TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 1519
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....elopment Authority ("UDA") to Ajar for the period from 21 December 2012 till 20 December 2042; (ii) directed that possession of the land in dispute be taken back; (iii) that in order to fetch the best price, the land be put to a public auction; and (iv) directed that the transfer fee which was charged to Ajar should be fixed on the basis of the guidelines for 2011-2012 and the differential be recovered with interest at eight percent per annum. These directions have been issued by the High Court while entertaining a petition filed in public interest by the first and second Respondents. 3. UDA is a statutory body constituted under the Madhya Pradesh Town and Country Planning Act, 1973. On 16 July 1985, a deed of lease was executed by UDA of land admeasuring 43,407.00 square meters, situated at Sanwer Road and comprised in Nanakheda Scheme No. 23 at Ujjain in favour of a company by the name of IISCO Stanton Pipe & Foundry Company Ltd. ("IISCO"). The term of the lease was thirty years and an amount of Rs. 4,34,070 was charged as premium. The annual lease rent was fixed at Rs. 8, 681 at the rate of two percent of the total premium. The salient provisions of the lease were: (i) The pu....
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....ent (Clause 6); and (vii) The lease would be governed by other requirements of UDA, the municipal corporation and by the bye-laws of the government then prevailing or as would be made applicable from time to time (Clause 12). 4. IISCO, which was a subsidiary of Steel Authority of India Limited (a public sector undertaking of the Union government), was ordered to be wound up by the High Court of Judicature at Calcutta in BIFR Case No. 503 of 1994 instituted under the Sick Industrial Companies (Special Provisions) Act 1985. The Official Liquidator took over the movable and immovable assets of the company, including the leased land in dispute. 5. On 9 May 2003, the Official Liquidator invited offers for the purchase of the assets of IISCO including the leased land on an "as is where is whatever there is basis". The leasehold rights were valued at Rs. 1.35 crores. 6. On 6 June 2003, UDA issued a notice to the Official Liquidator stating that it had cancelled the lease and would re-enter upon the land. The ground for cancellation was that in breach of the lease conditions, IISCO had defaulted in the payment of the lease rent for the period from June 1995 to May 2003 and had, in add....
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.....50 square meters out of the leased land admeasuring 43,407 square metres. 10. On 4 August 2003, the Official Liquidator informed UDA that the leasehold rights had already been sold, together with the other assets of the company, by an order dated 4 July 2003 of the High Court in consequence of which the cheque for refund was returned. 11. By an order dated 18 August 2003, the Company Judge rejected an application filed by a third party for setting aside the sale of the assets of the company liquidation. The sale consideration was, however, enhanced from Rs. 20 crores to Rs. 20.50 crores. The sale consideration is stated to have been deposited on 17 September 2003 and Ajar was nominated by the purchaser as the entity to whom the assets which were sold in the auction were to be transferred. According to Ajar, possession of the land and assets was handed over to it on 30 September 2003. 12. Ajar, by its letter dated 29 March 2004 requested UDA to mutate and transfer the land in its favour. UDA by its letter dated 18 May 2004 declined to do so on the ground that the lease stood cancelled and that it had re-entered upon the land. 13. UDA filed an application before the Calcutta Hig....
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....e valuation of the leased land had been apportioned at Rs. 1,35,20,183. The recital in the deed of assignment reads thus: (n) For the purpose of valuation the said property has been valued at Rs. 1,35,20,183/- (Rupees One Crore Thirty Five lakhs Twenty thousand One hundred Eighty Three) only being the apportioned purchase price of the said property out of the total sale consideration of Rs. 20,50,00,000/- (Rupees Twenty Crores Fifty Lacs only) as was directed to be apportioned by an order dated 6th July 2004, passed by the Hon'ble High Court at Calcutta. The deed of assignment records that (i) the assignment of the leasehold land to Ajar was for the remainder of the lease term that is, upto 21 December 2012; (ii) the lease was being assigned subject to the rights and privileges of the original lessee under the lease agreement dated 16 July 1985. The material recitals in the deed of assignment are thus: (o) In or about August, 2004 the said Ujjain Vikash Pradhikaran, the said original lessor filed an application before the Hon'ble High Court at Calcutta, inter-alia, Praying therein for cancellation of the lease of the demised lease hold property and for possession ther....
