DELHI DEVELOPMENT AUTHORITY versus M/S. KARAMDEEP FINANCE & INVESTMENT (I) PVT. LTD. & ORS. on 12 February 2019

[2019] 3 S.C.R. 725

DELHI DEVELOPMENT AUTHORITY

v.

M/S. KARAMDEEP FINANCE & INVESTMENT (I) PVT. LTD.& ORS.

(Civil Appeal No. 1533 of 2019)

FEBRUARY 12, 2019

[ASHOK BHUSHAN AND K. M. JOSEPH, JJ.]

Transfer of Property:

Leasehold property – Acquired under Chapter XXC of theIncome Tax Act – Income Tax Department paid amount towardsunearned increase of market value to Delhi Development Authority(DDA) – Thereafter the property was put to auction, through thedepartment of Revenue in which respondent was the highest bidder– Sale deed was executed in favour of the respondent – Thereafterrespondent moved application with DDA for conversion of lease-hold rights in the plots into freehold rights and also deposited amounttowards conversion charges – DDA, thereupon demanded an amountfrom the respondent towards unearned increase of market value –The demand raised by DDA was set aside by Single Judge of HighCourt in writ petition and DDA was directed to refund the conversionamount – In LPA, High Court set aside the order of Single Judgeand directed DDA to refund the amount towards conversion fee,while holding that unearned increase was not payable by thepurchaser to DDA – On appeal, held: Since the auction was madeon the market value of the property, there was no question of claimof unearned increase by DDA – Also, since income tax departmenthad already paid unearned increase, DDA was not entitled to raiseany demand of unearned increase – On interpreting the auctionnotice and the sale deed it is clear that what was transferred to therespondent was leasehold right – Therefore, the respondent is notentitled for refund of conversion charges – DDA is directed toprocess the respondent’s application for conversion of leaseholdrights into freehold rights – Income Tax Act, 1961 – s. 269 UD.

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[2019] 3 S.C.R.

ADeeds and Documents:

Interpretation of deeds and documents – Held: Whileconstruing documents, intention of the parties have to beascertained.

Doctrines/Principles:BPrinciple of merger – Applicability of.Disposing of C.A. No. 1534 of 2019 and dismissing C.A.No. 1533 of 2019, the Court HELD: 1. In the present case, the appropriate authorityChas exercised its power under Section 269UD of the Income TaxAct for the purchase of the property by the Central Government.It is by exercise of statutory power that rights of lessee werepurchased by Central Government. Central Government issuedauction notice for auction of property in question. All bids inDauction of a property are given normally to match the marketprice of the property. When the petitioner gave highest bid andbecame the successful auction purchaser, the auction purchasehas to be treated on the basis of market value of the property.When the auction was made on the market value of the property,there was no question of claim of unearned increase by the DDA.EOn purchase of the property under Section 269UD of the IncomeTax Act, the Income Tax department has already paid unearnedincrease to the DDA. Therefore, High Court has rightly held thatDDA was not entitled to raise any demand of unearned increasefrom the writ petitioner. [Para 12][736-A-E]F2.1 A plain reading of clauses 1 and 2 of the Sale Deed doesgive impression that what was sold to the writ petitioner was allrights, titles, interests and appurtenances but Clause 3 of thesame Sale Deed, gives a different impression. The principles ofconstruction of documents are well settled. While construingthe documents, intention of the parties have to be ascertained.GIn cases of ambiguity, several parts of the document have to beexamined to find out what was really intended by the parties. Theauction notice by which the property was put to auction, detailsof four properties were given. A perusal of the details of theproperties indicate that property in question was included as ItemH

No. 2, which was mentioned as “This is a lease hold residentialplot”. So far as properties at Sl. Nos. 1, 2 and 3, the wordsmentioned were “leasehold residential plots” whereas withregard to property details given at Sl. No.4, it was mentionedthat “all rights, titles and interests in the dwelling unit”, which, ifcontrasted with details of properties given at Sl. Nos. 1, 2 and 3contains the intendment. Thus, there cannot be any doubt thatproperty in question, which was put in auction was a property asleasehold 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 auctionnotice, he was bidding for lease-hold residential plot with a doublestoried building. [Paras 15, 16, 17, 18 and 19][740-H; 741-A-C]

Sahebzada Mohammad Kamgarh Shah v. JagdishChandra Deo Dhabal Deb and Others AIR 1960 SC953 : [1960] SCR 604 – relied on.

2.2 While interpreting the Sale Deed, the auction noticehas to be looked into to find out the nature of transaction. TheSale Deed cannot be read divorced to the auction notice orcontrary to auction notice. Auction of a leasehold residential plotand auction of freehold residential plot carries differentconnotations. Leasehold rights are limited rights, which aresubservient to freehold rights of a property. In giving bid forleasehold rights and freehold rights, different considerations arethere. Clause 3 indicates that the property sold and transferredis in terms of the agreement dated 29.09.1988 entered into bythe originl lease holders. Thus, they could best transfer theirright, which was conferred to them by the Indenture dated18.03.1970.[Para 19][741-C-E]

2.3 Present is a case of Government grant whereGovernment has granted rights by Sale Deed to the writpetitioner. Section 3 of the Government Grants Act, 1895 providesfor Government grants to take effect according to their tenor.Paragraph No.3 contains the intention of the granter to transferthe rights to the writ petitioner in terms of the agreement dated29.09.1988. Clause 3 limits and explains the rights, which weregiven in Clause Nos. 1 and 2 of the Sale Deed, but it cannot besaid that Clause 3 is totally contradictory to Clauses 1 and 2. The ABC

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Athree clauses have to be harmoniously construed to give effectto the intention of the granter. Furthermore, auction noticeprovided for auction of leasehold rights, which is an importantfactor, which cannot be brushed aside while interpreting the SaleDeed. [Paras 20 and 22] [743-H; 744-E-F]

