M/S. Jain Bothers vs Dsiidc
2018 Latest Caselaw 1689 Del

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* IN THE HIGH COURT OF DELHI AT NEW DELHI

                         Judgment pronounced on: 13.03.2018
+        W.P.(C) 7222/2014
M/S. JAIN BOTHERS                                ..... Petitioner

                             Through:      Mr. Sumit Bansal with Mr.
                                           Prateek Kohli, Advocates.
                             versus
DSIIDC                                           ..... Respondent

                             Through:      Mr. Satvik Verma, Mr.
                                           Lalltaksh Joshi and Mr. Udit
                                           Chauhan, Advocates.
CORAM:-
HON'BLE MR. JUSTICE RAJIV SHAKDHER
RAJIV SHAKDHER, J. (ORAL)

1. In this writ petition, two broad reliefs have been sought:-

(i) that writ of mandamus be issued to the respondent to convert the property bearing no. 96, Okhla Industrial Estate, Phase-Ill, New Delhi (in short "subject property") from leasehold to freehold;

(ii) that a demand notice dated 21.1.2013 for the sum of Rs. 18,26,173/- be quashed.

2. In so far as the first relief is concerned, I am told that during the pendency of the writ petition, this relief stood granted as the respondent has converted the subject property from leasehold to freehold.

2.1 Therefore, as of now, one, is concerned only with the second relief sought for in the writ petition which, as adverted to above, pertains to the prayer made to quash the demand notice dated 21.1.2013.

3. Briefly, the facts which arise in the present case and are necessary to rule upon the relief sought for quashing the demand notice are as follows:-

3.1 The petitioner is a partnership firm (hereafter referred to as "Partnership Firm"). At the relevant point of time, that is, on 4.6.1966, when the partnership firm was first constituted, it comprised of four partners, namely, Mr. M.K. Jain, Mr. N.K. Jain, Mr. P.K. Jain and Ms. Jeewani Jain.

3.2 The partnership firm was given on lease by the respondent, the subject property along with a shed constructed thereon. The lease transaction stood consummated on 15.7.1966. The possession of the subject property was, however, handed over to the said partnership firm on 25.7.1996.

3.3 It appears that on 02.4.1984 one of the partners i.e., Mr. N.K. Jain set up a unit on the subject property in the name and style of: Pick Pack Packaging Industries. The said unit which was, concededly, a new unit was started by Mr. N. K. Jain in the name of his minor son, Master Shailesh Jain.

3.4 In view of this development two letters were addressed to the respondent. These being: letters dated 02.4.1984 and 06.2.1985.

In sum, via these letters, the respondent was informed that a new unit had been set up on the subject property.

3.5 Furthermore, a perusal of the letter dated 06.2.1985 would show that there was, perhaps, some discussion with the respondent qua the issue of setting up of a new unit on the subject property and hence the obvious resistance to the execution of the sale cum perpetual lease deed in the favour of the partnership firm. Apparently, the partnership firm was able to persuade the respondent to its point of view and accordingly on 04.3.1985, the sale cum perpetual sale deed was executed qua the subject property.

4. The record shows that a scheme for conversion of leasehold rights to freehold rights was formulated by GNCTD on 29.3.2006. Consequent thereto, the partnership firm moved an application for conversion, albeit, six years later. Along with the application, a sum of Rs. 18,14,445 was deposited towards conversion charges.

4.1 As indicated above, this aspect pertaining to conversion got resolved only during the pendency of the writ petition.

4.2 The respondent had, infact, vide an impugned notice dated 21.1.2013, raised a demand on the partnership firm in the sum of Rs. 18,26,173, substantially on account of sub-letting charges and interest thereon with a claim of a minuscule amount of Rs. 39 towards outstanding conversion charges. There was much

correspondence exchanged qua the demand raised between the parties.

4.3 The impugned demand resulted in a show cause notice dated 4.7.2014 being issued by the respondent in continuation of the impugned notice. This said, show cause notice dated 4.7.2014 was followed by yet another show cause notice dated 19.9.2014. The partnership firm filed its reply to the show cause notice on 30.9.2014.

4.4 I may also indicate at this juncture that prior to the aforementioned notice, a show cause notice was issued by the respondent to the partnership firm on 19.3.1987.

4.5. The admitted position is that there is no reply on record qua this show cause notice. The stand of partnership firm is that no reply was filed since show cause notice dated 19.3.1987 was not received by it.

5. Be that as it may, that there is a demand which is outstanding qua the partnership firm in the sum of Rs. 18,26,173. The demand has three components which are evident upon a bare perusal of the notice itself. For the sake of convenience, the three components of the demand are set out hereafter:-

(i) Sub-letting charges - Rs. 5,60,733/-

(ii) Interest on Sub-letting charges - Rs. 12,65,401/-

(iii) Difference of conversion charges- Rs. 39/-

6. Mr. Bansal, who appears on behalf of the partnership firm has confined his challenge to the impugned notice only qua the demand raised vis-a-vis interest on sub-letting charges.

