JUDGMENT
K. Shivashankar Bhat, J.
(1) Civil writ petitions are filed challenging the conversion fee fixed for the purpose of converting the lease hold interest into free hold in Delhi. There is no dispute that all the lands involved in these writ petitions belonged to the President of India and these lands were allotted to several persons either directly or through Group Housing Societies or-Delhi Development Authority. The allottees had to execute lease deeds. The lease period is 99 years. Under the lease deed certain restrictions are imposed about the manner in which the land should be utilised. There is also restriction regarding the alienation of the lease hold property by the lessee. Except in the case of the allottees under the Rehabilitation Scheme, whenever the original allottee alienates his interest 50% of the unearned increase shall have to be paid to the Lesser (Union of India). In respect of subsequent alienations also this requirement continues. In other words, whenever there is alienation of the leasehold interest by the allottees or the subsequent transferees the Union of India will be getting 50% of the unearned increase. However, in the case of an allottee under the Rehabilitation Scheme (of refugees) the first transfer by the allottee is not governed by this requirement of paying 50% of the unearned increase to the Union of India. It is only the subsequent transfers that are governed by this requirement. In the case of the persons governed by the rehabilitation scheme the original allotment is made after collecting the cost of the land and the development charges from the allottee and the allottee shall have to pay an yearly ground rent of Rs.l.00 per 100Sq.Yards. In the case of other allottees the allotments were made on the basis of the premium arrived at, at the auctions or otherwise. In most of the cases these allotments were made on the basis of auctions conducted. Another type of allottees are the persons who purchased ’63 apartments in which the superstructure vested in the allottee but the land continued to vest in the government for which separate ground rent is charged. All these petitioners have welcomed the proposal to permit the conversion of the lease hold into freehold. But they are aggrieved by the conversion fee which is fixed under the scheme. For the purpose of arriving at the conversion fee payable certain formula are stated in the scheme. The basis for the conversion fee is the market rate of the land as on 1.4.1987. The scheme exempts up to 50 Sq.Yds. from the levy of conversion fee. The exemption continues to operate a tall stages. In other words, even when the land measures say about 200 Sq.Yds., the conversion fee payable is calculated with reference to 150 Sq.Yds., having regard to the slab found in the scheme. Delhi is divided into several zones and different rates are fixed for different zones having regard to their relative advantages. Similarly,additional conversion fee shall have to be paid if a part of the premises is used for commercial purposes. The scheme has been made optional subsequently, though initially it was made compulsory.
(2) Several contentions are urged on be half of the petitioners. The tenor of all these arguments is to point out that the slab rate is arbitrary. In the case of the allottees governed by the rehabilitation scheme, it was contended that no conversion fee should believed a tall. Alternatively it was contended that the uniform rate applied to the original allottees as well as the subsequent transfers and others renders the scheme arbitrary since the scheme fails to classify the allottees properly.
(3) The respondents contended that the conversion fee levied is a very moderate sum. The conversion fee payable has been co-related to the value of the residuary rights of the Lesser.
(4) In addition to these respective contentions the respondents of Ashok Vihar/Wazirpur area have challenged the market rate fixed for computing the conversion fee. In C.W.P. 146/1993 it is contended that initially Rs.l,510.00 per Sq.Mtr. was the land rate notified for the members covered by Wazirpur Residential Scheme, but the brochure under which the scheme is announced mentions the land rate as Rs.3,225.00 . According to the petitioner, this land rate of Rs.3,225.00 was a mistaken rate, obviously referable to the industrial plots. It is further contended that the respondents are now trying to make a distinction between Wazirpur and AshokVihar when in fact both of them referred to the same locality or area. In this writ petition it is also contended that in the case of a land having more than one apartment/flats the conversion fee payable by each flat owner is fixed without reference to the actual share of the flat owner in the land. It was contended in case a land has a building of 2 flats, the conversion fee will be Rs.18,000.00 being @ Rs.9,000.00 ) while under the identical situation if the land has three flats the total conversion fee payable by the three flat owners will beRs.27,000.00 .