B2.4 While finding out the tenor of grant as reflected in SaleDeed, the provisions of sub-section (1) of Section 269UE ofIncome Tax Act, 1961 as amended by Finance Act, 1993 has alsoto be taken note of. In sub-section (1) of Section 269UE in placeof words “free from all encumbrances” the words “in terms ofthe agreement for transfer referred to in sub-section (1) of SectionC269UC” have been inserted. When the Sale Deed was executedin favour of the auction-purchaser above amendment in Section269UE sub-section (1) had already been inserted. The vestingof property in Central Government when is in terms of agreementfor transfer referred to in sub-section (1) of Section 269UE at theDtime of execution of Sale Deed, the statutory mandate has beenreflected in Clause 3 of the Sale Deed. Thus, the Court can neitherignore Clause 3 of the Sale Deed nor can hold that said Clausehas to give way to Clauses 1 and 2 of Sale Deed. Thus, on trueconstruction of Sale Deed, it is clear that all rights, titles andinterests were not conveyed to the petitioner in the leaseholdEresidential plot, when Clauses 1, 2 and 3 are read together. [Paras24 and 25][745-D-G]

Radha Sundar Dutta v. Mohd. Jahadur Rahim & Ors.AIR 1959 SC 24 : [1959] SCR 1309; S.N.Ranadev.Union of India and Another AIR 1964 SC 24 : [1964]FSCR 885; T. Lakshmipathi and Others v. P. NithyanandaReddy and Others (2003) 5 SCC 150 : [2005] 3SCR 1119; Pramod Kumar Jaiswal and Others v. BibiHusn Bano and Others (2005) 5 SCC 492 : [2005] 3 SCR 1119; M/s. Bansal Contractors (India) Ltd. & Anr.Gv. Union of India and Others 76 (1998) DLT 805 –referred to.

2.5 Present being a case of a Government grant by virtueof the Section 2 of the Government Grants Act, 1895, nothing inthe Transfer of Property Act, 1882, shall apply or be deemedHever to have applied to any grant or other transfer. Issue being A

Government grant, the principle of merger may not be of muchrelevance. More so, having construed the Sale Deed as not havingconveyed all rights and interests in the leasehold property, theprinciple of merger does not in any manner advance the claim ofthe writ petitioner. [Para 27][747-F-H]

2.6 Having held that writ petitioner is not entitled for refundof conversion charges, DDA is directed to process the writpetitioner’s application for conversion of the leasehold rights intofreehold rights. [Para 29][748-E]

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Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1533of 2019.

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From the Judgment and Order dated 30.03.2016 of the HighCourt of Delhi at New Delhi in LPA No. 226 of 2014.

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Civil Appeal No. 1534 of 2019.

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Aman Lekhi, K. M. Nataraj, ASGs, Dhruv Mehta, Sr. Adv.,Ashwani Kumar, Ms. Kumud Lata Das, Jay Kumar, Manish Vashisht,Sameer Vashisht, Anmol Mehta, Ms. Anupama Dhruve, Ms. JyotiMendiratta, H. Raghavendra Rao, T. M. Singh, Mrs. Anil Katiyar, Advs.for the appearing parties.

The Judgment of the Court was delivered by G

ASHOK BHUSHAN, J. 1. These two appeals have been filedagainst the judgment dated 30.03.2016 of Delhi High Court by whichjudgment Delhi High Court has partly allowed the LPA No.226 of 2014(Delhi Development Authority vs. M/s. Karamdeep Finance and H

AInvestment (I) Pvt. Ltd. and Ors.). The Delhi Development Authorityas well as M/s. Karamdeep Finance & Investment (I) Pvt. Ltd., the writpetitioner have filed these two separate appeals challenging the samejudgment. Both the appeals have been heard together and are beingdecided by this common judgment.

B2. The brief facts of the case necessary for deciding these twoappeals are:

2.1 One Shri Trilochan Singh Rana purchased Plot No.14, BlockA-2, Safdarjung Development Area, New Delhi measuring725 sq. yards in a public auction by DDA. A PerpetualCLease Deed was executed in his favour on 18.03.1970. Asper clause (4)a) of the Perpetual Lease Deed, the lesseewas not entitled to sell, transfer, assign or otherwise partwith the possession of the whole or any part of the plotexcept with previous consent in writing of the lessor, thatis, the President of India. In the event of the consent beingDgiven, the lessor was entitled to impose such terms andconditions as he deems fit and the lessee was under anobligation to pay 50% unearned increase of the market valueof the plot (i.e. the difference between the premium paidand the market value) of the residential plot at the time ofEsale, transfer, assignment, or parting with the possession.

2.2 On 29.09.1988, Shri Trilochan Singh Rana entered into anagreement to sell the said property to M/s OceanConstruction Industries Pvt. Ltd. The application in Form37-I for sale of the said property was filed on 06.10.1988Funder Section 269UD of Income Tax Act, 1961 seekingNOC from the Appropriate Authority, Income TaxDepartment. Later, an order under Section 269UD(1) ofthe Income Tax Act, 1961 was passed by the AppropriateAuthority for compulsory acquisition of the property atRs.76,00,000/- on 13.12.1988.

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2.3 Thereafter, the DDA (Finance Member) vide letter dated12.01.1989 required the Chief Commissioner (Tech.)Income Tax Department, Central Revenue Building, NewDelhi, to pay an amount towards unearned increase to theextent of Rs.17,88,114.55. The Chief Commissioner, Income H

PVT. LTD. [ASHOK BHUSHAN, J.]

Tax Department vide his letter dated 30.01.1989 remitted acheque for Rs.17,86,420/- favouring Delhi DevelopmentAuthority towards payment of unearned increase in respectof said property.

