Dlf Universal Ltd. & Anr vs Director, T.&C. Planning Haryana & Ors

Lalit, learned senior counsel for the respondents. We have 3

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 4

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 the full

payments of the plot/flats have been received."

5. In order to consider the question as to the validity of the

impugned memo few relevant facts may have to be noticed.

BACKGROUND FACTS :

6. The appellants were granted licence under the provisions

of Haryana Development and Regulation of Urban Areas Act,

1975 (for short `the Act') and the Rules framed thereunder,

i.e. Haryana Development and Regulation of Urban Area

Rules, 1976 (for short `the Rules') for setting up residential

colonies. The appellants entered into required agreements

with the Governor of Haryana acting through Director Town 5

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.

6

7. In order to consider the central question as to whether

the impugned order is void and unenforceable, it is just and

necessary to notice the relevant provisions of the Act.

SCHEME OF THE ACT :

8. The Act intends to regulate the use of land in order to

prevent ill planned and haphazard urbanization in or around

towns in the State of Haryana. The Act applies to all urban

areas in the State of Haryana. We shall notice the relevant

provisions of the Act and the Rules which are as under :

" Section 2. Definitions

(a) ..............................

(aa).............................

(b) ..............................

(c) "colony" means an area of land divided or proposed to be divided into plots or flats for residential, commercial, industrial, cyber city or cyber park purposes or for the construction of flats in the form of group housing or for the construction of integrated commercial complexes, but an area of land divided or proposed to be divided--

(i) for the purpose of agriculture ; or 7

(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 metres 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 Information Technology enabled services, wherein no manufaturing units shall be permitted ; (ddd) "cyber park" means an area developed exclusively for locating software development activities and Information Technology Enabled Services, wherein no manufacturing of any kind (including assembling activities) shall be permitted ;

(e) "development works" means internal and external development works ;

8

(f) ............................

(g) "external development works" include water supply, sewerage, drains, necessary provisions of treatment and disposal of sewage, sullage and storm water, roads, electrical works, solid waste management and disposal, slaughter houses, colleges, hospitals, stadium/sports complex, fire stations, grid sub- stations etc. and any other work which the Director may specify to be executed in the periphery of or outside colony/area for the benefit of the colony/area;

(gg) "flat" means a part of any property, intended to be used for residential purposes, including one or more rooms with enclosed spaces located on one or more floors, with direct exit to a public street or road or to a common area leading to such streets or road and includes any garage or room whether or not adjacent to the building in which such flat is located provided by the coloniser/owner of such property for use by the owner of such flat for parking any vehicle or for residence of any person employed in such flat, as the case may be ;

(h) ..........................

(i) "internal development works" mean--

(i) metalling of roads and paving of footpaths;

(ii) turfing and plantation with trees of open spaces;

(iii) street lighting ;

(iv) adequate and wholesome water-supply ;

(v) sewers and drains both for storm and sullage water and necessary provision for their treatment and disposal ; and

(vi) any other work that the Director may think necessary in the interest of proper development of a colony ;

9

(j) ........................

k) "owner" includes a person in whose favour a lease

of land in an urban area for a period of not less than ninety nine years has been granted ;

(l) ..................................

(m) "plot/flat holder" means a person in whose favour a plot/flat in a colony has been transferred or agreed to be transferred by the coloniser ;

(n) . ..................

(o) .....................

Section 3 Application for licence :

(1) Any owner desiring to convert his land into a colony shall, unless exempted under section 9, make an application to 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.] 10

(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 estimated cost of development works in case of area of land divided or proposed to be divided into plots or flats for residential, commercial or industrial purposes and a bank guarantee equal to thirty-

seven and a half per centum of the estimated cost of development works in case of cyber city or cyber park purposes as certified by the Director and has undertaken--

(i) to enter into an agreement in the prescribed form for carrying out and completion of development works in accordance with the licence granted ;

(ii) to pay proportionate development charges in the external development works as defined in clause(g) of section 2 are to be carried out by the government or any other local authority. The proportion in which and the time within which, 11

such payment is to be made shall be determined by the Director ;