(5) I may straightaway deal with this contention instead of postponing the same. The respondents have pointed out that higher the member of flats, the extent of land to be set apart for any purposes will be more and this aspect has been taken note of while fixing the conversion fee. The respondents have pointed out that the case of a land having 2 flats cannot be compared with the case of land on which there are more than 2 apartments. The explanation, on the face of it, looks to be reasonable and therefore, I think it unnecessary to go into this aspect further.
(6) It was also contended in this context that the benefit of the exemption from 50 Sq. Yds. should have been calculated with reference to each flat owner and if so in several cases a flat owner may not be required to pay any conversion fee. As anillustration, it was pointed out that in case there are three apartments built on a land measuring 150 Sq. Yds., the share of each apartment owner will be 50 Sq. Yds., which is exempted from the levy of conversion fee. I do not think,I can accept this contention because in the illustration given the land is incapable of being partitioned. All the flat owners could be considered as joint owners or co-owners and each one of them has a proprietary interest in every particle of the eye of law until a partition takes place.
(7) This apart, the benefit of 50 Sq. Yds. is given from the total extent, as is clear from the several slab rates. Another contention based on a comparison of 2 contiguous areas wherein one part has several flats while the other part has a limited number of houses does not also require further consideration. The vast extent of common areas to be kept for the uses like Post Office, Schools, Parks, etc. shall have to be taken note of while fixing the value of these lands. It is always very easy to find error in any scheme of the Government, but the courts are not concerned with the possible errors while evaluating the price of a commodity or a land. It is necessary to remember that valuation of a land or a right therein is not in an exact science, there are more than one methods which could be adopted and each method may lead to a different result. Only because of such different results, it cannot be held that the scheme providing for a particular method to be adopted is arbitrary or discriminatory. As pointed out in an American Decision Metropolis Theatre Company Vs. State of Chicago: (1913)52 Law Ad 730, mere errors of Government are not subject to our judicial review. It is only its palpably arbitrary exercises which can be declared void. In the matter of calculations it has been held that the courts do not expect an exact division of subjects on scientific lines because it is a practical impossibility. Further the State is not expected to resort to microscopic classification. In a vast scheme like the present one, it may not be possible to evolve a formula judgment leading to an exact identical result in every case. In such a situation the test ought to be whether the scheme applies a uniform principle and whether the subjects are treated fairly and reasonably or whether the effect of the scheme results in hostile discrimination. When I say the discrimination as hostile, it does not mean that the maker of the scheme is guilty of any particular motive. The hostility is inferred by the gravity of the inequality. If the discrimination is patent the working of the scheme would result in palpable injustice and hardship, it can be said that the scheme causes hostile discrimination.
(8) The reply filed on behalf of the respondents in , 146/1993 itself indicates that land rate notified for Wazirpur and Ashok Vihar requires clarification. The petitioner has placed ample material to show that there was some confusion in referring to these two areas. The petitioner also has produced sufficient material to show that the names Wazirpur and Ashok Vihar overlap for each other. In the circumstances the respondents shall have to take steps to clarify the matter and issue an appropriate notification fixing the I and race for the purpose of fixing the conversion fee for these areas referred either as Ashok Vihar or Wazirpur.
(9) Undoubtedly, the President of India has a residuary interest which is quite valuable. The petitioners cannot expect that the said interest should be released in their favor without the petitioners paying a reasonable amount which is relatable to the value of the residuary interest. None of the petitioners is able to explain as to how the conversion fee arrived at is arbitrary. The conversion fee is payable in 5 yearly Installments bearing an interest of 12% per annum. As already noted the land rate of the year 1987 is made the basis which by itself is a great concession having regard to the prevailing land rate. Further the’ scheme itself is optional and there is no compulsion that any of the allottees should resort to the scheme and have the lease hold converted into free hold. In the circumstances it is not. possible on this ground alone to hold that the conversion fee is arbitrary or discriminatory.
(10) There was a contention that conversion is not permitted in the case of lands measuring 500Sq. Mtrs.and above. Learned Counsel for the respondent submitted that these lands are larger in extent and stand on a different footing from others. The learned counsel also submitted that the Government is seriously considering whether the lessees of such lands also should be permitted to convert the lease hold into free hold. In view of these factors I do not think that the scheme could be held vitiated only because lands measuring larger extent arc outside the present scheme.
