Delhi High Court
Union Of India & Anr vs Hotel Excelsior Ltd & Anr on 11 September, 2012
Author: Rajiv Sahai Endlaw
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 11th September, 2012
+ LPA 2298-99/2006& CM No.16584/2006
UNION OF INDIA & ANR ..... Appellants
Through: Mr. Mohan Parasaran, ASG with Ms.
Aarthi Rajan, Mr. B.V. Niren, Mr.
Manav Gupta, Mr. Alok Prasanna
Kumar & Mr. Meyyappan Nagappan,
Advs.
Versus
HOTEL EXCELSIOR LTD & ANR ..... Respondents
Through: Mr. Harish Malhotra, Sr. Adv. with
Ms. Malini Sud & Ms. Vidhi Goel,
Advs.
AND
+ LPA 147/2007& CM No.2839/2007
UOI & ANR. ..... Appellants
Through: Mr. Mohan Parasaran, ASG with Ms.
Aarthi Rajan, Mr. B.V. Niren, Mr.
Manav Gupta, Mr. Alok Prasanna
Kumar & Mr. Meyyappan Nagappan,
Advs.
Versus
EDEN PARK HOTEL P.LTD. ..... Respondent
Through: Ms. A. Poddar & Mr. Sidharth
Aggarwal, Advs.
AND
LPA Nos.2298-99/2006, 147/2007, 297/2007 & 161/2009 Page 1 of 35
+ LPA 297/2007& CM No.6320/2007
UOI &ORS. ..... Appellants
Through: Mr. Mohan Parasaran, ASG with Ms.
Aarthi Rajan, Mr. B.V. Niren, Mr.
Manav Gupta, Mr. Alok Prasanna
Kumar & Mr. Meyyappan Nagappan,
Advs.
Versus
J.R.SOOD ..... Respondent
Through: Mr. Harish Malhotra, Sr. Adv. with
Ms. Malini Sud & Ms. Vidhi Goel,
Advs.
AND
+
LPA 161/2009
UOI & ANR. ..... Appellants
Through: Mr. Mohan Parasaran, ASG with Ms.
Aarthi Rajan, Mr. B.V. Niren, Mr.
Manav Gupta, Mr. Alok Prasanna
Kumar & Mr. Meyyappan Nagappan,
Mr. Jatan Singh, CGSC, Mr. Brijesh
Chaudhary & Mr. Karan Burman,
Advs. for UOI.
Versus
LODHI PROPERTY COMPANY LTD & ANR. ..... Respondents
Through: None.
LPA Nos.2298-99/2006, 147/2007, 297/2007 & 161/2009 Page 2 of 35
CORAM :-
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
JUDGMENT
RAJIV SAHAI ENDLAW, J.
1. These four intra-court appeals, though against separate judgments in
separate writ petitions, are listed together since the judgments of the learned
Single Judge under challenge in LPA Nos.147/2007, 297/2007 and
161/2009 merely follow the judgment of the learned Single Judge under
challenge in LPA No.2298-99/2006. Further, all appeals are stated to entail
the same question of law i.e. the right, of the lessees of land underneath
disinvested hotels, to have the same converted into freehold. Though the
land subject matter of LPA No.297/2007 is not underneath a disinvested
hotel but underneath a cinema hall but the learned Single Judge has qua the
same also, followed the dicta under challenge in LPA No.2298-99/2006 and
the counsels in LPA No.297/2007 also have not argued the same any
differently. Rather, arguments have been addressed with respect to LPA
No.2298-99/2006 only, with the counsels in other matters merely adopting
the arguments.
2. LPA No.2298-99/2006 arises from order dated 29.08.2005 allowing
W.P.(C) No.15058-59/2004 preferred by the respondents therein and also
impugns the order dated 25.08.2006 in review petition preferred
thereagainst. The same concerns land underneath erstwhile Kanishka Hotel
and Kanishka Shopping Plaza. LPA No.147/2007 arises from judgment
dated 01.09.2006 allowing W.P.(C) No.450/2005 preferred by the
respondents therein and pertains to the land underneath erstwhile Qutub
Hotel. LPA No.297/2007 arises from the judgment dated 25.08.2006
allowing W.P.(C) No.14696/2004 preferred by the respondents therein and
pertains to land underneath the Eros Cinema Building. LPA No.161/2009
arises from judgment dated 04.12.2008 allowing W.P.(C) No.24033-
34/2005 preferred by the respondents therein and pertains to the land
underneath erstwhile Lodhi Hotel at Delhi.
3. The learned Single Judge has held the leasehold land underneath the
disinvested hotels and cinema to be entitled to freehold conversion under the
Policy introduced by the Government and has thereby quashed the decision
of the Land and Development Office (L&DO) refusing freehold conversion
of such land and held L&DO to be not entitled to discriminate between the
land underneath the disinvested hotels and cinema and other leasehold lands
being converted into freehold.