(iii) the responsibility for the maintenance and upkeep of all roads, open spaces, public parks and public health services for a period of five years from the date of issue of the completion certificate unless earlier relieved of this responsibility and thereupon to transfer all such roads, open spaces, public parks and public health services free of cost to the Government or the local authority, as the case may be ;

(iv) to construct at his own cost, or get constructed by any other institution or individual at its cost, schools, hospitals, community centres and other community buildings on the lands set apart for this purpose, or to transfer to the Government at any time, if so desired by the Government, free of cost the land set apart for schools, hospitals, community centres and community buildings, in which case the Government shall be at liberty to transfer such land to any person or institutions including a local authority on such terms and conditions as it may deem fit ;

(v) to permit the Director or any other officer uthorized by him to inspect the execution of the layout and the development works in the colony 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 :

(4) The licence so granted shall be for a period of 2 years an will be renewable from time to time for 12

a period of one years, on payment of prescribed fee.

Provided that the Director, having regard to the amenities which exit or are proposed to be provided in the locality, is of the opinion that it is not necessary or possible to provide one or more such amenities, may exempt the licencee 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 metre 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 instalments. The first instalment shall be deposited within 60 days from the date of the 13

grant of the licence and the second instalment to be deposited within six months from the date of grant of the licence.

(2) The Haryana Urban Development Authority local authorities, firms, undertakings of Government and other authorities involved in land development shall also be liable to deposit the service charges and shall be deemed to be colonizers for this purpose only. The date of first inviting applications for sale of plots in any colony by it shall be deemed to be the date of granting of licence under this Act for the purpose of deposit of service charges.

(3) The service charges shall be deposited by the colonizer with such officer or person as may be appointed by the Government in this behalf.

(4) The colonizer shall in turn be entitled to pass on the service charges paid by him to the plot holder.

(5) The amount of service charges if not paid within the prescribed period shall be recoverable as arrears of land revenue.

(6) The amount of service charges so deposited by the colonizer shall constitute a fund called the Haryana Urban Development Fund (hereinafter referred to as the Fund) which shall vest in the State Government.

(7) The Fund shall be administered by such officers of the State Government as may be appointed by it for this purpose.

14

(8) The amount of service charges deposited by the colonizers and grants from the Government or the local authority shall be credited to the Fund.

(9) The Fund shall be utilized by the State Government for the benefit of the urban development and for creation and improvement of urban infrastructure in the State of Haryana. The Fund may also be utilized to meet the cost of administering the Fund.

(10) The Government shall publish annually in the Official Gazette the report of the activities financed from the fund and the statement of accounts.

Section 3 ................

Section 4..................

Section 5. Cost of Development Works

(1) The colonizer shall deposit thirty per centum of the amount realised, from time to time, by him, from the plot-holders within a period of ten days of its realisation in a separate account to be maintained in a scheduled bank. This amount shall only be utilised by him towards meeting the cost of internal development works in the colony. After the internal development works of the colony have been completed to the satisfaction of the Director, the coloniser shall be at liberty to withdraw the balance amount. The remaining seventy per centum of the said amount shall be deemed to have been retained by the coloniser, inter alia, to meet the cost of land and external development works.

15

(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, land scaping 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;

16

(c) street lighting;

(d) adequate and wholesome water supply;

(e) sewers and drains both for storm and sullage water and necessary provision for their treatment and disposal; and

(f) any other works that the Director may think necessary in the interest of proper development of the colony.

11. Conditions required to be fulfilled by applicant [Section 3 (3)]--

(1) the applicant shall--

(a) furnish to the Director a bank guarantee equal to twenty five percent of the

estimated cost of the development works as certified by the Director and enter into an agreement in form LC-IV for carrying out and completion of development works in accordance with the licence finally granted;

(b) undertake to deposit fifty percent of the amount to be realized by him from the plot- holders, from time to time, within ten days of its realization in a separate account to be maintained in a scheduled bank and this amount shall only be utilized towards meeting the cost of internal development works in the colony;

(c) undertake to pay proportionate development charges if the main lines of roads, drainage, 17

sewerage, water supply and electricity are to be laid out and constructed by the Government or any other local authority. The proportion in which and the time within which such payment is to be made shall be determined by the Director;

