Supreme Court overturns High Court order on land lease: Gwalior Development Authority vs. Bhanu Pratap Singh (2023)

LEGAL ISSUE: Whether a High Court can direct the execution of a lease deed for additional land, after a prior lease deed for a portion of the land was executed without any demur, in a commercial transaction.

CASE TYPE: Civil Law, Land Lease, Commercial Transaction

Case Name: Gwalior Development Authority and Another vs. Bhanu Pratap Singh

[Judgment Date]: April 19, 2023

Date of the Judgment: April 19, 2023

Citation: 2023 INSC 363

Judges: Justice Ajay Rastogi and Justice Bela M. Trivedi. The judgment was authored by Justice Ajay Rastogi.

Can a High Court order the execution of a lease deed for additional land after a previous lease deed for a portion of the land has already been executed without any objection in a commercial transaction? The Supreme Court of India recently addressed this question in a case involving the Gwalior Development Authority and a bidder for a commercial plot. The core issue revolved around whether the High Court could direct the Gwalior Development Authority to execute a lease deed for the remaining land when a lease deed for a smaller portion of the land was already executed without any objection from either party. The Supreme Court overturned the High Court’s decision, emphasizing that once a commercial transaction is concluded and a lease deed is executed, it cannot be altered or amended under Article 226 of the Constitution of India.

Case Background

In 1997, the Gwalior Development Authority (hereinafter referred to as “the Authority”) issued an advertisement inviting bids for the grant of leases of different plots under the transport city scheme. Bhanu Pratap Singh (hereinafter referred to as “the respondent”) was one of the bidders for a plot of land measuring 27887.50 sq. meters (Market Complex -2). His bid of Rs. 725 per sq. meter was the highest and was accepted by the Authority. Consequently, on September 29, 1997, the Authority issued a letter of allotment to the respondent, informing him that the plot of 27887.50 sq. meters would be leased to him for a total consideration of Rs. 2,06,67,966. The respondent was required to deposit Rs. 1,91,67,966 in four installments by October 31, 1999, in addition to the earnest money of Rs. 15 lakhs.

The letter of allotment stipulated that the market complex had to be constructed according to the sanctioned plan by the Authority and completed within two years. Failure to deposit the installments as per the bid conditions would result in forfeiture of the security amount. The respondent, however, failed to adhere to the payment schedule. He made payments in piecemeal, with the last installment being deposited on August 25, 2005. Despite the delay, the Authority did not cancel the bid or forfeit the deposited amount. The Authority revised the layout plans on the request of the respondent, and the amended layout plan was accepted on August 17, 2001.

Eventually, a lease deed was executed on March 29, 2006, for a reduced area of 18262.89 sq. meters, for a principal amount of Rs. 1,32,39,356, along with interest of Rs. 69,97,087, totaling Rs. 2,02,18,437. The respondent executed the lease deed without any objection. The total land put to auction was 27887.50 sq. meters, but the lease deed was executed for only 18262.89 sq. meters, with the remaining area not being accounted for in the lease deed.

Timeline

Course of Proceedings

After more than three and a half years after the execution of the lease deed, the respondent filed a writ petition under Article 226 of the Constitution of India in the High Court of Madhya Pradesh, Bench at Gwalior, seeking a mandamus to direct the appellants to execute the lease deed for the remaining area of 9625.50 sq. meters. The Division Bench of the High Court allowed the writ petition and directed the appellants to execute the lease deed for the remaining area of 9625.50 sq. meters without any additional consideration, but with the liability on the respondent to pay interest for the period from August 17, 2001, to March 29, 2006, excluding the period from May 27, 2004, to March 29, 2005. The Gwalior Development Authority challenged this order in the Supreme Court.

Legal Framework

The case primarily involves the interpretation of the scope of Article 226 of the Constitution of India, which empowers High Courts to issue writs for the enforcement of fundamental rights and for any other purpose. The case also touches upon the principles governing commercial transactions and the finality of contracts. The Registration Act, 1908, particularly Section 17, which mandates the compulsory registration of lease deeds, is also relevant.

