Supreme Court Upholds Municipal Corporation’s Right: Century Textiles Loses Claim for Conveyance (2025)

Date of the Judgment: January 7, 2025

Citation: 2025 INSC 36

Judges: Vikram Nath, J. and Prasanna B. Varale, J.

Can a lessee claim ownership of property after a lease expires, especially when the lease doesn’t explicitly promise conveyance? The Supreme Court of India recently addressed this crucial question in a dispute between the Municipal Corporation of Greater Mumbai (MCGM) and Century Textiles and Industries Limited. The core issue revolved around whether MCGM was obligated to transfer ownership of a leased plot to Century Textiles after the lease term concluded. The bench, comprising Justices Vikram Nath and Prasanna B. Varale, delivered a unanimous judgment, authored by Justice Vikram Nath, setting aside the Bombay High Court’s order and ruling in favor of the Municipal Corporation.

Case Background

Century Textiles and Industries Limited, a cotton mill company, applied to the Improvement Trust in 1918 under the City of Bombay Improvement Act, 1898, to build dwellings for its workers under the Poorer Classes Accommodation Scheme (PCAS). The Improvement Trust approved the scheme, which involved constructing 980 rooms and 20 shops on a 50,000 sq. yd. land, divided into three plots (A, B, and C). The current dispute concerns only Plot A, measuring 23,000 sq. yds. By 1925, Century Textiles had constructed 476 dwellings and 10 shops on Plot A. The 1898 Act was repealed in 1925, and the Bombay Improvement Trust Transfer Act, 1925, came into effect. In 1927, Century Textiles requested modifications to the scheme, seeking to reduce the number of rooms and shops and requesting a lease for Block A and conveyance of Block B. The Improvement Trust granted the alteration, conveying Block B to Century Textiles in 1928 for Rs. 1,20,000 and granting a 28-year lease for Block A, starting April 1, 1927, at a nominal rent of Re. 1 per year. The lease expired on March 31, 1955. For 51 years, neither party took action until Century Textiles sent a legal notice in 2006, claiming they were entitled to conveyance of Block A. In 2009, Century Textiles applied for redevelopment of the land. After further communications and a lack of action from MCGM, Century Textiles filed a writ petition in the Bombay High Court in 2016, seeking a direction for MCGM to execute a formal conveyance deed.

Timeline

Course of Proceedings

The Bombay High Court, on March 14, 2022, allowed Century Textiles’ writ petition, directing MCGM to execute the conveyance of Plot A within eight weeks. The High Court held that the lease agreement, read with the relevant provisions of the 1925 Act, obligated MCGM to convey the property upon the expiry of the lease term. MCGM appealed to the Supreme Court, challenging the High Court’s decision. The Supreme Court granted a status quo order on July 13, 2022, pending the appeal.

Legal Framework

The case hinges on the interpretation of the City of Bombay Improvement Act, 1898, and the Bombay Improvement Trust Transfer Act, 1925. Key provisions include:

• ✓ Section 32B of the 1898 Act: This section allows employers to apply for Poorer Classes Accommodation Schemes (PCAS) to provide dwellings for their workers.
• ✓ Section 32G of the 1898 Act: This section outlines the terms of the lease, stipulating a 28-year lease period.
• ✓ Section 32I of the 1898 Act: This section deals with default and determination of lease. Sub-section (2) states that if no default is made, the Board’s rights vest in the employer upon lease determination.
• ✓ Section 48 of the 1925 Act: This section specifies the conditions of the lease, including the lessee’s obligation to maintain the premises and leave them in good condition at the end of the lease. Specifically, Section 48(a) states that, “The lessee shall keep during the term of the lease and leave at the end thereof the demised premises together with their fixtures in good and substantial repair and condition.”
• ✓ Section 51 of the 1925 Act: This section addresses default and determination of the lease. Sub-section (1) allows the Board to re-enter the premises upon default. Sub-section (2) states that “Where no default is made by the lessee in the conditions of the lease, then on determination of the lease at the end of the term thereof, the Board shall convey the premise to the lessee at his cost and free of all restrictions and liabilities imposed by the lease and by this Act or by the City of Bombay Improvement Act, 1898.”
• ✓ Section 527 of the Mumbai Municipal Corporation Act, 1888: This section mandates a one-month prior notice before filing a suit against the corporation, with a six-month limitation period from the accrual of the cause of action.

