Hon'ble Mr. Justice Ashok Bhushan
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1533 Of 2019
DELHI DEVELOPMENT AUTHORITY ...APPELLANT(S)
VERSUS
M/S. KARAMDEEP FINANCE &
INVESTMENT (I) PVT. LTD. & ORS. ...RESPONDENT(S)
WITH
CIVIL APPEAL NO. 1534 Of 2019
M/S. KARAMDEEP FINANCE &
INVESTMENT (I) PVT. LTD. ...APPELLANT(S)
VERSUS
DELHI DEVELOPMENT AUTHORITY & ORS. ...RESPONDENT(S)
J U D G M E N T
ASHOK BHUSHAN, J.
These two appeals have been filed against the
judgment dated 30.03.2016 of Delhi High Court by
which judgment Delhi High Court has partly allowed
the LPA No.226 of 2014 (Delhi Development Authority
vs. M/s. Karamdeep Finance and Investment (I) Pvt.
Ltd. and Ors.). The Delhi Development Authority as
1
well as M/s. Karamdeep Finance & Investment (I) Pvt.
Ltd., the writ petitioner have filed these two
separate appeals challenging the same judgment. Both
the appeals have been heard together and are being
decided by this common judgment.
2. The brief facts of the case necessary for
deciding these two appeals are:
2.1 One Shri Trilochan Singh Rana purchased Plot
No.14, Block A-2, Safdarjung Development Area,
New Delhi measuring 725 sq. yards in a public
auction by DDA. A Perpetual Lease Deed was
executed in his favour on 18.03.1970. 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 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
2
under an obligation to pay 50% unearned
increase of the market value of the plot (i.e.
the difference between the premium paid and
the market value) of the residential plot at
the time of sale, transfer, assignment, or
parting with the possession.
2.2 On 29.09.1988, Shri Trilochan Singh Rana
entered into an agreement to sell the said
property to M/s Ocean Construction Industries
Pvt. Ltd. The application in Form 37-I for
sale of the said property was filed on
06.10.1988 under Section 269UD of Income Tax
Act, 1961 seeking NOC from the Appropriate
Authority, Income Tax Department. Later, an
order under Section 269UD(1) of the Income Tax
Act, 1961 was passed by the Appropriate
Authority for compulsory acquisition of the
property at Rs.76,00,000/- on 13.12.1988.
2.3 Thereafter, the DDA (Finance Member) vide
letter dated 12.01.1989 required the Chief
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Commissioner (Tech.) Income Tax Department,
Central Revenue Building, New Delhi, to pay an
amount towards unearned increase to the extent
of Rs.17,88,114.55. The Chief Commissioner,
Income Tax Department vide his letter dated
30.01.1989 remitted a cheque for
Rs.17,86,420/- favouring Delhi Development
Authority towards payment of unearned increase
in respect of said property.
2.4 The said property was put to public auction on
20.03.1989 and M/s. Karamdeep Finance &
Investment (I) Pvt. Ltd. (hereinafter referred
to as the “writ petitioner”), the
appellant(writ petitioner) was the highest
bidder for an amount of Rs.1,08,05,000/-. The
said bid was accepted by the Department. The
writ petitioner was put in actual physical
possession of the said property on 25.04.1989.
On 25.09.1997, a registered Sale Deed was
executed in favour of the writ petitioner by
the President of India through the Director,
Department of Revenue, Ministry of Finance.
4
2.5 The writ petitioner moved an application with
the DDA for conversion of leasehold rights in
the plot into free-hold rights and also
deposited a sum of Rs.3,45,729/- as conversion
charges with the DDA. On receipt of the
application for conversion, the DDA calculated
the 50% amount of unearned increase of the
market value and intimated the same (i.e.
Rs.48,16,853/-) to the auction-purchaser i.e.
the writ petitioner. Thereupon, the DDA by a
letter dated 28.04.2000 raised a demand of
Rs.1,43,90,348/-.
2.6 Thereafter, the writ petitioner filed a Writ
Petition being W.P.(C)No.4152 of 2000 before
Delhi High Court. The learned Single Judge
vide its order dated 26.09.2013 had allowed
the writ petition and the demand of
Rs.1,43,90,348/- raised by the DDA vide demand
letter dated 28.04.2000 was set aside being
illegal and also directed the DDA to return
the amount of Rs.3,45,729/-, which had been
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deposited by the writ petitioner towards the
conversion charges with interest.
2.7 Thereafter, the DDA filed a Letters Patent
Appeal i.e. LPA No.226 of 2014 before the
Delhi High Court against the judgment and
order dated 26.09.2013 passed by the learned
Single Judge in W.P.(C)NO.4152 of 2000.
