2010 (11) TMI 1086 - SC - Indian Laws

Validity of the memo issued by the Director Town and Country Planning - agreements mutually entered by and between the parties - whether the Director Town and Country Planning is empowered to pass the impugned order? - Appellants were granted licence under the provisions of Haryana Development and Regulation of Urban Areas Act 1975 and the Rules framed thereunder i.e. Haryana Development and Regulation of Urban Area Rules 1976 for setting up residential colonies. The Appellants entered into required agreements with the Governor of Haryana acting through Director Town and Country Planning Haryana. The Appellants acting under the licence so granted and the agreements commenced setting up colonies by dividing the land into plots. The plots were sold to various buyers. The plot buyers are required to make construction on such plots to be used for the purpose for which the lay out was approved. The Appellants have also allotted flats to various persons and have entered into agreements. Mutual rights and obligations between the Appellants and the plot/flat buyers is structured by the agreements voluntarily entered into by them and all terms and conditions covenants were mutually agreed by and between the parties. In respect of certain areas even completion certificates were granted as early as in the year 1991-92. The Director all of a sudden without any notice whatsoever to any of the Appellants issued the impugned directions which were challenged on various grounds in the High Court. Interpretation of Contract - Freedom of contract is generally regarded as a reasonable social ideal only to the extent that equality of bargaining power between the contracting parties can be assumed and no injury is done to the interests of the community at large. The Court assumes that the parties to the contract are reasonable persons who seek to achieve reasonable results fairness and efficiency.... In a contract between the joint intent of the parties and the intent of the reasonable person joint intent trumps and the Judge should interpret the contract accordingly. A party who claims otherwise violates the principle of good faith. EXTENSION FEES - Whether the Director is empowered to issue any direction directing the Appellants not to collect the extension fee with further direction to delete the relevant clauses from the agreement? - HELD THAT - The provision for payment of extension fee has been provided for in the agreement according to the Appellants only in the interest of speedy development of each colony and also in order to prevent purchase of plots by speculators who may keep the plot vacant without making any construction with the only object to earn profit by selling the same at a future date and such an act may prove detrimental to other purchasers as such acts obstruct the all round development of the area which is pre-eminently/predominantly in the public interest. It is not necessary for us to express any firm opinion with regard to the plea so taken by the Appellants in this proceeding. It may altogether be a different matter if the purchasers raise objection as regards the very covenants incorporated into the agreement entered into by and between the parties in a properly constituted proceedings on such grounds as may be available to them in law. Whether the Director was justified in issuing directions asking the licensee/owner to virtually amend the clauses/covenants in the agreement? HELD THAT - The Director s functions and duties are well structured by the Act and the Rules. There is no provision in the Act or the Rules empowering the Director to sit in judgment on the perceived fairness of any clauses incorporated in the agreement entered by the parties. The terms and conditions in the licence granted by the Director do not prohibit incorporation of such a clause in the agreement to be entered between the owners and the purchasers. Nor there is any clause in the agreement entered by the owner with the Governor through the Director empowering the Director to sit in appeal over the agreement entered by the owners with the purchasers of the plots. TRANSFER FEES - Whether the owner/colonizer in law after obtaining full payments from the allottees is prohibited from transferring the plots to the nominees of the allottees? HELD THAT - Nor there is any provision whatsoever in the Stamp Act or Registration Act imposing any restriction on the assignment or transfer of rights under a sale/purchase agreement by the purchaser to a third party before the execution of any conveyance deed in respect of any immovable property. The parties in the agreement had agreed for the substitution of the name of allottees at the sole discretion of the owner. The conveyance deed executed by the owner is the one which is executed either in favour of the allottee or his nominee as the case may be on which a proper stamp duty and registration fee is required to be paid. In any event the Director has no power under the Act or the Rules to issue any such direction altogether prohibiting such nomination of another person thereby substituting the allottee. MAINTENANCE FEE/CHARGES LEVIED - Whether the Director is empowered to issue any directions directing the Appellants to stop charging maintenance fee from the plot/flat holders and also delete the relevant clauses from the agreement and refund the amounts so far collected to the Government immediately - HELD THAT - the maintenance fee/charges levied and collected are clearly not in respect of any of the internal development works defined under Clause (i) to (v) of Section 2(i) . Perhaps the learned senior counsel conscious of the difficulty to bring it under Section 2(i) (i) to (v) urged that maintenance expenses can be considered to be covered by Section 2 (i)(vi) which refers to any other work that the Director may think necessary in the interest of proper development of a colony . We find no merit in the submission. We have already noticed that providing services of the kind for which the maintenance charges/fee are collected are in no manner in respect of a work of internal development which is required to be carried out within the licenced area. The expression work in Section (i) (vi) cannot be interpreted in isolation ignoring the Clauses (i) to (v) in Section 2 . Such a construction is impermissible in law. It is therefore clear that Director has no authority or power under the Act to issue any directions directing the owners/colonizers to incur maintenance expenses by deeming the same to be part of the internal development works covered by Section 2(i). It is needless to reiterate that the maintenance of services specifies in Section 3(3)(a)(iii) cannot be considered to be part of the internal development works as defined by Section 2(i) . Whether the amount of maintenance service charges was already included in the sale price of the plots/flats? - HELD THAT - There is no price fixation formula devised under the provisions of the Act Rules and Regulations framed thereunder. The Statutory Authorities have no role to play in the fixation of price and costs of land and rate at which the plots/flats are to be sold. The price charged by the owner for the plot is fixed and covered by Clauses (1) and (2) of plot sale agreement entered into by and between the parties. The agreed sale price of the plot includes external development charges. The payment of maintenance charges by the plot buyer is provided for in Clause (14) of the said agreement. The sale price charged by the owner from the plot buyers includes maintenance of service charges at the most could be a bonafide contention between the owners/colonizers and the purchasers of plots/flats. Functions and duties of the Director and the power conferred upon him under the provisions of the Act and Rules - the Director is not authorized to interfere with agreements voluntarily entered into by and between the owner/colonizer and the purchasers of plots/flats. The agreed terms and conditions by and between the parties do not require the approval or ratification by the Director nor is the Director authorized to issue any direction to amend modify or alter any of the clauses in the agreement entered into by and between the parties. It is thus clear that there is no provision in the Act Rules or in the licence that empowers the Director to fix the sale price of the plots or the cost of flats. It is thus clear that there is no provision in the Act Rules or in the licence that empowers the Director to fix the sale price of the plots or the cost of flats. The impugned directions issued by the Director are beyond the limits provided by the empowering Act. The directions so issued by the Director suffer from lack of power. It needs no restatement that any order which is ultra vires or outside jurisdiction is void in law i.e. deprived of its legal effect. An order which is not within the powers given by the empowering Act it has no legal leg to stand on. Order which is ultra vires is a nullity utterly without existence or effect in law. LIMIT OF 15% PROFIT - Whether Appellants made any profit over and above 15% would arise for consideration only after the grant of final completion certificate in respect of the entire colony/development - HELD THAT - The application for grant of final completion certificate remained pending with the authorities since long time. The complete accounts are to be finalized to determine whether the 15% limit on the profit has been exceeded and whether the colonizers/owners made profits over and above that. Further steps may have to be taken in accordance with law only thereafter. It would be appropriate to direct the authorities to decide the application so filed by the developers/colonizers for grant of final completion certificate as expeditiously as possible preferably within six months. In case if it is found that the owners had exceeded the said 15% limit on the profit it shall always be open to the authorities to take appropriate action in accordance with law. We find it difficult to sustain the impugned memo of the Director and the same is set aside. But this order of ours shall not preclude owners of plots/flats to avail such remedies as may be available to them in law and raise any dispute that had arisen or may arise and for the enforcement of contractual terms and conditions in which event the matters have to be decided on its own merits uninfluenced by the observation if any made in the order of the High Court of Punjab and Haryana and in this order. Therefore the judgment of the High court is set aside. The appeals are accordingly allowed. All interlocutory applications and contempt cases are accordingly disposed of in terms of this order.