4. W.P.(C) No. 15058-59/2004 from which LPA 2298-99/2006 has
arisen, was filed pleading:-
A. that by a Scheme of Demerger sanctioned by the Central
Government on 5th August, 2002, Hotel Kanishka including
Kanishka Shopping Plaza was hived off from Indian Tourism
Development Corporation (ITDC)and merged into Hotel
Excelsior Pvt. Ltd. (HEPL);
B. thereafter vide two Share Purchase Agreements dated 8th
August, 2002, the shares of HEPL held by Union of India and
Indian Hotels Company Ltd. were purchased by the respondent
no.2 Nehru Place Hotels Ltd. for a total price of
`1,01,38,22,146/-(Rupees One hundred one crores thirty eight
lakhs twenty two thousand one hundred forty six only);
C. that thereby the ownership and management of Hotel Kanishka
including Kanishka Shopping Plaza stood transferred/handed
over to Nehru Place Hotels Ltd.;
D. a lease deed dated 8th October, 2002 for a period of 99 years
was executed by the President of India acting through the
L&DO in favour of HEPL and whereunder a sum of
`4,68,35,949/- was paid as security deposit;
E. that on 6thJune, 2003, L&DO came out with a policy/scheme
for conversion of leasehold rights into freehold; as per Clause
1.5 of the Scheme of Conversion, all commercial and mixed
land use properties allotted by L&DO "for which ownership
rights had been conferred and lease deed executed and
registered" could be converted into freehold;
F. as per the Master Plan for Delhi, the aforesaid property i.e.
Kanishka Hotel and Kanishka Shopping Plaza falls under the
category „Commercial‟;
G. that HEPL being desirous of taking advantage of the said
policy of conversion of leasehold rights into freehold, applied
thereunder with respect to the land underneath Kanishka Hotel
&Kanishka Shopping Plaza and sought adjustment of the
security deposit of `4,68,35,949/- in the conversion charges;
H. however neither any response was received nor were the
leasehold rights converted into freehold.
Accordingly the writ petition aforesaid was filed seeking mandamus
for conversion of the land underneath Hotel Kanishka & Kanishka Shopping
Plaza into freehold on adjustment of conversion charges of `4,44,78,504/-
out of the security deposit of `4,68,35,949/-.
5. Notice of the said writ petition was issued. A counter affidavit was
filed by the L&DO contesting the petition. It was inter alia stated in the said
counter affidavit:-
a. that the land aforesaid had been leased out to HEPL under the
Disinvestment Policy of the Government of India;
b. that the scheme for conversion was not applicable to
disinvested hotels which formed a separate and distinct
category;
c. that the matter was examined in consultation with the Ministry
of Finance which had also affirmed that private parties which
had acquired the commercial business of hotel, cinema houses
etc. by way of disinvestment are a different category altogether
and are not to be treated at par with the allottees of other
properties eligible for conversion;
d. that conversion could not also be granted since HEPL had
encroached upon service lane;
e. that conversion could also not be granted for the reason that
HEPL, instead of depositing the conversion charges, had
sought adjustment of the security deposit which was not
permissible;
f. along with counter affidavit, a copy of the letter dated 25th
February, 2005 rejecting the request for conversion was also
filed.
6. Needless to state the respondents in their rejoinder to the aforesaid
counter affidavit controverted the averments therein. It was pleaded that
neither the conversion policy carved out any exception qua the disinvested
hotels nor did the lease deed for 99 years executed in favour of HEPL
restricted conversion from leasehold to freehold. It was further pleaded that
the rejection of the application for conversion was after the filing of the writ
petition.
7. The Learned Single Judge, holding that, i) interest in land was vested
in HEPL as perpetual lessee under the lease agreement dated 8th October,
2002;ii) the conversion policy did not carve out any exception qua
disinvested hotel; iii) the exceptions if any to the policy have to be in the
policy only and cannot be by executive instructions; iv) the conversion
policy was applicable to commercial properties, as the Kanishka Hotel &
Kanishka Shopping Plaza was; v) as such the said property could not be
discriminated against; and vi) the lease deed and the share purchase
agreement did not prohibit freehold conversion, vide order dated 29.08.2005
allowed the writ petition and directed the L&DO to convert the leasehold
rights into freehold and also allowed adjustment of the security deposit
under the lease agreement into conversion charges.