2.8 The Delhi High Court passed the impugned
judgment and final order dated 30.03.2016 in
LPA No.226 of 2014 vide which the direction of
learned Single Judge in W.P.(C)No.4152 of 2000
to refund the amount of conversion fee paid by
the writ petitioner has been set aside and
partly allowed the appeal of the appellant-DDA
and also held that the unearned increase is
not payable by the purchaser to the DDA.
Both the parties being aggrieved by the
judgment of the Division Bench has filed these
appeals.
3. We have heard Shri Aman Lekhi, learned Addl.
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Solicitor General for the DDA. Shri Dhruv Mehta,
learned senior counsel has appeared for M/s.
Karamdeep Finance & Investment (I) Pvt. Ltd. We have
also heard learned counsel for the Union of India.
4. Shri Aman Lekhi, learned Addl. Solicitor General
submits that both the learned Single Judge and
Division Bench erred in setting aside the demand
raised by the DDA of unearned increase. It is
submitted that admittedly the property in question
was leasehold property leased out to Shri Trilochan
Singh Rana. The interest of Shri Trilochan Singh Rana
was acquired under Chapter XXC of the Income Tax Act,
1961. In the auction notice which was issued by the
competent authority, the leasehold rights of the
property were sought to be put for auction. The writ
petitioner could not have purchased in auction
anything more than the leasehold rights. The
depositing of conversion charges by the writ
petitioner itself indicates that the understanding
was that they have purchased in auction only the
leasehold rights. The view of the High Court that the
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unearned increase is liable to be paid only in case
of voluntary transfer is erroneous. The liability to
pay unearned increase is fasten on all transfers. The
writ petitioner being the highest bidder of the
auction was liable to pay unearned increase. The
value of the property having substantially increased
the unearned increase ought to have been paid and
both the Single Judge and the Division Bench erred in
setting aside the demand of unearned increase.
5. Shri Dhruv Mehta, learned senior counsel
appearing for the writ petitioner refuting the
submissions made by the learned counsel for the
appellant-DDA supported the judgment of the High
Court in so far as it held that there is no liability
to pay unearned increase on the auction-purchaser. He
submits that there was no condition in the auction
notice that unearned increase is to be paid by the
auction-purchaser. More so unearned increase was paid
by the Income Tax Department earlier which has been
noticed in the conveyance deed itself, unearned
increase having been paid when the Income Tax
8
Department acquired the property there was no
occasion to make any further payment by auctionpurchaser. In support of the appeal filed by the writ
petitioner, Shri Mehta submits that what was conveyed
to the auction-purchaser is not a leasehold right but
absolute right to the property. The auction-purchaser
having become absolute owner of the property, there
was no occasion to pay any conversion charge. It is
submitted that it was under some mis-conception that
the writ petitioner had deposited the conversion
charges under some bona fide mistake. Hence, they
filed a writ petition for refund of the conversion
charges which were deposited by them under bona fide
mistake. He submits that competent authority having
acquired the right of the property under Chapter XXC
of the Income Tax Act, the leasehold rights are also
vested in the Government. There is merger of
leasehold rights in the lessor, the Government. The
lesser right having been merged in the higher right,
the principle of merger becomes applicable. What was
sold to the writ petitioner was absolute right. The
lease came to end when Income Tax Department
9
purchased the property.
6. Shri Mehta further referring to the Sale Deed
executed in favour of the writ petitioner, submits
that Clause 1 and Clause 2 of the Lease Deed clearly
vest absolute right to the aforesaid property in
favour of the vendee. He further submits that Clause
3 of the Sale Deed which refers to terms of agreement
for transfer dated 29.09.1988 between transferor and
M/s. Ocean Construction Industries is not compatible
with Clauses 1 and 2 and hence has to give way to the
Clauses 1 and 2. He submits that Sale Deed read as a
whole clearly indicates that what was sold was
absolute right.
7. Shri Aman Lekhi making his submission in
rejoinder contends that condition of the auction of
the property under which the writ petitioner was
declared the highest bidder itself mentions that what
was proposed to be sold was leasehold rights. He has
referred to auction notice and submits that mention
of leasehold rights with regard to present property
in question and mention of an absolute right with
10
regard to certain other properties clearly indicates
that in the auction notice what was proposed to be
transferred was leasehold rights of the property in
question. He further submits that the principle of
merger is inapplicable since necessary conditions of
merger are not fulfilled in the present case. The
Income Tax Department which acquired the property was
not in the capacity of lessor, hence, the condition
is not fulfilled. He submits that conveyance deed in
favour of writ petitioner has to be construed as a
whole. The document cannot be construed in part. He
submits that Clause 11 and some other Clauses mention
“ground rent” etc. which indicates that there is no
question of absolute sale. The property is never
vested in the writ petitioner, the depositing of
conversion charges itself indicated that the writ
petitioner is aware of what he purchased is only
leasehold rights. The Division Bench has rightly held
that writ petitioner is liable to pay conversion
charges.
8. Learned counsel for the parties have relied on
11
various judgments of this Court and Delhi High Court
which shall be referred to while considering the
submissions in detail.
