M/S. KARAMDEEP FINANCE & INVESTMENT (I) PVT. LTD. v. DELHI DEVELOPMENT AUTHORITY

1. This writ petition reflects the predicament in which a person is placed on account of ignorance of law and apathy on the part of the instrumentality of the State, Delhi Development Authority (DDA) in this case.

2. One Trilochan Singh Rana purchased plot No.14, Block A-2, Safdarjung Development Area, New Delhi measuring 725 sq. yards in a public auction held by the DDA. A Perpetual Lease Deed was executed in his favour on 18th March, 1970. As per clause 4-A of the Perpetual Lease Deed, the lessee was not entitled to sell, transfer, assign or otherwise part with the possession of the whole or any part of the plot except with the previous consent in writing of the lessor, that is, the President of India. In the event of the consent being given, the lessor was entitled to impose such terms and conditions as he deems fit and the lessee was under an obligation to pay 50% unearned increase of the market value of the plot. 2013:DHC:4941 On 29.09.1988, the lessee (Trilochan Singh Rana) entered into an agreement to sell with one Ocean Construction Industries. Necessary clearance for sale of the property was applied under Section 269 UD of the Income Tax Act, 1961 (the Act). On 13.12.1988, the Income Tax Department/Central Government passed an order under Section 269(1) UD of the Act for compulsory acquisition of the property. On 30.01.1989, the Income Tax Department paid an amount of `17,86,420/to the DDA towards unearned increase.

3. The property was put to public auction by the Income Tax Department declaring that the property was being sold free from all encumbrances and with vacant possession. There were no terms and conditions specified for making any payment towards unearned increase pursuant to the auction.

4. The Petitioner was the highest bidder in the auction held on 20.03.1989 on his bid of `1,08,05,000/-. In pursuance of the bid having been accepted and the price paid, the Petitioner was put in actual physical possession of the property No.14, Block A-2, Safdarjung Development Area, New Delhi on 25.04.1989. On 25.09.1997, a registered sale deed was executed in favour of the Petitioner by the President of India through the Director, Department of Revenue, Ministry of Finance. The terms and conditions of the sale deed, inter alia included:-

5. It was also stated in the sale deed that the vendor had already paid an unearned increase of `17,86,420/- to the DDA at the time of acquisition of the property.

6. Unfortunately the Petitioner, unaware of the fact that a sale deed vesting the property absolutely in him had already been executed in his favour by the President of India on 15.12.1999, applied for conversion of leasehold rights to freehold rights and deposited a sum of ` 3,45,729/- with the DDA. Thereupon, the DDA by a letter dated 28.04.2000 raised a demand of `1,43,90,348/-.

7. The Petitioner realised his mistake and approached this Court with the instant writ petition urging that the President of India having executed a sale deed in his favour, the property did not require conversion to freehold as the scheme of conversion from leasehold to freehold will apply only in respect of leasehold property. By an amendment, the Petitioner also sought refund of the amount of `3,45,729/- deposited with the DDA under a mistaken belief with interest @ 12% per annum w.e.f. 17.12.1999, i.e. from the date of the deposit.

8. In the counter affidavit filed by the DDA, it is admitted that an amount of `17,86,420/- had been deposited by the Income Tax Department towards 50% unearned increase. The Respondent/DDA took a plea that there were two sales. Firstly, the property was purchased by the Income Tax Department for which the unearned increase was paid and the second transaction was when the Petitioner purchased the said property. Thus, it is stated that even on the second transaction, the Petitioner would be obliged to pay 50% of the unearned increase and the decision of the lessor in respect of the market value will be final.

9. Referring to the judgment of a Division Bench of this Court in M/s. Bansal Contractors (I) Ltd & Anr. v. Union of India & Ors., 76 (1998) DLT 805, Mr. Manish Vashisht, learned counsel for the Petitioner urges that on the first sale of the property (by acquisition) in favour of the Income Tax Department on which the unearned increase was paid, the Central Government who was the lessor and the absolute owner of the property, the lease came to an end by operation of doctrine of merger. The Central Government through President of India executed a sale deed vesting the property absolutely and free from all encumbrances in favour of the Petitioner. Thus, there was no question of payment of any liability of unearned increase by the Petitioner who was a purchaser of the property from the Central Government. Mr. Manish Vashist submits that even if there was any liability, it was the liability of the seller (although there could be none in view of the fact that the lessor became the absolute owner on account of merger).

10. In M/s. Bansal Contractors, a similar question fell for consideration before a Division Bench of this Court. In para 18, the Division Bench held as under:-

11. Subsequently, a learned Single Judge of this Court in Monoflex India Pvt. Ltd. V. Commissioner of Income Tax & Anr. 107 (2003) DLT 786¸ in similar circumstances held that when any sale is held under auction, the same is governed by the conditions of the auction. If it was not a condition of the auction, the auction purchaser cannot be saddled with the liability of an unearned increase of the sale amount.