Rationalization of procedure and formulation of a comprehensive policy in supersession of all previous policies for levying Misuse Charges.

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1 Item No. Sub: Rationalization of procedure and formulation of a comprehensive policy in supersession of all previous policies for levying Misuse Charges. File No. PS/Dir(RL)/2016/Misuse Policy I. Background [A][i] DDA has issued various circulars for levying misuse charges from time to time as well as has come out with various schemes providing for amnesty as well as discount for clearing pending misuse charges. However, the response to most of the previous schemes and circulars has been poor and the pendency continues to remain with the respective branches. There have been various difficulties noticed with the present policies. [ii] In large number of cases determination of date of commencement and/or closure of misuse is not based on any authentic documentary evidence and is determined on the basis of random field surveys done decades ago and the said survey reports do not clearly bring out the date of commencement of misuse and area of misuse. Further, in a number of such cases, show cause notices have not been issued to the concerned parties about such misuses. In some cases where the show cause notices were issued and parties have responded by either conveying that they have removed misuse or no misuse exists the department did not take any action on such replies from the concerned parties. Therefore, levying misuse charges in these right from the date of such initial inspection till the date of conversion application seems to be arbitrary. [iii] There are also instances where misuse charges calculated is more than the current value of the property. Raising demand for such misuse charges is illogical and leads to avoidable litigation. [iv] Further due to multiplicity of circulars on the subject the public at large and the department officials also remain in a state of confusion regarding calculation of misuse charges which is also difficult to ascertain the exact number misuse cases pending in various branches since number of property files are huge and the survey/complaint regarding misuse area for the period is kept in file and does not come to surface till the owner/sub-lessee/gpa/ats holder applies for conversion/mutation of the respective property. The old formula for calculation of misuse charges was adopted on the basis of circular issued by Ministry of Works & Housing dated The calculation based on that formula resulted in very high misuse charges and made it difficult for the owners to come forward and pay their misuse on timely basis. [v] There are cases where even after going through the cumbersome process for calculation of misuse charges and after raising the demand to the allottee, the cases of payment is very minimal as illustrated in a test check of 12 cases in which the demands were raised and in only one case the principal amount was deposited (Annexure-I). [B] Further it has been noticed that for years together many of the cases are lying pending and after issue of demand no action has been taken by DDA or their has been no response from the owner. Few of such cases also landed up in High Court and Supreme Court. The Hon ble Court was critical regarding the conduct of DDA in settling of misuse cases. Few of the notable Judgments are as follows:- [i] The Hon ble High Court of India in its judgment dated in WPC No.8464 of 2006 titled Ram Prakash Vs. Delhi Development Authority observed as under:

2 -: 2 :- This court is unable to accept the submissions of the DDA that there is no limitation whatsoever for recovering misuse charges. That would render the power to recover misuse charges arbitrary and unreasonable. The petitioner is right in contending that even where a penalty in terms of Section 29(2) DD Act, has to be recovered within a reasonable time, it is inconceivable that there would be no limitation whatsoever for recovering misuse charges. Also, this court is not prepared to accept the argument advanced by the DDA that by repeatedly issuing show cause notices to the lessees, without taking any follow up action on such alleged misuse for several years, the DDA was in fact being lenient. By not adjudicating on these show cause notices and by merely repeating the same charges in the subsequent show cause notices, DDA cannot expect to give itself a endless period of limitation of adjudicating on the alleged misuse. Significantly, in none of the show cause notices or final notices has the lessee been informed that the DDA is proposing to levy and collect misuse charges. There is therefore no mention of the likely amount of such misuse charges. The petition is right in contending that till 2004 he was never informed that he was even required to pay misuse charges. The exercise of the power by the DDA to levy and collect misuse charges in the instance case can by no means be said to be reasonable. [ii] In Rattan Kaur Vs. Delhi Development Authority decision dated in WPC No.7270 of 2003, the Hon ble High Court examined the validity of the demand by the DDA for misuse charges as a pre-condition to the grant of conversion of a property from leasehold to freehold basis. There the DDA had sought to recover in 1997 misuse charges in relation to a misuse that had stopped in The Hon ble High Court observed as under: [a] [b] [c] [d] [e] The DDA is charged with a statutory duty of ensuring that it takes prompt corrective action after the detection of misuse. Further, the underlying presumption of reasonable exercise of statutory powers in such instance would be that the further corrective action, after the stoppage of misuse, would also be taken within a reasonable time. Just like the DDA cannot seek to prosecute a person for an offence under the Delhi Development Act, 1957 at any length of time, likewise collection of fines and penalties will also have to be done within a reasonable time, if no outer limit for such recovery is specifically mentioned. In other words, there cannot be an open-ended time frame for recovery of misuse charges. If the DDA wants to avoid the loss it might suffer for the failure of its officials to act within a reasonable time, it requires to put its house in order and ensure that the necessary corrective action, in the event of a misuse, and the consequential action after the stoppage of such misuse is taken promptly. The answer is that the demand by the DDS made on for the misuse that stopped in February 1979 is unsustainable in law.

