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

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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

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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

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Department  acquired  the  property  there  was  no

occasion  to  make  any  further  payment  by  auction-

purchaser. 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

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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

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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

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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

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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

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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

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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.

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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

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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

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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  under- leases 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

22

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. E- 444  (Ground  Floor),  Greater Kailash  Part-II,  New  Delhi- 110048. All  rights,  titles  and Interests  in  the  dwelling unit  on  ground  floor,  and mazanine  floor  of  House  No. E-444, Greater Kailash, Part- II, 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

23

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.   

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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 sub- section (1) of section 269UD is made by the appropriate  authority  in  respect  of  an immovable  property  referred  to  in  sub- clause (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) *** *** *** “

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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 sub-

section (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.        

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