9. From the pleadings of the parties and submissions
made before us, following are the two issues, which
arises for consideration:-
(i) Whether writ petitioner was liable to pay
unearned increase in value of the property
to the DDA?
(ii) Whether writ petitioner was entitled to get
refund of conversion charges deposited by
it?
Issue No.1
10. In Perpetual Lease, granted to Shri Trilochan
Singh Rana and Mrs. Rani Rana, one of the conditions
provided that lessor may impose conditions to claim
and recover a portion of the unearned increase in the
value (i.e. the difference between the premium paid
and the market value) of the residential plot at the
time of sale, transfer, assignment or parting with
the possession, the amount to be recovered being
12
fifty percent of the unearned increase. The relevant
clause (4)(a) of the Perpetual Lease is as follows:-
“(4)(a) The Lessee shall not sell, transfer
assign or otherwise part with the
possession of the whole or any part of the
residential plot except with the previous
consent in writing of the Lessor which he
shall be entitled to refuse in his absolute
direction.
Provided that such consent shall not be
given for a period of ten years, from the
commencement of the Lease unless, in the
opinion of the Lessor, exceptional
circumstances exist for the grant of such
consent.
Provided further that in the event of the
consent being given, the Lessor may impose
such terms and conditions as he thinks fit
and the Lessor shall be entitled to claim
and recover a portion of the unearned
increase in the value (i.e. the difference
between the premium paid and the market
value) of the residential plot at the time
of sale, transfer, assignment or parting
with the possession, the amount to be
recovered being fifty percent of the
unearned increase and the decision of the
Lessor in respect of the market value shall
be final binding.”
11. We have already noticed above that original
lessee Trilochan Singh Rana entered into agreement of
sale with M/s. Ocean Construction Industries Pvt.
Ltd. dated 29.09.1988 to transfer the rights for a
13
consideration of Rs.76,00,000/-. Exercising power
under Section 269UD of Income Tax Act, 1961,
appropriate authority passed a purchase order dated
13.12.1988 of the property in question. After the
aforesaid purchase order an amount of Rs.17,86,240/-
towards payment of unearned increase was paid to the
DDA by Income Tax Department. After the aforesaid
purchase order, auction notice dated 20.03.1989 was
issued giving details of the properties, which
included the property in question. In pursuance of
the auction notice, the writ petitioner gave highest
bid and was declared auction purchaser for an amount
of Rs.1,08,05,000/-. The writ petitioner paid the
full amount and was delivered the possession on
25.04.1989. Sale Deed was also executed in favour of
writ petitioner on 25.09.1997. The petitioner made
an application to the DDA for grant of freehold
rights and also deposited amount of Rs.3,45,729/-.
While processing the application for conversion of
leasehold rights to free hold rights, DDA made a
demand of Rs.1,43,90,348/- towards unearned increase,
which was challenged by the writ petitioner. Whether
14
the writ petitioner was liable to pay unearned
increase payment is the question to be answered.
12. We have already noticed the clause (4)(a) of the
Perpetual Lease Deed dated 18.03.1970, which provided
that in event sanction is given by lessor to the
lessee for sale, transfer or assignment, lessor shall
be entitled to claim and recover a portion of the
unearned increase in the value. The unearned
increase being the difference between the premium
paid and the market value. The object behind the
said clause was that a lessee when is permitted to
transfer the leasehold rights, the lessor should not
be deprived of the difference between the premium
paid and the market value. The clause was inserted
in the Perpetual Lease to compensate the lessor. The
present is not a case where lessee is making any
transfer or seeking any permission from the lessor to
give his consent. In the present case, the
appropriate authority has exercised its power under
Section 269UD of the Income Tax Act for the purchase
of the property by the Central Government. It is by
15
exercise of statutory power that rights of lessee
were purchased by Central Government. Central
Government issued auction notice for auction of
property in question. All bids in auction of a
property are given normally to match the market price
of the property. When the petitioner gave highest
bid and became the successful auction purchaser, the
auction purchase has to be treated on the basis of
market value of the property. Clause (4)(a) of
Perpetual Lease as noted above provided for payment
of unearned increase to cover up the difference
between premium paid and the market value. When the
auction was made on the market value of the property,
we are of the view that there was no question of
claim of unearned increase by the DDA. We further
noticed that on purchase of the property under
Section 269UD of the Income Tax Act, the Income Tax
department has already paid unearned increase to the
DDA. We, thus, are of the view that High Court has
rightly held that DDA was not entitled to raise any
demand of unearned increase from the writ petitioner.
16
We, thus, do not find any merit in the appeal filed
by the DDA, which deserves to be dismissed.
