Innocent Flat Buyers Cannot Be Made to Suffer Due to Institutional Failures: Supreme Court on Tamil Nadu Housing Board Land Dispute

“TNHB Is Not Blameless… It Allowed Construction and Sale of Flats on Acquired Land” - Supreme Court of India, delivered a significant verdict involving land acquired by the Tamil Nadu Housing Board (TNHB), which later became the site for illegal construction and flat allotments. While affirming the ownership of TNHB over the entire disputed land, the Court took a balanced and equitable approach by safeguarding the rights of 54 flat purchasers who had acquired the properties without knowledge of the underlying dispute.

The Court underscored, “TNHB is also not blameless, as it not only allowed the land in question to be occupied but even gave permission for construction, as a result of which several flats were constructed, and as many as 54 flats have been sold to third parties.”

The core of the dispute revolved around 0.90 cents of land located in Survey No. 297/1, Kodambakkam Village, part of a total of 4.95 acres of land which had been acquired by TNHB. A clerical error in an earlier judgment wrongly recorded the acquired extent as 4.05 acres, leading to confusion and claims by private parties, including the appellant T. Udaykumar, who relied on subsequent Patta entries and sale deeds from 1996 and a Ratification Deed dated 19.01.2004.

Rejecting this claim, the Court clarified, “It is clear to us… the total land acquired was 4.95 acres. The awarded compensation mentioned in the order dated 13.03.1981 matches with the amount of compensation payable to the then owners.”

The Supreme Court categorically dismissed Udaykumar’s claim to ownership, stating, “What was ratified thereunder were the sale deeds executed in the year 1996. This will be of no consequence, as the sellers were not the owners of the land in question.”

The Court upheld the cancellation of the Patta dated 10.06.2004 and the subsequent Patta in Udaykumar's name, observing, “We uphold the cancellation… The Patta was also issued in favour of the appellant after he had purchased the rights from the erstwhile Patta holder, which too has been cancelled.”

However, the Bench, led by Chief Justice Sanjiv Khanna and Justice Sanjay Kumar, went on to acknowledge the role of the TNHB in creating the predicament. It observed, “TNHB not only allowed the land to be occupied but even gave permission for construction… The Revenue authority, obviously with the knowledge of the TNHB, had issued Patta in the name of the predecessors…”

The Court noted that 58 flats had been constructed, and 54 had been sold to third parties who had also approached the Court for relief. Taking a pragmatic approach, the Court declared, “We permit the said 54 flat buyers to continue to occupy and use their flats. They will be treated as absolute owners thereof.”

In a rare move blending legality with equity, the Court held, “The sum of ₹5 crores deposited by the appellant, T. Udaykumar, shall be treated as sale consideration paid to the TNHB for the land on which the flats have been constructed.”

Regarding four remaining flats, the Court permitted the TNHB to sell them, adding, “It will be open to the TNHB to deal with the said flats and the remaining land, if any, in the manner it deems appropriate.”

The Supreme Court also pulled up Udaykumar for disobeying its earlier order dated 02.11.2007, which restrained him from alienating any of the four unallotted flats. Noting that two of those flats were sold to C.S. Jayaraman and Kalavalli Selvaraj, the Court said, “We reject the prayer for allotment of these two flats… However, they are at liberty to enforce their rights and claims against the appellant… in accordance with law.”

The Court made it clear that no opinion was being expressed on the potential claims of Udaykumar against those who had earlier sold the land to him: “We also make it clear that we have not pronounced on or examined the question of the rights/claims, if any, of the appellant, T. Udaykumar, against the persons who had sold or transferred the land to him.”

Disposing of the appeals, the Supreme Court struck a balance between upholding legal rights and protecting innocent purchasers who had acted in good faith.

The Bench concluded, “To balance out equities and keeping in view the fact that the TNHB itself is partly responsible for this imbroglio… we permit the 54 flat buyers to continue to occupy and use their flats… They will be treated as absolute owners.”

This landmark ruling reiterates that institutional accountability cannot be ignored and that equity must be applied when third-party rights are involved in complex land disputes.

Date of Decision: 27 March 2025