3 -: 3 :- [f] [g] [h] [i] [j] While it is a trite proposition that mere possibility of a misuse of a power cannot result in its invalidation, the recognition of such a power without hedging it with in-built limitations can provide a prescript for its continued misuse. The answer to the first aspect concerning the existence of the power of the DDA would appear to be this: the DDA can levy misuse charges provided it adopts a reasonable and fair procedure consistent with the principles of natural justice and further that it exercises such power within a reasonable time. This envisages seeking an explanation from the lessee of the exact nature of the misuse, taking a decision thereon within a reasonable time and informing the lessee of such decision within a reasonable time thereafter. If the DDA seeks to levy misuse charges then the lessee has to be informed of such decision and the basis of the calculation of such misuse charges has also to be communicated in advance. Otherwise, it would render the power to recover misuse charges arbitrary and unreasonable. On the facts of the instant case, it cannot be said that the power to levy misuse charges has been exercised reasonably. [iii] The Hon ble Supreme Court of India, in its judgment dated , in SLP No of 2009 titled Delhi Development Authority vs. Ram Parkash observed as under: Having considered the submissions made on behalf of the DDA and by the respondent appearing in-person, and also having considered the reasoning of the learned Single Jude and the Division Bench in repudiating the claim of misuse charges by the DDA, we are unable to convince ourselves that the decisions rendered by the High Court, both by the learned Single Judge as also the Division Bench, require any interference in these proceedings. The materials on record will show that the respondent took prompt steps against the tenants for their transgression. During arguments it was indicated that, in fact, one of the tenants had already vacated the portion of the premises occupied by him. It is also very clear that after issuing the Show Cause Notices, the petitioner did not take any follow-up action thereupon. Instead, after a lapse of 25 years, the petitioner sat over the matter to take advantage of its inaction in claiming misuse charges. Even as to the contention raised on behalf of the petitioner that there was no limitation prescribed for making a demand of arrear charges, the Division Bench relying on the decision of his Court in State of Punjab & am; Ors. Vs. Bhatinda District Cooperative Milk Producers Union Ltd.(2007) 11 SCC 363) observed that even where no period of limitation is indicted, the statutory Authority is required to act within a reasonable time. In our view, what would construe a reasonable time, depends on the facts and circumstances of each case, but it would not be fair to the respondent if such demand is allowed to be raised after 25 years, on account of the in action of the petitioner.

4 -: 4 :- II. ANALYSIS AND PROPOSAL [A] Further a circular dated was also issued with the approval of Authority in item No.85/2015 in which scheme of discount or relief was provided on the basis of certain criteria. But the same also could not resolve most of the pending cases. In order to remove the need for survey/fresh site inspection by the DDA staff and to avoid public harassment, another circular dated with the approval of Authority was issued, according to which the applicant could submit an affidavit with recent photographs of the property and certification by two neighbour s/registered RWAs. But due to confusion prevailing in the previous policies as well as high demand raised along with long pending interest very few applicants came forward even after issue of the circular. Therefore, the need was felt that one comprehensive policy be formulated which imbibes the best features from the previous policies but at the same time removes all the ambiguities undermining the efficient implementation of the previous policies. Further, once this policy is approved and implemented it will supercede all previous policies and will be the final word regarding calculating and settling of misuse charges. It also attempts to simplify the procedure for levying misuse charges by introducing new formula which is simple and user friendly and will also be helpful in initiating the process of self-assessment and declaration of misuse charges by owner. This will do away with the need for sending all the files to Accounts Department for calculation of misuse charges and the applicants will be able to get a copy of the file and calculate the misuse charges on their own on the basis of formula and remit the amount within stipulated time. However, to ensure that self-assessment is done accurately without any false submission of fact/data, a system of random check will also be introduced. This will cover 5% of the cases picked randomly by a computerized system. The Draft policy along with the proposal formula is as follows:- [B] [I] Type of cases and proposed action. Cat. Type of case Action proposed 1[a] Cases where report about Affidavit from the applicants along with recent misuse is available on file but Show Cause Notices were not issued. photographs of property and certification by way of Affidavit from two witnesses/registered RWA certifying that there is no misuse of the respective property may be accepted in lieu of inspection of DDA and no misuse [b] [c] [d] Cases where report about misuse is available on file and Show Cause Notices were issued but the allottee denied violations but no further/ inspection was undertaken by DDA. Cases where report about misuse is available on file and Show Cause Notices were issued but there was no response from the allottee. Cases where report about misuse is available on file and Show Cause Notices were issued and allottee informed about removal of violations but no further action/inspection undertaken by DDA. was charges to be levied. Affidavit from the applicants along with recent photographs of property and certification by way of Affidavit from two witnesses/registered RWA certifying that there was and is no misuse of the respective property may be accepted in lieu of inspection of DDA and no misuse charges to be levied. Misuse charges to be levied for a period from the date of initial date of detection upto : three years after the last report about the misuse OR the date of first sale after the last report about the misuse, whichever is earlier. Affidavit from the applicants along with recent photographs of property and certification by way of Affidavit from two witnesses/registered RWA and misuse charges to be levied for a period from the date of initial date of detection upto the date of removal of violation by the applicant.