6.1 It is Mr. Bansal's submission that for the first time the impugned notice was served on the partnership firm in and about 21.01.2013. Learned counsel submits that since there was no quantification of the demand, interest, if any, could have been charged only for the period post January, 2013 when the demand was raised and not prior to that date.

7. Mr. Verma, on the other hand, submits that the partnership firm was always aware that regularization could only be accorded at the prescribed rate. For this purpose, Mr. Verma relies upon averments made in paragraph 6 of his counter affidavit.

7. 1 The averment made therein is that the sub-letting charges are calculated at the rate of Rs.1/- per sq. ft. per month upto 50% of the covered area, and if, the covered area of the property which is sub- let is more than 50%, then, sub-letting charges are calculated at twice the rate.

8. At this juncture it would be relevant to advert to clause 12 of the sale cum lease deed dated 04.3.1985 which, broadly, provides the purpose for which the subject property could have been used and that if the purpose had to be changed, it could only have been done with the written consent of the lessor i.e, respondent no. 1.

9. Thus, a composite reading of the averments made in respondent no. 1's counter affidavit and the provisions of the sale cum perpetual lease deed would show that regularization was permissible if requisite charges were paid by the lessee, in this case, the partnership firm.

10. The record does show, as is alluded to above, that the partnership firm did indicate to the respondent not once but twice that a new unit had been set up on the subject property. This intimation was given via letters dated 2.4.1984 and 6.2.1985. As a matter, the factum of setting up of a new unit appeared to have become somewhat of an impediment prior to execution of the sale cum perpetual lease deed. .

11. Despite this initial hiccup, the sale cum perpetual lease deed was executed and therefore, the issuance of the show cause notice dated 19.3.1987, to my mind, was, perhaps uncalled for.

11.1 Curiously, having issued the show cause notice, the respondent did not follow it up with the threat incorporated therein. The show cause notice clearly indicated that if the partnership failed to reply, the subject lease would be determined.

11.2 While it is the stand of the partnership firm that it did not receive the show cause notice, it was incumbent upon the respondent to either follow up with the threat contained in the show cause notice dated 19.3.1987 or issue a fresh show cause notice.

12. The respondent, as the narration above would show, issued a second show cause notice only on 04.7.2014. This was followed by yet another show cause notice dated 19.9.2014.

12.1 Therefore, given these facts, while respondent is right in seeking to recover a sum of Rs. 5,60,733 towards sub-letting charges, I am not persuaded to validate the demand raised qua interest on sub-letting charges amounting to Rs. 12,65,401 for the period prior to 21.01.2013.

13. Mr. Verma has fairly informed me that the interest has been calculated at the rate of 18% per annum.

13.1 To my mind, the demand on that score is not sustainable.

14. I have, however, asked Mr. Bansal whether the partnership firm would have any objection to imposition interest on the amount sought to be recovered towards sub-letting charges for the period after 21.1.2013.

14.1 Mr. Bansal says that if this court were to fix a reasonable rate of interest, then, the partnership firm would pay the same for the period, post 21.1.2013.

15. Having regard to the totality of circumstances, I am inclined to direct the partnership firm to pay not only sub-letting charges but also interest at simple rate of 8% per annum, albeit, with effect from 21.1.2013 till 31.3.2018.

16. To be noted, since the partnership firm pursuant to order dated 24.10.2016, has already deposited a sum of Rs. 22,15,16 with

the respondent, the respondent shall after making due adjustment towards sub-letting charges and interest, which will be calculated at the rate of 8% per annum for the period spanning between 21.01.2013 and 31.3.2018 shall refund the surplus, if any, to the partnership firm.

16.1 I must put in forefront, another aspect of the matter. Mr. Bansal had attempted to argue that since dues were deposited with the respondent, interest as directed to be paid by the Court should run only till the date of deposit. This plea is rejected for two reasons. First, the deposit was conditional. In fact, respondent was put to notice that if the partnership firm succeeded in the matter, it would have to refund the amount with such interest as the Court may fix. The partnership has succeeded, albeit, only partially. Second, the rate of interest was kept at 8% per annum bearing in the facts and circumstances of this case. If one were to exclude interest charges for the period falling between the date of deposit and 31.3.2018, it would further depreciate the rate of interest.

17. Writ petition is disposed of in the aforesaid terms.

18. Needless to say this order has been passed in peculiar facts and circumstances of the case and that it would not be used as a precedent in other cases.

RAJIV SHAKDHER, J MARCH 13, 2018 /c