Dda vs M/S.Mahabir Prasad And Sons & Anr.
2009 Latest Caselaw 5060 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

%                   Judgment Reserved on: 4th December, 2009
                   Judgment Delivered on: 8th December, 2009

+                       LPA No.28/2004

       DDA                                  ....Appellant
                  Through:    Mr.Pawan Mathur, Advocate.

                              Versus

       M/S.MAHABIR PRASAD AND SONS & ANR. ....Respondents
                Through: Mr.Sumit Bansanl, Advocate.

       CORAM:
       HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
       HON'BLE MR. JUSTICE SURESH KAIT


     1. Whether the Reporters of local papers may be
        allowed to see the judgment?

     2. To be referred to the Reporter or not?     No

     3. Whether the judgment should be reported in the
        Digest?                                   No


PRADEEP NANDRAJOG, J.

1. On 1st April 1975 a partnership firm was constituted

to carry on business under the name and style: "M/s.Mahabir

Prashad & Sons". Respondent No.2 Satendra Kumar Jain was

one of the many partners of the firm. The other partners were

Shri Ajit Prasad Jain, Shri Mahendra Prasad Jain, Shri Vijendra

Prasad Jain, Shri Narender Kumar Jain, Shri Jitender Prasad Jain,

Shri Ravinder Prasad Jain and Shri Arun Jain i.e. the real

paternal uncles and first cousins of Satendra Kumar Jain.

2. DDA allotted a plot of land in the name of the

partnership firm bearing Municipal No.D-54 Okhla Industrial

Area, Phase-I, New Delhi and in respect of the allotment

executed a perpetual lease deed in favour of the partnership

firm on 12.12.1983. Inter-alia, the lease deed stipulates that

the firm shall not sell the leasehold rights without the prior

permission of DDA and in case permission is applied for and

granted, DDA would be entitled to charge 50% unearned

increase in the price of the land. It was further stipulated in

the lease deed that in case there was a change in the

constitution of the partnership firm the unearned increase of

50% proportionate to the share affected of a partner(s) on

reconstitution would be charged.

3. In other words, the lease deed contemplated that if

a partner having 10% share in the profits of the firm was

replaced by another partner, the 50% unearned increase

would be charged as if 10% interest in the leasehold rights has

been transferred.

4. The partnership was reconstituted from time to

time. At no stage did outsiders become partners of the firm.

Ultimately, a family settlement took place under which the

lease-hold rights in the property were assigned solely in the

name of Shri Satendra Jain.

5. DDA stepped in and demanded unearned increase

in sum of Rs.18,50,146/- alleging that with the reconstitution

of the firm from time to time and ultimately the dissolution of

the firm resulting in the perpetual lease-hold rights being

assigned solely to Shri Satendra Jain, unearned increase was

payable with reference to the share of the partners who had

retired.

6. At this stage, the relationship between the parties

may be noted. We note relationship in the form of a pedigree

table. The same reads as under:-

---- Jitender Prasad

------------Sham Lal-------

----Satendra Jain (Son) (sons)

----Ravinder Jain

--------Ajit Prasad---------

----Arun Jain (Son) (Sons)

Mahabir Prasad----

----Surinder Jain

----Mahender Prasad-----

----Mukesh Jain (Son) (Sons)

-------Vijendra Prasad

(Son)

-----Manoj Jain

------Narender Jain-------

-----Pankaj Jain (Son) (Sons)

7. It is not in dispute that DDA had issued a policy

circular notifying that: 'where a deed has been registered,

addition and substitution of family members shall be allowed

without any charge but on execution of a regular

conveyance/gift deed'.

8. Clause-VII of the said policy decision defines „family

member‟ as under:-

"(VII) The terms „family member‟ mean the allottee‟s husband/wife, father, mother, sister, brother, son, daughter, grand-son/grand-daughter. (For the purpose of this definition grand-son/grand-daughter means a son or a daughter‟s child). In cases where the allottee has no family of his own, the family members will mean the heirs as defined in the law of Succession applicable to him."