Issue No.2
13. The submission, which has been much pressed by
learned counsel for the writ petitioner is that, what
was sold to writ petitioner by Sale Deed dated
25.09.1997 was absolute rights with all rights and
interests in the property. The sale in favour of
writ petitioner was not sale of leasehold rights
rather it was for all rights, title and interests,
hence writ petitioner acquired freehold rights. It
is submitted that application for conversion of
leasehold rights into freehold rights and deposit of
the amount on the said application by writ petitioner
was under bonafide mistake. He submits that in the
writ petition, the petitioner has alternatively
prayed for refund of the amount paid for conversion.
14. Learned counsel for the petitioner has relied on
Clauses 1 and 2 of the Sale Deed, which are to the
following effect:-
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“1. That in pursuance of the said auction
and consideration of the sum of Rs.
1,08,05,000/- (Rs. One Crore Eight Lakh and
Five Thousand only) already paid by the
Vendor/Auction Purchaser to the Vendor as
aforesaid, the receipt of which the Vendor
hereby acknowledged, the Vendor hereby
transfers, conveys and sells to the Auction
Purchaser, the Vendee, by way of sale of
that plot of land measuring 725 sq. yds.
bearing No. 14 in Block A-2 in the lay out
plan of Safdarjung Development Scheme, Ring
Road, South Delhi (Villages Mohammadpur
Munirka and Humayunpur Revenue Estate,
together with all rights, titles,
interests, appurtenances, easements,
privileges in and pertaining to the
aforesaid property in favour of the Vendee
absolutely and forever, with the provisions
of Section 269UE(1) of the Income Tax Act,
1961 and all the powers rights and
interests vested in the Vendor with regard
to the sale, transfer and conveyances of
the aforesaid property to the Vendee
hereto.
2. That on the execution of this sale deed,
the Vendee has become the absolute and
exclusive owner of the property hereby
sold, conveyed and transferred to it and
that the Vendee shall have absolute rights
and title to the same and to deal with the
property in any manner it likes. It is made
clear that the Vendor has no right and is
left with no……………interest, claim or title
of any nature whatsoever into on upon the
aforesaid property.”
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15. A plain reading of the above clauses does give
impression that what was sold to the writ petitioner
was all rights, titles, interests and appurtenances
but when we read Clause 3 of the same Sale Deed, the
said clause gives a different impression. Clause 3
of the Sale Deed is as follows:-
“3. That the Vendor hereby represents and
assures to the Vendee that his right in the
property hereby sold, transferred and
conveyed is in terms of agreement for
transfer dated 29-9-1988 between Mr.
Trilochan Singh Rana and Mis, Rani Rana
transferor and M/s. Ocean Construction
Industries Pvt. Ltd. (through its Director
Shri Jugal Kishore Malhan) transferee.”
16. The principles of construction of documents are
well settled. While construing the
documents/intention of the parties have to be
ascertained. In this context, reference is made to
judgment of this Court in Sahebzada Mohammad Kamgarh
Shah Vs. Jagdish Chandra Deo Dhabal Deb and Others,
AIR 1960 SC 953. In Paragraph Nos. 12 and 13,
following was laid down:-
“12. In his attempt to establish that by
this later lease the lessor granted a lease
even of these minerals which had been
excluded specifically by Clause 16 of the
earlier lease, Mr Jha has arrayed in his
19
aid several well established principles of
construction. The first of these is that
the intention of the parties to a document
of grant must be ascertained first and
foremost from the words used in the
disposition clause, understanding the words
used in their strict, natural grammatical
sense and that once the intention can be
clearly understood from the words in the
disposition clause thus interpreted it is
no business of the courts to examine what
the parties may have said in other portions
of the document. Next it is urged that if
it does appear that the later clauses of
the document purport to restrict or cut
down in any way the effect of the earlier
clause disposing of property the earlier
clause must prevail. Thirdly it is said
that if there be any ambiguity in the
disposition clause taken by itself, the
benefit of that ambiguity must be given to
the grantee, the rule being that all
documents of grants must be interpreted
strictly as against the grantor. Lastly it
was urged that where the operative portion
of the document can be interpreted without
the aid of the preamble, the preamble ought
not and must not be looked into.
13. The correctness of these principles is
too well established by authorities to
justify any detailed discussion. The task
being to ascertain the intention of the
parties, the cases have laid down that that
intention has to be gathered by the words
used by the parties themselves. In doing so
the parties must be presumed to have used
the words in their strict grammatical
sense. If and when the parties have first
expressed themselves in one way and then go
on saying something, which is
irreconcilable with what has gone before,
the courts have evolved the principle on
the theory that what once had been granted
20
cannot next be taken away, that the clear
disposition by an earlier clause will not
be allowed to be cut down by a later
clause. Where there is ambiguity it is the
duty of the Court to look at all the parts
of the document to ascertain what was
really intended by the parties. But even
here the rule has to be borne in mind that
the document being the grantor’s document
it has to be interpreted strictly against
him and in favour of the grantee.”