(d) undertake responsibility for the maintenance and upkeep of all roads, open spaces, public parks and public health services for a period of five years from the date of issue of the completion certificate under rule 16 unless earlier relieved of this responsibility and there upon to transfer all such roads, open spaces, public parks and public health services free of cost to the Government or the local authority, as the case may be;

(e) undertake to construct at his own cost or get constructed by any other institution or individual at its cost, schools, hospitals, community centers and other community buildings on the land set apart for this purpose, or undertake to transfer to the government at any time, if so desired by the Government free of cost, the land set apart for schools, hospitals, community centers and community buildings, in which case the Government shall be at liberty to transfer such land to any person or institution including a local authority on such terms and conditions as it may deem fit; and

(f) undertake to permit the Director or any other officer authorized by him to inspect the execution of the layout and the development works in the colony and to carry out all directions issued by him for ensuring due 18

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 to the approved designs and specifications the colonizer shall make an application to the Director in form LC-VIII.

19

(2)After such (scrutiny), as may be necessary, the Director may issue a completion certificate/part completion certificate in form LC-IX or refuse to issue such certificate stating the reasons for such refusal;

Provided that the colonizer shall be afforded an opportunity of being heard before such refusal.

18. Cancellation of licence [Section 8(1)]--

(1) If the Director determines at any time that the execution of the layout plans and the construction or other works is not proceeding according to the licence granted under rule 12 or is below specification or is in violation of the provisions of these rules or of any law or rules for the time being in force, he shall by notice in form LC-X require the colonizer to remove the various defects within the time specified in the notice.

(2) If the colonizer fails to comply with the requirements detailed in the notice issued under sub-rule (1), the Director shall issue him a further notice in form LC-XI to afford him an opportunity to show cause within a period of one month why the licence granted should not be cancelled.

(3) After hearing the colonizer and considering such representation as he may make the Director may either cancel the licence or grant him further time for complying with the requirements of the notice issued under sub- rule (1). If, however, the colonizer does not comply with the said requirements within 20

such extended period, the Director shall cancel the licence and thereafter, within one month, shall cause a proclamation made in the locality about the cancellation of the licence by beat of drum within thirty days of cancellation of licence.

(4) On cancellation of the licence, no further work shall be undertaken or carried out by the colonizer,

[(5) Deleted.]

20. Release of Bank guarantee [Section 24]--

After the layout and development works or part thereof in respect of the colony or part thereof have been completed and a completion certificate in respect thereof issued, the Director may, on an application in this behalf from the colonizer, release bank guarantee or part thereof as the case may be;

Provided that if the completion of the colony is taken in parts only , the part of the bank guarantee corresponding to the part to the colony completed 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

21...........................

22................................

23.................................

24.................................

25....................................

26. maintenance and submission of accounts [Section 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 of accounts indicating the amount 22

realized from each plot-holders, the expenditure incurred on internal and external development works separately of the colony with details thereof together with the amount due from each plot holder indicating their postal address. This statement should be duly audited, certified and signed by a chartered accountant.

9. The validity of the impugned memo is required to be

decided with reference to the scheme of the Act, Rules and

the Regulations framed thereunder.

10. The agreement with the Governor required to be entered

by owners of land intending to set up a colony is structured

and regulated by Rule 11 of the Rules. The terms and

conditions of the agreement and the obligations of the owner

of land and covenants thereof are prescribed by Statutory

Rules. The contract between the owner of land and its

buyers, unlike the agreement entered by the owner of the

land with the government, is not required to be in any

statutory form. It is a contract between the two willing

contracting parties whereunder the terms and conditions are 23

mutually agreed upon. The covenants decide the mutual

obligations between the owner of the land and the buyers

thereof.

Interpretation of Contract:

11. It is settled principle in law that a contract is interpreted

according to its purpose. The purpose of a contract is the

interests, objectives, values, policy that the contract is

designed to actualize. It comprises joint intent of the parties.

