Paragraph numbers below are the court’s original numbering, recovered from the source text.
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 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 A 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 B 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 of the contract and the circumstances c 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 0 regarded as a reasonable, social, ideal only to the extent that equality of bargaining poweir 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 E 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 F University Press]. Extension Fee:
12. Whether the Director is empowered to issue any G 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 H approval of his building plans from the competent authority, "be DLF UNIVERSAL LTD. v. DIRECTOR, T & C. PLANNING HARYANA [B. SUDERSHAN REDDY, J.] 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 same." This clause enables c 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.· D "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 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 A 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 8 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 C clause in the agreement to be entered 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 D 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 11 B read with E 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 F 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 the colony. After the completion of the internal development works to the satisfaction of the Director, the colonizer is entitled to G 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. DLF UNIVERSAL LTD. v. DIRECTOR, T & C. PLANNING HARYANA [B. SUDERSHAN REDDY, J.] 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 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. 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 B 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 c of a plot or other immovable property, such deed 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 D 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 E 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 F 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. 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 DLF UNIVERSAL LTD. v. DIRECTOR, T & C. PLANNING HARYANA [B. SUDERSHAN REDDY, J.] 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 mainte'nance charges is void? zti
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 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 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 B 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: c (a) metalling of roads and paving of footpaths; (b) turfing and plantation of trees in open spaces; (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 F 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 G 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 DLF UNIVERSAL LTD. v. DIRECTOR, T & C. PLANNING HARYANA [B. SUDERSHAN REDDY, J.] electrical system and its upgradation. (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 c 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 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.
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 C 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 D 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 E Director has not taken into consideration the said maintenance expenses for the purpose of computing the 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 F 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 G 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 H charges. The payment of maintenance charges by the plot buyer DLF UNIVERSAL LTD. v. DIRECTOR, T & C. PLANNING HARYANA [B. SUDERSHAN REDDY, J.] 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 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 c 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 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 A 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 writing, shall grant a licence in the prescribed form, after the application is furnished to the Director, a bank guarantee equal to 25 per B 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 c 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 D 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 E appropriate 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 F 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 G 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. DLF UNIVERSAL LTD. v. DIRECTOR, T & C. PLANNING HARYANA [8. SUDERSHAN REDDY, J.]
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 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 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 WB. and others [(1987) 3 SCC 82] upon which 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, B 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 c 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 0 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 E 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.~.F. Qutab Enclave Complex Educational Charitable Trust vs. State of Haryana and others [(2003) 5 sec 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 H and handing over of such construction, such power does not DLF UNIVERSAL LTD. v. DIRECTOR, T & C. PLANNING HARYANA [B. SUDERSHAN REDDY, J.] encompass within itself the right to exercise power in manner that inhibits terms andcontracts and freedom granted therein. 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. 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 rhay 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. The judgment of the High court is, accordingly, set aside. The appeals are, accordingly, allowed subject to the observations B made hereinabove. 44. All interlocutory applications and contempt cases are, accordingly, disposed of in terms of this order. D.G. Appeals allowed.