17. This Court further in Paragraph No.14 has held
that in cases of ambiguity, several parts of the
document have to be examined to find out what was
really intended by the parties. In Paragraph No. 14,
following was laid down:-
“14. …………………………………In cases of ambiguity it
is necessary and proper that the court
whose task is to construe the document
should examine the several parts of the
document in order to ascertain what was
really intended by the parties. In this
much assistance can be derived from the
fourth condition of the conditions which
were imposed by the lease as regards the
grant of sub-leases. This condition
provided inter alia that all such underleases to be granted by the lessee shall be
subject to the provisions of Clause 16 of
the principal lease………………………………………”
18. Before we construe the document, we need to first
notice the auction notice by which the property was
21
put to auction. Auction notice, which has been
brought on the record as Annexure-R1 indicate that
details of four properties were given in the auction
notice. It is useful to look into the details given
as follows:-
Details of Properties Reserve
Price
1. Property No. B-6, Friends
Colony Mathura Road, New
Delhi.
This is a lease hold
residential plot measuring
195.097 sq. Mt. together with
buildings and structure
thereon and fixtures and
fitting therein
34.20 lacs
2. Property No. 14, Block A-2,
Safdarjung Development Area,
New Delhi.
This is a lease hold
residential plot measuring
(725 sq. yds.) with a double
storeyed building. The Ground
Floor consists of drawing
dining bed room, kitchen and
a garage. The First Floor
consists of 3 bed rooms, 3
bath rooms, store and a lobby
over the garage. There are 2
floors each having a servant
room W.O. and a cocking
verandah.
1.08 crores
3. Property No. A-8/23, Vasant
Vihar, New Delhi.
This is a lease hold
residential plot N. 23 in
Street No. A-8 in the lay out
plan of Vasant Vihar of the
36.60 Lacs
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Government Servants
Cooperative. House Building
Society Ltd., and measuring
150 Sq. yds alongwith the
super structure build
thereon. (Covered area 1350
Sq. Ft).
4. Property bearing House No. E444 (Ground Floor), Greater
Kailash Part-II, New Delhi110048.
All rights, titles and
Interests in the dwelling
unit on ground floor, and
mazanine floor of House No.
E-444, Greater Kailash, PartII, New Delhi, together with
undivided. Indivisible and
impartible ownership right of
35% in the land underneath of
the said building and
including the followings :-
1. One drawing-cum-dining
hall, three bed rooms with
attached bath rooms,
balcony, kitchen, storage
space (servants Quarters)
and servant's bath rooms on
ground floor.
2. Front lawn and back
courtyard on the ground
floor.
Parking space for a Maruti
Car in the Driveway.
Ingress and Egress from the
main gate to the dwelling
unit.
25.60 lacs
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19. A perusal of the details of the properties
indicate that property in question is included as
Item No. 2, which is mentioned as “This is a lease
hold residential plot”. It is to be noticed that in
so far as properties at Sl. Nos. 1, 2 and 3, the
words mentioned are “leasehold residential plots”
whereas with regard to property details given at Sl.
No.4, it has been mentioned that “all rights, titles
and interests in the dwelling unit”, which, if
contrasted with details of properties given at Sl.
Nos. 1, 2 and 3 contains the intendment. Thus, there
cannot be any doubt that property in question, which
was put in auction was a property as lease hold
rights residential plots. When property is
auctioned, the terms and conditions of auction are
binding on both the parties. When petitioner
submitted his bid in pursuance of the auction notice,
he was bidding for lease hold residential plot with a
double storied building. While interpreting the Sale
Deed, the auction notice has to be looked into to
find out the nature of transaction. The Sale Deed
cannot be read divorced to the auction notice or
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contrary to auction notice. Auction of a leasehold
residential plot and auction of freehold residential
plot carries different connotations. Leasehold
rights are limited rights, which are subservient to
freehold rights of a property. In giving bid for
leasehold rights and freehold rights, different
considerations are there. Clause 3 as noted above
indicate that the property sold and transferred is in
terms of the agreement dated 29.09.1988 between
Trilochan Singh Rana and Mrs. Rani Rana to M/s. Ocean
Construction Industries Pvt. Ltd. Trilochan Singh
Rana and Mrs. Rani Rana were only lease holders.
Thus, they could best transfer their right, which was
conferred to them by the Indenture dated 18.03.1970.