8. Appellant L&DO applied for review of the aforesaid order. The
judgment dated 25th August, 2006 of the Leaned Single Judge thereon
records that the counsel for the respondents/writ petitioners conceded that
the said review petition be decided on merits. The Learned Single Judge
thereafter proceeded to decide the writ petition afresh and noticed the pleas
of the L&DO in the review application to the effect that, a) the land had
been leased out to HEPL only for operating and managing the commercial
business of hotel by way of Disinvestment Policy of the Government; b) the
reserve price for the auction (pursuant to disinvestment) was not fixed
having regard to the value of the land; c) even in the lease deed dated 8th
October, 2002 executed in favour of HEPL, no premium was charged and
the said lease deed was as such different from leases conversion of which
into freehold was being permitted.
9. Clause 1.5 of the Scheme of Conversion / Conversion Policy, relied
upon by the learned Single Judge is as under:-
"WHAT ARE THE PROPERTIES UNDER THE
CONTROL OF LAND & DEVELOPMENT OFFICE
ELIGIBLE FOR CONVERSION FROM LEASEHOLD
TO FREEHOLD
1.5 All commercial and mixed land use properties
allotted by the department of Rehabilitation, L&DO or
the Dte. of Estate, for which ownership rights have been
conferred and lease deed executed and registered."
The Learned Single Judge, in the judgment dated 25th August, 2006 held:-
I. that the share purchase agreements required the government to
co-operate with the purchaser of shares of HEPL, in perfecting
or registering ownership of the assets;
II. that out of the bid amount, a sum of `31,22,39,658/- was
assigned for payment to the L&DO of 50% of the unearned
increase on leased land;
III. that the lease deed dated 8th October, 2002 was executed
simultaneously with the execution of the share purchase
agreements;
IV. that for Clause 1.5 aforesaid of the Conversion Policy to apply,
only thing to be established was that the lease was executed
either by the Department of Rehabilitation or the L&DO or the
Directorate of Estates and that ownership rights were conferred
under the lease deed;
V. that the concept of ownership rights would have to be
understood and appreciated in the context of leasehold tenures;
VI. that the very fact that a right of sale, mortgage, construction
and of dealing with the property was conferred on the lessee
showed conferment of ownership rights on the lessee, even if
the lease was for 99 years. Reliance in this regard was placed
on Smt. Shanti Sharma v. Smt. Ved Prabha (1987) 4 SCC 193
where the holder of a leasehold tenure, in the matter of seeking
eviction of tenant under the Delhi Rent Control Act, 1958,was
viewed as the owner;
VII. that in today‟s world particularly in India, ownership in the
sense of absolute unrestricted right to deal with the property is
non-existent;
VIII. the rights to enjoy the land and the building thereon, to re-
develop and re-construct as per the Master Plan, mortgage,
assign, transfer or sub-lease conferred under the lease deed
dated 8th October, 2002 are all facets of ownership. The
argument of the L&DO that for acquiring ownership, a
premium had to be paid and which had not been paid under the
lease in question was negatived holding that payment of
premium had no relation to the concept of ownership as
understood in the contextual sense in the city of Delhi, since
when premium is paid rent is less and vice versa;
IX. that out of the payments under the share purchase agreements,
monies had flowed to the land owning agency i.e. L&DO
which, prior to the transaction in question had given land free
of cost or on notional basis to another department of
Government of India;
X. that the difference in language of the lease in question and the
other leases of the L&DO was irrelevant;
XI. entitlement for conversion is to be found in the Conversion
Policy and not in the lease.
Accordingly the review application was dismissed.
10. The Learned ASG appearing for the appellant L&DO has argued that,
i) the land aforesaid was earlier allotted in favour of ITDC and no lease was
ever executed in favour of ITDC; ii) that the stamp duty on the lease deed
dated 8th October, 2002 was also computed on the basis of the ground rent
payable thereunder; iii) comparison is sought to be drawn with the lease
deed contemporaneously granted in favour of HUDCO with respect to the
land where Ansal Plaza is situated; iv) that what was sold under the share
purchase agreement was only the shares; and v) that the Learned Single
Judge has wrongly confused the unearned increase with the premium.
11. Mr. Harish Malhotra, Sr. Advocate for the respondents in LPA
No.2298-99/2006 has, i) invited attention to the Public Notices issued at the
time of disinvestment and has contended therefrom that it was in fact the
property of Kanishka Hotel which would include the land, which was
offered for sale, and further contended ii) that permission was given for
mortgage and sale of the property and which would have been given only
when ownership rights were conferred, even though the lease was for 99
years; iii) that under the new Stamp Act, the stamp duty payable on lease of
duration of over ten years is the same as a conveyance deed. Attention is
also invited to the clause of the lease deed dated 8th October, 2002 giving
the lessor i.e. L&DO a pre-emptive right of purchase in the event of
sale/transfer of rights by the lessee and the same is also urged to be a facet
of ownership.