9. It would be apparent to the reader that the dispute

between Satendra Jain and DDA centered around whether

Satendra Jain was entitled to the benefit of the policy decision

taken by DDA or not. The precise question which was debated

between the parties was what was the exact span of the

definition of the term „family members‟.

10. Whereas DDA alleged that the family member

would be as defined and no more; Satendra Jain alleged that

meaningfully read, the definition of the term „family members‟

would include a transfer inter-se the cousins. Secondly, the

debate was whether at all a transfer had taken place i.e.

whether with the dissolution of the firm from time to time and

reconstitution within the family members as partners thereof,

a transfer inter-vivos was taking place.

11. Since DDA did not agree with the stand taken by

Satendra Jain, he was constrained to file a writ petition. The

first writ petitioner was M/s.Mahabir Prashad & Sons and the

second was Satendra Jain. Prayer in the writ petition was to

quash the demand raised by DDA vide letter dated

17.10.1991; demand being in sum of Rs.18,50,146/-.

Mandamus was prayed that DDA be directed to grant time to

the petitioner to raise construction on the plot.

12. The learned Single Judge has held in favour of the

writ petitioners and has quashed the demand and directed

that a mutation letter be issued in favour of Satendra Kumar

Jain. Further direction has been issued that on the petitioner

making a representation for extension of time to construct on

the plot, the same would be considered and decided in

accordance with law within two months.

13. The reasoning of the learned Single Judge is as

under:-

"13. In my considered view, the limited question to be considered is whether the transfer in the present case falls within the ambit of family members as defined under the policy of DDA. The object and purpose of inclusion of the restrictive clause in the lease deed is to prevent transfer in cases of holding by limited

Companies and partnership through their process of c change in shareholding and re-constitution of partnership. It is in such a situation that the same should be construed as a transfer and merely because the property happens to be allotted to a limited Company or partnership should not be an excuse not to pay unearned increase when a transfer takes place. It is to be further appreciated that the partnership consists of really the partners themselves. Thus whether there is addition and substitution of the partners, the same is permissible but on payment of 50 per cent unearned increase in terms of the lease deed read with the policy of DDA.

14. A specific exception has been carved out in case of substitution of family members where no charge is to be levied. The object of this clause is to exclude inter se arrangement between the family members where really no transfer takes place. The term "family-member" has been further explained in the policy and includes almost all the blood relations. Thus father, brother, son and grand-son fall in this definition. In my considered view, they definitely fall within the concept of a family member. Brother does fall within the definition directly under the family member and so does the son and the grandson. In the present case the partners are sons of two brothers and grandsons of one of the brothers whose sons are also partners in the partnership firm. A true interpretation of the definition of the family members should include such members and there cannot be a question of any unlimited expansion of clause. This aspect has to be considered taking into consideration the family members involved, their relationship and the very basis of this policy to exclude such parties in the family members.

15. The second aspect to be considered is the consequence of the dissolution deed which seeks to allocate shares of different partners and it is really a rearrangement of the business as a consequence of the dissolution of the firm. This can hardly be stated to be a ruse for evasion of unearned increase. The judgment referred to by learned counsel for the petitioner provided that there is no really transfer or

sale in such cases. In fact a reference has been made in the case of S.V.Chandra Pandian & Ors. (supra) to the concept of distribution of assets on dissolution of a partnership firm which can also occur by mutual settlement between the parties. This is what has happened in the present case. Thus even otherwise this is not a transfer. There is no doubt that the judgments relate to a different case and in the present case we are concerned with the perpetual Lease Deed and the terms thereof read with the policy of the DDA but these judgments are useful from point of view of appreciating the concept of transfer in the context of dissolution of a firm.