2.4The said property was put to public auction on 20.03.1989and M/s. Karamdeep Finance & Investment (I) Pvt. Ltd.(hereinafter referred to as the “writ petitioner”), theappellant(writ petitioner) was the highest bidder for anamount of Rs.1,08,05,000/-. The said bid was accepted bythe Department. The writ petitioner was put in actualphysical possession of the said property on 25.04.1989. On25.09.1997, a registered Sale Deed was executed in favourof the writ petitioner by the President of India through theDirector, Department of Revenue, Ministry of Finance.

2.5 The writ petitioner moved an application with the DDA forconversion of leasehold rights in the plot into free-hold rightsand also deposited a sum of Rs.3,45,729/- as conversioncharges with the DDA. On receipt of the application forconversion, the DDA calculated the 50% amount ofunearned increase of the market value and intimated thesame (i.e. Rs.48,16,853/-) to the auction-purchaser i.e. thewrit petitioner. Thereupon, the DDA by a letter dated28.04.2000 raised a demand of Rs.1,43,90,348/-.

2.6 Thereafter, the writ petitioner filed a Writ Petition beingW.P.(C)No.4152 of 2000 before Delhi High Court. Thelearned Single Judge vide its order dated 26.09.2013 hadallowed the writ petition and the demand of Rs.1,43,90,348/- raised by the DDA vide demand letter dated 28.04.2000was set aside being illegal and also directed the DDA toreturn the amount of Rs.3,45,729/-, which had beendeposited by the writ petitioner towards the conversioncharges with interest.

2.7 Thereafter, the DDA filed a Letters Patent Appeal i.e.LPA No.226 of 2014 before the Delhi High Court againstthe judgment and order dated 26.09.2013 passed by thelearned Single Judge in W.P.(C)NO.4152 of 2000.

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A2.8The Delhi High Court passed the impugned judgmentand final order dated 30.03.2016 in LPA No.226 of 2014vide which the direction of learned Single Judge inW.P.(C)No.4152 of 2000 to refund the amount ofconversion fee paid by the writ petitioner has been set asideand partly allowed the appeal of the appellant-DDA andBalso held that the unearned increase is not payable by thepurchaser to the DDA. Both the parties being aggrievedby the judgment of the Division Bench has filed theseappeals.

3. We have heard Shri Aman Lekhi, learned Addl. Solicitor GeneralCfor the DDA. Shri Dhruv Mehta, learned senior counsel has appearedfor M/s. Karamdeep Finance & Investment (I) Pvt. Ltd. We have alsoheard learned counsel for the Union of India.

4. Shri Aman Lekhi, learned Addl. Solicitor General submits thatboth the learned Single Judge and Division Bench erred in setting asideDthe demand raised by the DDA of unearned increase. It is submittedthat admittedly the property in question was leasehold property leasedout to Shri Trilochan Singh Rana. The interest of Shri Trilochan SinghRana was acquired under Chapter XXC of the Income Tax Act, 1961.In the auction notice which was issued by the competent authority, theEleasehold rights of the property were sought to be put for auction. Thewrit petitioner could not have purchased in auction anything more thanthe leasehold rights. The depositing of conversion charges by the writpetitioner itself indicates that the understanding was that they havepurchased in auction only the leasehold rights. The view of the HighCourt that the unearned increase is liable to be paid only in case ofFvoluntary transfer is erroneous. The liability to pay unearned increase isfasten on all transfers. The writ petitioner being the highest bidder of theauction was liable to pay unearned increase. The value of the propertyhaving substantially increased the unearned increase ought to have beenpaid and both the Single Judge and the Division Bench erred in settingGaside the demand of unearned increase.

5. Shri Dhruv Mehta, learned senior counsel appearing for thewrit petitioner refuting the submissions made by the learned counsel forthe appellant-DDA supported the judgment of the High Court in so faras it held that there is no liability to pay unearned increase on the auction-Hpurchaser. He submits that there was no condition in the auction notice that unearned increase is to be paid by the auction-purchaser. More sounearned increase was paid by the Income Tax Department earlier whichhas been noticed in the conveyance deed itself, unearned increase havingbeen paid when the Income Tax Department acquired the property therewas no occasion to make any further payment by auction-purchaser. Insupport of the appeal filed by the writ petitioner, Shri Mehta submits thatwhat was conveyed to the auction-purchaser is not a leasehold right butabsolute right to the property. The auction-purchaser having becomeabsolute owner of the property, there was no occasion to pay anyconversion charge. It is submitted that it was under some mis-conceptionthat the writ petitioner had deposited the conversion charges under somebona fide mistake. Hence, they filed a writ petition for refund of theconversion charges which were deposited by them under bona fidemistake. He submits that competent authority having acquired the rightof the property under Chapter XXC of the Income Tax Act, the leaseholdrights are also vested in the Government. There is merger of leaseholdrights in the lessor, the Government. The lesser right having been mergedin the higher right, the principle of merger becomes applicable. Whatwas sold to the writ petitioner was absolute right. The lease came to endwhen Income Tax Department purchased the property.

6. Shri Mehta further referring to the Sale Deed executed in favourof the writ petitioner, submits that Clause 1 and Clause 2 of the SaleDeed clearly vest absolute right to the aforesaid property in favour ofthe vendee. He further submits that Clause 3 of the Sale Deed whichrefers to terms of agreement for transfer dated 29.09.1988 betweentransferor and M/s. Ocean Construction Industries is not compatiblewith 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 whatwas sold was absolute right.

