Aditya Estate Pvt. Ltd. vs Land And Development Office And ...
2007 Latest Caselaw 683 Del

JUDGMENT

Badar Durrez Ahmed, J.

1. The petitioner, by way of this petition, is challenging the order dated 04.04.2006 whereby the petitioner's application for mutation and conversion from lease hold to free hold in respect of the premises situated at plot No. 2, Block No. 159, known as 3, Bhagwan Dass Road, New Delhi was rejected by the Deputy Land and Development Officer. The petitioner also seeks the cancellation of the demand raised on 07.01.1997 in respect of unearned increase to the tune of Rs. 17,33,66,420/- as being contrary to the terms of the perpetual lease which, admittedly, is a government grant within the meaning of the Government Grants Act, 1895.

2. Coming straightaway to the impugned order / letter dated 4.4.2006, the same reads as under:

Sub : Premises situated on Plot No. 2 Block No. 159 known as 3 Bhagwan Dass Road, New Delhi.

Sir,

I am directed to refer to your conversion application No. 11322 dated 15.1.2000 for conversion of aforesaid property from lease hold into freehold and to say that your request for mutation was examined and it was found that unearned increase to the tune of Rs. 17,33,66,426/- in addition to interest and other charges was recoverable. Accordingly the demand was raised on 7.1.97. The amount demanded has not been paid so far. Therefore your application for mutation has been closed. Further, since you are not the title holder of the property and in view of the outstanding Govt. dues, your conversion application cannot be considered. Your case for conversion is, therefore, rejected as per Clause 18.4 and 18.8 of conversion brochure.:

The conversion amount deposited by you is being refunded separately.

3. The first submission made by the learned Counsel for the petitioner is that the mutation of the property in favor of the petitioner ought to have been granted and that the respondent could not have imposed the condition of requiring the payment of unearned increase inasmuch as there was no such provision in the perpetual lease which governs the relationship between the parties. The second submission was that since the mutation ought to have been granted and the petitioner had paid the full conversion charges, the respondent ought to have carried out the conversion from leasehold to freehold. The learned Counsel for the petitioner placed reliance on a decision of this Court in the case of Jor Bagh Association v. Union of India : to contend that the perpetual lease was a government grant and that the relationship between the parties would be entirely governed by the same irrespective of any statutory provisions or instructions issued by the government from time to time.

4. On the other hand, the learned Counsel appearing on behalf of the respondent submitted that the unearned increase was being demanded from the petitioner because of an office order dated 14.9.1949 issued by the Government of India which provided that for leases in New Delhi Urban Area, unearned increase ought to be charged at the time of transfer and it ought to be recovered to the extent of 50% thereof in most cases and in the special cases relating to land originally sold at concessional rates to Ruling Princes and Chiefs and to others in the so called `Dewan's and Raises' area, the rate of unearned increase should be at least 75%. He submits that the decision in the case of Jor Bagh (supra) would not be applicable to the present case because in that decision itself, the question of unearned increase was not gone into as would be evident from paragraph 4 thereof. He further submitted that the present case would be covered by a decision of a Division Bench in the case of Ansal & Saigal Properties (P) Ltd and Ors. v. L & D.O. and Ors. wherein, according to him, the Division Bench had permitted the insertion of such a condition in a supplementary lease deed to be executed after observing that it was now the norm to introduce a clause for unearned increase in leases made by the Government. The learned Counsel for the respondent also submitted that Clause 11 of the lease required the lessee to take permission in writing prior to the transfer of the lease hold rights. He also referred to Clause 12 of the perpetual lease deed to contend that, on the breach of any condition prescribed under the lease, it was open to the Lesser to re-enter the premises and to determine the lease. In this context, he submitted that the transfer in question was done without a written approval of the Central Government and, therefore, the respondents were entitled to re-enter the premises and determine the lease. However, instead of doing so they gave an option by a demand letter issued in 1997 to the petitioner to continue with the lease on payment of unearned increase, ground rent, penalty and other charges. He submits that, it is in this context, that the demand for unearned increase based on the office order 14.09.1949 was issued because the letter of 1997 ought to be construed as a grant of fresh lease in favor of the petitioner.