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....t too, only for the residuary part of the first terms of the lease. The Appellant filed this application and there is no reasons has been (sic) shown in the petition in support of such delay caused by the Appellant. In these circumstances, we have to come to the conclusion that the Appellant had due notice of the facts of this case including the fact that the properties have been transferred and sold at this state. In our considered opinion, the possession of the property cannot be changed in any manner whatsoever since the order has given effect to. It is to be noted that the Appellant did not taken any steps in the matter for a long period. 16. On 28 February 2011, the Governing Board of UDA resolved to file a Special Leave Petition before this Court. The Special Leave Petition was dismissed on the ground of delay on 29 April 2011. 17. In the meantime, Ajar had, by its letters dated 16 February 2006 and 8 July 2010 requested UDA to transfer the leasehold land in its name. 18. On 25 May 2011, the first Respondent addressed a communication to UDA, requesting it not to effect a mutation of the property in the name of Ajar. On 1 June 2011, the Governing Board of UDA resolved t....
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....mber 2013 permissions and approvals for building upon and developing the land. Ajar claims to have entered into registered sale deeds in respect of 67 plots and to have incurred an expenditure of Rs. 18.39 crores on the project. Ajar claims to have received notice of the writ petition on 15 September 2014. 22. By its judgment and order dated 8 February 2016, the High Court cancelled the deed of renewal dated 21 May 2012 executed by UDA in favour of Ajar and directed that possession of the land be taken over. The High Court also directed UDA to obtain the best price for the land by putting it to public auction. UDA was also directed to calculate the transfer fees on the basis of the guidelines prevailing in 2011-2012 and to recover the differential together with interest at eight percent per annum in regard to the transfer of the lease from IISCO to Ajar. 23. The principal findings of the High Court are summarised below: (i) Though the resolution of the Board of UDA for the transfer of the land was dated 3 June 2011, inexplicably, the transfer fee was charged in accordance with the guidelines of the Collector prevailing on 22 July 2009 (the date of the decision of the Calcutta H....
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....lease on a nominal premium to confer a benefit on a private developer; (vii) The actions of UDA were contrary to public interest and it acted in a manner in which a responsible authority would conduct its affairs. 24. The judgment and order of the High Court has been questioned in three proceedings initiated Under Article 136 of the Constitution before this Court. One of them has been initiated by Ajar Enterprises Private Limited, the transferee of the leasehold interest and in whose favour the lease was initially renewed before the land was eventually converted into freehold. The court has also been moved on behalf of third party purchasers who claim to have purchased plots from the developer. They were not parties to the proceedings before the High Court. The third set of proceedings has been initiated by UDA. In addition, I.A. 6 of 2017 has been filed by 54 applicants who claim to have entered into transactions for the sale of plots with the developer. We allow the intervention application and have heard the learned Senior Counsel in support. 25. Mr. Shyam Divan learned Senior Counsel representing Ajar and Mr. Chander Uday Singh learned Senior Counsel representing the intere....
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....Lease situated in Urban Area Rules 2010. UDA had issued a public notice inviting applications for conversion to freehold. UDA processed as many as 425 renewals in the city of Ujjain; (iv) All transactions were in terms of statutory provisions and were effected by duly registered instruments. The provisions of Sections 181, 181-A and 182 as well as the provisions contained in the Rules of 1977 and 2010 have not been challenged by the original Petitioners before the High Court. Hence, they were not entitled to question the mode of renewal or the rate at which the renewal of the lease or conversion to freehold could be affected. The High Court ignored the statutory provisions holding the field; (v) The decision of the Constitution Bench of this Court, in re: Natural Resources Allocation indicates that a public auction is not a mandatory requirement in all circumstances. When a statute provides for any other mode, other than auction or tender, such a provision must be followed; (vi) In any event, the option of an open auction or tender arises only where it is proposed to alienate natural resources or land belonging to or in the possession of the government or its instrumentality.....
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....es for conversion to freehold. 27. On the other hand, it has been urged on behalf of first and second Respondents by Ms. Kamini Jaiswal learned Counsel that: (i) According to the Rules of 1977, land can be allotted by only four modes: (i) by direct negotiations; (ii) by auction; (iii) by tender; or (iv) under concessional terms. In the present case, the land was transferred to IISCO on concessional terms. Upon a default by IISCO of its obligations under the original lease deed, UDA cancelled its allotment and re-entered upon the land. The Official Liquidator could not have conveyed a better title than that which was held by IISCO. The fresh agreement between UDA and Ajar was for the residuary term of the original lease namely, for seven years ending on 20 December 2012. Under Rule 25, only a person holding a lease of thirty years is eligible for renewal and hence Ajar was not entitled to renewal of the lease; (ii) The Calcutta High Court in its order dated 5 August 2005 noted that the leasehold interest of IISCO was being conveyed for the remaining term of seven years after which it would be at the absolute discretion of UDA to determine whether or not to renew the lease; (i....