7. Shri Aman Lekhi making his submission in rejoinder contendsthat condition of the auction of the property under which the writ petitionerwas declared the highest bidder itself mentions that what was proposedto be sold was leasehold rights. He has referred to auction notice andsubmits that mention of leasehold rights with regard to present propertyin question and mention of an absolute right with regard to certain otherproperties clearly indicates that in the auction notice what was proposedto be transferred was leasehold rights of the property in question. Hefurther submits that the principle of merger is inapplicable since necessary AB

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Aconditions of merger are not fulfilled in the present case. The IncomeTax Department which acquired the property was not in the capacity oflessor, hence, the condition is not fulfilled. He submits that conveyancedeed in favour of writ petitioner has to be construed as a whole. Thedocument cannot be construed in part. He submits that Clause 11 andsome other Clauses mention “ground rent” etc. which indicates thatBthere is no question of absolute sale. The property is never vested in thewrit petitioner, the depositing of conversion charges itself indicated thatthe writ petitioner is aware of what he purchased is only leasehold rights.The Division Bench has rightly held that writ petitioner is liable to payconversion charges.C

8. Learned counsel for the parties have relied on various judgmentsof this Court and Delhi High Court which shall be referred to whileconsidering the submissions in detail.

9. From the pleadings of the parties and submissions made beforeus, following are the two issues, which arises for consideration:- D

(i) Whether writ petitioner was liable to pay unearned increase invalue of the property to the DDA?

(ii) Whether writ petitioner was entitled to get refund of conversioncharges deposited by it?EIssue No.1

10. In Perpetual Lease, granted to Shri Trilochan Singh Rana andMrs. Rani Rana, one of the conditions provided that lessor may imposeconditions to claim and recover a portion of the unearned increase in thevalue (i.e. the difference between the premium paid and the marketFvalue) of the residential plot at the time of sale, transfer, assignment orparting with the possession, the amount to be recovered being fiftypercent of the unearned increase. The relevant clause (4)(a) of thePerpetual Lease is as follows:- “(4)(a) The Lessee shall not sell, transfer assign or otherwiseGpart with the possession of the whole or any part of the residentialplot except with the previous consent in writing of the Lessorwhich he shall be entitled to refuse in his absolute direction.

Provided that such consent shall not be given for a period of tenyears, from the commencement of the Lease unless, in the opinion H

of the Lessor, exceptional circumstances exist for the grant ofsuch consent.

Provided further that in the event of the consent being given, theLessor may impose such terms and conditions as he thinks fit andthe Lessor shall be entitled to claim and recover a portion of theunearned increase in the value (i.e. the difference between thepremium paid and the market value) of the residential plot at thetime of sale, transfer, assignment or parting with the possession,the amount to be recovered being fifty percent of the unearnedincrease and the decision of the Lessor in respect of the marketvalue shall be final binding.”

11. We have already noticed above that original lessee TrilochanSingh Rana entered into agreement of sale with M/s. Ocean ConstructionIndustries Pvt. Ltd. dated 29.09.1988 to transfer the rights for aconsideration of Rs.76,00,000/-. Exercising power under Section 269UDof Income Tax Act, 1961, appropriate authority passed a purchase orderdated 13.12.1988 of the property in question. After the aforesaid purchaseorder an amount of Rs.17,86,240/- towards payment of unearned increasewas paid to the DDA by Income Tax Department. After the aforesaidpurchase order, auction notice dated 20.03.1989 was issued giving detailsof the properties, which included the property in question. In pursuanceof the auction notice, the writ petitioner gave highest bid and was declaredauction purchaser for an amount of Rs.1,08,05,000/-. The writ petitionerpaid 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 freeholdrights and also deposited amount of Rs.3,45,729/-. While processing theapplication for conversion of leasehold rights to free hold rights, DDAmade a demand of Rs.1,43,90,348/- towards unearned increase, whichwas challenged by the writ petitioner. Whether the writ petitioner wasliable to pay unearned increase payment is the question to be answered.

12. We have already noticed the clause (4)(a) of the PerpetualLease Deed dated 18.03.1970, which provided that in event sanction isgiven by lessor to the lessee for sale, transfer or assignment, lessor shallbe entitled to claim and recover a portion of the unearned increase in thevalue. The unearned increase being the difference between the premiumpaid and the market value. The object behind the said clause was that alessee when is permitted to transfer the leasehold rights, the lessor should A

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Anot be deprived of the difference between the premium paid and themarket value. The clause was inserted in the Perpetual Lease tocompensate the lessor. The present is not a case where lessee is makingany transfer or seeking any permission from the lessor to give his consent.In the present case, the appropriate authority has exercised its powerunder Section 269UD of the Income Tax Act for the purchase of theBproperty by the Central Government. It is by exercise of statutory powerthat rights of lessee were purchased by Central Government. CentralGovernment issued auction notice for auction of property in question.All bids in auction of a property are given normally to match the marketprice of the property. When the petitioner gave highest bid and becameCthe successful auction purchaser, the auction purchase has to be treatedon the basis of market value of the property. Clause (4)(a) of PerpetualLease as noted above provided for payment of unearned increase tocover 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 byDthe DDA. We further noticed that on purchase of the property underSection 269UD of the Income Tax Act, the Income Tax department hasalready paid unearned increase to the DDA. We, thus, are of the viewthat High Court has rightly held that DDA was not entitled to raise anydemand of unearned increase from the writ petitioner. We, thus, do notEfind any merit in the appeal filed by the DDA, which deserves to bedismissed.

Issue No.2

Issue No.2

13. The submission, which has been much pressed by learnedcounsel for the writ petitioner is that, what was sold to writ petitioner byFSale Deed dated 25.09.1997 was absolute rights with all rights andinterests in the property. The sale in favour of writ petitioner was notsale of leasehold rights rather it was for all rights, title and interests,hence writ petitioner acquired freehold rights. It is submitted thatapplication for conversion of leasehold rights into freehold rights andGdeposit of the amount on the said application by writ petitioner was underbonafide mistake. He submits that in the writ petition, the petitioner hasalternatively prayed for refund of the amount paid for conversion.

