2017 (8) TMI 1519 - SC - Indian Laws

Supreme Court Protects Third-Party Land Buyers, Orders Refunds

Ajar Enterprises Private Limited Versus Satyanarayan Somani and Ors.

Ajar Enterprises Private Limited Versus Satyanarayan Somani and Ors. - TMI Issues Involved:1. Validity of the renewal of the lease granted by Ujjain Development Authority (UDA) to Ajar Enterprises Private Limited.2. Legality of the transfer of the leasehold rights from IISCO to Ajar Enterprises.3. Appropriateness of the conversion of the leasehold land into freehold.4. Rights of third-party purchasers who bought plots from Ajar Enterprises.5. Compliance with public interest and statutory provisions by UDA.Issue-wise Detailed Analysis:1. Validity of the Renewal of the Lease:The High Court set aside the renewal of the lease granted by UDA to Ajar for the period from 21 December 2012 till 20 December 2042. The court noted that UDA had incorrectly assumed it was bound to renew the lease based on the Calcutta High Court judgment, which did not mandate such renewal. The High Court emphasized that UDA should have considered the breach of covenants by IISCO and the public interest, including the location and market value of the land. The renewal was done on a nominal premium, conferring an undue benefit on a private developer, which was contrary to public interest.2. Legality of the Transfer of Leasehold Rights:The original lease to IISCO was for the development of a residential colony. IISCO, a subsidiary of Steel Authority of India Limited, was wound up, and its assets, including the leasehold land, were sold by the Official Liquidator. UDA had canceled the lease due to IISCO's default in payment and failure to construct on the land. However, the Calcutta High Court allowed the sale of the leasehold interest for the remaining term of the lease. The High Court's judgment clarified that the lease could be renewed but did not mandate it. UDA's decision to renew the lease without considering public interest and the breach of covenants was flawed.3. Conversion of Leasehold Land into Freehold:The conversion of the leasehold land into freehold was based on the renewed lease, which was found to be invalid. The 2010 Rules for the grant of freehold rights require the land to be on a leasehold basis for thirty years or more. Since the renewal was flawed, the subsequent conversion to freehold was also unsustainable.4. Rights of Third-Party Purchasers:The third-party purchasers were not parties to the proceedings before the High Court. However, the Supreme Court heard their submissions. The court noted that the developer executed agreements to sell and sale deeds during the pendency of the writ proceedings. The court found a lack of bona fides on the part of Ajar, as many transactions were executed after the High Court reserved judgment. The court protected the rights of purchasers with registered sale deeds executed before the High Court's judgment but directed Ajar to refund the consideration to other purchasers.5. Compliance with Public Interest and Statutory Provisions:The Supreme Court emphasized that disposal of public property must ensure the best price to generate funds for welfare activities. UDA acted in disregard of public interest by renewing the lease and converting the land to freehold without following an open and transparent process. The court highlighted the importance of ensuring public interest and fairness in the disposal of public land.Conclusion:The Supreme Court affirmed the High Court's judgment, setting aside the renewal of the lease and the conversion of the land to freehold. The court protected the rights of bona fide third-party purchasers with registered sale deeds and directed Ajar to refund the consideration to other purchasers. UDA's actions were found to be contrary to public interest, and the court emphasized the need for transparency and fairness in the disposal of public land.