Lease – Lease deed – Recovery of unearned increase (UEI) in the value of the commercial plot at the time of sale, transfer assignment – Respondent no.1-public Ltd. company was allotted a commercial plot by the appellant-DDA – Pursuant thereto, a perpetual lease deed was executed by the appellant in favour of respondent no.1 – Respondent no.1 and respondent no.2 entered into an arrangement and invited an order of demerger from the Company Judge, of the High Court – The order of demerger was passed – Consequent to which, all the assets rights, powers, debts and liabilities of respondent no.1 stood transferred to respondent no.2 – As the subject plot transferred to another company-respondent no.2, appellant demanded respondents u/cl.2(d) of the appellant’s policy to pay Rs.6,17,53,998/- towards UEI and an amount of Rs.10,44,394/- towards misuse charges – Respondents failed to pay – Show cause notice issued by the appellant – Writ petition by respondents challenging the said show cause notice – Single Judge of the High Court held that the notice issued by the appellant was valid – However, Division Bench of High Court set aside the demand notice and show cause notice issued by the appellant – Respondents contended that the two companies were admittedly group companies and respondent no.1 continued to have control over the property in question – Also, the transfer of property was not to an outsider and, in any case, was without any consideration and on no-profit basis – As a result, the respondents were not liable to pay UEI – Held: The order passed by the Company Judge approving the scheme of demerger made it clear that all property, assets, rights and powers in respect of the specified properties, including the said plot, transferred to and vested in respondent no.2 – Once it is a case of transfer, it must abide by the stipulation in cl. 6(a) of the Lease Deed of taking previous consent in writing of the lessor (appellant) and to fulfill such terms and conditions as may be imposed, including to pay any unearned increase amount – Further, cl.2(d) of the appellant’s policy relating to the charge of unearned increase plainly applied to the present case – The obligation to pay UEI did not flow only from the instructions/policy issued by the competent authority of the appellant but primarily from the stipulation in the Perpetual Lease Deed in the form of cl.6(a) – Going by the plain language of cl.6(a) of the Lease Deed, there is no reason to extricate the respondents from the obligation of the lessee (transferor) flowing therefrom – Therefore, judgment of the Division Bench of the High Court set aside and the order passed by the single judge restored – DDA policy/instructions No.LSAI/ 1(6) 87/Policy Case/ Unearned Increase dated 06.09.88 – cl.2(d)
Allowing the appeal, the Court
HELD: 1. In the first place, it is not open to the respondents to contend that the arrangement and demerger scheme does not result in transfer of the subject plot from the original lessee (respondent No.1) to respondent No.2. Inasmuch as, clause (2) of the order passed by the Company Judge approving the scheme of demerger, as reproduced above, makes it amply clear that all property, assets, rights and powers in respect of the specified properties, including the subject plot, shall stand transferred to and vest in respondent No.2. Once it is a case of transfer, it must abide by the stipulation in clause 6(a) of the Lease Deed of taking previous consent in writing of the lessor (appellant) and to fulfill such terms and conditions as may be imposed, including to pay any unearned increase (UEI) amount. There is force in the argument of the appellant that the fact situation of the present case would, in fact, be governed by clause 2(d) of the instructions. This clause plainly applies to the present case. The demand of unearned increase from the respondents is founded on that basis. The High Court misinterpreted the said clause and erroneously opined that it is not applicable to a case of demerger of a public limited company. [Para 13][799-G-H; 800-A-E]
2. The principal clause is clause 6(a) of the Lease Deed. The clause referred to in the instructions is equally significant. Indeed, the latter merely provides for the mechanism to recover the unearned increase from the original lessee. The fact that the same group of persons or directors/ promoters/shareholders would be and are associated with the transferee company does not cease to be a case of transfer or exempted from payment of UEI, as envisaged in clause 6(a) of the Lease Deed. Rather, clause 2(d) of the policy, makes it expressly clear that unearned increase be charged irrespective of the fact that the directors in both companies are common and the old (parent) company has not changed its name. [Para 14][800-E-G]
3. The fact that it was a case of transfer is reinforced from the order of demerger passed by the Company Judge and once it is a case of transfer, coupled with the fact that the respondents are not covered within the categories specified in clauses 1(a) to 1(d) of the policy of the appellant, they would be liable to pay unearned increase (UEI) in the manner specified in clause 6(a) of the Lease Deed. The obligation to pay UEI does not flow only from the instructions issued by the competent authority of the appellant but primarily from the stipulation in the Perpetual Lease Deed in the form of clause 6(a). Viewed thus, the Division Bench of the High Court committed a manifest error in allowing the appeal and setting aside the judgment of the Single Judge, who had rightly dismissed the writ petition and upheld the demand notice and the show cause notice calling upon the respondents to pay the unearned increase amount in terms of clause 6(a) of the Perpetual Lease Deed. That demand was final and binding on the respondents, so long as the stipulation in the form of clause 6(a) of the Perpetual Lease was in force. [Para 15][800-G-H; 801-A-C]
4. In the present case, the fact that it is a case of transfer of the subject plot from the lessee (respondent No.1), a public limited company, to the transferee (respondent No.2), another public limited company, is indisputable. That is reinforced from the order of the Company Judge, formulating the scheme for demerger of the lessee company. It is not an involuntary transfer as such. The only issue is whether, by virtue of the fact that the affairs of the transferee company (respondent No.2) are controlled by the same set of directors/shareholders of the original lessee (respondent No.1) with about 98.62% of the shares of the transferee company (respondent No.2), that would or would not absolve the respondent No.1 of its obligations under the Lease Deed. The answer is an emphatic “No”. For, under clause 6(a) of the Lease Deed, it is incumbent to seek previous consent in writing from the lessor (appellant) and to abide by the terms and conditions specified by the appellant in that behalf, including the payment of unearned increase determined as per the said clause. Going by the plain language of clause 6(a) of the Lease Deed, there is no reason to extricate the respondents from the obligation of the lessee (transferor) flowing therefrom. Therefore, the decision of the Single Judge in dismissing the writ petition restored. [Paras 16 and 18][801-E-H; 802-D-E] M/s. Parasram Harnand Rao v. M/s. Shanti Parsad Narinder Kumar Jain and Anr. (1980) 3 SCC 565 : [1980] 3 SCR 444 ; Cox & Kings Ltd. and Anr. v. Chander Malhotra (Smt.) (1997) 2 SCC 687 : [1996]
10 Suppl. SCR 1 ; M/s. General Radio and Appliances Co. Ltd. and Ors. v. M.A. Khader (dead) by LRs. (1986)
2 SCC 686 : [1986] 2 SCR 607 ; Indian Saving Products Ltd. v. Delhi Development Authority and Ors. (2004)
120 Com. Cases 818 (Delhi) ; Singer India Ltd. v. Chander Mohan Chadha and Ors. (2004) 7 SCC 1 : [2004] 3 Suppl. SCR 535 ; Madras Bangalore
Transport Co. (West) v. Inder Singh and Ors. (1986) 3 SCC 62 – referred to.
K. Devarajulu Naidu v. C. Ethirajavalli Thayaramma and Ors. (1949) 2 MLR 423 ; State of U.P. and Ors. v. Renusagar Power Co. and Ors. (1988) 4 SCC 59 : [1988] 1 Suppl. SCR 627 ; New Horizons Limited and Anr. v. Union of India and Ors. (1995) 1 SCC 478 : [1994] 5 Suppl. SCR 310 – held inapplicable.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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