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Supreme Court: Petitioner Not Entitled For Refund Of Conversion Charges For Conversion Of Leasehold Rights Into Freehold Rights

Vanshita Singh ,
  10 October 2022       Share Bookmark

Court :
Hon’ble Supreme Court of India
Brief :

Citation :
Civil Appeal No. 1533 of 2019 with Civil Appeal No. 1534 of 2019

Delhi Development Authority Vs M/S. Karamdeep finance and investment (I) Pvt. Ltd. And Ors. With M/S. Karamdeep Finance And Investment (I) Pvt. Ltd. And Ors. Vs. Delhi Development Authority

12 February 2019

Justice K Joseph and Justice A Bhushan


Two appeals have been filed in opposition to the Delhi High Court’s decision from March 30, 2016, which allowed the LPA No. 226 of 2014 in part. These two different appeals were filed by the writ petitioner, M/s. Karamdeep Finance & Investment (I) Pvt. Ltd., as well as the Delhi Development Authority, both of which are contesting the same ruling. Both appeals were heard concurrently, and this common judgement is being used to decide both of them.


Transfer of Property Act, 1882

  • Section 111: Determination of lease

Income Tax Act, 1961

  • Section 269UD(1) - Subject to the provisions of sub-sections (1A) and (1B), the appropriate authority, after the receipt of the statement under sub-section (3) of section 269UC in respect of any immovable property, may, notwithstanding anything contained in any other law or any instrument or any agreement for the time being in force, make an order for the purchase by the Central Government of such immovable property at an amount equal to the amount of apparent consideration: Provided that no such order shall be made in respect of any immovable property after the expiration of a period of two months from the end of the month in which the statement referred to in section 269UC in respect of such property is received by the appropriate authority.

Government Grants Act, 1895

  • Section 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 take effect according to their tenor, any rule of law, statute or enactment of the Legislature to the contrary notwithstanding.


  • In a DDA public auction, one Shri Trilochan Singh Rana won the 725 square yard Plot No.14, Block A-2, Safdarjung Development Area, New Delhi. On 18.03.1970, a Perpetual Lease Deed was signed in his favour. The lessee was not permitted to sell, transfer, assign, or otherwise part with ownership of the whole or any part of the plot without the prior written agreement of the lessor, which was the President of India, according to clause (4)(a) of the Perpetual Lease Deed.
  • Once the consent was granted, the lessor would be free to impose any terms and conditions he saw fit, and the lessee would be required to pay 50% of any unearned increase in the residential plot’s market value (i.e., the difference between the premium paid and the market value) at the time of sale, transfer, assignment, or giving up possession.
  • Shri Trilochan Singh Rana entered into a contract with M/s Ocean Construction Industries Pvt. Ltd. to sell the aforementioned property. According to Section 269UD of the Income Tax Act of 1961, a request for permission to sell the aforementioned property was made, and the Appropriate Authority, Income Tax Department, was requested. Later, the Appropriate Authority issued an order under Section 269UD (1) of the Income Tax Act of 1961 authorising the forcible acquisition of the property for Rs. 76,000,000.
  • The Chief Commissioner (Tech) of the Income Tax Department was then asked by the DDA (Finance Member) to pay an amount toward unearned increment to the tune of Rs. 17,88,114.55. By letter, the Chief Commissioner of the Income Tax Department transferred a check for Rs. 17,86,420 in Delhi Development Authority’s favour for the payment of the unearned increase for the relevant property.
  • On March 20, 1989, the aforementioned property was put up for public auction, with M/s. Karamdeep Finance & Investment (I) Pvt. Ltd., the appellant, placing the highest bid of Rs. 1,08,05,000/-. The Department approved the said bid. On 25.04.1989, the writ petitioner took real physical possession of the aforementioned property. By way of the Director, Department of Revenue, Ministry of Finance, the President of India executed a registered Sale Deed on 25.09.1997 in favour of the writ petitioner. The writ petitioner filed a request with the DDA for the conversion of the plot's leasehold rights into freehold rights and also paid Rs. 3,45,729 as conversion fees.
  • When the conversion application was received, the DDA estimated the 50% undeserved rise in market value and informed the auction-purchaser, who was the writ petitioner, of the figure. In response, the DDA issued a demand for Rs. 1,43,90,348 in a letter dated 28.04.2000. After that, the writ petitioner submitted a Writ Petition to the Delhi High Court. The learned Single Judge granted the writ petition in his order dated26.09.2013, and declared the DDA’s demand for Rs. 1,43,90,348/- to be illegal. He also ordered the DDA to return the Rs. 3,45,729/- that the writ petitioner had paid as a deposit for the conversion fees, along with interest.
  • The Delhi Development Authority (DDA) then filed a Letters Patent Appeal, or LPA No. 226 of 2014, before the Delhi High Court in opposition to the judgement and decision issued by the learned Single Judge in W.P.(C)NO.4152 of 2000 on 26.09.2013. The Delhi High Court issued the contested judgement and final order, whereby it partially upheld the appellant-appeal DDA’s and set aside the learned Single Judge’s order directing a refund of the conversion fee paid by the writ petitioner. It also held that the purchaser is not responsible for paying the DDA for the unearned increase. These appeals have been submitted by both parties who feel wronged by the Division Bench’s decision.