Every such contract expresses the autonomy of the

contractual parties' private will. It creates reasonable, legally

protected expectations between the parties and reliance on its

results. Consistent with the character of purposive

interpretation, the court is required to determine the ultimate

purpose of a contract primarily by the joint intent of the

parties at the time the contract so formed. It is not the intent

of a single party; it is the joint intent of both parties and the

joint intent of the parties is to be discovered from the entirety 24

of the contract and the circumstances surrounding its

formation. As is stated in Anson's Law of Contract, "a basic

principle of the Common Law of Contract is that the parties

are free to determine for themselves what primary obligations

they will accept....Today, the position is seen in a different

light. 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. [ See Purposive

Interpretation in Law by Aharon Barak : 2005 Princeton

University Press].

25

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 his favour....in case the purchaser fails to

commence construction within the stipulated period, the seller

shall be entitled to resume the plot, refund the amount paid

by the purchaser and to resell the plot to somebody else

provided that the seller in its sole discretion may extend the

aforesaid period of construction "provided the purchaser pays

additional charges to the owner." It was mutually agreed

that a provision to this effect may have to be incorporated in

the sale deed and the purchaser "shall be bound by the 26

same." This clause enables the owner to charge additional

amount for the non completion of the construction by the

purchaser within the period stipulated in the agreement.

There is nothing in the Act, the Rules and Regulations

prohibiting the owner of the land to collect such charges from

the buyer. The said 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 27

entered into by and between the parties in a properly

constituted proceedings on such grounds as may be available

to them in law.

14. The question that arises for our consideration is whether

the Director was justified in issuing directions asking the

licensee/owner to virtually amend the clauses/covenants in

the agreement? Whether the statute confers any authority or

jurisdiction upon the Director to meddle with the terms of

agreement entered into by and between the owners and the

purchasers of plots/flats?

15. 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 28

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 29

the colony. After the completion of the internal development

works to the satisfaction of the Director, the colonizer is

entitled to withdraw the balance amount. The remaining 70%

of the said amount shall be deemed to have been retained by

the colonizer to meet the cost of the land and the external

development works. There is no doubt that accounts are

required to be maintained by the colonizer in the prescribed

manner.

Rule 11(b) merely reiterates as to what has been

provided for in Section 5 of the Act.

Rule 26 obligates the colonizer to issue regular receipts

to the plot holders in respect of the money received by him

and maintain counterfoils of the receipts so issued; maintain

separate ledger of each plot holder, maintain a Register

containing authenticated copies of each of the agreements

entered into between him and each of the plot holders; and

maintain account books showing details of expenses incurred

on various developmental works in the colony. We fail to

appreciate as to how and in what manner these provisions 30

restrain or prohibit the colonizer/owner to insist buyers of the

plots to complete construction in time bound manner and

charge extra amounts as may be agreed between the parties

for failure to do so. It shall always be open for the Director to

insist the colonizer/owner to submit a statement of accounts

indicating the amount realized from each plot holders, the

expenditure incurred on internal and external development

works. We do not find anything in these provisions

empowering the Director to issue the impugned directions

prohibiting the owners to collect the extension fee for the

delayed construction of buildings by the purchasers of the

plots. We are essentially dealing with the question as to the

authority of the Director and as to whether he is empowered

to pass such an order and not with regard to the question as

to whether the clauses dealing with this aspect of the matter

suffer from any infirmity. The dispute, if any, between the

parties to the agreement, may have to be resolved in a

properly constituted proceeding in private law domain. 31

Transfer Fee:

18. 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? Whether the

allottees' right to nominate another person as purchaser of

the property can be denied by the colonizer?

19. The prevailing 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 32

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 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.

33

MAINTENANCE FEE:

20. The crucial question that arises for our consideration is

whether the Director of Country and Town Planning 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. Whether the Act imposes any obligation upon

the colonizers or owners to incur maintenance charges out of

their own resources? Whether the colonizers/owners are

prohibited from recovering the amounts spent towards the

maintenance charges from the plots/flats buyers? Whether

the clause incorporated in the sale agreement enabling the

owners to collect the maintenance charges is void?

