JUDGMENT
S. Ravindra Bhat, J.
1. The present appeal, under letters patent, is directed against the judgment and order of a learned single judge dated 28.04.2004 in WP (C) 272/2003. By the judgment, the writ petition of the respondent was allowed, with certain directions.
2. The issue involved in this appeal is with regard to the power of the appellant to insist upon payment of damages as a pre-condition for conversion of leasehold property into freehold.
3. The predecessor in interest of the respondent, Late Shri Lakshmi Chand was the perpetual lessee of Plot No. 1 Block 90, 1, at Jain Mandir Road, New Delhi further to a lease deed executed on 15.03.1922. A two storied building was constructed on that plot (“the plot”) in 1935. On the death of Lakshmi Chand, the property and the plot was mutated as per letter dated 06.06.1963 in the name of the petitioner. Later, apparently, the respondent made certain additional constructions as per the Resolution of the New Delhi Municipal Committee but the appellant, Land & Development Office, Government of India, which was the perpetual Lesser refused to grant permission for the additional construction and further refused to regularise the misuse on the premises. This position appears from the letter dated 09.07.1969. The appellant expressed willingness to reconsider its decision provided the respondent complied with the terms set out in the letter requiring payment of certain additional charges.
4. The respondent, however, did not comply with the terms. He represented on 14.11.1969 stating that the charges were exorbitant and penalty should not be imposed. The appellant, by letter dated 18.12.1969, rejected that representation. It sought compliance with the terms and conditions of its letter dated 09.07.1969 within 15 days, failing which the terms were to be treated as cancelled and withdrawn; action was threatened against the respondent under Clause 13 of the lease deed for violation of its terms and conditions. The respondent raised the same issues in the letter dated 27.01.1970.
5. The appellant by letter dated 10.04.1970, determined the lease of the respondent and re-entered the premises with effect from 01.04.1970,on account of the failure of the respondent to comply with the terms of the letter dated 09.07.1969. The letter informed that the Department has been directed to take possession of the premises from the respondent. The respondent again represented on 04.06.1970. He was called to attend the office of the appellant. The respondent, by his letter of 19.10.1971 raised the issue about the quantification of the demand (in terms of letter dated 09.07.1969 for Rs. 17,556/20 as charges for misuse, for office use, of an area measuring 1205 sq. feet). He stated that in any case the area of misuse is 120-6 square feet, and that only one room was used as a personal office.
6. The respondent apparently addressed several reminders. He also requested information for additional charges under the rules. No response was forthcoming from the appellant. The respondent, by letter dated 16.06.1984 informed the appellant that the first floor and barsati floor were still in his possession for purpose of residence and requested for information about misuse charges, if any. On 12.04.1993 the respondent informed the appellant that entire premises were lying vacant from January 1993 and could be inspected.
7. In 1992, a scheme for conversion of leasehold rights into freehold was introduced by the appellant; and a brochure was issued in April 1992. This scheme was concerned only with plots of land up to 500 sq. meters. This restriction was subsequently waived in terms of a new brochure issued in July 1999 and concessional land rates of 1987 were made applicable as per the earlier scheme to even such plots, up to 31.03.2000.
8. The respondent applied under the said scheme for conversion of the property as aforesaid into freehold vide application dated 13.07.1999. On 20.09.1999, the respondent wrote a letter stating that as per information received, the property had been re-entered and requested that the application for conversion be processed if re-entry was withdrawn and charges for withdrawal of re-entry at the rate of Rs. 3000/- per annum from the date of re-entry be accepted. The respondent relied on a notification dated 25.06.1996. The application of the respondent was, however, rejected on 30.09.2002, by a letter. The respondent filed a writ petition, seeking certiorari in respect of the letter dated 30.09.2002, and for a direction to restore the lease as per Clause 4(c) of the notification dated 25.06.1996 and Clause 1(c) of the notification dated 24.07.1996.
9. The appellant’s stand was that the leasehold rights of the respondent were determined on 10.04.1970; that action was accepted by the petitioner, as was evident that it was not challenged anytime. The application for conversion into freehold was therefore, rejected due to an express condition in the policy that such cases where leases had been determined, could not be given the benefit of conversion. The appellant relied upon Para 18 of the Brochure issued in July, 1999. It outlines grounds on which the conversion application could be rejected. Para 18.1 states that where a lease stands determined/cancelled or the property is re-entered, an application ( for conversion) could be rejected.