Summary

Issues Involved:
1. Authority of the Director, Town and Country Planning to issue the impugned memo.
2. Legality of the extension fee.
3. Legality of the transfer fee.
4. Legality of the maintenance fee.
5. Limit on profit percentage.

Detailed Analysis:

1. Authority of the Director, Town and Country Planning:
The primary issue was whether the Director, Town and Country Planning, had the authority to issue the impugned memo directing the deletion of clauses related to extension and maintenance fees from the agreement between the appellants and plot/flat buyers. The court noted that the Director's functions and duties are structured by the Haryana Development and Regulation of Urban Areas Act, 1975, and the Rules framed thereunder. The Director is not empowered to sit in judgment on the fairness of clauses in agreements entered into by private parties. The terms and conditions in the licence granted by the Director do not prohibit the incorporation of such clauses in agreements between owners and purchasers. The court found no provision in the Act or the Rules empowering the Director to issue the impugned directions, making the memo void and unenforceable.

2. Legality of the Extension Fee:
The agreement between the owners and purchasers included a clause allowing the owner to charge an extension fee if the purchaser failed to commence construction within a stipulated period. The court found no prohibition in the Act, Rules, or Regulations against such a clause. The extension fee was deemed to encourage speedy development and prevent speculative buying. The court held that the Director had no authority to direct the deletion of this clause from the agreement, as it was a matter of private contract between the parties.

3. Legality of the Transfer Fee:
The court examined whether the colonizer could deny the right of allottees to nominate another person as the purchaser of the property. The prevailing practice of permitting the transfer of plots before the registration of the conveyance deed was not contrary to the provisions of the Act or the Rules. The court found no merit in the argument that the State would lose stamp duty on subsequent transactions before the conveyance deed's execution. The Director had no power to issue directions prohibiting such nominations, making the impugned directions void.

4. Legality of the Maintenance Fee:
The court considered whether the Director could direct the appellants to stop charging maintenance fees and delete the relevant clauses from the agreement. The Act imposes certain obligations on colonizers, but it does not require them to provide maintenance services free of cost. The maintenance fees collected by the owners were for additional services not covered by the internal development works defined in Section 2(i) of the Act. The court found that the Director had no authority to issue directions regarding maintenance fees, as these were not part of the internal development works. The court also noted that the maintenance charges were a matter of private contract between the parties.

5. Limit on Profit Percentage:
The issue of whether the appellants made any profit over and above the 15% limit would arise only after the grant of the final completion certificate for the entire colony. The court directed the authorities to decide the application for the final completion certificate expeditiously. If it was found that the owners exceeded the 15% profit limit, appropriate action could be taken in accordance with the law.

Conclusion:
The Supreme Court found the impugned memo issued by the Director, Town and Country Planning, to be beyond the limits provided by the empowering Act, making it void and unenforceable. The court set aside the judgment of the Punjab and Haryana High Court and allowed the appeals, subject to observations made in the judgment. The court emphasized that disputes arising out of contracts between private parties should be resolved in a properly constituted proceeding in the private law domain.