21. The Act no doubt imposes certain obligations upon the

colonizers/owners and specifies certain items of expenses to

be borne by them. Section 3(3)(a)(ii) of the Act requires the 34

colonizer/owner to pay proportionate development charges if

the external development works as defined under Section 2

(g) of the Act are to be carried out by the Government or any

other local authority. Similarly Section 3 (3) (a) (iv) requires

the owner to construct at his own cost schools, hospitals,

community centres and other community buildings on the

lands set apart for the said purposes. Further Section 5 of the

Act read with Rule 11 (1) (b) imposes obligation and requires

the owner to meet the cost of internal development works as

defined in Section 2 (i) of the Act.

22. It is no doubt true that Section 3 (3) (a) (iii)

imposes responsibility for the maintenance and upkeep of all

roads, open spaces, public parks and public health services

for a period of five years from the date of issue of the

completion certificate unless earlier relieved of this

responsibility and thereupon to transfer 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 35

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 plantation of trees in open spaces; 36

(c) street lighting;

(d) adequate and wholesome water supply;

(e) sewers and drains both for storm and sullage water

and necessary provision for their treatment and

disposal; and

(f) any other works that the Director may think necessary

in the interest of proper development of the colony.

24. There is no dispute whatsoever that any maintenance

fee or charges are being collected by the owners/colonizers in

respect of any of the internal development works mentioned

in Section 2 (i). It is not disputed that the appellants are

rendering the following additional services, which are not in

any manner whatsoever covered by Section 3 (3) (a) (iii) or

any provisions of the Act or the Rules.

a) Round the clock security

b) Electricity consumption of street lights, which shall

include replacement of bulbs, tubes etc., maintenance of

electrical system and its upgradation. 37

c) Reparing and strengthening of boundary walls and

fencing.

d) Conservancy and general upkeep, which shall

include sweeping of roads, door to door garbage

collection and its disposal, clearing of unwanted growth

of plants in vacant plots, repair/replacement/painting of

signages, guide maps and gates etc.

e) Upgradation of Roads/parks.

f) Establishment/administrative charges for rendering

the aforesaid services, which shall include salaries of

staff, rent of the building, telephone, printing,

stationery, electricity, computer expenses etc. incurred

in running complaint centre in DLF City.

25. In our considered opinion 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 38

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. Clause (i) to (v) of Section 2 (i) refers to

"Works" which are erected within the colony as an integral

part of the internal development of the colony. The residuary

clause (vi) of Section 2 (i) also refers to "work" which means

and implies activities akin to that of which constitute an

`internal development of the colony'. 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 (i). Such a

construction is impermissible in law.

39

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 specified in Section 2 (i).

Section 3 (3) (a) of the Act mandates the colonizer/owner to

furnish a bank guarantee equal to 25% of the estimated cost

of the development works. It is an admitted case that the

Director has not taken into consideration the said

maintenance expenses for the purpose of computing the 40

amount of the bank guarantee, which is 25% of the total cost

of the internal development works.

28. Whether the amount of maintenance service charges

was already included in the sale price of the plots/flats?

29. 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 41

purchasers of plots/flats. The Act, Rules and the Regulations

framed thereunder do not provide for any approval or

ratification of the agreements so entered into by and between

the owners/colonizers. The Director of the Country and Town

Planning is not required to put his seal of approval on the

agreements so entered. The Director is not authorized or

empowered to review or evaluate the terms of contract and

resolve the disputes, if any, between the owners/colonizers

and the purchasers of plots/flats.

30. The sale price charged by the owner from the buyers for

the sale of the plots/flats is a market driven sale price and is

not based on any particular figure of cost. The provisions of

the Act or the Rules in no manner impose any price control

directly or indirectly in respect of plots/flats sold by the

colonizer/owner. The sale and purchase of the plots/flats is

between a willing vendor and a willing vendee. The Director

is not empowered to meddle with the transactions and put 42

any restriction on the rights of the owner/colonizer in the

matter of sale and purchase of plots/flats.

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 43

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

industrial purpose and a bank guarantee equal to thirty-seven

and a half per centum of the estimated cost of development

works in case of cyber city or cyber park. The owner is

required to enter into an agreement in the prescribed form for

carrying out and for the completion of development works in

accordance with the licence granted. Section 3(3)(a)(v)

permits the Director or any other officer authorized by him to

inspect the execution of the layout and the development

works in the colony and to carry out all the directions issued

by him for ensuring due compliance of the execution of the

layout and development works in accordance with the licence

granted. It is thus clear that the Director is entitled to

inspect the execution of the lay out and internal and external

development works in the colony and to issue appropriate 44

directions which he may consider necessary and proper for

ensuring due compliance of the execution of the layout and

development works in accordance with the licence granted.