14. Learned counsel for the petitioner has relied on Clauses 1 and2 of the Sale Deed, which are to the following effect:- H

“1. That in pursuance of the said auction and consideration of thesum of Rs. 1,08,05,000/- (Rs. One Crore Eight Lakh and FiveThousand only) already paid by the Vendor/Auction Purchaser tothe Vendor as aforesaid, the receipt of which the Vendor herebyacknowledged, the Vendor hereby transfers, conveys and sells tothe Auction Purchaser, the Vendee, by way of sale of that plot ofland measuring 725 sq. yds. bearing No. 14 in Block A-2 in thelay out plan of Safdarjung Development Scheme, Ring Road, SouthDelhi (Villages Mohammadpur Munirka and HumayunpurRevenue Estate, together with all rights, titles, interests,appurtenances, easements, privileges in and pertaining to theaforesaid 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 Vendorwith regard to the sale, transfer and conveyances of the aforesaidproperty to the Vendee hereto.

2. That on the execution of this sale deed, the Vendee has becomethe absolute and exclusive owner of the property hereby sold,conveyed and transferred to it and that the Vendee shall haveabsolute rights and title to the same and to deal with the propertyin any manner it likes. It is made clear that the Vendor has noright and is left with no……………interest, claim or title of anynature whatsoever into on upon the aforesaid property.”

15. A plain reading of the above clauses does give impression thatwhat was sold to the writ petitioner was all rights, titles, interests andappurtenances but when we read Clause 3 of the same Sale Deed, thesaid clause gives a different impression. Clause 3 of the Sale Deed is asfollows:- “3. That the Vendor hereby represents and assures to the Vendeethat his right in the property hereby sold, transferred and conveyedis in terms of agreement for transfer dated 29-9-1988 betweenMr. Trilochan Singh Rana and Mis, Rani Rana transferor and M/s. Ocean Construction Industries Pvt. Ltd. (through its DirectorShri Jugal Kishore Malhan) transferee.”

16. The principles of construction of documents are well settled.While construing the documents/intention of the parties have to beascertained. In this context, reference is made to judgment of this Court AB

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Ain Sahebzada Mohammad Kamgarh Shah Vs. Jagdish Chandra DeoDhabal Deb and Others, AIR 1960 SC 953. In Paragraph Nos. 12and 13, following was laid down:-

“12. In his attempt to establish that by this later lease the lessorgranted a lease even of these minerals which had been excludedBspecifically by Clause 16 of the earlier lease, Mr Jha has arrayedin his aid several well established principles of construction. Thefirst of these is that the intention of the parties to a document ofgrant must be ascertained first and foremost from the words usedin the disposition clause, understanding the words used in theirstrict, natural grammatical sense and that once the intention canCbe clearly understood from the words in the disposition clausethus interpreted it is no business of the courts to examine whatthe parties may have said in other portions of the document. Nextit is urged that if it does appear that the later clauses of thedocument purport to restrict or cut down in any way the effect ofDthe earlier clause disposing of property the earlier clause mustprevail. Thirdly it is said that if there be any ambiguity in thedisposition clause taken by itself, the benefit of that ambiguitymust be given to the grantee, the rule being that all documents ofgrants must be interpreted strictly as against the grantor. Lastly itwas urged that where the operative portion of the document canEbe interpreted without the aid of the preamble, the preamble oughtnot and must not be looked into.

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13. The correctness of these principles is too well established byauthorities to justify any detailed discussion. The task being toascertain the intention of the parties, the cases have laid downthat that intention has to be gathered by the words used by theparties themselves. In doing so the parties must be presumed tohave used the words in their strict grammatical sense. If and whenthe parties have first expressed themselves in one way and thengo on saying something, which is irreconcilable with what hasgone before, the courts have evolved the principle on the theorythat what once had been granted cannot next be taken away, thatthe clear disposition by an earlier clause will not be allowed to becut down by a later clause. Where there is ambiguity it is the dutyof the Court to look at all the parts of the document to ascertainwhat was really intended by the parties. But even here the rulehas to be borne in mind that the document being the grantor’s F

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DDA v. M/S. KARAMDEEP FINANCE & INVESTMENT (I)PVT. LTD. [ASHOK BHUSHAN, J.]

document it has to be interpreted strictly against him and in favourof the grantee.”

17. This Court further in Paragraph No.14 has held that in casesof ambiguity, several parts of the document have to be examined to findout what was really intended by the parties. In Paragraph No. 14,following was laid down:- “14. …………………………………In cases of ambiguity it isnecessary and proper that the court whose task is to construe thedocument should examine the several parts of the document inorder to ascertain what was really intended by the parties. In thismuch assistance can be derived from the fourth condition of theconditions which were imposed by the lease as regards the grantof sub-leases. This condition provided inter alia that all such under-leases to be granted by the lessee shall be subject to the provisionsof Clause 16 of the principal lease ………………………………………”

18. Before we construe the document, we need to first notice theauction notice by which the property was put to auction. Auction notice,which has been brought on the record as Annexure-R1 indicate thatdetails of four properties were given in the auction notice. It is useful tolook into the details given as follows:-

D e t a ils o f P r o p e r t ie s R e s e r v e P r ic e 1. P r o p e rty N o . B - 6 , F r ie n d s 3 4 . 2 0 lac s C o lo n y M a th u r a R oa d , N e w D e lh i . T h is is a le a se h o ld r e sid e ntia l p l o t m e a s u r in g 1 9 5 .0 97 s q . M t. to g e th er w ith b u ild in g s a n d s tr u ct u r e the r e o n a n d fix tur e s a n d f ittin g th e r e in 2. P r o p e rt y N o . 1 4 , B lo c k A - 2 , 1 . 0 8 c r o r e sS a f d a r ju n g D e v el o p m e n t A r e a , N e w D e lh i. T h is is a le a s e h o l d r e sid e ntia l p lo t m e a s u r in g (7 2 5 s q . y d s. ) w ith a d o ub le s to r e y e d b u ild ing . T h e G r o u n d F lo o r c o ns i sts of d ra w in g d in in g be d r o o m , kit ch e n a n d a g a r a ge . T h e F ir s t F loo r c o ns ists o f 3 b e d r o o m s , 3 ba th ro o m s, sto re a nd a lo b b y o v e r the g ar a g e . T h e r e a r e 2 flo o r s e ac h h av in g a se r v a n t r o om W . O . a n d a co c kin g v e r a nd a h .

