a commercial space.

"The additional FAR as built and existing in excess of that sanction will also have to be regularised by paying penalty charges and any non-compoundable constructions will have to be removed," the judgment said.

The issue cropped up as part of the MC Mehta public interest litigation case, which was initiated in 1985.

Through this case, the Supreme Court has for decades monitored issues concerning environmental regulation and urban development in Delhi. Over the years, the case expanded to include scrutiny over illegal industrial activities, misuse of residential premises, and unauthorised constructions across the city.

To oversee compliance, the Court, in 2006, appointed a three-member Monitoring Committee, which sealed numerous residential properties that were being used commercially. In 2022, a Judicial Committee was set up to consider requests for de-sealing, regularisation, and demolition in individual cases.

The applicant before the Court owned a small property measuring about 89 square yards in the New Rajinder Nagar Market. He claimed that the premises were originally intended for commercial use and that earlier leases and permissions - some dating back to 1957 - showed that both ground and first floors could be used for business purposes. He also relied on a 1987 lease deed and subsequent sale documents to argue that the property had always been treated as commercial.

However, the Municipal Corporation of Delhi (MCD), supported by the Amicus Curiae, opposed the application to de-seal the property. It argued that while the ground floor could be used commercially, the upper floors were sanctioned as residential spaces. The MCD added that the applicant had constructed additional floors without permission and had exceeded the permissible FAR.

The Bench agreed with the MCD’s position and said that the Judicial Committee’s general findings could not override the specific documents governing an individual plot.

The Court noted that the conveyance deed and sanctioned plans submitted by the applicant himself showed the upper floors as residential, with kitchens and bedrooms.

The Court also relied on the Master Plan for Delhi, 2021, which classifies markets in Delhi into different categories: community centres, local shopping centres (LSCs), and convenience shopping centres (CSCs).

LSCs were further divided into two kinds - planned LSCs, where all floors could be used commercially, and designated LSCs, where only the ground floor was commercial and upper floors were residential but could be converted upon payment of charges.

It found that New Rajinder Nagar was part of a “designated LSC” - a mixed-use area where only partial commercial use was permitted.

The Court observed that the applicant’s building already exceeded the sanctioned FAR, and any additional commercial activity could be permitted only after paying conversion and penalty charges.

The Bench further directed the MCD to issue a fresh notice and carry out a joint inspection of the premises to identify non-compoundable violations. The MCD was told to specify the conversion and penalty charges payable by the applicant and allow compliance within a reasonable time.

It clarified that once these charges are paid and unauthorised constructions are removed, the applicant may be permitted to carry out commercial activities on the upper floors in accordance with law.

[Read Order]