This is to be read along with the condition of licence which

requires "that the colony is laid out to conform to the

approved layout plans and development works are executed

according to the designs and specifications shown in the

approved plan accompanying the licence." The Director thus

is empowered to issue appropriate directions in order to

ensure strict compliance of the terms and conditions of

licence subject to which the colony is to be set up by the

owner or colonizer. Rule 5 provides that the designs and

specifications of the development works to be provided in a

colony which is nothing but reproduction of Section 2 (i)

which we have noticed in the preceding paragraphs.

33. Section 8 speaks about cancellation of licence by the

Director if the colonizer contravenes any of the conditions of

the licence or the provisions of the Act or the Rules made 45

thereunder; provided that before such cancellation the

colonizer shall be given an opportunity of being heard.

34. It further provides for the consequences that may flow

after the cancellation of the licence.

35. From a fair analysis of these provisions, it becomes clear

that the Director's functions and duties and as well as power

is completely structured by the statute and the Rules. He

undoubtedly plays a vital role and is authorised to issue

appropriate directions from time to time concerning the

execution 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 46

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 ultra vires is a nullity, utterly

without existence or effect in law.

38. In Khargram Panchayat Samiti and another vs.

State of W.B. and others [(1987) 3 SCC 82] upon which 47

reliance has been placed by the leaned senior counsel for the

second respondent in no manner supports the impugned

directions issued by the Director. The only issue which arose

was, whether, in the absence of any specific statutory

provision, the authority conferred with a statutory power to

issue licence for holding "hats" or "fairs" also possessed any

incidental powers to fix the date on which the `hat' or `fair'

would take place. It was held that such power to fix the date

was necessarily incidental to the power of the grant of the

licence, in the absence of any provision in the statute. In the

very nature of things this court came to the conclusion that it

is impossible to separate the power to grant a licence to hold

the "fairs" from that of the fixation of the date thereof,

because the two are inseparably and intrinsically

interconnected. The provisions of the 1975 Act and the

Rules enumerates in detail the powers of Director and arms

him with jurisdiction to issue appropriate directions from

time to time for ensuring due compliance in the execution of

the layout and the development works in accordance with the 48

licence granted. The impugned directions issued result in

far-reaching consequences and they cannot be considered to

be incidental or ancillary to the power conferred under the Act

and Rules. The submission made in this regard is totally

devoid of merit.

39. In D.L.F. Qutab Enclave Complex Educational

Charitable Trust vs. State of Haryana and others [(2003)

5 SCC 622 ], it is held by this court :

"38. A regulatory Act must be construed having regard to the purpose it seeks to achieve. The State as a statutory authority cannot ask for something which is not contemplated under the Act."

40. Thus while Act and Rules may impose many restrictions

on profit percentages etc. time limit on construction and

handing over of such construction, such power does not

encompass within itself the right to exercise power in manner

that inhibits terms and contracts and freedom granted

therein.

49

LIMIT OF 15% PROFIT :

41. The question as to 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. 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. 50

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 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. The

question as to whether the cost of the plot includes the

maintenance charges may have to be decided on a proper

interpretation of the terms and conditions of the agreement.

The court in a public law remedy cannot undertake the task of

resolving disputes arising out of a contract for such disputes

as they essentially lie in the private law domain.

43. In the circumstances, we find it very difficult to sustain

the view taken by the High Court for upholding the impugned

memo issued by the Director, Town and Country Planning. 51

The judgment of the High court is, accordingly, set aside.

The appeals are, accordingly, allowed subject to the

observations made hereinabove.

44. All interlocutory applications and contempt cases

are, accordingly, disposed of in terms of this order.

----------------------------J. [B.SUDERSHAN REDDY]

----------------------------j.

[SURINDER SINGH NIJJAR]

New Delhi, November 19, 2010