1990 (10) TMI 377 - SC - Companies Law

Summary

Issues Involved:
1. Application for permission to convert the user of the land.
2. Date from which conversion charges are leviable.
3. Date from which interest is chargeable on the conversion charges.
4. Automatic or statutory conversion of land use under the Master Plan.

Detailed Analysis:

1. Application for Permission to Convert the User of the Land:
The primary issue was whether the letter dated February 15, 1978, constituted a valid application for converting the land's use from residential to commercial. The court examined the contents of the letter and concluded that it was merely an enquiry about the terms and conditions for conversion and the charges involved. The court emphasized that the letter did not constitute a formal application as it was not signed by all co-lessees nor did it express readiness to abide by the terms and conditions for conversion. The court held that the proper application was made only on February 27, 1981, when a duly signed application by all co-lessees was submitted.

2. Date from Which Conversion Charges are Leviable:
The court determined that the conversion charges should be calculated based on the date of the proper application, which was February 27, 1981. The authority had calculated the additional premium with reference to May 27, 1981, assuming a three-month outer limit for granting permission. The court found no justification for this assumption and held that the conversion charges should be calculated from February 27, 1981. However, the court noted that in this case, the difference in dates was immaterial.

3. Date from Which Interest is Chargeable on the Conversion Charges:
The court directed that interest on the additional premium should be charged from April 12, 1984, allowing a period of three months from the date of the notice (January 12, 1984) for the respondents to make the payment. The court provided the respondents with the facility to make the payment in three equal annual installments with an interest rate not exceeding 14 percent per annum. The court further stipulated that the respondents would not be entitled to convert the land use until the full amount of the additional premium, along with interest, was paid.

4. Automatic or Statutory Conversion of Land Use Under the Master Plan:
The High Court had held that there was an automatic and statutory conversion of the land use from residential to commercial based on the Master Plan prepared by the Delhi Development Authority in September 1962. The Supreme Court disagreed with this view, clarifying that the change of user permitted by the Master Plan was enabling in nature and did not automatically convert the land use. The court emphasized that the land use could only be changed as per the agreement between the contracting parties and that permission from the landlord was still required.

Conclusion:
The Supreme Court set aside the High Court's decision and directed that the additional premium should be calculated based on the rate prevalent on February 27, 1981. Interest on the additional premium was to be charged from April 12, 1984. The respondents were provided with the facility to pay the amounts in installments with specified interest rates. The court also held that the respondents would be liable to pay misuse charges until April 12, 1984, after which they would pay the conversion charges. The appeal was allowed with no order as to costs.