(11) According to the respondents the conversion fee is co-related to the residuary rights of the Lesser. If so, it necessarily follows that the conversion fee payable should vary according to the value of the residuary right of the Lesser. It is also a settled principle that the principle of valuation is to award to the owner the equivalent of his property with its existing advantages and its potentialities. The principle of valuation should result in providing proper payment to the owner for what he has lost including the benefit of advantages present as well as future, without taking into account the urgency involved in the transactions, the disinclination of the owner to part with the property (vide R.C.Kooper Vs. Union of India; ). The allottees under the rehabilitation scheme for refugees contended that under the Displaced Persons (Compensation and Rehabilitation) Act (Act for short), the land should have been allotted to them absolutely and under compulsion of circumstances prevailing at the time the allottees agreed to execute the lease deeds and the said Lease Deeds should be treated as Sale Deeds or conversion should be now permitted without charging any conversion fee. It is unnecessary to go into the several provisions of the said Act because all the allottees have executed lease deeds. It is too late for them to question the title of the Lesser. They are bound by the terms of the leasedeed. Both the parties have acted upon the terms of the lease deed. It is also clear that no premium was collected from any of such allottees but only the cost of the land and the development charges. The government did not levy the real price as a consideration for the allotment. In such a situation it cannot be held that the levy of conversion fee which reflects the value of the residuary rights of the government is arbitrary or unwarranted. It is also a recognised principle that the State or its instrumentalities may fix the price bearing in mind the commercial value of the goods or the property to be sold. .
(12) However, one fact remains to be considered. Admittedly, the original allottee of the plot covered by the rehabilitation scheme is still in possession of the property. Such an allottee need not part with 50% of the unearned income in case he sells his interest in the lease hold. The term ‘allottee’ here could include his legal representatives also. Therefore, as against the original allottee under this rehabilitation scheme the value of the residuary rights of the government cannot be the same as the value of the residuary right against others. On the face of it there is a difference between the two kinds of the residuary rights. The scheme nowhere makes any exception in respect of these original allottees. There is no provision to reduce the conversion fee payable by the original allottees in such a situation.
(13) All allottees no doubt belong to one class or group. But that does not mean that every kind of allottee may be treated in the same manner as other allottees of the plot, when there is a real difference between one set of allottees and another.
(14) In the State of’Andhra Pradesh and another- Vs. Nanda Raj Reddy and Others; , the Supreme Court held: “A statutory provision may offend Article 14 of the Constitution both by finding differences where there is none and by making no difference where there is one. Decided cases laid down tests to ascertain whether a classification is permissible or not, viz. (i) the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and (ii) that the differentia must have a rational relation to the object sought to be achieved by the statute in question.”
(15) While applying the said principle, I have also considered the vast latitude given to the State in the matter of grouping the people or persons for any particular purpose. In this connection, in the case of State of Gujarat Vs. Shri Ambica Mills; , the Supreme Court observed at page 1313 – “A reasonable classification is one which includes all who are similarly situated and none who are not. The question then is: What docs the phrase ‘similarly situated’ mean? The answer to the question is that we must look beyond the classification to the purpose of the law. A reasonable classification is one which includes all persons who are similarly situated with respect to the purpose of the law. The purpose of a law may be either the elimination of a public mischief or the achievement of some positive public good. A classification is under-inclusive when all who are included in the class are tainted with the mischief but there are others also tainted whom the classification does not include. In other words,a classification is bad as under-inclusive when a State benefits or burdens persons in a manner that furthers a legitimate purpose but does not confer the same benefit or place the same burden on others who are similarly situated. A classification is over-inclusive when it includes not only those who are similarly situated with respect to the purpose but others who are not so situated as well. In other words, this type of classification imposes a burden upon a wider range of individuals than are included in the class of those attended with mischief at which the law aims. Herod ordering the death of all male children born on a particular day because one of them would some day bring about his downfall employed such a classification.”
