Supreme Court rules on unearned increase payment in plot transfer due to demerger.

The Supreme Court held that the respondents are liable to pay 50% unearned increase (UEI) upon transferring the plot due to a demerger. The Court interpreted clause 6(a) of the Lease Deed to include transfers without consideration, obligating UEI payment. Policy instructions on UEI apply to demergers, and the demand and show cause notices issued by the appellant were deemed valid and enforceable. The Single Judge's decision upholding the notices was reinstated, setting aside the Division Bench's judgment.

---

---

Issues Involved:
1. Liability to pay 50% unearned increase (UEI) on the market value of the plot upon transfer due to demerger.
2. Interpretation of lease deed clause 6(a) regarding transfer and UEI.
3. Applicability of policy instructions on UEI in cases of demerger.
4. Validity of demand and show cause notices issued by the appellant.

Issue-wise Detailed Analysis:

1. Liability to pay 50% unearned increase (UEI) on the market value of the plot upon transfer due to demerger:
The primary issue is whether the original lessee (respondent No.1) must pay 50% UEI to the appellant upon transferring the leased plot to another public limited company (respondent No.2) due to a demerger order. The Supreme Court held that the transfer of the plot resulting from the demerger order by the Company Judge constitutes a transfer under clause 6(a) of the Lease Deed, thus making the respondents liable to pay UEI. The Court emphasized that the transfer, even without consideration, mandates UEI payment based on the difference between the premium paid and the market value of the plot.

2. Interpretation of lease deed clause 6(a) regarding transfer and UEI:
Clause 6(a) of the Lease Deed prohibits selling, transferring, assigning, or otherwise parting with possession of the plot without the appellant’s prior written consent. The clause allows the appellant to impose conditions, including recovering 50% of the unearned increase. The Court clarified that the expansive terms "sell, transfer, assign or otherwise part with the possession" include transfers without consideration, thus obligating the payment of UEI.

3. Applicability of policy instructions on UEI in cases of demerger:
The Court examined the policy instructions regarding UEI, particularly clause 2(d), which stipulates charging 50% UEI when a new company is formed, even if the directors remain the same. The Court found that this clause applies to the present case of demerger, rejecting the respondents' argument that clause 1(b), which exempts certain transfers from UEI, should apply. The Court emphasized that the policy does not specifically exempt demergers from UEI, and the respondents' case does not fall within the exempted categories.

4. Validity of demand and show cause notices issued by the appellant:
The appellant issued demand and show cause notices to the respondents for UEI payment. The respondents challenged these notices, but the Single Judge upheld them, which the Division Bench later set aside. The Supreme Court reinstated the Single Judge’s decision, affirming the validity of the notices. The Court ruled that the demand for UEI was consistent with clause 6(a) of the Lease Deed and the applicable policy instructions, thus making the notices legitimate and enforceable.

Conclusion:
The Supreme Court concluded that the respondents are liable to pay 50% UEI upon transferring the plot due to the demerger. The interpretation of clause 6(a) of the Lease Deed and the relevant policy instructions support the appellant's demand. The demand and show cause notices issued by the appellant were deemed valid, and the Division Bench's judgment was set aside, restoring the Single Judge’s decision.

---