Learned counsel for the writ petitioner has submitted
that Clause 3 being clearly contradictory to Clauses
1 and 2 has to give way to earlier clauses in the
Sale Deed. He has placed reliance on judgment of
this Court in Radha Sundar Dutta Vs. Mohd. Jahadur
Rahim & Ors., AIR 1959 SC 24. In Paragraph Nos. 11
and 13, following was laid down:-
“11. Now, it is a settled rule of
interpretation that if there be admissible
25
two constructions of a document, one of
which will give effect to all the clauses
therein while the other will render one or
more of them nugatory, it is the former
that should be adopted on the principle
expressed in the maxim “ut res magis valeat
quam pereat”. What has to be considered
therefore is whether it is possible to give
effect to the clause in question, which can
only be by construing Exhibit B as creating
a separate Patni, and at the same time
reconcile the last two clauses with that
construction. Taking first the provision
that if there be other persons entitled to
the Patni of lot Ahiyapur they are to have
the same rights in the land comprised in
Exhibit B, that no doubt posits the
continuance in those persons of the title
under the original Patni. But the true
purpose of this clause is, in our opinion,
not so much to declare the rights of those
other persons which rest on statutory
recognition, but to provide that the
grantees under the document should take
subject to those rights. That that is the
purpose of the clause is clear from the
provision for indemnity which is contained
therein. Moreover, if on an interpretation
of the other clauses in the grant, the
correct conclusion to come to is that it
creates a new Patni in favour of the
grantees thereunder, it is difficult to see
how the reservation of the rights of the
other Patnidars of lot Ahiyapur, should
such there be, affects that conclusion. We
are unable to see anything in the clause
under discussion, which militates against
the conclusion that Exhibit B creates a new
Patni.
13. We must now refer to the decision on
which the learned Judges in the Court below
have relied in support of their conclusion.
In Kanchan Barani Debi v. Umesh Chandra,
26
AIR 1925 Cal. 807, the facts were that the
Maharaja of Burdwan had created a Patni of
lot Kooly in 1820. The Choukidari Chakran
lands situated within that village were
resumed under the Act and transferred to
the Zamindar who granted them in 1899 to
one Syamlal Chatterjee in Patni on terms
similar to those in Exhibit B. In 1914 the
Patni lot Kooly was sold under the
Regulation, and purchased by Smt Kanchan
Barani Debi. She then sued as such
purchaser to recover possession of the
Choukidari Chakran lands. The defendants
who represented the grantees under the
Patni settlement of 1899 resisted the suit
on the ground that the sale of Patni Kooly
did not operate to vest in the purchaser
the title in the Choukidari Chakran lands,
as they formed a distinct Patni. Dealing
with this contention, B.B. Ghose, J. who
delivered the judgment of the Court,
observed:
“It is certainly open to the only
two parties concerned to alter the
terms of the original patni if they
chose to do so; and what we have to
see is whether that was done. In
order to do that, we have to examine
the terms of the pattah by which the
Choukidari Chakran lands were granted
to Syamlal Chatterjee.”
The learned Judge then refers to the two
clauses corresponding to the last two
clauses in Exhibit B, and comes to the
conclusion that their effect was merely to,
restore the position as it was when the
original Patni was created, and that, in
consequence, the purchaser was entitled to
the Patni as it was created in 1820, and
that the plaintiff was entitled to the
possession of the Choukidari Chakran lands
as being part of the Patni. Now, it is to
be observed that in deciding that the
Choukidari Chakran lands granted in 1899
27
became merged is lot Kooly, as it was in
1820, the learned Judge did not consider
the effect of the clause providing for sale
of those lands as a distinct entity under
the provisions of the Regulation when there
was default in the payment of rent payable
thereon under the deed, and that, in our
opinion, deprives the decision of much of
its value. In the result, we are unable to
hold that the two clauses on which the
learned Judges base their conclusion are
really inconsistent with the earlier
clauses which support the view that the
grant under Exhibit B is of a distinct
Patni. Nor do we agree with them that the
earlier clause providing for the sale of
the Chaukidari Chakran lands in default of
the payment of jama, should be construed so
as not to override the later clauses. If,
in fact, there is a conflict between the
earlier clause and the later clauses and it
is not possible to give effect to all of
them, then the rule of construction is well
established that it is the earlier clause
that must override the later clauses and
not vice versa. In Forbes v. Git, (19220
1 AC 256, Lord Wrenbury stated the rule in
the following terms:
“If in a deed an earlier clause is
followed by a later clause which
destroys altogether the obligation
created by the earlier clause, the
later clause is to be rejected as
repugnant and the earlier clause
prevails. In this case the two
clauses cannot be reconciled and the
earlier provision in the deed
prevails over the later.”
We accordingly hold that Exhibit B created
a new Patni and that the sale of the lands
comprised therein is not bad as of a
portion of a Patni.”
28
20. There cannot be any dispute to principles of
construction of document as laid down by this Court
as noticed above. But we have to look into the
different clauses to find out the real intention of
the granter. We need to notice that present is a
case of Government grant where Government has granted
rights by Sale Deed to the writ petitioner. Section
3 of the Government Grants Act, 1895 provides for
Government grants to take effect according to their
tenor. Section 3 is as follows:-
3. Government grants to take effect
according to their tenor.- All provisions,
restrictions, conditions and limitations
over contained in any such grant or
transfer as aforesaid shall be valid and
the effect according to their tenor, any
rule of law, statute or enactment of
the Legislature to the contrary
notwithstanding.