Again the Supreme Court pointed out that the problem of legislative classification is a perennial one, admitting of no doctrinaire definition. The Supreme Court further observed: “THE legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws arc not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry, that exact wisdom and nice adaptation of remedies cannot berequired, that judgment is largely a prophecy based on meagre and uninterrupted experience, should stand as reminder that in this area the Court does not take the equal protection requirement in a pedagogic manner.”
(16) The instant case before me reveals that irrespective of the nature of the residuary right of the State and its value as against the lessee,a uniform conversion fee is levied, payable by all the allottees. Admittedly, there is a difference on the face of it between the original allottees who are in possession of the lands under the rehabilitation scheme, and others. When such a patent and manifest difference is shown to exist, it was imperative that a proper classification should have been done and a different treatment should have been meted out to such original allottees. The scheme has failed to achieve this object.
(17) No doubt, if a scheme violates the provisions of Article 14 of the Constitution the same shall have to be declared as invalid and void. I do not think that such a course should be adopted in all such cases when the result of striking down the scheme will deprive a large number of people from the beneficial provisions of the scheme. Admittedly, there is a clamour for conversion of the lease hold into free hold. The Government has come forward with a scheme to satisfy the demands of the people in this regard. But in formulating the scheme some error of judgment seems to have been committed. The error could be erased and the defect rectified by a proper measure. This court no doubt, cannot formulate a scheme to replace the impugned scheme. It is ultimately for the Government to consider as to how the distinction pointed out in this order should be brought out in the scheme and to what extent the provisions could be made for collecting a reduced conversion fee from the original allottees under the rehabilitation scheme. The manner of quantifying the conversion fee and the formula to be adopted for the said purpose are matters for the experts to examine and thereafter the same have to be incorporated in the scheme.
(18) I have also noted already that the scheme reflects an error regarding Wazirpur/ Ashok Vihar area. This also requires clarification or rectification. Instead of striking down the entire scheme only because of these defects, I am of the view that the implementation of the scheme can be postponed for a few months to enable the respondents to remove the defects pointed out, failing which it can be declared that the scheme is incapable, of being enforced.
(19) It was strongly contended on behalf of the respondents that the scheme is purely optional and if any of the allottees is not satisfied with the scheme he need not claim conversion at all.
(20) The argument no doubt is quite attractive but it should be remembered that the scheme in question affects a large number of persons in Delhi. Though the scheme is made optional, the very purpose of giving the option may be defeated by compelling a substantial number of persons from taking the benefit of the scheme. In other words, a person who desires to opt for conversion is made incapable of exercising such an option because of a patent illegality in the scheme. Here is a case where the discrimination is writ large amongst the persons who are likely to opt for the conversion, by not classifying the original allottees under the rehabilitation scheme and others who are holding the lands.
(21) It was then contended that courts should not interfere with policy matters, especially, the subjects concerning economic matters.
(22) It is true that a very large latitude is given to the Government to formulate its policy, it is not for the courts to interfere with it nor direct the government to evolve a policy considered best by the court. The Government is faced with diverse and complex problems and the court has neither the expertise nor all the materials to formulate any particular policy. Government is answerable to the people and many a times political compulsions contribute in the formulation of a policy. In the context of testing the constitutional validity of an enacted law, the Supreme Court had pointed out the need to have judicial restraint before proceeding to strike down a law and to a large extent the same principle would govern the approach of the courts while examining the validity of any scheme framed by the Executive. In State of Madras Vs. V.G.Row; the classical statement is found in the following words, at page 200: “IT is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict. In evaluating such elusive factors and forming their own conception of what is reasonable, in all the circumstances of a given case, it is inevitable that the social philosophy and the scale of values of the Judges participating in the decision should play an important part, and the limit to their interference with legislative judgment in such cases can only be dictated by their sense of responsibility and self-restraint and the sobering reflection that the Constitution is meant not only for people of their way of thinking but for all, and that the majority of the elected representatives of the people have, in authorising the imposition of the restrictions considered them to be reasonable.”
