Estate Officer vs. D. K. Khanna (Now Dead Through Lrs)

ITEM NO.1 COURT NO.7 SECTION XVII-A

S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS

Miscellaneous Application No. 331/2022 in C.A. No. 4964/2021

(Arising out of impugned final judgment and order dated 07-09-2021 in C.A. No. No. 4964/2021 passed by the Supreme Court Of India)

ESTATE OFFICER & ANR. Petitioner(s)

VERSUS

CHARANJIT KAUR Respondent(s)

W I T H

MA 332/2022 in C.A. No. 4965/2021 (XVII-A) (Office report for Directions)

MA 333/2022 in C.A. No. 4966/2021 (XVII-A) (Office report for Directions)

Date : 29-08-2022 This petition was called on for hearing today.

CORAM : HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE SUDHANSHU DHULIA

For Petitioner(s) Mr. K.M. Nataraj, Ld. ASG Mr. Varun Chugh, Adv. Mr. Vatsal Joshi, Adv. Mr. B.K. Satija, Ad.AG. Mr. Sughosh Subramanyam, Adv. Mr. Anuj Srinivas Uupa, Adv. Mr. Nakul Chengappa K.K., Adv. Mr. Chitransh Sharma, Adv. Mr. Ankit Goel, AOR Mr. Gurmeet Singh Makker, AOR 1.1 Mr. K.M. Nataraj, Ld. ASG Mr. Sarad Kr. Singhania, Adv. Mr. Vatsal Joshi, Adv. Mr. Varun Chugh, Adv. Mr. Sughosh Subramanyan, Adv. Mr. G.S. Makkar, AOR For Respondent(s) Mr. Arvind Kumar Sharma, AOR Mr. Siddharth Mittal, AOR Ms. Archana Pathak Dave, AOR Signature Not Verified

Mr. M. C. Dhingra, AOR

Mr. Ajit Kumar Ekka, AOR Ms. Malvika Kapila, AOR Mr. Avi Singh, Adv. Mr. Manohar Pratap, Adv. 1.2 Mr. Siddharth Mittal, AOR, Mr. Prabhat Kumar, Adv. Mr. Kshitiz Chauhan, Adv. Mr. Sahil Amarnath, Adv. Ms. Shilpa G. Mittal, Adv. For Impleader/ Respondent Ms. Kavita Wadia, Adv. Ms. Malvika Kapila, AOR Ms. Tanwangi Shukla, Adv. Ms. Shruti Venugopal, Adv.

UPON hearing the counsel the Court made the following O R D E R

In terms of Order dated 18.07.2022, the Chandigarh Administration has filed Action Taken Report enclosing a copy of the communication dated 28.08.2022 forwarded to Under Secretary, Govt of India, Ministry of Home Affairs, in respect of conversion of industrial/ commercial plots from lease-hold to free-hold in Union Territory of Chandigarh. The issues which have been raised by the Administration are as under :

"(a) Chandigarh is a landlocked Union Territory with limited land resource. Majority of commercial and industrial plots were allotted on the leasehold basis and ownership of these plots lies with the Chandigarh Administration. If the commercial and industrial plots are converted to freehold, there will be shortage of properties with the Administration.

(b) As the properties had been leased out, Chandigarh Administration is getting annual ground rent from these properties which are a regular source of revenue for the Administration. Government may lose regular income once it is converted to freehold.

(c) Loss of income in the form of Unearned Increase: As per

the provisions of Rule 7(i) of Chandigarh Estate Rules, 2007, unearned increase is being levied at the time of transfer of leasehold property. Currently, Chandigarh Administration is charging 1/4th (25%) Unearned increase which is a major source of income.

(d) Once property is converted from leasehold to freehold then the person is entitled to sale it immediately. So there will be huge windfall gain at the cost of exchequer which can be easily questioned.

(e) In some cases, multiple transfers have already happened. In that case, chances of legal conflicts may arise on account of huge gain.

(f) Conversion may also be examined in the light of limited land in Chandigarh. So all earlier leaseholds whether it is Industrial, Commercial, Institutional, Educational etc. are entitled for conversion."

We find the issues raised by the Administration appear to be not tenable for the following reasons:-

The first issue (a) raised by the administration is that Chandigarh is a landlocked Union Territory with limited land resource. If the commercial and industrial plots are converted from leasehold to freehold there will be shortage of property with the Administration. We do not understand the logic of the said reasoning. The properties whether they are leasehold or freehold are not available with the Administration for use according to their own choice. It has to be used in terms of the Capital of Punjab (Development & Regulation) Act, 1952 and the Rules made thereunder.

Issues (b) and (c) are that annual ground rent is a regular source of revenue for the Chandigarh Administration. The said reasoning is again not tenable as the ground rent cannot be said to

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be a regular income. If the property is converted to freehold, it will lead to transfer of the property inviting attractive stamp duty on the sale documents. Even income from unearned increase is a dampener in use of the property which leads to the sales on the basis of Power of Attorney prior to the judgment of this Court in Suraj Lamp & Industries (P) Ltd. (2) v. State of Haryana, (2012) 1 SCC 656. The free hold property may increase the investment in the industrial or service industry, giving employment to the citizen, more revenue and taxes - direct and indirect. The long-term benefit would outweigh the projected income from the ground rent. In any case, the Chandigarh Administration can factor this aspect when raising demand for the budget from the Central Government.

In issue (d), the reason given by the Administration is wholly untenable when it is said that it can be windfall gain at the cost of exchequer in case of sale of the property. In fact, if the property is converted to freehold it will lead to ease of doing business which will attract not only capital investment but also human resource leading to the overall development of the city.

The view in Issue (e) is only imaginary. The chances of legal conflicts cannot be a ground for avoiding conversion of leasehold property into freehold. In fact, non-conversion leads to more problems as the financial needs of an individual are inevitable. The needs of an individual should be easily met.

The other issue is user of the industrial sites under the Micro, Small and Medium Enterprises Development Act, 2006. The Administration itself has allowed commercial properties to be used for different purposes on 31.3.2006 after policy of conversion of

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use of buildings from a particular trade on payment of conversion charges. Such policy has a negative list which are not permitted in plots or building allotted for use of commercial purposes. The same process can be adopted for the industrial sites where industrial sites can be permitted to be used for any manufacturing activity or service industry having a negative list of the prohibited activities.

The conversion has to be in respect of all industrial, commercial, institutional plots which are not many i.e. 6621 commercial plots and 1451 industrial plots apart from 500 plots allotted to educational, political, cultural, institutional bodies. As per the communication dated 20.08.2022, the rates of conversion mentioned in para 3 needs to be followed for the purposes of allowing conversion from leasehold properties to freehold properties.

Rest of the proposals will also be taken into consideration by the Ministry of Home Affairs and a positive response taken before the date fixed.

Let the needful be done within three weeks. List the matter on 16th September, 2022.

If needful is not done before the said date, Mr. Ajay Kumar Bhalla, Union Home Secretary shall remain present in Court. The Advisor to Administrator, Chandigarh Administration shall coordinate with the learned Union Home Secretary to facilitate the above directions.

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(VIJAY KUMAR) (RENU BALA GAMBHIR) COURT MASTER (SH) COURT MASTER (NSH)