Section 17 of the Registration Act, 1908 states that, “Documents of which registration is compulsory. – (1) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act is or shall be in force, namely:– (a) instruments of gift of immovable property; (b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property; (c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest; (d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent; (e) non-testamentary instruments transferring or assigning any decree or order of a Court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property: Provided that the State Government may, by order published in the Official Gazette, exempt from the operation of this sub-section any leases executed in any district, or part of a district, the terms granted by which do not exceed five years and the annual rents reserved by which do not exceed fifty rupees.”

Arguments

Arguments by the Appellants (Gwalior Development Authority):

• The appellants argued that undue indulgence was granted to the respondent, as the last installment, which was due by October 31, 1999, was paid on August 25, 2005.
• The Authority contended that the auction should have been canceled due to non-compliance with the bid conditions. However, they granted indulgence to the respondent considering the peculiar circumstances.
• The lease deed was executed on March 29, 2006, for 18262.89 sq. meters with the consent of both parties, and the transaction attained finality.
• The appellants submitted that the High Court erred by overlooking the fact that the lease deed was executed without demur, and it was a pure business/commercial transaction entered into with open eyes.
• They argued that the High Court’s direction to execute the lease deed for the remaining area of 9625.50 sq. meters without any consideration was an amendment to the registered instrument, which is not permissible under Article 226 of the Constitution.
• The appellants stated that the land is to be disposed of in accordance with the land disposal rules, but they are willing to consider the respondent’s claim for the remaining area at the prevalent circle rate to settle the dispute.

Arguments by the Respondent (Bhanu Pratap Singh):

• The respondent argued that the tender was floated for 27887.50 sq. meters, and the Authority could not segregate the land after accepting his bid.
• He contended that the execution of the lease deed for only 18262.89 sq. meters and keeping away the remainder of the land was unjustified.
• The respondent submitted that the Authority, being a public body, should act fairly in commercial transactions.
• He argued that the High Court’s order was equitable, as it secured the interests of the appellants by making him liable to pay interest for the interregnum period.

Innovativeness of the argument: The respondent’s argument that the Authority could not segregate the land after the bid was accepted was a notable point, highlighting the need for fairness in public transactions. The appellant’s argument that the High Court’s order amounted to an amendment of a registered instrument was a strong legal point.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue that the court addressed can be summarized as:

1. Whether the High Court was justified in directing the appellant to execute a lease deed for the remaining area of land after a lease deed for a part of the land was already executed without any demur.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court did not cite any specific cases or books in its judgment.

Judgment

How each authority was viewed by the Court?

• Section 17 of the Registration Act, 1908:* The Court relied on this provision to emphasize that the lease deed, once registered, could not be altered or amended, even by the High Court under Article 226 of the Constitution.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Finality of Commercial Transactions: The Court emphasized that once a commercial transaction is concluded with the execution of a lease deed without any objection, it cannot be reopened or altered in writ jurisdiction.
• Impermissibility of Amending Registered Instruments: The Court held that the High Court’s direction to execute a lease deed for the remaining area was effectively an amendment to a registered instrument, which is not permissible under Article 226 of the Constitution.
• Abuse of Discretion by the Authority: The Court noted that the Authority had shown undue indulgence to the respondent by allowing him to deposit installments much beyond the stipulated time. However, the Court decided not to delve further into this aspect, acknowledging that much time had passed.
• Limited Scope of Writ Jurisdiction: The Court reiterated that the writ jurisdiction under Article 226 is not meant to interfere with concluded commercial transactions, especially when the parties have entered into the transaction with open eyes.