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A3 . P ro p e r ty N o . A - 8 /2 3 , V as a n t 3 6 . 6 0 L a c sV i h a r, N e w D e lh i. T h is is a l ea s e h o ld r e s id e n tia l p lo t N . 2 3 in S tr e e t N o . A - 8 in t h e la y o u t p la n o f V as a n t V i h a r o f th e G o v e r n m e n t S e rv a n t s C o o p e ra tiv e . H o u s e B u il d in g S o c ie ty L td . , a n d Bm e a s u rin g 1 5 0 S q . y d s a l o n g w ith t h e s u p e r s tr u c tu re b u ild th e r e o n . ( C o v e r e d a re a 1 3 5 0 S q . F t ).4 . P ro p e r ty b e a rin g H o u s e N o . E -2 5 . 6 0 lac s 4 4 4 ( G r o u n d F lo o r ) , G r e a ter K ail as h P a r t-I I , N e w D e lh i - C1 1 0 0 4 8 . A l l r ig h ts , title s a n d In te r e s ts i n th e d w e lli n g u n it o n g ro u n d f lo o r, an d m a z a n i n e f lo o r o f H o u s e N o . E - 4 4 4 , G r e a ter K ail as h , P a r t- II , N e w D e lh i, t o g et h e r w ith u n d iv i d e d . DI n d iv is i b le a n d im p a r tib le o w n e r s h ip r i g h t o f 3 5 % in th e l a n d u n d e r n e a th o f th e s a id b u ild in g a n d in c lu d in g th e f o llo w in g s :- 1 . O n e d r a w in g -c u m -d in in g h a ll, th r e e b e d Ero o m s w ith a tta c h e d b a th ro o m s , b a lc o n y , k i tc h e n , s to ra g e s p a ce ( s er v a n ts Q u a r te rs ) a n d s e r v an t's b a th r o o m s o n g ro u n d fl o o r . 2 . F r o n t la w n a n d b a c k Fc o u rty a rd o n th e g ro u n d fl o o r . P a rk in g s p a c e f o r a M ar u ti C ar in th e D riv e w a y. GIn g r e s s a n d E g r e s s f ro m th e m a in g a te to th e d w e llin g u n it .

19. A perusal of the details of the properties indicate that propertyin question is included as Item No. 2, which is mentioned as “This is alease hold residential plot”. It is to be noticed that in so far as properties H

at Sl. Nos. 1, 2 and 3, the words mentioned are “leasehold residentialplots” whereas with regard to property details given at Sl. No.4, it hasbeen mentioned that “all rights, titles and interests in the dwelling unit”,which, if contrasted with details of properties given at Sl. Nos. 1, 2 and3 contains the intendment. Thus, there cannot be any doubt that propertyin question, which was put in auction was a property as lease hold rightsresidential plots. When property is auctioned, the terms and conditionsof auction are binding on both the parties. When petitioner submitted hisbid in pursuance of the auction notice, he was bidding for lease holdresidential plot with a double storied building. While interpreting theSale Deed, the auction notice has to be looked into to find out the natureof transaction. The Sale Deed cannot be read divorced to the auctionnotice or contrary to auction notice. Auction of a leasehold residentialplot and auction of freehold residential plot carries different connotations.Leasehold rights are limited rights, which are subservient to freeholdrights of a property. In giving bid for leasehold rights and freehold rights,different considerations are there. Clause 3 as noted above indicatethat the property sold and transferred is in terms of the agreement dated29.09.1988 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 theirright, which was conferred to them by the Indenture dated 18.03.1970.Learned counsel for the writ petitioner has submitted that Clause 3 beingclearly contradictory to Clauses 1 and 2 has to give way to earlier clausesin the Sale Deed. He has placed reliance on judgment of this Court inRadha 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 beadmissible two constructions of a document, one of which willgive effect to all the clauses therein while the other will renderone or more of them nugatory, it is the former that should beadopted on the principle expressed in the maxim “ut res magisvaleat quam pereat”. What has to be considered therefore iswhether it is possible to give effect to the clause in question, whichcan only be by construing Exhibit B as creating a separate Patni,and at the same time reconcile the last two clauses with thatconstruction. Taking first the provision that if there be other personsentitled to the Patni of lot Ahiyapur they are to have the same A

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rights in the land comprised in Exhibit B, that no doubt posits thecontinuance in those persons of the title under the original Patni.But the true purpose of this clause is, in our opinion, not so muchto declare the rights of those other persons which rest on statutoryrecognition, but to provide that the grantees under the documentshould take subject to those rights. That that is the purpose of theclause is clear from the provision for indemnity which is containedtherein. Moreover, if on an interpretation of the other clauses inthe grant, the correct conclusion to come to is that it creates anew Patni in favour of the grantees thereunder, it is difficult tosee how the reservation of the rights of the other Patnidars of lotAhiyapur, should such there be, affects that conclusion. We areunable to see anything in the clause under discussion, whichmilitates against the conclusion that Exhibit B creates a new Patni.