12. We may at the outset state, that a lessee has no right to claim
conversion of the leasehold into freehold or to compel the lessor to so grant
conversion. The respondents also did not peg their case so high. All that
which thus requires determination is, whether the respondents, under the
Policy floated by the L&DO, have a right to such conversion and if not,
whether the appellant L&DO, in denying such conversion to the
respondents, is discriminating against the respondents.
13. It is not as if the appellant L&DO allows such conversion, with
respect to all leases. Judicial notice can be taken of the fact that the
Policy/Scheme for conversion, when first introduced in the year 1992, was
qua residential plots only and that too of size not exceeding 500 sq. mtrs.
Subsequently in the year 1999 all residential plots irrespective of size were
brought within the ambit of the Scheme. It is only in the next stage in the
year 2003 that the Policy/Scheme was extended to commercial/mixed use
plots of land. Even now, the Scheme/Policy does not state that all leaseholds
under the L&DO are eligible for conversion to freehold, as would have been
the case, had the intent been so. Instead, in Clauses 1.1 to 1.5 of the
Scheme/Policy, the leases eligible for freehold conversion are specified.
Significantly, while mentioning (in Clause 1.1) residential plots as eligible
for conversion, it is not mentioned, "for which ownership rights have been
conferred", as has been mentioned in Clause 1.5 while including
commercial and mixed land use properties in the list of properties eligible
for freehold conversion. The only inference can be, that while leases of all
residential properties were eligible for conversion, irrespective of whether
the ownership rights thereunder were conferred or not, it was not so qua the
commercial/mixed land use properties. Only those commercial/mixed land
use properties were/are, under the Scheme/Policy, eligible for conversion,
"where ownership rights have been conferred".
14. We have not come across any challenge having been made, since the
year 1992 when the Scheme/Policy of freehold conversion was first
introduced, on the ground of discrimination, for allowing such conversion
qua one category of leases and not others. The question of discrimination in
our view in such a situation does not arise since as aforesaid, no lessee has a
right of such conversion and merely because the lessor has granted such
privilege to some lessees, does not entitle others, who form a distinct
class/category, to also claim such privilege / benefit.
15. The appellant L&DO claims leases of lands under disinvested hotels
to be forming a separate class/category since no ownership rights were
conferred under the said leases. To support the said plea, non-payment of
premium under the said lease is cited. As aforesaid, under the
Scheme/Policy itself, appellant L&DO had made only such commercial and
mixed land use properties eligible for conversion, "for which ownership
rights had been conferred". The learned Single Judge also has noticed the
paradox in the said expression. A lease is different from ownership and a
lease in which ownership rights are conferred would cease to be a lease (see
Byramjee Jeejeebhoy (P) Ltd. v. State of Maharashtra AIR 1965 SC 590).
However the fact remains that the appellant L&DO while formulating the
Scheme/Policy for freehold conversion did intend to exclude certain
categories of leases of commercial/mixed land use properties from
eligibility for conversion. We are unable to agree with the reliance placed by
learned Single Judge on Smt. Shanti Sharma (supra) for holding that
ownership rights are conferred in a lease for 99 years. Smt. Shanti Sharma
was a dispute between a landlord and a tenant in the regime of the rent
control laws which protected the tenant from eviction except on the grounds
mentioned in the Act; one of the said grounds was of bonafide requirement
by the landlord of the tenanted premises. However, such ground was made
available only to a landlord who was also the owner of the premises. It was
in this context that the Supreme Court held that all that was required to be
owner was to have a title better than the tenant and thus the landlord who
was himself a lessee for 99 years of the land underneath the property was
held to be the owner. The said judgment has been wrongly relied upon in a
dispute between the lessor and lessee of the land, for holding a lessee of 99
years to be having ownership rights in the property. A lease, even if for 99
years, does not confer ownership rights on the lessee.
16. The Division Bench of the Bombay High Court in the The Collector
of Bombay v. Khatizabai Dharsi Somji Dossa MANU/MH/0171/1961 held
that whether the term of the lease be 5 years, 50 years, 99 years or even 999
years, the transaction is only a lease and there is always a reversion which
continues to vest in the owner in the entire term of the lease and the lessee
even if for 999 years does not become the owner. The Privy Council in
Subramanya Chettiar v. Subramanya Mudaliyar AIR 1929 PC 156 held
the length of the lease to be not indicative of even permanency of the lease
much less of transfer of ownership. The Calcutta High Court also in Kamal
Kumar Datta v. Nandalal Dubey AIR 1929 Cal 37 expressly held the lease
for 99 years to be not qualifying as a permanent lease. Even a clause of
heritability of the lease was in Chapsibhai Dhanjibhai Danad v.
Purshottam AIR 1971 SC 1878 held to be not an indice of permanency.
Thus, in law no ownership rights can be said to be conferred on the
respondents for the reason of the leases in their favour being for the long
term of 99 years. Even a perpetual lessee of Nazul land, in Kiran Tandon v.