10. The appellant also took the stand that misuse of property stood on a different footing; that two notifications, of 1996 had expressly provided for such cases. Hence, the policy did not permit conversion of property that had been re-entered was rightly relied upon, and the respondent could not make a grievance. The appellant, filed an additional affidavit making calculations of amounts due from the respondent. As per this, the amount due was disclosed as almost Rs. 60 lakhs. This was based on the area misused and the rates applicable from year to year. These amounts were over and above the amount due prior to the date of the lease which was stated to be Rs. 14,331/-. This amount was reduced from the original demand as apparently the stand of the respondent was found to be correct that misused area was less than the area for which the demand was raised in 1969. The letter dated 09.07.1969 calculated the payment on misuse charges on an area measuring 1205 sq. feet while the affidavit dated 12.03.2004 filed now by the respondent shows the misuse area as 859 sq. feet.
11. The learned single judge noted that indisputably, the lease was determined by the letter dated 10.04.1970 but the respondent took no action. The affidavit dated 12.03.2004 further showed that at no stage of time was any further demand made by the appellant. For the first time, a demand had been specified in the affidavit, filed pursuant to Court’s direction, setting out the basis as to what amount the respondent would be liable to pay for the re-entry to be withdrawn. It was also held that the appellant took about three years time to reject the application of the respondent; the rejection letter was issued only on 30.09.2002 whereas the application for conversion was made in July 1999. The learned single judge held that the circular dated 24.07.1996 made it clear that application for conversion into freehold could not to be rejected merely because of re-entry. It prescribes that the re-entry fee is to be charged from the date of re-entry to the date of allowing the conversion. The mode of charging of this re-entry fee was not specified but from the earlier circular dated 25.06.1996 it was obvious that charges specified there were applicable to withdrawal from re-entry. The circular of 25.06.1996 had specified the mode of charging of Rs. 100 per day or Rs. 3000/- per annum. This rate was specified for re-entry wherein sale took place, i.e. a step ahead of the case at hand, involving simple re-entry, and no further transfer. The learned judge therefore concluded that the respondent could not be worse off than persons who transferred properties which were re-entered. It was also held that if the appellant wanted to raise any demand, it should have been raised on the respondent when he repeatedly sought specification of amounts. Therefore, impugned letter dated was quashed. The learned single judge allowed the petition, by directing payment of the amount of Rs. 14,331/- with varying rates of interest for different periods, by the respondent, as a condition for conversion.
12. Shri Ashok Gupta, learned counsel appearing for the appellant, submitted that the judgment under appeal requires interference. He contended that there was no question of equating a case where some mis-user existed, with one where the Lesser had effected re-entry. According to him in the first case, the lease subsists; in the latter, there is no lease. The two notifications dated 1996 and the whole policy of conversion was applicable only to cases where leases subsisted. In the present case, the lease stood determined long time back in 1970. This position was never questioned by the respondent. He also contended that while filling the form seeking conversion, the respondent intentionally omitted any reference to re-entry or determination of the lease.
13. Learned counsel further submitted that the scheme contained in the Brochure, issued in 1999 constituted a whole package, which clearly spelt out, in Para 18, that properties where leases had been re-entered/ determined were not eligible for conversion. That condition was not questioned by the respondent. Hence, it was not open to them to seek relief. He also submitted that the essential characteristic of the relationship between the parties was that of Lesser and lessee. In the case of mis-use, the Lesser was within his rights to prescribe certain conditions which could include payment of specified charges, etc as stipulations for regularization. Equally, in cases of re-entry, without taking proceedings in accordance with law, the Lesser could decide, as a matter of policy, that conversion would not be permitted.
14. Shri O.P. Khadaria, learned counsel for the respondents supported the findings of the learned single judge. He submitted that the stand taken by the appellants, in refusing to grant conversion was arbitrary. He submits that the two notifications issued in 1996 altered the position existing previously; the Brochure being relied upon in no way constituted a change in policy. It was further submitted that the Brochure nowhere stated that all previous instructions and circulars on the issue were superceded. Hence, when the appellant deemed it appropriate to permit restoration of lease, and conversion even in cases where the lessee had unauthorizedly sold or transferred the property, denial of conversion on the ground of determination of the lease, as also denial of the relief of withdrawal of the re-entry, was inequitable and arbitrary. Learned counsel submitted that the respondent had paid the amount as per the circular dated 24.7.1996. Besides, a substantial amount of over Rs. 2,80,000/- was deposited towards conversion charges.
15. During the course of hearing, the appellant placed on record the policy, issued in April 1992, for conversion from lease hold to free hold. That policy remained in force, till certain modifications were made through the two circulars issued on 25.06.1996, and 24.07.1996 ( hereafter, “the first 1996 circular” and “the second 1996 circular” respectively.
