TMI Blog2010 (11) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter 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 refun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... senior counsel Shri Harish Salve, Shri S. Ganesh, Shri Harish Malhotra and the learned Counsel Shri Rajiv Vermani for the Appellants and Shri U.U. Lalit, learned senior counsel for the Respondents. We have also heard the learned Counsel appearing on behalf of the interveners-applicants. 3. The central question that arises for our consideration in this group of appeals is whether the Director, Town and Country Planning, is empowered to pass the impugned order. Whether the impugned order is ultra vires. 4. By the impugned memo the Director had purported to give the following directions: (a) the provision in the agreement between the Appellant and the plot/flat buyers regarding extension fee and maintenance fee should be deleted from the agreement as the same is not permissible under the law; (b) further directed to stop charging of extension fee and maintenance fee from the plot/flat holders henceforth and the charges recovered on account of both from the plot/flat holders may be refunded to the Government immediately. (c) stop allowing the transfer of plots after obtaining full payment for the same and to ensure immediate registration of Conveyance Deed where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complexes, but an area of land divided or proposed to be divided-- (i) for the purpose of agriculture; or (ii) as a result of family partition, inheritance, succession or partition of joint holding not with the motive of earning profit ; or (iii) in furtherance of any scheme sanction under any other law; or (iv) by the owner of a factory for setting up of a housing colony for the labourers or the employees working in the factory; provided there is no profit motive ; or (v) when it does not exceed one thousand square meters or such less area as may be decided from time to time in an urban area to be notified by Government for the purposes of this sub-clause. shall not be a colony, (d) colonizer means an individual, company or association or body of individuals, whether incorporated or not, owning land for converting it into a colony and to whom a licence has been granted under this Act ; (dd) cyber city means self contained intelligent city with high quality of infrastructure, attractive surrounding and high speed communication access to be developed for nucleating the Information Technology concept germination of medium and large software companies and Info ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Director, for the grant of a licence to develop a colony in the prescribed from and pay for it such fee and conversion charges as may be prescribed. The application shall be accompanied by an income- tax clearance certificate: Provided that if the conversion charges have already been paid under the provisions of the Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated Development Act, 1963 (41 of 1963), no such charges shall be payable under this section. (2) On receipt of the application under Sub-section (1), the Director shall, among other things, enquire into the following matters, namely: (a) title to the land ; (b) extent and situation of the land ; (c) capacity to develop a colony ; (d) the layout of a colony ; (e) plan regarding the development works to be executed in a colony ; and (f) conformity of the development schemes of the colony land to those of the neighbouring areas (3) After the enquiry under Sub-section (2), the Director, by an order in writing, shall- (a) grant a licence in the prescribed form, after the applicant has furnished to the Director a bank guarantee equal to twenty-five per centum of the estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... locality, is of the opinion that it is not necessary or possible to provide one or more such amenities, may exempt the licensee from providing such amenities either wholly or in part ; (b) refuse to grant a licence, by means of a speaking order, after affording the applicant an opportunity of being heard. (Provided that in the licensed colony permitted as a special project by the Government, the licence shall be valid for a maximum period of five years and shall be renewable for a period as decided by the Government.) (5) A separate licence shall be required for each colony. 3-A . Establishment of Fund (1) Any colonizer whom a licence has been given under this Act shall deposit as service charges a sum (at such rate as may be prescribed by the Government from time to time, per square meter of the gross area and of the covered area of all the floors in case of flats proposed to be developed by him into a colony) in two equal installments. The first installment shall be deposited within 60 days from the date of the grant of the licence and the second installment to be deposited within six months from the date of grant of the licence. (2) The Haryana Urban Develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, inter alia, to meet the cost of land and external development works. (2) The colonizer shall maintain accounts of the amount kept in the scheduled bank, in such manner as may be prescribed: Provided that where the licence under Section 3 is granted for setting up a colony for cyber city or cyber park purposes, the provisions of Sub-sections (1) and (2) shall not be applicable. ------------------------------------------------------------------------ Rule 2. Definitions (a) ... (b) amenity includes roads, water supply, street lighting, drainage, sewerage, public parks, schools, play grounds, hospitals, community centers and other community buildings , horticulture, landscaping and any other public utility service; Rule 3.... Rule 4.... Rule 5. Development works to be provided in colony Section 3(3) The designs and specifications of the development works to be provided in a colony shall include-- (a) metalling of roads and paving of footpaths; (b) turfing and plantation of trees in open spaces; (c) street lighting; (d) adequate and wholesome water supply; (e) sewers and drains both for storm and sullage water and necessary provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ony and to carry out all directions issued by him for ensuring due compliance of the execution of the layout and development works in accordance with the licence granted. (2) If the Director, having regard to the amenities which exist or are proposed to be provided in the locality, decides that it is not necessary or possible to provide such amenity or amenities, the applicant will be informed thereof and Clauses (c), (d) and (e) of Sub-rule (1) shall be deemed to have been modified to that extent. 12. Grant of licence ( Section 3(3) and (4))- (1) After the applicant has fulfilled all the conditions laid down in Rule 11 to the satisfaction of the Director , the Director shall grant the licence in form LC-V. (2) The licence granted under Sub-rule (1) shall be valid for a period of two years from the date of its grant during which period all development works in the colony shall be completed and certificate of completion obtained from the Director as provided in Rule 16. 