Arguments

Arguments by the Municipal Corporation of Greater Mumbai (Appellants):

• ✓ Delay and Laches: The appellants argued that Century Textiles’ writ petition was filed after a 61-year delay from the expiration of the lease in 1955, making it highly barred by laches. They cited Shri Vallabh Glass Works Ltd. v. Union of India (1984) 3 SCC 362 and SS Rathore v. State of MP (1989) 4 SCC 582, to support that such delays should not be condoned.
• ✓ Interpretation of Section 51(2) and Section 48 of the 1925 Act: The appellants contended that the phrase “shall convey” in Section 51(2) should be read as “may convey” to harmonize it with Section 48(a), which requires the lessee to leave the premises in good condition at the end of the lease. They relied on CIT v Hindustan Bulk Carriers (2003) 3 SCC 57, Sultana Begum v. Prem Chand Jain (1997) 1 SCC 373, and Sainik Motors v. State of Rajasthan (1962) 1 SCR 517, to support their interpretation.
• ✓ Contracting Out and Waiver: The appellants argued that parties could contract out of obligations and waive statutory rights, citing Lachoo Mal vs. Radhey Shyam (1971) 1 SCC 619, Sita Ram Gupta v. Punjab National Bank (2008) 5 SCC 711, and HR Basavaraj v. Canara Bank (2010) 12 SCC 458.
• ✓ Misreading of Documents: The appellants claimed the High Court misread the Board’s resolution dated 31.05.1927 and the lease deed dated 03.10.1928.
• ✓ Internal Notings: The appellants argued that internal communications and notings within the Corporation could not be relied upon unless approved by the competent authority, citing Shanti Sports Club vs. Union of India (2009) 15 SCC 705.
• ✓ No Automatic Vesting: The appellants submitted that Section 51 of the 1925 Act did not provide for automatic vesting of the property but required a separate conveyance deed, with the lessee bearing the cost.
• ✓ Cost of Scheme: The appellants argued that the cost of the scheme borne by Century Textiles did not entitle them to a conveyance without paying the cost of the land.

Arguments by Century Textiles and Industries Limited (Respondents):

• ✓ Right to Conveyance: The respondents argued that the lease deed, read with the Board’s agreement to alter Scheme No. 51, implied an obligation to convey the land upon expiry of the lease.
• ✓ Section 51(2) of the 1925 Act: The respondents contended that Section 51(2) of the 1925 Act is mandatory and cannot be contracted out, citing Murlidhar Agarwal and Anr. v State of Uttar Pradesh and Others (1974) 2 SCC 472, Devkaran Nenshi Tanna v. Manharlal Nenshi (1994) 5 SCC 681, and PTC (India) Financial Services Ltd. v Venkateswarlu Kari (2022) 9 SCC 704.
• ✓ Section 108(q) of the Transfer of Property Act, 1882: The respondents argued that Section 108(q) of the Transfer of Property Act, 1882, was excluded in the lease deed, and therefore, the appellants could not claim a right to re-possess.
• ✓ Mandatory Vesting: The respondents argued that the provisions of Section 51(2) of the 1925 Act, as well as Section 32I(2) of the 1898 Act, are mandatory due to the use of the word “shall.”
• ✓ Composite Nature of Scheme: The respondents submitted that once the lessee fulfills all obligations, the land and buildings should be conveyed to them under the statutory scheme.
• ✓ Special Provision: The respondents argued that Section 51 of the 1925 Act is a special provision that prevails over the general provision of Section 48(a), citing Managing Director Chattisgarh State Co-operative Bank Maryadit v Zila Sahkari Kendriya Bank Maryadit and Ors. (2020) 6 SCC 411 and J.K. Spinning and Weaving Mill Co Ltd. v State of uttar Pradesh & Others SCC Online SC 16.
• ✓ Definition of “Premises”: The respondents argued that the word “premises” includes both land and buildings, as defined in Section 3(gg) of the 1888 Act.
• ✓ Public-Private Partnership: The respondents contended that the scheme was an early example of a public-private partnership, entitling them to vesting/conveyance.
• ✓ Vested Right: The respondents argued that the right to conveyance was a vested right that could not be divested by subsequent conduct, citing Rameshwar and Others vs. Jot Ram and Another (1976)1 SCC 194.
• ✓ Acknowledgment of Ownership: The respondents claimed that the appellants had recognized and acknowledged their ownership rights through internal communications.
• ✓ Delay: The respondents explained the delay by stating that their possession was never obstructed and that they were unaware of the Assistant Commissioner’s opinion against conveyance until 2013. They cited State of Maharashtra vs. Digambar (1995) 4 SCC 683.