5 -: 5 :- 2 Cases where report about misuse is available on file and Show Cause Notices were issued and allottee informed about removal of violations. During inspection removal of violations confirmed by the DDA officials 3 [a] [b] [c] Cases where report about misuse is available on file and Show Cause Notices were issued and allottee informed about removal of violations and further inspection was undertaken by DDA confirming existence of violations at the time of inspection. After confirmation of violation next SCN was also issued negating reply to the allottee about removal of violations but there was no response from the allottee. Cases where report about misuse is available on file and Show Cause Notices were issued and allottee informed about removal of violations and further inspection was undertaken by DDA confirming existence of violations at the time of inspection. After confirmation of violation next SCN was also issued negating reply to the allottee about removal of violations but no further action/inspection was undertaken by DDA. Cases where report about misuse is available on file and Show Cause Notices were issued and allottee informed about removal of violations and further inspection was undertaken by DDA confirming existence of violations at the time of inspection. After confirmation of violation, SCN was not issued negating reply of the allottee about removal of violations. 4. Cases where the lease has been determined on the ground of misuse. 5. Cases where property was misused by the tenant without the connivance or knowledge of the owner and owner has filed suit for eviction with misuse of the property as one of the ground for eviction. Misuse charges to be levied for the period from initial the date of detection upto the date of removal of violations. Affidavit from the applicants along with recent photographs of property and certification by way of Affidavit from two witnesses/registered RWA certifying that is no misuse in the property as on date. Misuse charges to be levied upto three years from the date of 2 nd confirmation OR from the date of first sale after the 2 nd confirmation about the misuse, whichever is earlier. Affidavit from the applicants along with recent photographs of property and certification by way of Affidavit from two witnesses/rwa certifying that there was and is no misuse of the respective property may be accepted in lieu of inspection of DDA. Misuse charge for the period from initial date of detection upto the date of filing of conversion application along with restoration charges. The process of restoration will remain the same and competent authority will be Hon ble L.G. for restoration of determination of lease. In such cases, in case the owner has filed a suit for eviction of the tenant and misuse of the property is one of the terms of reference for eviction then 10% of misuse charges from the date of filing of court case till the date of disposal of case or filing application for conversion, whichever is earlier. The owner will have to submit the proof of filing of court case as well as the filing date of disposal of the case and will also have to show that one of the grounds for filing of suit for eviction was misuse of the leased property.