16. The substance of the first 1996 circular, as far as the present controversy is concerned, is that where sale permissions were applied for and unearned increase was deposited as per the terms of the lease deed but sale deed had not been executed, the amount of unearned increase deposited was to be in fact refunded. In such cases where the property has been re-entered, the re-entry order was to be revoked by the Lease Administering Authority on payment of prescribed charges of Rs. 100 per day or Rs. 3000 per annum. In such cases no damages on account of the lessee being in unauthorized occupation of the property was recoverable. The material terms of the said first 1996 circular read as follows:
“4. In this connection it is further clarified that:-
a) In respect of misuse of properties or unauthorized construction thereon, if misuse is condonable as per master plan provisions/zoning regulations or it is within the condonable items as prescribed by the Government, from time to time, no additional conversion fee will be charged in such cases as prescribed vide this Ministry’s letter of even number, dated 8.4.1992.
b) In respect of other misuses, conversion to freehold will be available provided the area misused does not exceed 25% of the built up area or 500 sq. ft. conversion fee, as prescribed, will be charged.
c) In cases where applications for sale permission were made by the parties and in the process unearned increase was deposited, but sale deeds have not been executed, pursuant to the sale permission, refund/adjustment or the amount paid by the party will be available in case party approaches the Government of conversion of property on payment of the prescribed conversion fee/surcharge/Addl. Conversion fee, as applicable.
In such cases it is further clarified that where property has been re-entered, the re-entry order will be revoked by the lease administering authorities on payment of prescribed charges of Rs. 100/- per day or Rs. 3,000/- per annum and in such cases no damages on account of deemed unauthorized occupation of Government land/property will be levied by the lease administering authority while allowing conversion.
5. In respect of unauthorized construction and misuse of the property, i.e. use other than the designated one as reflected in the allotment letter/lease deed, it is further clarified that action to this effect could be taken by the concerned authorities under the building bye-laws and zoning regulations even after the properties have been converted into freehold.. Therefore, the role of the Local Body should not be exercised by the lease administering authorities and in such cases where misuse charges and damages for unauthorized construction, if any, claimed, prior to the receipt of the application for conversion, should only be charged before allowing conversion and no fresh demand need be raised by the lease administering authorities on this account as clarified earlier as well”.
17. The second circular of 1996 concerns itself with clarifications about the extent of plots, where misuse exists; it limits entitlement of conversion to plots where mis-use is less than 500 sq. metres, or 25% of the plot area. This circular makes it clear that application for conversion into freehold is not to be rejected merely because there is re-entry which has taken place. It prescribes that a re-entry fee is to be charged from the date of re-entry to the date of allowing the conversion, in the following terms, as per para 2(c):
“c) The fee for revocation of re-entry should be charged from the date of the re-entry to the date of allowing conversion because re-entry order could be deemed to have been withdrawn only from the date conversion to freehold is allowed by the competent authority.”
18. Before dealing with clause 18 of the Brochure of 1999, it may be noticed that an earlier condition, viz, Para 11 prescribes that conversion could be granted even if there was a misuse of the property inasmuch as where a portion of the residential property was being put to non-residential use. Para 18 details the eventualities when applications for conversion into freehold may be rejected. Sub-clause (1) stipulates that a ground for rejection can be where the lease has been re-entered. Other eventualities include pendancy of litigation between the Lesser and lessee, non-construction upon the plot by the allottee, etc.
19. There is no gainsaying the fact that the lease was determined on 10.04.1970; that action remained unchallenged. Yet, the appellant did not take any action on it. Likewise, it made a demand sometime in the early nineteen seventies, but did not take any action to ensure payment.
20. The original scheme, conceived in 1992 has remained more or less the same except that restrictions on the area of the plot which could be converted was subsequently withdrawn and the 1999 scheme gave an opportunity to avail of the concessional rates for the last time up to 31.03.2000. During the working of the 1992 scheme certain issues required resolution, as a result of which the two circulars of 1996 were issued. The finding of the learned single judge, that the scheme (contained in the 1999 circular) has to be read with the circulars, is in our opinion, the correct view.
21. The circular dated 28.06.1999 made the conversion scheme applicable to plots over 500 sq. years. The reading of the second 1996 circular shows that applications for conversion into freehold were not to be rejected merely because there is re-entry which has taken place. It provides that the re-entry fee is to be charged from the date of re-entry to the date of allowing the conversion. The mode of charging of this re-entry fee was not specified but from the earlier circular dated 25.06.1996 it is obvious that the charges specified therein would apply to such withdrawal of re-entry. The first 1996 circular specified the rate, viz. Rs. 100 per day or Rs. 3000/- per annum. It is true, that was in respect of re-entry wherein sale took place. The learned single judge, in our view correctly held that this eventuality or situation was a step ahead of the present case where there is mere, or simplicitor re-entry and no further transfer was being made.
