2019 (2) TMI 663 - SC - Indian Laws

Whether writ petitioner was liable to pay unearned increase in value of the property to the DDA? - Held that - The present is not a case where lessee is making any transfer or seeking any permission from the lessor to give his consent. In the present case the appropriate authority has exercised its power under Section 269UD of the Income Tax Act for the purchase of the property by the Central Government. It is by exercise of statutory power that rights of lessee were purchased by Central Government. Central Government issued auction notice for auction of property in question. All bids in auction of a property are given normally to match the market price of the property. When the petitioner gave highest bid and became the successful auction purchaser the auction purchase has to be treated on the basis of market value of the property. Clause (4)(a) of Perpetual Lease as noted above provided for payment of unearned increase to cover up the difference between premium paid and the market value - High Court has rightly held that DDA was not entitled to raise any demand of unearned increase from the writ petitioner - petition dismissed. Whether writ petitioner was entitled to get refund of conversion charges deposited by it? - Held that - In sub-section (1) of Section 269UE in place of words free from all encumbrances the words in terms of the agreement for transfer referred to in sub-section (1) of Section 269UC have been inserted. When the Sale Deed was executed in favour of the auction-purchaser above amendment in Section 269UE sub-section (1) had already been inserted. The vesting of property in Central Government when is in terms of agreement for transfer referred to in subsection (1) of Section 269UE at the time of execution of Sale Deed the statutory mandate has been reflected in Clause 3 - Clause 3 of the Sale Deed cannot be ignored nor can it be held that said Clause has to give way to Clauses 1 and 2 of Sale Deed. While finding out the tenor of grant as reflected in Sale Deed the provisions of sub-section (1) of Section 269UE as amended by Finance Act has also to be taken note of. Thus on true construction of Sale Deed it is clear that all rights titles and interests were not conveyed to the petitioner in the leasehold residential plot when we read Clauses 1 2 and 3 together. Present being a case of a Government grant by virtue of the Section 2 of the Government Grants Act 1895 nothing in the Transfer of Property Act 1882 shall apply or be deemed ever to have applied to any grant or other transfer. The principles contained in the Transfer of Property Act have been applied while construing the Government grants as has been noticed above. But herein issue being Government grant the principle of merger may not be of much relevance. More so we having construed the Sale Deed as not having conveyed all rights and interests in the leasehold property the principle of merger does not in any manner advance the claim of the writ petitioner. The writ petitioner is not entitled for refund of conversion charges the DDA is not directed to process the writ petitioner s application for conversion of the leasehold rights into freehold rights. Appeal dismissed decided against appellant.

Summary

Issues Involved:
1. Whether the writ petitioner was liable to pay unearned increase in the value of the property to the DDA.
2. Whether the writ petitioner was entitled to get a refund of conversion charges deposited by it.

Detailed Analysis:

Issue No. 1: Liability to Pay Unearned Increase

The Supreme Court analyzed the Perpetual Lease Deed dated 18.03.1970, which stipulated that the lessor could claim and recover a portion of the unearned increase in the value of the property at the time of sale, transfer, or assignment. The Court noted that the original lessee, Trilochan Singh Rana, entered into an agreement to sell the property, which led to the property being compulsorily acquired by the Income Tax Department under Section 269UD of the Income Tax Act, 1961. The Income Tax Department paid the unearned increase to the DDA.

The writ petitioner purchased the property through an auction conducted by the Income Tax Department and paid the full bid amount, which was considered the market value. The Court held that since the auction was based on the market value, there was no question of claiming unearned increase from the writ petitioner. The Court also noted that the unearned increase had already been paid by the Income Tax Department when it acquired the property. Thus, the demand for unearned increase by the DDA was deemed unjustified, and the appeal by the DDA was dismissed.

Issue No. 2: Refund of Conversion Charges

The writ petitioner contended that the Sale Deed executed in its favor conveyed absolute rights to the property, making the payment of conversion charges unnecessary. The petitioner argued that the application for conversion of leasehold rights to freehold rights and the deposit of conversion charges were made under a bona fide mistake.

The Supreme Court examined Clauses 1, 2, and 3 of the Sale Deed. While Clauses 1 and 2 suggested the transfer of absolute rights, Clause 3 indicated that the transfer was in terms of an agreement that involved leasehold rights. The Court emphasized the need to harmoniously construe all clauses of the Sale Deed and considered the auction notice, which specified that the property was a leasehold residential plot.

The Court also referred to Section 269UE of the Income Tax Act, which mandates that property acquired by the Central Government vests in terms of the agreement for transfer. Given this statutory context and the terms of the auction, the Court concluded that the Sale Deed did not convey absolute rights but leasehold rights.

The Court rejected the writ petitioner's argument based on the doctrine of merger under Section 111(d) of the Transfer of Property Act, noting that the principle was not applicable in the context of a Government grant. The Court also distinguished the present case from the Delhi High Court's judgment in M/s. Bansal Contractors (India) Ltd., noting differences in the facts and the absence of a similar clause in the Sale Deed.

Ultimately, the Court upheld the Division Bench's decision to set aside the refund of conversion charges but directed the DDA to process the writ petitioner's application for conversion of leasehold rights to freehold rights in accordance with the law.

Conclusion:

The Supreme Court dismissed the appeal by the DDA and upheld the Division Bench's judgment that the writ petitioner was not liable to pay unearned increase. However, the Court also upheld the decision to deny the refund of conversion charges but directed the DDA to process the conversion application. Both parties were directed to bear their own costs.