Issues Framed by the Supreme Court

The Supreme Court framed the following core issues:

1. Whether the Municipal Corporation was obligated to convey the leased land to Century Textiles upon the expiration of the lease, free from all restrictions and liabilities.
2. Whether the writ petition filed before the Bombay High Court suffered from delay and laches, and whether a writ petition was the appropriate remedy instead of a civil suit.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• ✓ The Supreme Court followed Shri Vallabh Glass Works Ltd. v. Union of India [CITATION] and SS Rathore v. State of MP [CITATION], holding that the writ petition was barred by laches due to the significant delay.
• ✓ The Court followed CIT v Hindustan Bulk Carriers [CITATION], Sultana Begum v. Prem Chand Jain [CITATION], and Sainik Motors v. State of Rajasthan [CITATION], emphasizing the need for a harmonious construction of statutes, particularly Sections 48(a) and 51(2) of the 1925 Act.
• ✓ The Court cited Lachoo Mal vs. Radhey Shyam [CITATION], Sita Ram Gupta v. Punjab National Bank [CITATION], and HR Basavaraj v. Canara Bank [CITATION], noting that parties can contract out of obligations and waive statutory rights, but it did not find that such a contracting out had occurred.
• ✓ The Court cited Shanti Sports Club vs. Union of India [CITATION], holding that internal communications within the corporation are not binding unless approved by a competent authority.
• ✓ The Court cited Murlidhar Agarwal and Anr. v State of Uttar Pradesh and Others [CITATION], Devkaran Nenshi Tanna v. Manharlal Nenshi [CITATION], and PTC (India) Financial Services Ltd. v Venkateswarlu Kari [CITATION], but distinguished their applicability, finding that the term “shall” in Section 51(2) does not mandate automatic conveyance.
• ✓ The Court cited Managing Director Chattisgarh State Co-operative Bank Maryadit v Zila Sahkari Kendriya Bank Maryadit and Ors. [CITATION] and J.K. Spinning and Weaving Mill Co Ltd. v State of uttar Pradesh & Others [CITATION], but held that Section 51(2) of the 1925 Act is not a special provision that overrides Section 48(a).
• ✓ The Court cited Rameshwar and Others vs. Jot Ram and Another [CITATION], but found that no vested right to conveyance existed in this case.
• ✓ The Court cited State of Maharashtra vs. Digambar [CITATION], but found that the delay was not condonable and the respondent had not shown due diligence.
• ✓ The Supreme Court followed Aflatoon v. Lt. Governor of Delhi [CITATION], Hari Singh v. State of U.P. [CITATION], Municipal Corporation of Greater Bombay v. Industrial Development Investment Co. (P) Ltd. [CITATION], and New Okhla Industrial Development Authority v. Harkishan [CITATION], reiterating that significant delays in land acquisition matters cannot be condoned.

Reasoning of the Court:

The Supreme Court’s judgment was based on several key findings:

• ✓ The Court found that neither the statutory framework nor the lease deed imposed an absolute obligation on the Municipal Corporation to convey the property. Section 51(2) of the 1925 Act was interpreted to be contingent upon the terms of the lease and not an automatic mandate.
• ✓ The Court held that the writ petition was barred by laches due to the 61-year delay. The respondent’s failure to take action after the lease expired in 1955, and even after sending a legal notice in 2006, was deemed inexcusable.
• ✓ The Court emphasized that the phrase “shall convey” in Section 51(2) of the 1925 Act must be read harmoniously with Section 48(a), which requires the lessee to leave the premises in good condition. The two provisions were not in conflict but were meant to be read together.
• ✓ The Court held that the High Court had misread the Board’s resolution dated 31.05.1927 and the lease deed dated 03.10.1928. The documents did not explicitly guarantee a conveyance of the property upon expiry of the lease.
• ✓ The Court emphasized that internal communications and notings within the Corporation cannot be relied upon unless approved by the competent authority.
• ✓ The Court also found that the lessee was required to bear the cost of conveyance and that the cost of the scheme did not entitle them to a conveyance without payment for the land.
• ✓ The Court concluded that the writ petition was not the appropriate remedy, and the respondent should have pursued a civil suit if they believed they had a valid claim.

Flowchart of the Case

Conclusion

The Supreme Court’s judgment in The Municipal Corporation of Greater Mumbai & Ors. vs. Century Textiles and Industries Limited & Ors. is a significant ruling that clarifies the interpretation of lease agreements and the obligations of municipal corporations. The Court’s emphasis on the need for a harmonious interpretation of statutory provisions and the rejection of claims based on significant delays underscores the importance of timely legal action. The ruling also highlights that the mere existence of a lease agreement does not automatically entitle the lessee to a conveyance of the property upon expiry of the lease term. This case serves as a crucial precedent for similar disputes involving lease agreements and municipal authorities, emphasizing the need for clear contractual obligations and timely legal recourse.