6 (ii) Rules -: 6 :- (I) (II) (III) (IV) Misuse charges in respect of the misuse which is/was continuing after the date of submission of conversion application, the quantum of misuse charges shall be worked out upto date of such application. In case applicant does not submit affidavit from two witnesses/ registered RWA then his conversion application will be rejected due to non-submission of documents. The unsettled cases where the demand of misuse charges has been raised by DDA but the lessee has not deposited it and consequently their cases of conversion are pending will be reviewed and fresh calculation to be done as per the new policy. However cases where misuse charges have already been paid by the applicant will not be re-opened and no refund will be made on this account. So far as determination of the date of receipt of application for conversion is concerned, it should be the date on which a conversion application has been received in the prescribed format with full conversion charges and processing fee in the bank in conformity with the circular issued by Director (LC) vide no. F.4 (2)/2002/AO (R)/Misc./152 dated Non submission of any document/ information will not affect the date of conversion application if application is prescribed format is submitted with required conversion charges and processing fees. (V) Random checking will be carried out in 5% cases. Misrepresentation/ concealment of facts will invite levy of penalty which will be double of differential amount of unpaid misuse charges + 15% interest per annum as well as criminal prosecution and may also lead to cancellation of Conveyance Deed. Action will also be taken against neighbour (2 witnesses)/rwa member for giving the false affidavit which may include criminal prosecution as well as penalty. (VI) (VII) (VIII) (IX) In such cases, however, where unauthorized construction or misuse stands reported on record, after submission of conversion application, a letter may simultaneously be sent to the Building Department of the DDA or MCD (if services of the area stand transferred) for violation of building bye-laws for taking appropriate action under relevant law/ regulation. However, this will not affect the conversion applicant and same will be processed as per policy. The applicant to be provided copy of the survey report/file within 2 working days of applying for conversion along with method of calculating misuse charges and a period of two weeks to deposit charges. In case application for conversion is rejected due to non-submission of documents, the amount deposited by the applicant to be directly remitted to the bank account of the applicant through ECS. The applicant will be asked to submit ECS details along with application including cancelled cheque in order to ensure timely refund to the applicant in case of rejection of application. Since neigbour/office bearer of registered RWA who was residing in the Society may not be easy to find, therefore, the applicant may submit an affidavit from the existing member of RWA or any existing neighbor. Moreover the neighbor will be defined as a person residing in the colony for a period of at least 5 years and will have to submit proof of residence along with I.D Proof with his affidavit.

7 -: 7 :- (X) The applicants who apply within first six months of implementation of the policy will not have to pay any interest charges on the misuse charges calculated as per new formula and thereafter interest charge of 12% compounded every six months will have to be borne by the applicant. In the old pending cases where the demand has already been raised and the applicant wishes to clear the misuse charges as per old policy, will have the option to do so within first six months of implementation of the new policy without paying any interest charges on the demand raised. However, if he does not come forward within first six months for settling the old demand then he will have to apply afresh in the new policy and interest charges as applicable in the new policy will be levied on the calculated misuse charges. (iii) Proposed Formula The new formula has been worked out in a manner so that it simplifies the calculation of misuse charges and also becomes more reasonable having a co-relation with the commercial rate of the area where the property is located as well as size of the plot in sq. mtr. as well as the duration of the period of misuse. In order to ensure that misuse charges do not exceed the value of the property itself and bear good correlation with the benefit that would have been derived by owner by indulging in misuse only 10% of the existing commercial rates of the area have been taken into account for formulating the base rate across different zones of DDA. Accordingly, the base rates in the various zones are as follows:- S.No. Zone Rates in * Base Rate [rounded of to nearest 100] [1] [2] [3] [4] 1. Central, South & Dwarka Rs.1,12,050/- Rs.11,200/- 2. West, North, East & Rohini Rs. 77,815/- Rs.7,800/- 3. Narela Rs. 31,127/- Rs.3,100/- *Rates shown in column [3] are the land rates for calculating conversion charges in respect of commercial properties for 100 FAR whereas the base rate shown in column [4] have not been linked to FAR. Since the benefit derived by the owner/user increases with the size of the plot but the exact area of misuse is not clear in most of the cases, therefore, an average of 25% of the size of the plot has been proposed for levying misuse and the same has been incorporated in the formula. Moreover, wherever the area of misuse is not in dispute and same has already been accepted by the applicant earlier and in recorded in file in such cases the exact area of misuse will be used in calculating amount of misuse. Further, to ensure that applicant who have carried out on the misuse for different periods of time are penalized according to the time period of misuse, the following time factor has been introduced in the formula called the Time Duration Factor : Period (in years) Factor 0 to 5 1 Above 5 and less than Above