21. This Court in S.N. Ranade Vs. Union of India and
Another, AIR 1964 SC 24 while considering the case of
Inam laid down following:-
“……………………when the said Government made a
grant to the appellant’s predecessors, the
principle enunciated by Section 8 of the
Transfer of property Act should be applied
29
and the grant should be construed to
include all rights, title and interest of
the grantor, unless there is a contrary
provision either expressly made, or implied
by necessary implications.”
22. Normally, the grant should be construed to
include all rights, title and interest of the
grantor, unless there is a contrary provision either
expressly made, or implied by necessary implications,
is the principle, which has been laid down by this
Court in above case. Paragraph No.3 contains the
intention of the granter to transfer the rights to
the writ petitioner in terms of the agreement dated
29.09.1988. Clause 3 limits and explain the rights,
which were given in Clause Nos. 1 and 2 of the Sale
Deed, but it cannot be said that Clause 3 is totally
contradictory to Clauses 1 and 2. The three clauses
have to be harmoniously construed to give effect to
the intention of the granter. Furthermore, as we
have noticed that auction notice provided for auction
of leasehold rights, which is an important factor,
which cannot be brushed aside while interpreting the
Sale Deed.
30
23. With reference to Clause 3 in the Sale Deed a
statutory provision also needs to be noticed. Section
269UE of the Income Tax Act, 1961 deals with vesting
of property in Central Government. Section 269UE has
been amended by Finance Act, 1993 w.e.f. 17.11.1992.
Amended Section 269UE sub-section (1) is as follows:
“269UE. Vesting of property in Central
Government.—(1) Where an order under subsection (1) of section 269UD is made by the
appropriate authority in respect of an
immovable property referred to in subclause (i) of clause (d) of section 269UA,
such property shall, on the date of such
order, vest in the Central Government in
terms of the agreement for transfer
referred to in sub-section (1) of section
269UC:
Provided that where the appropriate
authority, after giving an opportunity of
being heard to the transferor, the
transferee or other persons interested in
the said property, under sub-section (1A)
of section 269UD, is of the opinion that
any encumbrance on the property or
leasehold interest specified in the
aforesaid agreement for transfer is so
specified with a view to defeat the
provisions of this Chapter, it may, by
order, declare such encumbrance or
leasehold interest to be void and thereupon
the aforesaid property shall vest in the
Central Government free from such
encumbrance or leasehold interest.
(2) *** *** ***
“
31
24. In sub-section (1) of Section 269UE in place of
words “free from all encumbrances” the words “in
terms of the agreement for transfer referred to in
sub-section (1) of Section 269UC” have been inserted.
When the Sale Deed was executed in favour of the
auction-purchaser above amendment in Section 269UE
sub-section (1) had already been inserted. The
vesting of property in Central Government when is in
terms of agreement for transfer referred to in subsection (1) of Section 269UE at the time of execution
of Sale Deed, the statutory mandate has been
reflected in Clause 3. We, thus, neither can ignore
Clause 3 of the Sale Deed nor can hold that said
Clause has to give way to Clauses 1 and 2 of Sale
Deed. While finding out the tenor of grant as
reflected in Sale Deed, the provisions of sub-section
(1) of Section 269UE as amended by Finance Act has
also to be taken note of.
25. We, thus, find that on true construction of Sale
Deed, it is clear that all rights, titles and
interests were not conveyed to the petitioner in the
32
leasehold residential plot, when we read Clauses 1, 2
and 3 together.
26. Learned counsel for the writ petitioner relying
on provisions of Section 111 of the Transfer of
Property Act, 1882 contends that leasehold rights
have been merged in the lessor since when lessor’s
interest coalesces with lessee’s interest, the
principle of merger comes into play. He has placed
reliance on judgment of this Court in T. Lakshmipathi
and Others Vs. P. Nithyananda Reddy and Others,
(2003) 5 SCC 150 and Pramod Kumar Jaiswal and Others
Vs. Bibi Husn Bano and Others, (2005) 5 SCC 492.
This Court in T. Lakshmipathi (supra) had examined
the doctrine of merger as contained in Section
111(d). In Paragraph Nos. 14 to 17, following was
laid down:-
“14. The common-law doctrine of merger is
statutorily embodied in the Transfer of
Property Act, 1882. Section 111(d)
provides:
“111. Determination of lease.—A
lease of immovable property,
determines—
* * *
33
(d) in case the interests of the
lessee and the lessor in the whole of
the property become vested at the
same time in one person in the same
right;
* * *”
A bare reading of the doctrine of merger,
as statutorily recognized in India,
contemplates (i) coalescence of the
interest of the lessee and the interest of
the lessor, (ii) in the whole of the
property, (iii) at the same time, (iv) in
one person, and (v) in the same right.