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....adhya Pradesh Land Revenue Code 1959 is titled "Government Lessees and Service Land". Section 181, as its marginal note indicates, deals with government lessees. Sub-Section 1 of Section 181 provides as follows: 181. Government Lessees.--(1) Every person who holds land from the State Government or to whom a right to occupy land is granted by the State Government or Collector and who is not entitled to hold land as a bhumiswami shall be called a Government lessee in respect of such land. Section 182 provides for the rights and liabilities of government lessees: 182. Rights and liabilities of a Government lessee.-- (1) A Government lessee shall, subject to any express provisions in this Code, hold his land in accordance with the terms and conditions of the grant, which shall be deemed to be a grant within the meaning of the Government Grants Act, 1895 (XV of 1895); (2) A Government lessee may be ejected from his land by order of a Revenue Officer on one or more of the following grounds, namely: -- (i) that he has failed to pay the rent for a period of three months from the date on which it became due; or (ii) that he has used such land for purposes other than for which it w....
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.... the state government which shall take a decision on the proposal. 32. The Rules contain specific provisions in regard to the modalities to be followed for the disposal of land. Rule 6 adverts to the procedure where land is disposed of by direct negotiations. Rule 6 inter alia provides for (i) the mode of fixing the premium by the authority in accordance with a scale of premium sanctioned by the government; (ii) due publicity of the proposed negotiations in newspapers and in stipulated public offices; (iii) invitation of offers accompanied by the stipulated earnest money deposit; (iv) procedure to be followed where more than one person makes an offer to take on lease the same plot; (v) mode of deposit of the balance premium. Rule 7 provides for the fixation of premium after the authority has auctioned a few plots of each category in the layout and the sanction of the state government has been obtained. Rule 6 indicates that even when the authority embarks upon direct negotiations for the transfer of lands vested in it, it is required to ensure adequate publicity for a proposed disposal of land. This ensures that competing offers are duly considered. Even in regard to the fixation ....
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....ewal. Undoubtedly, a development authority as a public body cannot act arbitrarily or at its own whims, in deciding whether or not to renew the lease. Its decisions must be guided by public interest. Public interest postulates both protecting the interests of the authority and ensuring fairness to the leaseholder who may have constructed on the land in pursuance of the leasehold. Neither Rule 24 nor Rule 25 can be read to divest the authority of the element of discretion on whether to renew the lease. However, exercise of discretion must meet the touchstone of Article 14 of the Constitution. As a public authority, the decision must be fair, reasonable and guided by public interest. Under Rule 25, where the period of lease is thirty years, renewal is provided for two terms, each of thirty years subject to the payment of ground rent enhanced on the occasion of each renewal by an amount not exceeding fifty percent. Rules 24 and 26, read together indicate the extent of the enhancement in ground rent where the lease is renewed. 35. Now it is in this background that it would be necessary to appreciate the facts pertaining to the acquisition of the land and its allotment to IISCO under t....
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.... at two percent of the premium. Under the terms of the lease, there was a prohibition on the transfer of the land unless the lessee, which had been granted the land to develop a colony and construct residential houses had done so. In the event that the lessee wished to transfer the land due to 'special circumstances', UDA could consider such a request subject to the payment of stipulated transfer fees. The original lease agreement contemplated that the term of the lease could be renewed for two further periods, each of thirty years, with an enhancement of the lease rent at the time of every renewal. We have duly considered both English translation of the Clause for renewal as set out in the lease deed annexed to these proceedings as well as the original in Hindi which read as follows: 1. The above land is being given on lease for first 30 years for construction of residential houses on lease. The lease period is ineffective from 21.12.82. Thereafter the term of lease can be extended (renewed) for two further periods of 30-30 years. At the time of every extension the lease rent can be increased by 50 %. 38. A close reading of the Clause for renewal would make it abundan....
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....han IISCO. There is intrinsic merit in the submission which has been urged by Ms. Kamini Jaiswal, learned Counsel for the first and second Respondents that the allotment in the present case was not referable to Rule 5(a) which speaks of a transfer of land by direct negotiations. Since the allotment to IISCO was neither by way of public auction Under Rule 5(b) nor by inviting tenders Under Rule 5(c) the allotment would only be referable to Rule 5(d) which is an allotment on concessional terms. The power to grant land on concessional terms is subject to Rule 19 under which a grant is contemplated to a public institution or body registered under any law for the time being in force. Ordinarily, as Rule 20 prescribes, such a grant can be made only for charitable purposes. The expression 'ordinarily' indicates a general though not an invariable or mandatory requirement. This aspect of the matter, in our view, is of importance since the purpose for which the land which was granted to a subsidiary of a public sector undertaking was the development of a residential colony, evidently for the benefit of the employees of IISCO. 39. When IISCO went into liquidation, its assets and prop....