Allahabad Development Authority (2004)10 SCC 745 was held to be not
entitled to get full compensation for acquisition thereof, observing that only
a full owner gets the entire amount of compensation.
17. We are similarly of the opinion that the learned Single Judge was
unduly swayed by conferment under the lease dated 8th October, 2002 for 99
years of right to mortgage, construct and otherwise deal with the property,
to hold ownership rights having been conferred therein. Conferment of such
rights is not inconsistent with a lease and in fact under Section 108 of the
Transfer of Property Act, 1882, in the absence of a contract to the contrary,
a lessee is entitled to make accession to the property [Section 108 (B)( d)],
make repairs to the property [Section 108 (B) (f)], transfer absolutely or by
way of mortgage or sub-lease, the whole or any part of his interest in the
property [Section 108 (B) (j)] and erect on the property any permanent
structure with the consent of the lessor [108 (B) (d)]. It thus cannot be said
that the reasons which prevailed with the Learned Single Judge to find
ownership rights to have been conferred on HEPL are anything out of the
extraordinary or for the reasons whereof it can be said that something more
than lease hold rights were vested in the respondent no.1.
18. In Mohd. Noor v. Mohd. Ibrahim (1994) 5 SCC 562 it was held that
a tenant may be entitled by law to transfer his interest in the property but
that is not transfer of ownership and a lessee from a local body or a State
Government may be having right to raise building and such rights may be
heritable and transferable but right of transferring subordinate rights does
not make it transfer of ownership. Similarly in Hamidullah (Dead) v.
Sheikh Abdullah (1972) 4 SCC 800 long possession for generations and the
factum of the tenant making construction on the land of permanent
structures at own cost were held to be not factors capable of raising
presumption of the tenancy being a permanent one. The onus of proving the
lease/tenancy to be a permanent one was also held to be on the tenant. Even
in Bhatia Co-operative Housing Society Ltd. v. D.C. Patel AIR 1953 SC 16
the reasoning of the High Court that the lessee of the land is the owner of
the building constructed thereon at the lessee‟s cost was set aside holding
that the limitations on the use of the building and the restrictions on transfer
etc. indicate that the lessor has the dominant voice and the real ownership
and the erection by the lessee of the building at its own cost is for the lessor.
19. Markby in his "Elements of Law" explained the position succinctly
by stating "however numerous and extensive maybe the detached rights (in
the favour of lessee), however insignificant may be the residue (with the
lessor), it is the holder of this residue of right whom we always consider as
the owner."
20. Though when a lease is for building purposes an inference of
permanency is drawn (see Sivayogeswara Cotton Press, Devangere v. M.
Panchaksharappa AIR 1962 SC 413) but the lease in favour of the
respondents cannot be said to be for building purposes inasmuch as the
same already has a building constructed thereon and the lease is of the land
with building with the right to the respondents as lessees to make
additions/alterations thereto or to reconstruct the same. Moreover,
subsequently in Chapsibhai Dhanjibhai Danad v. Purshottam AIR 1971
SC 1878 a provision in the lease, though for building purposes but
permitting the lessee to on the expiry of the term thereof remove the
structures was held to be not indicative of the lease being a permanent one.
21. We are further of the opinion that once the Policy/Scheme for
freehold conversion had made only such commercial and mixed land use
properties eligible for freehold conversion, where ownership rights had been
conferred, a meaning was/is required to be given to the said words and the
same cannot be rendered otiose and redundant, as would be the case if the
opinion of the learned Single Judge was to prevail. To look into the mind of
the framers of the said Policy, our research led us to the very constitution of
the L&DO. It is an attached office of the Ministry of Urban Development
and is responsible for the properties of the Government of India in Delhi.
These properties fall into two broad categories i.e. Nazul Lands which were
acquired in 1911 for formation of the Capital of India at Delhi and
rehabilitation lands which were acquired by the Government of India for the
speedy rehabilitation of displaced persons from Pakistan. These properties
were given out on leases for residential, commercial and institutional
purposes. Leases on old Nazul land are perpetual leases and ground rent is
revisable at the option of the L&DO as lessor after every 30 years.
Rehabilitation leases are for a period of 99 years and revision of ground rent
is due after 20 years.
22. The Lease Deed dated 8th October, 2002 was not granted by the
L&DO in exercise of its powers of administration of the properties of the
Government of India in Delhi. L&DO as aforesaid had allowed the said
land to be used by ITDC, a Government company for construction of
Kanishka Hotel and Kanishka Shopping Plaza. However, when the
Government decided to disinvest Kanishka Hotel and Kanishka Shopping
Plaza, the need arose for creation of some right in land underneath in favour
of the highest bidder. This distinguishes the subject lease from the other
leases granted by the L&DO.
