TaxTMI 
TaxTMI 
2010 (11) TMI 1086
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.... Harish Malhotra and the learned Counsel Shri Rajiv Vermani for the Appellants and Shri U.U. Lalit, learned senior counsel for the Respondents. We have also heard the learned Counsel appearing on behalf of the interveners-applicants. 3. The central question that arises for our consideration in this group of appeals is whether the Director, Town and Country Planning, is empowered to pass the impugned order. Whether the impugned order is ultra vires. 4. By the impugned memo the Director had purported to give the following directions: (a) the provision in the agreement between the Appellant and the plot/flat buyers regarding extension fee and maintenance fee should be deleted from the agreement as the same is not permissible under the law; (b) further directed to stop charging of extension fee and maintenance fee from the plot/flat holders henceforth and the charges recovered on account of both from the plot/flat holders "may be refunded to the Government immediately." (c) stop allowing the transfer of plots after obtaining full payment for the same and to ensure immediate registration of Conveyance Deed "where the full payments of the plot/flats have ....
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.... of land divided or proposed to be divided-- (i) for the purpose of agriculture; or (ii) as a result of family partition, inheritance, succession or partition of joint holding not with the motive of earning profit ; or (iii) in furtherance of any scheme sanction under any other law; or (iv) by the owner of a factory for setting up of a housing colony for the labourers or the employees working in the factory; provided there is no profit motive ; or (v) when it does not exceed one thousand square meters or such less area as may be decided from time to time in an urban area to be notified by Government for the purposes of this sub-clause. shall not be a colony, (d) "colonizer" means an individual, company or association or body of individuals, whether incorporated or not, owning land for converting it into a colony and to whom a licence has been granted under this Act ; (dd) "cyber city" means self contained intelligent city with high quality of infrastructure, attractive surrounding and high speed communication access to be developed for nucleating the Information Technology concept germination of medium and large softwar....
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....or licence: (1) Any owner desiring to convert his land into a colony shall, unless exempted under Section 9 make an application to the Director, for the grant of a licence to develop a colony in the prescribed from and pay for it such fee and conversion charges as may be prescribed. The application shall be accompanied by an income- tax clearance certificate: Provided that if the conversion charges have already been paid under the provisions of the Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated Development Act, 1963 (41 of 1963), no such charges shall be payable under this section. (2) On receipt of the application under Sub-section (1), the Director shall, among other things, enquire into the following matters, namely: (a) title to the land ; (b) extent and situation of the land ; (c) capacity to develop a colony ; (d) the layout of a colony ; (e) plan regarding the development works to be executed in a colony ; and (f) conformity of the development schemes of the colony land to those of the neighbouring areas (3) After the enquiry under Sub-section (2), the Director, ....
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.... be for a period of 2 years an will be renewable from time to time for a period of one years, on payment of prescribed fee. Provided that the Director, having regard to the amenities which exit or are proposed to be provided in the locality, is of the opinion that it is not necessary or possible to provide one or more such amenities, may exempt the licensee from providing such amenities either wholly or in part ; (b) refuse to grant a licence, by means of a speaking order, after affording the applicant an opportunity of being heard. (Provided that in the licensed colony permitted as a special project by the Government, the licence shall be valid for a maximum period of five years and shall be renewable for a period as decided by the Government.) (5) A separate licence shall be required for each colony. 3-A . Establishment of Fund (1) Any colonizer whom a licence has been given under this Act shall deposit as service charges a sum (at such rate as may be prescribed by the Government from time to time, per square meter of the gross area and of the covered area of all the floors in case of flats proposed to be developed by him into....
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....ds meeting the cost of internal development works in the colony. After the internal development works of the colony have been completed to the satisfaction of the Director, the coloniser shall be at liberty to withdraw the balance amount. The remaining seventy per centum of the said amount shall be deemed to have been retained by the coloniser, inter alia, to meet the cost of land and external development works. (2) The colonizer shall maintain accounts of the amount kept in the scheduled bank, in such manner as may be prescribed: Provided that where the licence under Section 3 is granted for setting up a colony for cyber city or cyber park purposes, the provisions of Sub-sections (1) and (2) shall not be applicable. ------------------------------------------------------------------------ Rule 2. Definitions (a) ... (b) "amenity" includes roads, water supply, street lighting, drainage, sewerage, public parks, schools, play grounds, hospitals, community centers and other community buildings , horticulture, landscaping and any other public utility service; Rule 3.... Rule 4.... Rule 5. Development works ....