13. We must now refer to the decision on which the learned Judgesin the Court below have relied in support of their conclusion. InKanchan Barani Debi v. Umesh Chandra, AIR 1925 Cal. 807,the facts were that the Maharaja of Burdwan had created a Patniof lot Kooly in 1820. The Choukidari Chakran lands situatedwithin that village were resumed under the Act and transferred tothe Zamindar who granted them in 1899 to one Syamlal Chatterjeein Patni on terms similar to those in Exhibit B. In 1914 the Patni lot Kooly was sold under the Regulation, and purchased by SmtKanchan Barani Debi. She then sued as such purchaser to recoverpossession of the Choukidari Chakran lands. The defendantswho represented the grantees under the Patni settlement of 1899resisted the suit on the ground that the sale of Patni Kooly did not operate to vest in the purchaser the title in the ChoukidariChakran lands, as they formed a distinct Patni. Dealing with thiscontention, B.B. Ghose, J. who delivered the judgment of the Court,observed:

“It is certainly open to the only two parties concerned to alterthe terms of the original patni if they chose to do so; and whatwe have to see is whether that was done. In order to do that,we have to examine the terms of the pattah by which theChoukidari Chakran lands were granted to Syamlal Chatterjee.”

The learned Judge then refers to the two clauses correspondingto the last two clauses in Exhibit B, and comes to the conclusion that their effect was merely to, restore the position as it was whenthe original Patni was created, and that, in consequence, thepurchaser was entitled to the Patni as it was created in 1820, andthat the plaintiff was entitled to the possession of the ChoukidariChakran lands as being part of the Patni. Now, it is to be observedthat in deciding that the Choukidari Chakran lands granted in1899 became merged is lot Kooly, as it was in 1820, the learnedJudge did not consider the effect of the clause providing for saleof those lands as a distinct entity under the provisions of theRegulation when there was default in the payment of rent payablethereon under the deed, and that, in our opinion, deprives thedecision of much of its value. In the result, we are unable to holdthat the two clauses on which the learned Judges base theirconclusion are really inconsistent with the earlier clauses whichsupport the view that the grant under Exhibit B is of a distinctPatni. Nor do we agree with them that the earlier clause providingfor the sale of the Chaukidari Chakran lands in default of thepayment of jama, should be construed so as not to override thelater clauses. If, in fact, there is a conflict between the earlierclause and the later clauses and it is not possible to give effect toall of them, then the rule of construction is well established that itis the earlier clause that must override the later clauses and notvice versa. In Forbes v. Git, (19220 1 AC 256, Lord Wrenburystated the rule in the following terms:

“If in a deed an earlier clause is followed by a later clausewhich destroys altogether the obligation created by the earlierclause, the later clause is to be rejected as repugnant and theearlier clause prevails. In this case the two clauses cannot bereconciled and the earlier provision in the deed prevails overthe later.”

We accordingly hold that Exhibit B created a new Patni and thatthe sale of the lands comprised therein is not bad as of a portionof a Patni.”

20. There cannot be any dispute to principles of construction ofdocument as laid down by this Court as noticed above. But we have tolook 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 whereGovernment has granted rights by Sale Deed to the writ petitioner.

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ASection 3 of the Government Grants Act, 1895 provides for Governmentgrants to take effect according to their tenor. Section 3 is as follows:-

3. Government grants to take effect according to theirtenor.- All provisions, restrictions, conditions and limitations overcontained in any such grant or transfer as aforesaid shall be validBand the effect according to their tenor, any rule of law, statute orenactment 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 downfollowing:- C

“……………………when the said Government made a grant tothe appellant’s predecessors, the principle enunciated by Section8 of the Transfer of property Act should be applied and the grantshould be construed to include all rights, title and interest of thegrantor, unless there is a contrary provision either expressly made,Dor 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 eitherexpressly made, or implied by necessary implications, is the principle,which has been laid down by this Court in above case. Paragraph No.3Econtains the intention of the granter to transfer the rights to the writpetitioner in terms of the agreement dated 29.09.1988. Clause 3 limitsand explain the rights, which were given in Clause Nos. 1 and 2 of theSale Deed, but it cannot be said that Clause 3 is totally contradictory toClauses 1 and 2. The three clauses have to be harmoniously construedto give effect to the intention of the granter. Furthermore, as we haveFnoticed that auction notice provided for auction of leasehold rights, whichis an important factor, which cannot be brushed aside while interpretingthe Sale Deed.

23. With reference to Clause 3 in the Sale Deed a statutoryprovision also needs to be noticed. Section 269UE of the Income TaxGAct, 1961 deals with vesting of property in Central Government. Section269UE 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 sub-section (1) of section 269UD is made by the appropriate authority in respect of an immovable propertyreferred to in sub-clause (i) of clause (d) of section 269UA, suchproperty shall, on the date of such order, vest in the CentralGovernment in terms of the agreement for transfer referred to insub-section (1) of section 269UC:

Provided that where the appropriate authority, after giving anopportunity of being heard to the transferor, the transferee or otherpersons interested in the said property, under sub-section (1A) ofsection 269UD, is of the opinion that any encumbrance on theproperty or leasehold interest specified in the aforesaid agreementfor transfer is so specified with a view to defeat the provisions ofthis Chapter, it may, by order, declare such encumbrance orleasehold interest to be void and thereupon the aforesaid propertyshall vest in the Central Government free from such encumbranceor leasehold interest.