(23) In State of Madhya Pradesh Vs. Nand Lal; , the Supreme Court after referring to an earlier decision in R.K.Gargi case (AIR 1981 Sc 2138) quoted American decision in Morey Vs. Dond (1957) 354 Us 457 as follows: “IN the utilities, tax and economic regulation cases, there are good reasons for judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these arc added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events – self limitation can be seen to be the path to judicial wisdom and institutional prestige and stability.”
Then the Supreme Court proceeded to observe: LEGISLATION relating to economic matters must apply equally in regard to executive actions in the field of economic activities, though the executive decision may not be placed on as high a pedestal as legislative judgment in so far as judicial deference is concerned. We must not forget that in complex economic matters every decision is necessarily empiric and it is based on experimentation or what one may call ‘trial and error method’ and, therefore, its validity cannot be tested on any rigid ‘a priori’ considerations or on the application of any strait jacket formula. The court must while adjudging the constitutional validity of an executive decision relating to economic matters grant a certain measure of freedom or ‘play’ in the “joints” to the executive. “The problem of Government” as pointed out by the Supreme Court of the United States in Metropolis Theatre Company Vs. State of Chicago, (1912) 57 L ed 730 ‘are practical ones and may justify, if they do not require, rough accommodations, illogical, it may be, and unscientific. But even such criticism should not be hastily expressed. What is best is not discernible, the wisdom of any choice may be disputed or condemned. Mere errors of Government are not subject to our judicial review. It is only its palpably arbitrary exercise which can be declared void”. The Govemment,as was said in Permian Basin Area Rate Cases, (1968) 20 Led(2d) 312, is entitled to make pragmatic adjustments which may be called for by particular circumstances. The Court cannot strike down a policy decision taken by the State Government merely because it feels that another policy decision would have been fairer or wiser or more scientific or logical. The Court can interfere only if the policy decision is patently arbitrary, discriminatory or malafide. It is against the background of these observations and keeping them in mind that we must now proceed to deal with the contention of the petitioners based on Article 14 of the Constitution”.
(24) This approach is reflected in another decision of the Supreme Court in G.B.Mahajan & others Vs. The Jalgaon Municipal Council and othcrs; , where the Supreme Court was considering the reasonableness of an executive action. At page 1163 the Court quoted Prof. Wade: “THE doctrine that powers must be exercised reasonably has to be reconciled with the no less important doctrine that the Court must not usurp the discretion of the public authority which Parliament appointed to take the decision. Within the bounds of legal reasonableness is the area in which the deciding authority has genuinely free discretion, If it passes those bounds, it acts ultra vires. The Court must therefore resist the temptation to draw the bounds too tightly, merely according to its own oppnion. It must strive to apply an objective standard which leaves to the deciding authority the full range of choice’ which the-legislature is presumed to have intended. Decisions which are extravagant or capricious cannot be legitimate. But if the decision is within the confines of reasonableness, it is no part of the Court’s function to look further into its merits. ‘With the question whether a particular policy is wise or foolish the Court is not concerned; it can only interfere if to pursue it is beyond the powers of the authority’ …….”.
Thereafter the court proceeded to say:
“IN the arguments there is some general misapprehension of the scope of the “reasonableness” test in administrative law. By whose standards of reasonableness that a matter is to be decided? Some phrases which pass from one branch of law to another – as did the expressions ‘void’ and voidable’ from private law areas to public law situations – carry over with them meanings that may be in a oposite in the changed context. Some such thing has happened to the words ‘reasonable’, ‘reasonableness’ etc.”
At page 1165 it was pointed out:
“…..a thing Is not unreasonable in the legal sense merely because the Court thinks it is unwise”
(25) The need to have restraint and the fact that more than two views arc possible on a particular subject, are factors to be borne in mind by the Court always, while discharging its constitutional responsibility. If the impugned action of the State is arbitrary, unreasonable or unconstitutional for any reason, this Court has a duty to set at naught or make an appropriate order to have the defects rectified.
(26) There was an argument that facilities given to power of attorney holder for conversion, results in favoritism. A number of transfers are made in the guise of executing. Power of Attorney, and the P.A. holder is permitted conversion by paying the normal conversion fee plus 33-1/3% of the said fee. This ignores the unearned increase which was not paid by the real transferors and transferees, who resort to this device of transferring the land by executing the Power of Attorney.