23. Though neither the Policy/Scheme for conversion cites the objective
thereof, nor has the appellant placed the same before us but we find this
Court in Bal Kishan Chhabra v. UOI 127 (2006) DLT 460 to have
observed that the properties of which leases had been granted had virtually
moved out of the hands of the government because of the execution of long
term leases of 99 years and the rent whereof was so nominal that even
administrative costs were not recoverable. It was further observed that it
would be most sanguine to expect that these lands or buildings could be
resumed by the government even after the tenure of 99 years had run out
inasmuch the public will be incensed to such an extent that political parties
are likely to steer clear from any such attempt. The Policy/Scheme for
freehold conversion was thus found to be intended to earning revenue for
the government through conversion charges and at the same time reducing
administrative obligations and costs. The intra court appeal being LPA No.
1659/2006 against the said judgment was dismissed on 12.08.2010.
Applying the said objective of the Policy/Scheme for freehold conversion,
we do not find the subject leases to be falling in the category where the rents
are nominal, not enough to recover even the costs of administration of the
lease. The lease deed dated 8th October, 2002 in LPA 2298-99/2006 is at a
rent of `1,56,11,983/- per annum to be increased by 30% every 10 years.
The position in the other leases is the same.
24. We find the following other differences between the leases of which
freehold conversion is being allowed and the subject leases :-
i.) The leases of which conversion is being allowed are in the format
prescribed in the L&DO Manual. We find the leases of the
disinvested hotels to be not in that format and in an entirely different
format;
ii.) While the leases of which conversion is being allowed are in
consideration of premium and the rent to be paid, the leases in favour
of the respondents are in consideration only of payment of rent and
without payment of any premium whatsoever; the unearned increase
for allowing transfer of rights in land, from in favour of ITDC to
HEPL, paid out of the share price, cannot be equated to premium -
the same in any case was only 50% of the increase in the value of the
land between the date when first leased/licensed and the date when
assigned to HEPL and can by no stretch be called the price for the
grant of lease. A Division Bench of the Bombay High Court recently
in Smt. Jaikumari Amarbahadursingh v. State of Maharashtra
MANU/MH/0909/2008 held that the claim towards unearned increase
is essentially a levy/charge in respect of the property, legally
claimable by the grantor from the grantee or the transferee in exercise
of rights over the land. The claim for unearned increase was held
ascribable to power of regulation and control in respect of the land
and was further held referable to land revenue. It was also described
as a price for enabling the grantee/lessee to transfer his rights, the
government being the real owner of the land. A Division Bench of
this Court in The Commissioner Of Income Tax, Delhi-IX v.
Monoflex India P. Ltd. MANU/DE/3111/2011 held payment of
unearned increase to be a condition of leasehold rights, restricting
right of lessee to make third party transfers. Unearned increase cannot
partake the character of premium also for the reason that while
premium is the consideration for acquisition of leasehold rights,
unearned increase is payable by a lessee already holding leasehold
rights and as a condition for transfer thereof. Unearned increase is
thus payable by the lessee and not by the transferee of the lessee. It is
a different matter that under the agreement between the lessee and its
transferee, the transferee pays the same. The payment, even if by the
transferee, is on behalf of the lessee and thus cannot qualify as a
consideration paid by the transferee for acquisition of leasehold
rights. The unearned increase cannot also be said to be premium paid
by the respondents for transfer/grant of lease in their favour for the
reason that the same does not find any mention whatsoever in the
leases in favour of the respondents and finds mention only in the
share purchase agreements. Moreover, every payment / consideration
flowing from the lessee to the lessor cannot be termed as premium or
price, within the meaning of Section 105 of the Transfer of Property
Act. A Full Bench of the High Court of Andhra Pradesh in Vinay
Construction and Development Company, Hyderabad v. Inspector
General of Registration and Stamps, Andhra Pradesh AIR 1967 AP
90 held that the amount required to be spent on new structures during
lease term could not be considered as premium. A research in law
shows that high rent or even security deposit cannot be a substitute
for premium. Premium has always been treated at least in the Income
Tax laws at par with price and a capital receipt as distinct from rent
which is treated as a revenue/recurring receipt and refundable security
deposit which is not even treated as income for taxation purposes. In
Abdul Rahim v. State of Madras AIR 1962 Madras 272,
Veeraswami, J. after referring to the well known judgment in King v.