16. It is also to be appreciated that if the contention of the learned counsel for the respondent was to be accepted, it would create an anomalous satiation with the same group of partners merely by reason of the fact that the assets would vest in some other partner. In the present case 86 per cent share is stated to have been transferred for which unearned increase is levied. If instead of Satender Kumar Jain it would be Ajit Prashad Jain who would have been the sole holder of this property, the consequences would be that no unearned increase would be chargeable insofar as share of Mohinder Kumar Jain, Vijender Kumar Jain and Narinder Kumar Jain is concerned since they are real brothers. Similarly, no unearned increase would be chargeable for share of Ravinder Kumar Jain and Arun Jain, who are his sons. A different configuration would arise where the property to vest to Arun Jain since in that case the share of Ravinder Kumar Jain and Ajit Prashad Jain would not result in liability of unearned increase.

17. In my considered view, such an anomaly cannot be envisaged and the whole transaction has to be considered in the light of the general principles which requires that no unearned increase should be payable for adjustments within family members while such charges should be levied to prevent actual transfer in case of partners being brought in or resigning from a partnership firm who are outsiders. In view of the statement, I am of the considered view that the impugned demand dated 17th October, 1991 cannot

be sustained and is thereby quashed. It is directed that a mutation letter be issued in favour of Shri Satender Kumar Jain within a period of four weeks from today. In case the said petitioner No.2 is required to execute any other document, an intimation should be sent to the petitioner within a period of eight weeks from today."

14. Suffice would it be to state that the learned Single

Judge has held that under the restrictive clause in the lease

deed the intention was to prevent transfer of holding to third

parties; and the transfer being for consideration. Therefrom,

the learned Single Judge has deduced that where the transfer

is within the family members „as conventionally understood‟

and there is no consideration involved, the transfer would not

attract the levy of unearned increase. The learned Single

Judge has given a second reason; being that, between father

and son, between brothers and sisters, between grandsons

and granddaughters, their parents and grand-parents, the

policy circulated by DDA excluded liability to pay unearned

increase by treating all of them to be family members.

15. With reference to the pedigree of the family, the

learned Single Judge, in para 16 of the decision, has

highlighted that if the route adopted was that the sons of Ajit

Prasad, Mahinder Prasad and Narender Prasad relinquished

their respective shares in favour of their fathers, then as

defined under the policy, the said transfer had to be treated as

within the family members and hence said relinquishment of

interest would not have attracted the levy of unearned

increase. Thereafter, if Ajit Prasad, Mahinder Prasad, Vijendra

Prasad and Narender Prasad transferred their interest in favour

of their brother Sham Lal even the same would not have

attracted the levy of unearned increase for the reason it would

have been a case of brothers relinquishing their shares in

favour of a brother. Thereafter, if Sham Lal relinquished his

share in favour of Satendra Jain and likewise Jitender Prasad

relinquished his share in favour of Satendra Jain; said

relinquishments between father and son and brother and

brother would not have attracted the levy of unearned

increase. The learned Single Judge has held that merely

because the afore-noted route of relinquishment was not

adopted it would make no difference for the reason Mahabir

Prasad‟s family consisting of his five sons and his grandsons

was an extended family.

16. Lastly, the learned Single Judge has held that in

view of the decision reported as JT 1993 (1) SC 278 SV

Chandra Pandian & Ors. vs. S.V.Sivalinga Nadar & Ors. it

cannot be said that it was a case of sale by transfer.

17. At the hearing of the appeal Mr.Pawan Mathur,

learned counsel for DDA urged that as held in the decisions

reported as 2002 (4) SCC 510 State of Himachal Pradesh vs.

Padam Devi & Ors., 2003 (5) SCC 437 Union of India & Anr. vs.

International Trading Co. & Anr. and 1994 Supp (1) SCC 44

K.Narayanan & Ors. vs. State of Karnataka & Ors., it was

settled law that a policy decision was not subject to a judicial

review. Second contention urged was that the term „family

members‟ had been exhaustively defined and the learned

Single Judge could not have interpreted it by supplying words

to the definition. It was urged that the drafter of the policy did

not include cousins within the family members. It was lastly

urged that the lease deed was executed under the

Government Grants Act and hence the same overrides all

other laws.