Logical Reasoning:

The Supreme Court considered the argument that the High Court’s order was an amendment of a registered instrument. The Court rejected the High Court’s interpretation that the Authority could not segregate the land after accepting the bid. The Court reasoned that the transaction was concluded with the execution of the lease deed, and the High Court’s order was beyond its jurisdiction. The Court also considered the fact that the respondent had not paid the installments on time and had been granted undue indulgence by the Authority. The final decision was reached by emphasizing the finality of commercial transactions and the limited scope of writ jurisdiction.

The Court observed, “The High Court under impugned judgment has although passed a very lengthy order, but the judgments on which reliance has been placed have no semblance to the facts of the instant case and natural justice has no role to play in the given facts and circumstances, of which reference has been made. In our considered view, the judgment passed by the High Court in issuing a mandamus to execute the lease deed in favour of the respondent for the remaining area of 9625.50 sq. meters is completely beyond jurisdiction and such directions, in our view, being contrary to law deserve to be set aside.”

The Court also stated, “The submission made by the respondent that the tender floated by the appellants on 13th March, 1997 was called upon to the bidders to submit their bid for 27887.50 sq. meters and which could not have been segregated, more so after the bid has been finalized @Rs.725/- per sq. meter and that alone has been taken care of by the High Court by directing to execute the lease deed for the remainder of the land, in our considered view, is bereft of merit for the reason that so far as the tender floated by the Authority on 13th March, 1997 is concerned, the transaction was concluded on execution of the lease deed executed without demur for 18262.89 sq. meters on 29th March, 2006 and after the transaction is concluded and the instrument being registered under the law, it was not open to either party to question at least in the writ jurisdiction of the High Court under Article 226 of the Constitution and the mandamus issued by the High Court to execute the lease deed for the remainder of the area without any consideration is completely contrary to the settled principles of law and deserves to be set aside.”

Further, the court observed, “In the ordinary course of business, as the respondent has failed to deposit in terms of the tender document, the last instalment by 31st October, 1999, the auction was supposed to be cancelled and the earnest money deserved to be forfeited. We find no reasonable justification in the present facts and circumstances as to what would be the reason for undue indulgence being shown to the respondent while extending him the benefit to deposit the instalment by 25th August, 2005 and we have our strong reservations and such exercise of power by the Authority, in our view, is a clear abuse of discretion which is not only violative of Article 14 of the Constitution, but also smacks of an undue favour which is always to be avoided and whenever there is such a business/commercial transaction, it is always to be examined on the commercial principles where equity has no role to play. Be that as it may, as much water has flown in the Ganges, we would not like to stretch it any further.”

There were no dissenting opinions in this case; the judgment was unanimous.

Key Takeaways

• Once a lease deed is executed without any objection in a commercial transaction, it cannot be altered or amended under Article 226 of the Constitution of India.
• High Courts should be cautious in interfering with concluded commercial transactions.
• Public authorities should act fairly, but commercial transactions are to be examined on commercial principles, where equity has no role to play.
• Undue indulgence shown by public authorities in commercial transactions can be seen as an abuse of discretion.

Directions

The Supreme Court directed that the respondent be given the first opportunity to purchase the remaining land at the prevalent circle rate notified by the government. If the respondent does not show interest, the appellants are at liberty to dispose of the land as per their land disposal rules.

Development of Law

The ratio decidendi of this case is that once a lease deed is executed without demur in a commercial transaction, it cannot be altered or amended under Article 226 of the Constitution. This judgment reinforces the principle of finality in commercial transactions and limits the scope of writ jurisdiction in such matters. This case does not change the previous position of law but clarifies the limitations of the High Court’s powers under Article 226 in cases of concluded commercial transactions.

Conclusion

The Supreme Court allowed the appeal, setting aside the High Court’s order. The court held that the High Court exceeded its jurisdiction by directing the execution of a lease deed for the remaining land, as the transaction had been concluded with the execution of the lease deed for a portion of the land without any objection. The Supreme Court emphasized the importance of finality in commercial transactions and the limitations of the writ jurisdiction under Article 226 of the Constitution.