5. Before I discuss the rival contentions, it would be appropriate to set out the facts. The property in question was leased out originally to Lala Sukhbir Sinha by virtue of a perpetual lease deed executed on 14.12.1920. Since Clauses 11 and 12 of the lease deed are relevant, the same are set out hereinbelow:

11. The Lessee shall before every assignment or transfer of the said premises hereby demised or any part thereof obtain from the Chief Commissioner, Delhi, or such officer or body as the Governor General in Council may authorise on this behalf approval in writing of the said assignment or transfer and all such assignees and transferees and the heirs of the Lessee shall be bound by all the covenants and conditions herein contained and be answerable in all respects therefore.

12. If any part of the said yearly rent hereby reserved or any part thereof shall at any time be in arrear and unpaid for one calendar month next after any of the said days whereon the same shall have become due, whether the same shall have been demanded or not / or if there shall have been in the opinion of the Chief Commissioner, Delhi, or such officer or body as the Governor General in Council may authorise on this behalf whose decision shall be final, any breach by the Lessee or by any person claiming through or under him of any of the covenants or conditions therein before contained and on his part to be observed or performed then and in such case it shall be lawful for the Lesser or any person or persons duly authorised by him notwithstanding the waiver of any previous cause or right of re-entry upon any part of the premises hereby demised or of the buildings thereon in the name of the whole to re-enter and thereupon this demise and everything herein contained shall cease and determine and the Lessee shall not be entitled to any compensation whatsoever.

6. On 02.11.1928 Lala Sukhbir Sinha passed away and his property devolved upon Shri A Sarup, Shri J. Sarup and Shri R. Sarup by virtue of a Registered Partition Deed dated 02.11.1928. The property was subsequently transferred by the Sarups to Delhi Cloth and General Mills Co. Ltd in 1934 and subsequently in 1938 to Lala Murlidhar. There is no dispute with regard to these transfers. On 14.09.1949, the said Government Office Order was issued. Clause 1 thereof reads as under:

1. Lease in respect of future allotment of Lands in the New Delhi Urban Area, should provide for Government claiming a portion of the unearned increase (i.e. the difference between the original purchase price and current market value) in the value of land, at the time of transfer (whether such transfer is of an entire site or only of a part thereof), the amount to be recovered being 50% of the unearned increase. In the case of Land originally sold at concessional rates to Ruling Princes and Chiefs, and to other in the so called `Dewan's and Raises' Area, the amount to be recovered will, however, be at least 75% of the unearned increase.

7. On 13.12.1949, Lala Murlidhar also passed away and the property in question devolved upon his two sons Lala Shridhar and Lala Bansidhar. On 10.04.1956 they executed a registered deed in favor of Madan Mohan Lal Shri Ram & Co. Pvt Ltd. Some time in 1961, the property was mutated in the name of this company. On 21.01.1966 the name of the company was changed and the consequential mutation was carried out by the L & DO in favor of Madan Mohan Lal Shri Ram & Co. Pvt Ltd. Thus, it is clear that till 1966, there was no dispute in respect of any of the transfers.

8. On 09.01.1985 an Agreement to Sell was executed between Madan Mohan Lal Shri Ram & Co. Pvt Ltd and the petitioner (Aditya Estates Pvt Ltd.). On 25.05.1993 a Sale deed was executed and registered, pursuant to the said agreement. It must be pointed out that the sale deed was executed in favor of the petitioner consequent to prolonged litigation which ultimately had the seal of the court. It must also be pointed out that the competent authority under the Income Tax Act, 1961 had also given its no objection by an order under Section 269(7) of the said Act on 10.03.1989. A Scheme of Arrangement under Section 391(1) and under Section 393 of the Companies Act, 1956 was under contemplation of this Court in CP 65/1991. The Scheme of Arrangement contemplated the transfer of the property from Madan Mohan Lal Shri Ram & Co. Pvt Ltd to the present petitioner. The Central Government had consciously given its no objection to the said Scheme of Arrangement on 14.8.1991 and by an order dated 27.5.1992 passed in CP 65/1991, this Court directed the said Madan Mohan Lal Shri Ram & Co. Pvt Ltd to execute and register the conveyance deed in favor of the vendee (the petitioner herein) after complying with all the legal requirements. Again, by the same order dated 27.5.1992, the court directed issuance of further notice to the Central Government and the Official Liquidator and for a citation to be published in the newspaper. Subsequently, on 02.11.1992, this Court sanctioned the Scheme of Arrangement and further directed that Madan Mohan Lal Shri Ram & Co Pvt Ltd shall execute the formal conveyance deed in favor of the petitioner in respect of the property in question.