Earl Cadogan L.R. (1915) 3 KB 485 pointed out that the term
premium as ordinarily understood is a lump sum payment made
outright as a price for lease. It was further held that what is
contemplated by premium is something other than the agreed rent and
premium in the context of a lease is in the nature of price for the lease
and money which is refundable cannot be called premium. Similarly
in Ranganayaki Ammal v. M. Chockalingam (1996) II MLJ 139 also
it was held that premium as defined in Section 105 of the Transfer of
Property Act is the price paid for the lease and consideration for the
lease and/or for the purposes of getting a lease. The Supreme Court in
Commissioner of Income Tax, Assam v. The Panbari Tea Company
Ltd. AIR 1965 SC 1871 was faced with the question whether the
amount described as premium in the lease deed is really a rent and
therefore a revenue receipt. It was held that Section 105 (supra)
brings out a distinction between the price paid for transfer of a right to
enjoy the property and the rent to be paid periodically to the lessor;
when the interest of the lessor is parted with for a price, the price paid
is premium or salami but a periodical payments made for continuous
enjoyment or benefits under the lease are in the nature of rent.
Accordingly it was held that premium was not a revenue but a capital
receipt. A Full bench of the Madras High Court in the Chief
Controlling Revenue Authority v. S.M. Abdul Jammal AIR 1970
Madras 288 also held that the premium is the consideration of the
conveyance implied in the lease and is quantified in lump sum
whether paid outright or by way of installments over a period; that
though rent is also in consideration of lease but is in lieu of
enjoyment which the lessee has and particularly as consideration
thererfor. Though even payment of premium does not make the lessee
an owner (See Municipal Corporation of Delhi v. Shashank Steel
Industries (P) Ltd. (2009) 2 SCC 349) but we are in these
proceedings to not so dissect the differences between the premium on
the one hand and high rent and security deposit on the other hand. All
that we are required to determine is whether the appellant while
formulating the policy of freehold conversion can be said to have held
bonafide belief that leases where no premium had been paid are not
eligible for freehold conversion. We are of the view that the appellant
clears the said test. Significantly, the Policy was intended to cover all
leases.
iii.) While the leases of which conversion is being allowed do not
contain any provision for payment of security deposit by the lessee to
the lessor, the respondents have under the lease deed paid security
deposit to the appellant L&DO which is free of interest and is to be
enhanced with enhancement in rent and is refundable on expiry of the
term of the lease against delivery of vacant peaceful physical
possession;
iv.) While under the leases of which conversion is being allowed,
the rent payable is nominal, under the leases in favour of the
respondents the rent payable is not only substantial but is also subject
to increase;
v.) While under the leases of which conversion is being allowed,
on the expiry of the term of the lease, though the accretions on the
leased land are to vest in the lessor but on payment by the lessor of
value thereof to be determined, but under the leases in favour of the
respondents, the accretions are to vest in the appellant L&DO,
without any obligations to pay the value thereof;
vi.) While the leases, of which conversion is being allowed, are by
way of a government grant and as a developmental act, the leases in
favour of the respondents were in pursuance to the share purchase
agreements.
25. We are of the opinion that the aforesaid differences are sufficient to
belie any case of discrimination and it is not for this Court to go into the
insufficiency even if argued of the differences to mete out a different
treatment to the respondents. These are policy matters and freehold
conversion, as aforesaid is in the sole discretion of the lessor and if the
lessor in its wisdom does not want to allow such conversion to certain
categories of lease, no case for judicial review thereof is made out in the
face of differences aforesaid. The Supreme Court recently in Union of India
v. Nitdip Textile Processors Pvt. Ltd. (2012) 1 SCC 226 held that a large
latitude is allowed to the State for classification upon a reasonable basis and
what is reasonable is a question of practical details and a variety of factors
which the Court will be reluctant and perhaps ill-equipped to investigate. It
was further observed that in this imperfect world, perfection even in
grouping is an ambition hardly ever accomplished and that the question of
classification is primarily for the governmental judgment and ordinarily
does not become a judicial question. It was yet further held that a power to
classify being extremely broad and based on diverse considerations of
executive pragmatism, the judicature cannot rush in where even the
legislature merely treads. Similarly, in N. Vasundara v. State of Mysore
(1971) 2 SCC 22 it was held that once the classification is on reasonable
basis, the Courts are not expected to interfere with the manner and method
of classification. The differences aforesaid in the two kinds of
leases/transactions are found to bear a just and reasonable relation to the
Policy of freehold conversion.