(27) This contention over looks the fact that a surcharge is levied in the case of a Power of Attorney holder. To estimate the number of transfers undergone already by this device of creating Power of Attorney holders and then estimating the unearned increase would create practical problems of administration. In the circumstances, the respondents have evolved a simpler mode of permitting the conversion by collecting an additional sum by way of surcharge. The factum of administrative difficulties is a relevant factor justifying a special treatment to any particular class.
(28) The contentions that the erstwhile displaced persons are entitled to be treated is absolute owners and the lease deeds executed by them should be equated to sale deeds and that no conversion fee should be charged even if they seek the conversion, ignore the basic rule that a lessee is estopped from denying the and lord’s title during the period of the lease and until the lessee surrenders his possession obtained under the lease and further, all these years for over 30 years these allottees conducted themselves as the lessees and were abiding by the terms of the lease deeds. The Displaced Persons (Compensation & Rehabilitation) Act and the Rules made there under in no way barred the allotments of plots by way of leases. All those lessees were allottees with plots only at cost price inclusive of development charges) and not at the market rate. In these circumstances, the elaborate arguments addressed on this aspect need not be considered in detail.
(29) Mr. Mohit Bhandari, learned counsel appearing for one of the writ petitioners raised an interesting contention to the effect that the Government has no competence at all to collect the conversion fee. The learned counsel contended that there is a democratically elected State Government and the question of conversion should have been adopted in the State Assembly so that the views of the people could be properly considered by the representatives of the people. The learned counsel also contended that Article 239Aa(3) of the Constitution shall have to be read as not depriving the State Assembly of its powers to deal with the questions pertaining to the lands.
(30) As per the above Article of the Constitution, matters with respect to entries 1,2 & 18 of the State List and entries 64,65 & 66 of that List insofar as they relate to the said Entries 1,2 &18 are not matters on which the Delhi State could make any law. The subject matter covered by those entries are still continuing to vest in the Parliament. Entry 18 reads thus:- "18.Land, that is to say, right in or over land, land tenures including the relation of landlord and tenant, and the collection of rents; transfer and alienation of agricultural land; land improvement and agricultural loans; colonization." From the above it is clear that the subject relating to the right in or over land and land tenures including the relation of landlord and tenant is a matter within the exclusive jurisdiction of the Parliament. The State Assembly is not given the competence to legislate over the said matter. If so, the executive power of the Union Government extends to the said subject. (31) Mr. Bhandari contended that Entry 45 of the Second List in the 7th Schedule as well as Entry 49 thereof shall have to be read together so as to confer a Power in the State to make a law or exercise its executive power in respect of the conversion of the lease hold interest in the free hold. (32) Any other interpretation, according to Mr. Bhandari will defeat the democratic structure of the State. The learned counsel contended that the Parliament consists of members representing the people all over India while the State Assembly comprises of the representatives of the people of Delhi alone. Therefore, the latter should, be given the power to make any law which affects the people of Delhi. (33) This court is concerned with the constitutional provision. The constitution, as it stands now, has given the relevant power to the Parliament and the Union Government. It is not for this court to examine the wisdom of retaining these powers with the Parliament. Parliament also is a democratically elected body. Therefore, it is not possible for me to accept the contention of the learned counsel for the petitioner.
(34) For the reasons stated above, I hold that the Scheme is defective, insofar as the areas referred as Ashok Vihar and Wazirpur and a clarification or rectification in that regard shall have to be done by the respondent within the time stipulated in this order. It is also declared that the scheme is defective and is violative of Article 14 of the Constitution of India in so far as the scheme for conversion impugned in these writ petitions fail to classify the original allottees who are in possession of the allotted lands under the rehabilitation schemes, separately and provide them a reduced rate of conversion fee. The respondents are directed to take steps to remove the defects so that the scheme could be implemented to realise its objects properly.
(35) The respondents are granted time till the end of September, 1994, to rectify the defects stated above, failing which the scheme is declared as inoperative and unenforceable for all purposes. The writ petitions are disposed of accordingly.