9. It is consequent upon these proceedings that the sale deed dated 25.05.1993 came to be executed in favor of the petitioner. Thereafter, on 18.07.1996 the petitioner made an application for mutation of property in its favor. The application was made to the Land and Development Office. Instead of mutating the property in favor of the petitioner, the respondent (Land and Development Office) issued a demand letter dated 07.01.1997 indicating that the Lesser would be pleased to consider the request for mutation of the premises in question in favor of the petitioner if certain terms and conditions mentioned therein were complied with in full and in advance. The terms and conditions included the payment of unearned increase, ground rent, penalty for sale without permission, misuse charges under various heads, damages for unauthorised construction etc. In this petition we are only concerned with the question of unearned increase inasmuch as the petitioner has no grievance with regard to the other terms and conditions. In fact, the learned Counsel for the petitioner submits that the ground rent, penalty, misuse charges have all been paid. The only issue is with regard to the question of the demand raised by the Land and Development Office with respect to unearned increase amounting to Rs. 17,33,66,426.00. Thereafter, the petitioner had been requesting for mutation excluding the unearned increase condition. On 15.01.2000 the petitioner applied to the Land and Development Office for conversion of the property to freehold. All these proceedings culminated in the said order dated 04.04.2006. By virtue of the order dated 04.04.2006 which has been extracted earlier in this judgment, it is clear that the application for mutation was rejected on the ground that the unearned increase was not paid and secondly the application for conversion was rejected on the ground that the applicant was not the recorded lessee. Clauses 18.4 and 18.8 of the conversion Brochure have been mentioned in the order dated 04.04.2006 and they read as under:

18.4. When the application is signed by a person who is not eligible to apply for conversion.

18.8. When the charges payable under different heads mentioned in the application form are not fully paid.

It would also be relevant to note that, by another letter dated 04.04.2006, the entire conversion charges of Rs. 7,77,559.44 were returned to the petitioner.

10. Essentially, the question which arises for consideration in the present petition is:

Whether, in the facts and circumstances narrated above, the respondents can insist upon charging unearned increase from the petitioner as a condition for granting mutation and for conversion of the plot in question from freehold to leasehold ?

11. As regards the question of charging unearned increase, it is more than clear on an examination of the decision in Jor Bagh Association (supra) that such leases are government grants and they have to be construed in terms of their own tenor notwithstanding any law to the contrary. The learned Counsel for the respondents submitted that the Jor Bagh Association case did not pertain to unearned increase but to damages and, therefore, the said decision would not cover the present case. I am unable to agree with this contention of the learned Counsel for the respondents. The ratio of the decision in the Jor Bagh Association (supra) is that such leases, which are government grants, should provide for instances such as charging of damages, unearned increase etc. If they are not found to be part of the lease, then the Lessers cannot be charged such amounts as being condition of the lease. Faced with this position, the learned Counsel for the respondents submitted that the petitioners have committed breaches and the charging of unearned increase is merely a condition for condoning the breach. In response to this Mr Rajiv Nayar, the learned senior counsel, submitted, and in my opinion rightly so, that so far as the question of transferring without permission is concerned, in the impugned bill of demand itself the penalty for sale without permission at the rate of Rs. 3,000/- per annum from 25.05.1993 to 23.07.1996 amounting to Rs. 9,477/- has already been imposed. There is no difficulty insofar as the question of making of payment towards this penalty is concerned. The petitioner is ready and willing to pay the same. The only difficulty is with regard to item No. 1 in the said demand letter of 07.01.1997, which relates to unearned increase, which is different from the penalty for sale without permission.

12. Insofar as the question of unearned increase is concerned, I am clear in my mind, that the decision in the Jor Bagh Association (supra) would apply and since there is no provision imposing such a charge, the same cannot be collected from the petitioner. The aspect of the 1949 office order can also be dealt with quite easily inasmuch as that applied to prospective leases and did not apply to leases already granted. In this view of the matter, I find that the respondents cannot insist upon charging unearned increase from the petitioner as a condition for granting mutation. Accordingly, the impugned demand in respect of unearned increase is set aside. As such, the two communications dated 04.04.2006 stand set aside. The respondents are directed to process the application for mutation and thereafter to process the application for conversion from lease hold to free-hold.

No costs.