26. We are further of the opinion that owing to the differences aforesaid
the appellant L&DO can be said to have bonafide held the view that the
leases of the land underneath disinvested hotels would not be eligible under
the Policy/Scheme for conversion, since no ownership rights had been
conferred thereunder. It is also worth highlighting that such
policies/schemes of freehold conversion are enunciated in the exercise of
executive function. It is up to the appellant L&DO as lessor of the land to
grant or not grant freehold rights in the land that was granted on leasehold
and to whom. However, the lessor herein being the State, cannot
discriminate arbitrarily. It thus falls for consideration whether the leases in
favour of respondents fall in the same category, where such conversion is being
permitted and whether the appellant is discriminating against the respondents. The
respondents herein do however, as aforesaid, form a class by themselves carved
out by the learned Single Judge, as disinvested hotels. Though the learned Single
Judge has held that the Conversion Policy does not carve out any exception qua
disinvested hotels and that the exception if any to the policy has to be in the policy
only and cannot be by way of executive instructions but losing sight of the fact
that the policy itself is an executive instruction and does not have a legislative
colour. Thus, even if it were to be held that the subsequent decision to not allow
freehold conversion of land underneath disinvested hotels is not borne out from
the policy, the same is at best a modification/amendment of the Policy and it is not
the case of the respondents that the officials/authority who took such subsequent
decision were any inferior to those who had framed the original Policy or that they
were not entitled to take the subsequent decision. The appellant in the matter of
implementation/working of such a policy is always entitled to exclude certain
persons who may be forming a class by themselves and we are unable to find any
bar to such modification/amendment of the policy. The Supreme Court in
Chairman, Ramappa Gundappa Sahakari Samyakta Besava Sangha Ltd. v.
State of Mysore (1974) 2 SCC 221 held that if everypolicy statement or direction
of Government especially regarding disposal of State Property were construed as
irreversibly creating right to property in prospective beneficiaries, strange
consequences would follow and the government cannot be held prisoner to its
administrative decisions which are required to be altered from time to time.
Reference with benefit can also be made to A.K. Kraipak Vs. UOI (1969) 2 SCC
262 and U.P. Financial Corp. Vs. Gem Cap (I) P. Ltd. (1993) 2 SCC 299 laying
down that if the High Court cannot sit as an appellate authority over the decision
and order of quasi judicial authorities, it follows equally that it cannot do so in the
case of administrative authorities and that if there is more than one choice
available to the administrative authorities they have a right to choose and the
Court cannot substitute its judgment for the judgment of the administrative
authorities in such cases.
27. The matter can be looked at from another aspect. What the respondents, by
claiming freehold conversion are seeking is, to become absolute owners of the
prime commercial properties belonging to the people at large held by the appellant
L&DO in trust and which absolute ownership rights were not intended to be given
at the time of disinvestment of the hotels standing thereon. The respondents did
not come to this Court with the case that instead of lease deeds, sale deeds ought
to have been executed. On the contrary, after becoming lessees, they are seeking
to become owners. The appellant L&DO in the matter of disposal of public
properties partakes the character of a trust and is entitled to the best price of such
properties and ownership cannot be smuggled in through the backdoor of lease.
Reference with benefit in this context can be made to Centre for Public Interest
Litigation v. Union of India (2012) 3 SCC 1. The Division Bench of this
Court speaking through one of us (Acting Chief Justice) in Aggarwal and
Modi Enterprises (Cinema Project) Pvt. Ltd. v. New Delhi Municipal
Council 123 (2005) DLT 154 repelled the plea of discrimination observing
that before a claim based on equality clause is upheld it must be established
that the claim is just and legal and that the doctrine of discrimination is
founded upon existence of an enforceable right. The attempt of the owners
of Chanakya Cinema in that case to equate their case with small
shopkeepers was held to be meaningless holding that they constitute a
separate class. Interestingly, in that case the plea of the owners of Chanakya
Cinema was that NDMC was giving longer leases to hotels and the same
treatment should be extended to the cinema sites. This argument was also
rejected.
28. The appellant and other governmental agencies are known to grant
leases viz. of markets, shops etc. Infact one such leases granted by NDMC
to Chanakya Cinema at New Delhi was held to have lapsed and the eviction
was upheld till the Supreme Court vide judgement reported as Aggarwal
and Modi Enterprises Pvt. Ltd. v. NDMC (2007) 8 SCC 75. The very fact
that the entitlement to freehold was confined only to those leases where
ownership rights had been conferred signifies that such conversion was not
intended where according to the appellant, ownership rights had not been
conferred. In the light of the differences pointed out above, the appellant can
well be believed to have entertained an opinion that conversion is to be
granted only of those leases for which premium had been paid and not to
other leases.
29. We therefore do not find any right in the respondents to compel the
appellant L&DO to convert the leasehold rights in the land underneath
disinvested hotels and cinema aforesaid into freehold. We also do not find
any arbitrariness or discrimination in the refusal of the appellant L&DO to
grant freehold conversion sought by the respondents. Axiomatically, we are
unable to uphold the judgments of the learned Single Judge under appeal
and set aside the same, allowing these appeals. Resultantly, the writ
petitions filed by the respondents are dismissed. However, in the
circumstances, no costs.
RAJIV SAHAI ENDLAW, J
ACTING CHIEF JUSTICE
SEPTEMBER 11, 2012/pp