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....y time, if so desired by the Government free of cost, the land set apart for schools, hospitals, community centers and community buildings, in which case the Government shall be at liberty to transfer such land to any person or institution including a local authority on such terms and conditions as it may deem fit; and (f) undertake to permit the Director or any other officer authorized by him to inspect the execution of the layout and the development works in the colony and to carry out all directions issued by him for ensuring due compliance of the execution of the layout and development works in accordance with the licence granted. (2) If the Director, having regard to the amenities which exist or are proposed to be provided in the locality, decides that it is not necessary or possible to provide such amenity or amenities, the applicant will be informed thereof and Clauses (c), (d) and (e) of Sub-rule (1) shall be deemed to have been modified to that extent. 12. Grant of licence ( Section 3(3) and (4))- (1) After the applicant has fulfilled all the conditions laid down in Rule 11 to the satisfaction of the Director , the Director shall grant t....
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....carried out by the colonizer, ((5) Deleted.) 20. Release of Bank guarantee (Section 24 )- After the layout and development works or part thereof in respect of the colony or part thereof have been completed and a completion certificate in respect thereof issued, the Director may, on an application in this behalf from the colonizer, release bank guarantee or part thereof as the case may be; Provided that if the completion of the colony is taken in parts only , the part of the bank guarantee corresponding to the part to the colony completed shall be released; Provided further that the bank guarantee equivalent to 1/15th amount thereof shall be kept unreleased to ensure upkeep and maintenance of the colony or part thereof, as the case may be, for a period of five years from the date of issue of the completion certificate under Rule 16 or earlier, in case the colonizer is relieved of the responsibilities in this behalf. 21... 22... 23... 24... 25... 26. maintenance and submission of accounts (Sections 5 and 6 )- (1) The colonizer shall-- (i) issue regular receipts to the ....
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....to determine the ultimate purpose of a contract primarily by the joint intent of the parties at the time the contract so formed. It is not the intent of a single party; it is the joint intent of both parties and the joint intent of the parties is to be discovered from the entirety of the contract and the circumstances surrounding its formation. As is stated in Anson's Law of Contract, "a basic principle of the Common Law of Contract is that the parties are free to determine for themselves what primary obligations they will accept.... Today, the position is seen in a different light. Freedom of contract is generally regarded as a reasonable, social, ideal only to the extent that equality of bargaining power between the contracting parties can be assumed and no injury is done to the interests of the community at large." The Court assumes "that the parties to the contract are reasonable persons who seek to achieve reasonable results, fairness and efficiency.... In a contract between the joint intent of the parties and the intent of the reasonable person, joint intent trumps, and the Judge should interpret the contract accordingly. A party who claims otherwise, violates the princip....
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.... 14. The question that arises for our consideration is whether the Director was justified in issuing directions asking the licensee/owner to virtually amend the clauses/covenants in the agreement? Whether the statute confers any authority or jurisdiction upon the Director to meddle with the terms of agreement entered into by and between the owners and the purchasers of plots/flats? 15. The Director's functions and duties are well structured by the Act and the Rules. There is no provision in the Act or the Rules empowering the Director to sit in judgment on the perceived fairness of any clauses incorporated in the agreement entered by the parties. The terms and conditions in the licence granted by the Director do not prohibit incorporation of such a clause in the agreement to be entered between the owners and the purchasers. Nor there is any clause in the agreement entered by the owner with the Governor through the Director empowering the Director to sit in appeal over the agreement entered by the owners with the purchasers of the plots. There is no explanation forthcoming as to the source of power under which the Director could have issued the impugned directions directing....
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....to pass such an order and not with regard to the question as to whether the clauses dealing with this aspect of the matter suffer from any infirmity. The dispute, if any, between the parties to the agreement, may have to be resolved in a properly constituted proceeding in private law domain. Transfer Fee: 18. Whether the owner/colonizer in law after obtaining full payments from the allottees is prohibited from transferring the plots to the nominees of the allottees? Whether the allottees' right to nominate another person as purchaser of the property can be denied by the colonizer? 19. The prevailing practice of permitting transfer of plots before registration of conveyance deed to the allottee is not contrary to the provisions of the Act or the Rules. The only justification sought to be given by the Respondent in this regard is that the State would like a separate set of stamp duty paid to it in respect of each transaction, even though there is no conveyance deed executed as yet in respect of the land in question. This argument is wholly devoid of any merit. Section 17(1)(b) of the Registration Act requires that where the Conveyance Deed has been prepared for effecting....