16. Completion certificate/Part Completion Certificate (Section 24 )- (1) After the colony has been laid out according to approved layout plans and development works have been executed according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted shall be released; Provided further that the bank guarantee equivalent to 1/15th amount thereof shall be kept unreleased to ensure upkeep and maintenance of the colony or part thereof, as the case may be, for a period of five years from the date of issue of the completion certificate under Rule 16 or earlier, in case the colonizer is relieved of the responsibilities in this behalf. 21. .. 22. .. 23. .. 24. .. 25. .. 26. maintenance and submission of accounts (Sections 5 and 6 )- (1) The colonizer shall-- (i) issue regular receipts to the plot holders in respect of the money received by him and maintain counterfoils of the receipts so issued; (ii) maintain separate ledger account of each plot-holder; (iii) maintain a register containing authenticated copies of each of the agreements entered into between him and each of the plot holders; and (iv) maintain accounts books showing details of expenses incurred by him on various development works in the colony. (2) The colonizer shall within a period of three months after the close of every financial year, submit to the director through registered post with acknowledgement due a statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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. ( See Purposive Interpretation in Law by Aharon Barak: 2005 Princeton University Press). Extension Fee: 12. 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? 13. The agreement entered into by the owners and purchasers inter-alia provides that the purchaser shall, after approval of his building plans from the competent authority, be bound to commence construction of the house on the plot not later than three years from the date the sale deed is executed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. There is no explanation forthcoming as to the source of power under which the Director could have issued the impugned directions directing the owner to delete such clauses from the agreement entered with the purchasers. 16. Whether Section 5 of the Act and Rule 11B read with Rule 26(2) of the Rules in any manner prohibit collection of additional charges characterized as `extension fee' by the owner/colonizer. 17. Section 5 of the Act merely requires the colonizer to deposit 30% of the amount realised, from time to time, from the plot holders in a separate account to be maintained in a scheduled bank and the said amount is to be utilised by him only for meeting the cost of internal development works in the colony. After the completion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailing practice of permitting transfer of plots before registration of conveyance deed to the allottee is not contrary to the provisions of the Act or the Rules. The only justification sought to be given by the Respondent in this regard is that the State would like a separate set of stamp duty paid to it in respect of each transaction, even though there is no conveyance deed executed as yet in respect of the land in question. This argument is wholly devoid of any merit. Section 17(1)(b) of the Registration Act requires that where the Conveyance Deed has been prepared for effecting the transfer of a plot or other immovable property, such deed should be registered within a period of 4 months after its execution. It does not, however, contain any provision whatsoever requiring that a Conveyance Deed should be executed within any period of time after the execution of sale agreement between the buyer and the seller. 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 immova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all such roads, open spaces, public parks and public health services free of cost to the Government or the authority, as the case may be. That a bare reading of the provisions does not suggest that the owner is required to provide the said maintenance services free of cost. On the other hand, the latter part of Section 3(3)(a)(iii) provides that on the expiry of the said period of five years the owner is required to transfer all such roads, open spaces etc. free of cost to the government or the local authority, as the case may be. 23. The learned senior counsel for the Respondents relying on Section 2(i)(vi) contended that maintenance expenses are covered by the said provisions and, therefore, they are required to be borne by the owner/colonizer. Let us test the submission so made by the learned senior counsel. The question that requires to be considered whether providing services of the kind by the owner/colonizer for which maintenance charges are imposed is a work of internal development which has to be carried out within the colony. Section 2(i) defines Internal Development Works as under: (a) metalling of roads and paving of footpaths; (b) turfing and plantatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny'. 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. 26. 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) . 27. Be it noted that this plea has not been taken by the Director in the High Court nor any such point is urged on his behalf in these appeals before us. On the other hand the material available on record suggests that the Director has never considered the maintenance expenses to be part of internal development works as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 31. Now what remains for our consideration is whether a direction could have been issued by the Director to delete the clause or relevant clauses from the agreements mutually entered by and between the parties. The agreement by and between the owners/colonizers, agreed terms and conditions and covenant therein are purely under private law domain. 32. Let us now examine what are the functions and duties of the Director and the power conferred upon him under the provisions of the Act and Rules. Section 3(1) of the Act provides that any owner of land desirous of setting up a colony shall make an application in writing to the Director in the prescribed Form LC-I alongwith the required particulars mentioned therein which are not required to be noticed in detail. Section 3(3)(a) provides that after making a proper enquiry under Sub-section (2), the Director, by an order in writing, shall grant a licence in the prescribed form, after the application is furnished to the Director, a bank guarantee equal to 25 per centum of the estimated cost of development works in case of area of land divided or proposed to be divided into the plots or flats for residential, commercial or indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecution of layout and development works in the colony and every such directions issued are required to be complied with by the licensee. 36. In our considered opinion 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. 37. 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 ult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te in respect of the entire colony/development. 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. 42. For the aforesaid reasons, 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 hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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