conversion of leasehold rights into freehold rights = Present being 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. 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. 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.


Hon’ble Mr. Justice Ashok Bhushan

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
1
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.

  1. 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
    2
    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
    3
    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
    5
    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.
  2. We have heard Shri Aman Lekhi, learned Addl.
    6
    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.
  3. 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,
  4. 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
    7
    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
    8
    Department acquired the property there was no
    occasion to make any further payment by auctionpurchaser. 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
    9
    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
    11
    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
    12
    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
    13
    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
    14
    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
    15
    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.
    16
    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:-
    17
    “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.
  15. 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.”
    18
  16. 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.”
  17. 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
    19
    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.
  18. 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
    20
    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.”
  19. 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 underleases to be granted by the lessee shall be
    subject to the provisions of Clause 16 of
    the principal lease………………………………………”
  20. 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
  21. 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
  22. 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
  23. 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).
  24. Property bearing House No. E444 (Ground Floor), Greater
    Kailash Part-II, New Delhi110048.
    All rights, titles and
    Interests in the dwelling
    unit on ground floor, and
    mazanine floor of House No.
    E-444, Greater Kailash, PartII, New Delhi, together with
    undivided. Indivisible and
    impartible ownership right of
    35% in the land underneath of
    the said building and
    including the followings :-
  25. 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.
  26. 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
  27. 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
    24
    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.
  28. 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
  29. 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:-
  30. 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.
  31. 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.”
  32. 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.
    30
  33. 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 subsection (1) of section 269UD is made by the
    appropriate authority in respect of an
    immovable property referred to in subclause (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) *** *** ***

    31
  34. 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 subsection (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.
  35. 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.
  36. 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.
  1. 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.
  2. 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.
  3. 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
  4. 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).”
  5. 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.
  6. 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
  7. 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.
38