  • Whether writ petitioner was liable to pay unearned increase in value of the property to the DDA?
  • Whether writ petitioner was entitled to get refund of conversion charges deposited by it?


  • The learned Addl. Solicitor General contended that it was incorrect for the learned Single Judge and Division Bench to reject the DDA’s motion for an undeserved increase. According to the argument, it was true that Shri Trilochan Singh Rana had a lease on the land in dispute. Shri Trilochan Singh Ranass shareholding was purchased in accordance with Chapter XXC of the Income Tax Act of 1961. The responsible body attempted to put the leasehold rights to the property up for sale in the auction notice that was issued. More than the leasehold rights could not have been acquired at auction by the writ petitioner.
  • The writ petitioner’s own deposit of conversion charges demonstrateed that it was agreed that just the leasehold rights had been acquired at auction. It was incorrect for the High Court to hold that only voluntary transfers give rise to the need to pay an undeserved increase. On all transfers, the need to pay an unearned increment was fixed. Being the highest bidder at the auction, the writ petitioner was responsible for paying the unearned increase. The unearned increase should have been paid because the property’s value had significantly grown, and both the Single Judge and the Division Bench erred by rejecting the motion for unearned increase.
  • The High Court’s ruling that the auction-purchaser has no need to pay unearned increment was backed by the senior counsel who represented the writ petitioner and refuted the arguments made by the learned counsel for the appellant-DDA. He asserted that the auction notice made no mention of the auction buyer being responsible for paying undeserved increase. Furthermore, unearned increment was already paid by the Income Tax Department when it acquired the property, as can be seen in the conveyance deed itself. As a result, there was never a need for the auction-buyer to make another payment.
  • It was argued in favour of the appeal put out by the writ petitioner that what was delivered to the auction-purchaser was an absolute right to the property rather than leasehold right. There was no need to pay a conversion fee because the auction-purchaser was now the sole owner of the property. It was argued that the writ petitioner deposited the conversion charges under some false assumption rather than on purpose. They consequently filed a writ action asking for the reimbursement of the conversion expenses they had mistakenly deposited.
  • He argued that the government had acquired the leasehold rights after becoming the owner of the property under Chapter XXC of the Income Tax Act. The lessor, the government, had merged the leasehold rights. The merger principle was now applicable since the lower right had been merged into the higher right. The writ petitioner bought exactly what was sold to him. When the Income Tax Department bought the property, the lease expired.


  • The Court observed that the difference between the premium paid and the market value was the unearned rise. The purpose of the aforementioned clause was to ensure that when a lessee is allowed to transfer their leasehold rights, the lessor is not denied the difference between the premium paid and market value. The provision was added to the Perpetual Lease to provide compensation to the lessor. The situation at hand did not involve the lessee transferring anything or asking the lessor for permission to do something. In this instance, the appropriate authorities used its authority under Section 269UD of the Income Tax Act to allow the Central Government to purchase the property.
  • This Court has further ruled that when there is ambiguity in a document, it is necessary to look at various areas of the document to determine the parties’ true intentions. The bench determined to first take note of the auction notice by which the property was put up for sale before interpreting the document. Four properties’ details were included in the auction notice, according to Annexure-R1, which has been added to the record.


The court ordered the DDA to handle the writ petitioner’s request for the conversion of the leasehold rights into freehold rights after ruling that the petitioner is not entitled to a refund of conversion fees. The Division Bench's decision was upheld in the Civil Appeal No. 1534 of 2019 brought by M/s. Karamdeep Finance and Investment (I) Pvt. Ltd., although DDA was instructed to handle the conversion application in compliance with the law. The 2019 Civil Appeal No. 1533 was rejected. Each party is responsible to bear their own costs.

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