8 -: 8 :- Finally, it is also matter of fact that a person who would have carried out misuse many years back would not have derived the same commercial benefit which an owner would have derived by indulging in misuse in the recent years. Therefore in order to take that into account following factor is introduced into the formula which will be called historical factor Period (in years) Historical Factor Prior to to to upto date 1 In case the misuse is overlapping in two above mentioned periods then Factor of the period in which the period of misuse is larger will be taken into consideration. On the basis of above mentioned criteria formula for calculation of misuse charges will be as follows:- [a] In cases where area of misuse is not clear or ambiguous or disputed :- Base rate of the Zone x 25% of the area of the plot in sq. mtr. x time factor X historical factor [b] In cases where area of misuse is clear and not in dispute and has been accepted by the applicant and DDA. Base rate of the Zone x total area under misuse in sq. mtr. x time factor X historical factor (iv) Illustrations The illustrations are given below to explain the application of the formula. [1] Suppose an allottee is having a plot of 200 sq. mtr. in Safdarjung Enclave and has misused the property for five years during the period 1979 to The misuse charges (25% of the plot area) are as under:- [a] Base rate of property will be = Rs.11,250/- [as the same falls in Central, South and Dwarka Zone] [b] Plot area is 200 sq. mtr. and 25% of the same is = 50 sqm. [c]since the period of misuse was 5 years, therefore, time factor = 1 [d]misuse was prior to , therefore, historical factor is 0.25 Now by application of the above formula, the result is as follows:- 11,200x50x1x0.25 = Rs.1,40,000/-. [2] Suppose an allottee is having a plot of 100 sq. mtr. in Paschim Vihar and has misused the property for ten years during the period 1986 to The misuse charges (25% of the plot area) are as under:- [a] Base rate of property will be Rs.7800/- [as the same falls in West, North, East and Rohini Zone] [b] Plot area is 100 sq. mtr. and 25% of the same is = 25 sqm. [c]since the period of misuse was 5 years, therefore, time factor = 1.25 [d]misuse was during the period from 1986 to1994, therefore, historical factor is 0.50

9 -: 9 :- Now by application of the above formula, the result is as follows:- 7,800x25x1.25x0.50 = Rs.1,21,875/- [3] Suppose an allottee is having a plot of 100 sq. mtr. in Narela and has misused the property for ten years during the period 2010 to2015. The area of misuse is 20 sqm. and is accepted by the applicant and DDA. [a] Base rate of the property will be =Rs.1600/- [as the same falls in Narela Zone] [b] Misuse area is 20 sqm. without dispute = 20 sqm. [c]since the period of misuse was 6 years, therefore, time factor = 1.25 [d]misuse was during the period , therefore, historical factor is = 0.50 Now by application of the above formula, the result is as follows:- 1600x20x1.25x1 Rs.40,000/- (v) Comparative Simulations A comparative simulation of rates were attempted with 7 live cases and the findings are illustrated below:- Comparative Chart S. No. A B C D E F G Example Old Formula New Formula Difference Difference in %age Area: New Rohtak Road 11,52,823/- 4,97,718/- 6,55,105/ % Size of the plot sq.mtr. Date of commencement Date of closure Misuse Area Area : Paharganj 65,81,902/- 6,63,264/- 59,18,638/- 89.9% Size of the plot: sq.mtr. Date of commencement Date of closure Misuse Area sqm. Area : Karol Bagh 15,44,678/- 2,49,116/- 12,95,562/ % Size of plot : sq.mtr. Date of Start Date of closure Misuse Area : Area : Saket 75,18,718/- 5,26,680/- 69,92,038 93% Size of plot : sq. mtr. Date of Start Date of closure Misuse Area : Area : Vivek Vihar 4,74,651/- 2,48,898/- 2,25,753/- 47.6% Size of plot : sqm. Date of start : Date of closure: Misuse Area: Area : Janak Puri 12,14,614/- 6,49,350/- 5,65,264/ % Size of plot : 444 sqm. Date of start : Date of closure: Misuse Area: Area : Rohini 8,84,863/- 69,520/- 8,15,343/ % Size of plot : sqm. Date of start : Date of closure: Misuse Area: 31.69

10 -: 10 :- On analysis of the comparative chart, it is found that in majority of the cases, there is a considerable reduction in the quantum of misuse charges varying from 40% to 93%. This would translate to revenue reduction to the DDA. Though, there is an upfront revenue loss to DDA. However, the adoption of the new formula would benefit public as follows: Better compliance by the allottee. Transparency in the system. Simplicity in the procedure as happened in the Income Tax Department. Actual realization of the revenue due to better compliance. Saving of unproductive labour. Concentrating on DDA s core area of DDA i.e. Development activities. Quick disposal of cases. Reduction in court cases. Clearance of backlog due to historic reasons. Will become more people friendly enhancing the brand value of DDA Proposal Authority may consider and approve the new comprehensive policy for rationalization of procedure for levying misuse in supersession of all previous policies on the same subject.

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