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.... what was being transferred was the interest of the company liquidation under the lease deed dated 16 July 1985. Undoubtedly, this comprised besides the residue of the unexpired term of seven years, the benefit of the original lease agreement which contains a renewal clause. However, both on the interpretation of that Clause by the Calcutta High Court as well as on the plain terms of the clause, it is evident that there was no indefeasible right of renewal. The Clause for renewal provided that the lease could be renewed, not that it must or shall be renewed. Moreover, Rules 24 and 25 of the 1977 Rules cannot be read to preclude UDA, as the lessor, from having due regard to all relevant circumstances bearing upon the public interest while deciding whether to renew the lease. Several aspects bearing upon the public interest were required to be borne in mind. These included: firstly, the fact that the purpose for which the land was originally granted to IISCO namely the construction of a residential colony for the employees of IISCO could not be achieved by Ajar; secondly, whether the breach of the covenants contained in the lease agreement would disentitle the grant of renewal; third....
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....in favour of Ajar on 10 May 2012. Rule 5 of the 2010 Rules for the grant of freehold rights provides as follows: 5. Class of land eligible for conversion-Any land situated in an urban area and which is,- 1. Granted on leasehold basis for a period of thirty years or more by the State Government or by an Officer authorised to do so for residential or commercial purpose; or 2. given on leasehold right of thirty years or more for residential or commercial purpose, by virtue of a lease executed in favour of any person by the Madhya Pradesh Housing Board or a Development Authority or a Housing Co-operative Society on producing of a no-objection certificate from such Board or Authority or Society, as the case may be, shall be eligible for conversion: Provided that such land as has been allotted without charging full premium as prescribed under the Revenue Book Circular shall not be eligible for conversion: Provided further that land allotted to an urban local body shall note be eligible for conversion: Provided also that no such leasehold land shall be converted whose lease conditions specifically prohibit conversion or on which leasehold rights have accrued under the Madhya P....
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....cording to Ajar, the third party transactions were entered into by it during the pendency of the writ proceedings before the High Court. The developer was aware of the pendency of the proceedings before the High Court and it is in this background that the claim of his having created third party rights needs to be evaluated. Ajar tendered during the course of these proceedings, a summary containing the third party rights stated to have been created on the land in dispute. According to the statement, the total land available for sale is 24,688.06 square meters and the remaining area has to be developed for roads, open spaces, gardens and services. The saleable area has been carved up into 178 plots. The position which Ajar claims is as follows: (i) out of the 178 plots third party rights have been created in respect of 124 plots while 54 plots remain unsold; (ii) sale deeds have been executed in respect of 67 plots; (iii) agreements to sell have been executed in respect of 20 plots; and (iv) allotments have been made in respect 37 plots. 47. The disclosures which have been made in the statement tendered on behalf of the developer indicate that the agreements to sell as well ....
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....iew, shall term the executive action as arbitrary, unfair, unreasonable and capricious due to its antimony with Article 14 of the Constitution. Justice Jagdish Singh Khehar (as the learned Chief Justice then was) in his concurring judgment held that: 200. I would therefore conclude by stating that no part of the natural resource can be dissipated as a matter of largess, charity, donation or endowment, for private exploitation. Each bit of natural resource expended must bring back a reciprocal consideration. The consideration may be in the nature of earning revenue or may be to "best subserve the common good". It may well be the amalgam of the two. There cannot be a dissipation of material resources free of cost or at a consideration lower than their actual worth. One set of citizens cannot prosper at the cost of another set of citizens, for that would not be fair or reasonable. 49. Undoubtedly, disposal of natural resources by auction is not a mandatory principle for, as the Constitution Bench held, individual statutes may provide for modalities of transfer by alternate modes which subserve public interest. In the present case, as we have noted, Rule 5 of the 1975 Rules prov....
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....nstruct and develop a residential colony for its employees. The land was not being allotted for commercial exploitation to a developer. The terms of the lease clearly evince the manner in which the land was to be utilized and the consequences of breach. When IISCO went into liquidation, the Official Liquidator placed its assets including the leasehold land for sale. Ajar under the deed of assignment acquired the leasehold rights for the remaining term of the lease on 1 September 2005 together with the rights and benefits arising out of the original lease of 16 July 1985. The Calcutta High Court had clearly and expressly observed, while rejecting UDA's claim of forfeiture and re-entry, that the transfer was of the residual term of seven years and that if UDA did not intend to renew the lease, the land would revert to it. There was no absolute or indefeasible right to renewal either in IISCO or in Ajar, which succeeded to the leasehold interest. As a matter of fact, when UDA decided to renew the lease, it was duty bound to evaluate all aspects bearing upon the public interest which included (i) the purpose for which the land was granted under the original lease agreement; (ii) th....