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....s, community centres and other community buildings on the lands set apart for the said purposes. Further Section 5 of the Act read with Rule 11(1)(b) imposes obligation and requires the owner to meet the cost of internal development works as defined in Section 2(i) of the Act. 22. It is no doubt true that Section 3(3)(a)(iii) imposes responsibility for the maintenance and upkeep of all roads, open spaces, public parks and public health services for a period of five years from the date of issue of the completion certificate unless earlier relieved of this responsibility and thereupon to transfer all such roads, open spaces, public parks and public health services free of cost to the Government or the authority, as the case may be. That a bare reading of the provisions does not suggest that the owner is required to provide the said maintenance services free of cost. On the other hand, the latter part of Section 3(3)(a)(iii) provides that on the expiry of the said period of five years the owner is required to transfer all such roads, open spaces etc. free of cost to the government or the local authority, as the case may be. 23. The learned senior counsel for the Respondents rely....
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.... Perhaps, the learned senior counsel conscious of the difficulty to bring it under Section 2(i) (i) to (v) urged that maintenance expenses can be considered to be covered by Section 2 (i)(vi) , which refers to "any other work that the Director may think necessary in the interest of proper development of a colony". We find no merit in the submission. Clause (i) to (v) of Section 2(i) refers to "Works" which are erected within the colony as an integral part of the internal development of the colony. The residuary Clause (vi) of Section 2(i) also refers to "work" which means and implies activities akin to that of which constitute an `internal development of the colony'. We have already noticed that providing services of the kind for which the maintenance charges/fee are collected, are in no manner in respect of a "work" of "internal development" which is required to be carried out within the licenced area. The expression "work" in Section (i) (vi) cannot be interpreted in isolation ignoring the Clauses (i) to (v) in Section 2 . Such a construction is impermissible in law. 26. It is, therefore, clear that Director has no authority or power under the Act to issue any directions d....
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.... any, between the owners/colonizers and the purchasers of plots/flats. 30. The sale price charged by the owner from the buyers for the sale of the plots/flats is a market driven sale price and is not based on any particular figure of cost. The provisions of the Act or the Rules in no manner impose any price control directly or indirectly in respect of plots/flats sold by the colonizer/owner. The sale and purchase of the plots/flats is between a willing vendor and a willing vendee. The Director is not empowered to meddle with the transactions and put any restriction on the rights of the owner/colonizer in the matter of sale and purchase of plots/flats. 31. Now what remains for our consideration is whether a direction could have been issued by the Director to delete the clause or relevant clauses from the agreements mutually entered by and between the parties. The agreement by and between the owners/colonizers, agreed terms and conditions and covenant therein are purely under private law domain. 32. Let us now examine what are the functions and duties of the Director and the power conferred upon him under the provisions of the Act and Rules. Section 3(1) of the Act provides ....
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....nce by the Director if the colonizer contravenes any of the conditions of the licence or the provisions of the Act or the Rules made thereunder; provided that before such cancellation the colonizer shall be given an opportunity of being heard. 34. It further provides for the consequences that may flow after the cancellation of the licence. 35. From a fair analysis of these provisions, it becomes clear that the Director's functions and duties and as well as power is completely structured by the statute and the Rules. He undoubtedly plays a vital role and is authorised to issue appropriate directions from time to time concerning the execution of layout and development works in the colony and every such directions issued are required to be complied with by the licensee. 36. In our considered opinion the Director is not authorized to interfere with agreements voluntarily entered into by and between the owner/colonizer and the purchasers of plots/flats. The agreed terms and conditions by and between the parties do not require the approval or ratification by the Director nor is the Director authorized to issue any direction to amend, modify or alter any of the clauses in the....
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....onstrued having regard to the purpose it seeks to achieve. The State as a statutory authority cannot ask for something which is not contemplated under the Act. 40. Thus while Act and Rules may impose many restrictions on profit percentages etc. time limit on construction and handing over of such construction, such power does not encompass within itself the right to exercise power in manner that inhibits terms and contracts and freedom granted therein. LIMIT OF 15% PROFIT: 41. The question as to whether Appellants made any profit over and above 15% would arise for consideration only after the grant of final completion certificate in respect of the entire colony/development. The application for grant of final completion certificate remained pending with the authorities since long time. The complete accounts are to be finalized to determine whether the 15% limit on the profit has been exceeded and whether the colonizers/owners made profits over and above that. Further steps may have to be taken in accordance with law only thereafter. It would be appropriate to direct the authorities to decide the application so filed by the developers/colonizers for grant of final completion ....