There must be a complete union of the whole
interests of the lessor and the lessee so
as to enable the lesser interest of the
lessee sinking into the larger interest of
the lessor in the reversion.
15. In Badri Narain Jha v. Rameshwar Dayal
Singh, AIR 1951 SC 186, it was held by this
Court that if the lessor purchases the
lessee’s interest, the lease no doubt is
extinguished as the same man cannot at the
same time be both a landlord and a tenant,
but there is no extinction of the lease if
one of the several lessees purchased only a
part of the lessor’s interest. In such a
case the leasehold and the reversion cannot
be said to coincide.
16. In Sk. Faqir Bakhsh v. Murli Dhar, AIR
1931 PC 63, the plaintiff was holding on
lease a portion of the entire property.
Subsequently, the plaintiff and the
defendant became pro indiviso joint
proprietors of the property by purchasing
shares from the earlier owners. The lease
was subsisting when the shares were bought
by the parties. In a suit for accounts
filed by the plaintiff it was held that the
plaintiff’s rights under lease of a part do
not merge in his rights as joint proprietor
34
of the whole of the property as between the
parties the plaintiff held a valid and
subsisting lease.
17. A Division Bench of the Patna High
Court in Parmeshwar Singh v. Sureba Kuer,
AIR 1925 Pat 530, held that Section 111(d)
applies only to a case where the interests
of the lessee and of the lessor in the
whole of the property become vested at the
same time in one person in the same right.
Where a co-proprietor in the property
purchased for himself the interest of the
lessees of the whole property, there could
be no merger. On purchase of a partial
interest in tenancy rights by the owner,
the onus of proving that the distinction
between the interests continued to be kept
alive subsequently also cannot be placed on
the party alleging that the distinction was
so kept alive. To the same effect is the
view of the law taken in Lala Nathuni
Prasad v. Syed Anwar Karim, AIR 1919 Pat
390. Merger is largely a question of
intention, dependent on circumstances, and
the courts will presume against it when it
operates to the disadvantage of a party, as
was held by this Court in Nalakath
Sainuddin v. Koorikadan Sulaiman, (2002) 6
SCC 1 (SCC para 20).”
27. To the same effect is judgment of this Court in
Pramod Kumar Jaiswal (supra). There cannot be any
dispute to the proposition laid down by this Court in
reference to Section 111(d). We, however, find that
in the present case, we need not rely on doctrine of
merger as contained in Section 111(d). Present being
35
a case of a Government grant by virtue of the Section
2 of the Government Grants Act, 1895, nothing in the
Transfer of Property Act, 1882, shall apply or be
deemed ever to have applied to any grant or other
transfer. The principles contained in the Transfer
of Property Act have been applied while construing
the Government grants as has been noticed above. But
herein issue being Government grant, the principle of
merger may not be of much relevance. More so, we
having construed the Sale Deed as not having conveyed
all rights and interests in the leasehold property,
the principle of merger does not in any manner
advance the claim of the writ petitioner.
28. Learned counsel for the writ petitioner has also
referred to and relied on judgment of the Division
Bench of Delhi High Court in M/s. Bansal Contractors
(India) Ltd. & Anr. Vs. Union of India and Others, 76
(1998) DLT 805. In the above case, sale of property
was made in public auction after exercising the power
under Section 269UD. From the judgment of Delhi High
Court, it is not clear that as to whether any clause
36
similar to Clause 3 as contained in the Sale Deed in
question, was there. In absence of any such clause,
interpretation put to the Sale Deed by the Delhi High
Court cannot be faulted. It is further relevant to
notice that details of the auction notice are not
noticed in the judgment to find out what was the
nature of the property, which was sought to be put
for auction. We, thus, are of the view that judgment
of Delhi High Court was on its own facts and cannot
be relied on by the writ petitioner in the facts of
the present case. We, thus, do not find any error in
the judgment of the Division Bench setting aside the
direction made by the learned Single Judge to refund
the amount of conversion. The writ petitioner has
made an alternative prayer in the writ petition
seeking a writ of mandamus directing the respondents
to allow/order the conversion of the lease hold
rights into freehold rights in respect of the
aforesaid plot of land without payment of any amount
of alleged unearned increase and or interest due
thereon.
37
29. We having held that writ petitioner is not
entitled for refund of conversion charges, we direct
the DDA to process the writ petitioner’s application
for conversion of the leasehold rights into freehold
rights. The Civil Appeal No.1534 of 2019 filed by
M/s. Karamdeep Finance and Investment (I) Pvt. Ltd.
is disposed of upholding the order of Division Bench,
however, with direction to DDA to process the
application for conversion in accordance with law.
The Civil Appeal No. 1533 of 2019 is dismissed. The
parties shall bear their own costs.
......................J.
( ASHOK BHUSHAN )
......................J.
( K.M. JOSEPH )
New Delhi,
February 12, 2019.
38