22. Counsel for respondent submitted, and in our view, correctly that the 1999 Brochure or scheme did not supersede the two circulars issued in 1996. there is no intrinsic material to show that the earlier circulars, which had been issued as clarifications while working out the 1992 scheme, were superseded. In fact, the 1999 Brochure, in its Introduction, makes mention of the 1992 scheme, and sets out the rationale for issuing the new Brochure. The provisions in the Brochure, in material particulars are similar to the 1992 scheme; it appears to be a compilation, put together in “Frequently Asked Questions” format, for the facility of easy reference. Therefore, the claim of the appellant that Para 18.1 operates as a blanket bar in all cases of re-entry has to be viewed in the context of the situations where conversion is permitted in certain cases of re-entry, dealt with in the two circulars.1
23. It is true that the appellant acts as a Lesser, with all the attendant rights and privileges, when it frames policies, and negotiates with individual lessees for conferment of benefits in relation to property. Nevertheless, the peculiar position it enjoys, as a State within the meaning of Artile 12 places certain inherent limitations upon its conduct. As a State or state agency, it is entitled to adopt a rational policy having universal application. However, in dealing with individuals or classes of persons, it has to keep within the bounds of Article 14, which makes non-arbitrary behavior imperative.
24. If one sees the power of the appellant in the perspective explained above, it would be apparent that there is no rationale why a person who has suffered re-entry should be denied the facility of conversion of his property from lease hold into freehold, whereas a General Power of Attorney holder or even a Lesser who sells the property, ( when there is no authority to do so) can nevertheless be relieved of the rigors of such determination/ re-entry of lease, and be permitted to enjoy the benefit of conversion into freehold. We are conscious of the fact that the respondent has not attacked clause 18.1. We therefore cannot say that the condition is arbitrary or unreasonable. However, while construing the provisions of a policy, the court is bound to give it a reasonable, and non-arbitrary interpretation. It is settled that when confronted with two interpretations, one which leads to the action becoming Unconstitutional, and the other which, even while furthering the object of the measure, saves it the court must adopt the latter (U.P. Avas Evam Vikas Parishad v. Jainul Islam, 1 and Maharashtra SRTC v. State of Maharashtra, 2)
25. The stand taken by the appellant that it can restore leases only in respect of those cases which relate to transfer, while not restoring the leases of those who seek no such transfers, is arbitrary. If it is possible to proceed and convert the leasehold rights of leases which have been determined, but where the lessees have transferred their rights, the ground of denial of such benefit in cases where there is no transfer, is indefeasible. The proper construction therefore, of Para 18.1 would be to read it down so as to extend the benefit of conversion in those cases of re-entry like the present, where the original Lesser continues in possession, and applies in time, as per the Brochure of 1999.
26. As far as the issue of damages or payment of amounts aggregating Rs. 60 lakhs is concerned, a further justification was sought to be made by way of another affidavit, filed in appeal, which relied upon circulars issued on 31.3.1976, 24.4.1981 and 29.6.1993. All these are in the form of circulars. There is no assertion, or averment that they can be the basis of claiming damages in respect of the eventuality we are concerned with. Nothing was brought to our notice that such circulars, or the basis of those circulars had been published, or otherwise made known to lessees, or that they had general application. We cannot therefore accept the plea that damages were leviable in accordance with those circulars. Furthermore, as noticed by the learned single judge, the amounts claimed in the additional affidavit were never sought from the respondent as charges payable by him.
27. We therefore agree with the view taken by the learned single judge, that the application of the respondent could not have been rejected on the ground of re-entry but on the other hand in view of payment made, it ought to have been processed, is the correct one.
28. The learned single judge had directed processing of the respondent’s application on the payment of the following amounts, aggregating Rs. 61,705/-:
(i) Amount demanded by the office letter dated 9.7.1969 Rs. 14331.00
(ii) 6% interest on above amount w.e.f. 9.7.1969 to 31.10.1971 Rs. 1930.00
(iii) 8% intrest from 4.10.1971 to 28.8.19785 Rs. 4473.00
(iv) 10% interest from 29.8.1975 to 31.3.2001 Rs. 36672.00
(v) 10% interest from 1.4.01 to 31.3.04 Rs. 4299.00
We may notice in this context that the respondent had sought for restoration of lease as per clause 4(c) of the first 1996 circular, and deposited Rs. 87,000/- ( being the amount of Rs. 3000/- per annum for each years’misuse, till date of application, i.e for 29 years). Such being the case, and having regard to the fact that the amount originally demanded by the appellant, viz Rs. 14,331/- being in respect of misuse which existed as of 1969, and not as charges for restoration of a lease that had been determined, it would not be appropriate to grant a relief that had not been claimed. Accordingly, we modify the direction contained in Para 23 of the judgment under appeal, so far as the amount is concerned, and affirm the operative portion in Para 24. Consequently, the appellant is directed to process the application of the respondent for conversion, by adjusting and accepting the amount of Rs. 87,000/- deposited as per para 4(c) of the circular dated 25.6.1996, along with the amount of conversion charges deposited. In case of any other formalities, they too shall be intimated to the respondent. The entire process shall be completed within six weeks.
29. The appeal is partly allowed to the extent indicated in para 26 leaving the parties to bear their own costs.