18. Frankly speaking, we fail to understand the last

argument. The learned Single Judge has not applied any other

law while construing the lease deed or setting at naught the

terms of the lease deed. Under the Government Grants Act a

Government Grant takes precedence if the grant comes into

conflict with any law.

19. With respect to the first two pleas urged by learned

counsel for the appellant we may note that in the decision

reported as 1971 (3) SCR 406 SIT vs. Bankey Lal Vaidya, a

decision noted by the learned Single Judge, it was held that

where, in the course of dissolution of assets of a firm,

respective shares are allotted to the partners by assigning an

estate or paying money value equivalent thereto, the receipt

thereto was not to be treated as the consequence of a sale,

exchange or transfer of asset. Similarly, in the decision

reported as 68 ITR 240 Commissioner of Income Tax vs. Dewas

Cine Corporation it has been held that a property allotted to a

family member in satisfaction of a claim in the share of a

partnership, cannot be deemed, in law, to be a sale.

20. With respect to the property of a partnership firm,

through the medium of the firm, all partners thereof have a

unity of title and unity of possession, akin to joint ownership in

a property. Where this relationship is brought to an end; in the

case of a partnership by means of dissolution thereof, the

division of assets results in unity of title and possession being

severed. Henceforth each one of them holds to the exclusion

of the other whatever share is allotted to each partner. No

transfer of interest takes place. The severing of interest takes

place and no more. The resultant thereof is conferment of

exclusive title and possession in favour of the respective

partner vis-à-vis the total assets of the partnership firm.

21. We concur with the view taken by the learned

Single Judge that unearned increase as a jural concept

requires a sale, for the reason, without a sale what would be

the measure to determine the increase in the price of the

land? Obviously none.

22. What is the concept of an unearned increase?

Where land is allotted at a concessional rate and later on is

sold at the market rate, the differential premium paid vis-à-vis

the sale price would be the unearned increase. Thus, "No sale

- No unearned increase".

23. That apart, even the other reasoning of the learned

Single Judge is sound. The definition of family members

includes husband/ wife, father, mother, sister, brother, son,

daughter, grand-son, grand-daughter, daughter-in-law and the

wife of the grand-son as also the son-in-law and the husband

of the grand-daughter as a family member.

24. The definition goes on to include all heirs defined in

law to succeed to the interest of the allottee. In the case of

male Hindus, it would include the children of the pre-deceased

brother and sister, if the allottee would have no Class-I heir.

25. It is obvious that the intention is to broadly define

the term „family members‟ so as to include all blood relations

within the family i.e. the original allottee, his or her children

and his or her grandchildren. It is in this context that the

grandchildren of the allottee i.e. the cousins would come

within the ambit of the term of „family members‟ as defined in

the policy.

26. It is settled law that while interpreting a policy a

purposive approach has to be adopted. It is equally settled

law that negative covenants have to be construed narrowly,

for the law frowns upon for restraint of trade and transfer of

immovable property.

27. The intention under the lease-deed is to charge

unearned increase if the allottee or a co-allottee makes a profit

by sale of his/her lease-hold interest in a plot of land demised

under the perpetual lease. Thus, any interpretation which

results in levy of unearned increase without there being an

actual profit by way of sale of the perpetual lease-hold interest

is to be avoided.

28. The submission made by learned counsel for the

appellant that in matters of policy decisions the Court should

be hesitant to interfere does not exclude the jurisdiction of the

Court to interpret a policy.

29. The decisions cited are most inappropriate and

have no relevance to the facts of the instant case inasmuch as

the same related to questions pertaining to the vires of a

policy decision in the context of same being reasonable or

unreasonable. The law is clear on the subject. Unless it is

held that a policy is so unreasonable that it violates a

constitutional mandate or the apparent statute, a Writ Court

would not interfere with a policy decision to re-write the same

as an expert body. But this question does not arise in the

instant case. We are only called upon to interpret the policy.

30. We find no merit in the appeal.

31. The appeal is dismissed.

32. No costs.

(PRADEEP NANDRAJOG) JUDGE

(SURESH KAIT) JUDGE December 08, 2009 Dharmender