24. In sub-section (1) of Section 269UE in place of words “freefrom all encumbrances” the words “in terms of the agreement for transferreferred to in sub-section (1) of Section 269UC” have been inserted.When the Sale Deed was executed in favour of the auction-purchaserabove amendment in Section 269UE sub-section (1) had already beeninserted. The vesting of property in Central Government when is in termsof agreement for transfer referred to in sub-section (1) of Section 269UEat the time of execution of Sale Deed, the statutory mandate has beenreflected in Clause 3. We, thus, neither can ignore Clause 3 of the SaleDeed nor can hold that said Clause has to give way to Clauses 1 and 2of Sale Deed. While finding out the tenor of grant as reflected in SaleDeed, the provisions of sub-section (1) of Section 269UE as amendedby Finance Act has also to be taken note of.

25. We, thus, find that on true construction of Sale Deed, it isclear that all rights, titles and interests were not conveyed to the petitionerin the leasehold residential plot, when we read Clauses 1, 2 and 3 together.

26. Learned counsel for the writ petitioner relying on provisionsof Section 111 of the Transfer of Property Act, 1882 contends thatleasehold rights have been merged in the lessor since when lessor’s A

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Ainterest coalesces with lessee’s interest, the principle of merger comesinto 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 asBcontained in Section 111(d). In Paragraph Nos. 14 to 17, following waslaid down:- “14. The common-law doctrine of merger is statutorily embodiedin the Transfer of Property Act, 1882. Section 111(d) provides:

“111. Determination of lease.—A lease of immovableproperty, determines—

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(d) in case the interests of the lessee and the lessor in thewhole of the property become vested at the same time in oneperson in the same right; D

A bare reading of the doctrine of merger, as statutorily recognizedin India, contemplates (i) coalescence of the interest of the lesseeand 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 thelessor and the lessee so as to enable the lesser interest of thelessee sinking into the larger interest of the lessor in the reversion.

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15. In Badri Narain Jha v. Rameshwar Dayal Singh, AIR 1951SC 186, it was held by this Court that if the lessor purchases thelessee’s interest, the lease no doubt is extinguished as the sameman cannot at the same time be both a landlord and a tenant, butthere is no extinction of the lease if one of the several lesseespurchased only a part of the lessor’s interest. In such a case theleasehold and the reversion cannot be said to coincide.

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16. In Sk. Faqir Bakhsh v. Murli Dhar, AIR 1931 PC 63, theplaintiff was holding on lease a portion of the entire property.Subsequently, the plaintiff and the defendant became pro indivisojoint proprietors of the property by purchasing shares from the H

earlier owners. The lease was subsisting when the shares werebought by the parties. In a suit for accounts filed by the plaintiff itwas held that the plaintiff’s rights under lease of a part do notmerge in his rights as joint proprietor of the whole of the propertyas between the parties the plaintiff held a valid and subsistinglease.

17. A Division Bench of the Patna High Court in ParmeshwarSingh v. Sureba Kuer, AIR 1925 Pat 530, held that Section111(d) applies only to a case where the interests of the lessee andof the lessor in the whole of the property become vested at thesame time in one person in the same right. Where a co-proprietorin the property purchased for himself the interest of the lessees ofthe whole property, there could be no merger. On purchase of apartial interest in tenancy rights by the owner, the onus of provingthat the distinction between the interests continued to be keptalive subsequently also cannot be placed on the party alleging thatthe distinction was so kept alive. To the same effect is the view ofthe 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 againstit when it operates to the disadvantage of a party, as was held bythis 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 KumarJaiswal (supra). There cannot be any dispute to the proposition laiddown by this Court in reference to Section 111(d). We, however, findthat in the present case, we need not rely on doctrine of merger ascontained in Section 111(d). Present being a case of a Governmentgrant by virtue of the Section 2 of the Government Grants Act, 1895,nothing in the Transfer of Property Act, 1882, shall apply or be deemedever to have applied to any grant or other transfer. The principlescontained in the Transfer of Property Act have been applied whileconstruing the Government grants as has been noticed above. But hereinissue being Government grant, the principle of merger may not be ofmuch relevance. More so, we having construed the Sale Deed as nothaving conveyed all rights and interests in the leasehold property, theprinciple of merger does not in any manner advance the claim of thewrit petitioner.

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A28. Learned counsel for the writ petitioner has also referred toand relied on judgment of the Division Bench of Delhi High Court in M/s. Bansal Contractors (India) Ltd. & Anr. Vs. Union of India andOthers, 76 (1998) DLT 805. In the above case, sale of property wasmade in public auction after exercising the power under Section 269UD.From the judgment of Delhi High Court, it is not clear that as to whetherBany clause similar to Clause 3 as contained in the Sale Deed in question,was there. In absence of any such clause, interpretation put to the SaleDeed by the Delhi High Court cannot be faulted. It is further relevant tonotice that details of the auction notice are not noticed in the judgment tofind out what was the nature of the property, which was sought to be putCfor auction. We, thus, are of the view that judgment of Delhi High Courtwas on its own facts and cannot be relied on by the writ petitioner in thefacts of the present case. We, thus, do not find any error in the judgmentof the Division Bench setting aside the direction made by the learnedSingle Judge to refund the amount of conversion. The writ petitionerhas made an alternative prayer in the writ petition seeking a writ ofDmandamus directing the respondents to allow/order the conversion ofthe lease hold rights into freehold rights in respect of the aforesaid plotof land without payment of any amount of alleged unearned increaseand or interest due thereon.

29. We having held that writ petitioner is not entitled for refund ofEconversion charges, we direct the DDA to process the writ petitioner’sapplication for conversion of the leasehold rights into freehold rights.The Civil Appeal No.1534 of 2019 filed by M/s. Karamdeep Financeand Investment (I) Pvt. Ltd. is disposed of upholding the order of DivisionBench, however, with direction to DDA to process the application for Fconversion in accordance with law. The Civil Appeal No. 1533 of 2019is dismissed. The parties shall bear their own costs.

Kalpana K. Tripathy

Appeals disposed of.

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