REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

                            CIVIL APPEAL NO. 550 OF 2003

DLF UNIVERSAL LTD. & ANR.         Appellant (s)

                  VERSUS

DIRECTOR, T.&C. PLANNING  HARYANA & ORS.                                       Respondent(s)

WITH

CIVIL APPEAL NO. 551 of 2003

M/s. ANSAL PROPERTIES &  Industries LTD.                   Appellant (s)

                  VERSUS

DIRECTOR, T.&C. PLANNING  HARYANA &  Anr.                                    Respondent(s)

WITH

CIVIL APPEAL NO. 1611 of 2003

M/s.Ajay ENTERPRISES LTD. & ORS.                                                           Appellant (s)

                  VERSUS

STATE OF HARYANA & ORS.                      Respondent(s)

WITH

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CONTEMPT PETITION(C) No. 215/2005 in CIVIL  APPEAL No.550/2003 and CONTEMPT PETITION  (C)No.106/2006 IN CIVIL APPEAL  No.550/2003

JUDGMENT

B.SUDERSHAN REDDY,J :

These appeals are directed against the orders of Punjab  

and Haryana High Court dismissing the Writ Petitions filed by  

the appellants herein challenging the impugned order dated  

05.05.1999  passed  by  the  Director,  Town  and  Country  

Planning, Chandigarh, Haryana.  The High Court upheld the  

validity of the impugned memo and accordingly dismissed the  

Writ Petitions.  The same is challenged in these appeals on  

various grounds.

2. We have heard the  learned senior counsel Shri Harish  

Salve, Shri S. Ganesh, Shri Harish Malhotra  and the learned  

counsel Shri Rajiv Vermani for the appellants and Shri U.U.  

Lalit,  learned senior  counsel  for  the respondents.  We have  

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also  heard the learned counsel  appearing on behalf  of  the  

interveners-applicants.

3. The central question that arises for our consideration in  

this  group  of  appeals  is  whether  the  Director,  Town  and  

Country Planning, is empowered to pass the impugned order?  

Whether the impugned order is ultra vires?

4. By the impugned memo the Director had purported to  

give the following directions:

(a) the provision in the agreement between the appellant  

and the plot/flat buyers regarding extension fee and  

maintenance  fee  should  be  deleted  from  the  

agreement as the same is not permissible under the  

law;

(b) further directed to stop charging of extension fee and  

maintenance fee from the plot/flat holders henceforth  

and the charges recovered on account of both from  

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the  plot/flat  holders  “may  be  refunded  to  the  

Government immediately.”

(c) stop allowing the transfer of plots after obtaining full  

payment  for  the  same  and  to  ensure  immediate  

registration  of  Conveyance  Deed  “where  the  full  

payments of the plot/flats have been received.”

5. In order to consider the question as to the validity of the  

impugned memo few relevant facts may have to be noticed.

BACKGROUND FACTS :

6. The appellants were granted licence under the provisions  

of Haryana Development and Regulation of Urban Areas Act,  

1975 (for short ‘the Act’) and the Rules framed thereunder,  

i.e.  Haryana  Development  and  Regulation  of  Urban  Area  

Rules, 1976 (for short ‘the Rules’) for setting up residential  

colonies.   The appellants  entered into required agreements  

with the Governor of Haryana acting through Director Town  

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and Country Planning, Haryana.  The appellants acting under  

the  licence  so  granted  and  the  agreements  commenced  

setting up colonies by dividing the land into plots.  The plots  

were sold to various  buyers.  The plot buyers are required to  

make construction on such plots to be used for the purpose  

for which the lay out was approved.  The appellants have also  

allotted  flats  to  various  persons  and  have  entered  into  

agreements.   Mutual  rights  and  obligations  between  the  

appellants  and  the  plot/flat  buyers  is  structured  by  the  

agreements voluntarily  entered into by them and all  terms  

and  conditions,  covenants  were  mutually  agreed  by  and  

between  the  parties.  In  respect  of  certain  areas  even  

completion certificates were granted as early as in the year  

1991-92.   The Director  all  of  a  sudden without  any notice  

whatsoever  to  any  of  the  appellants  issued  the  impugned  

directions which were challenged on various grounds in the  

High Court.  

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7. In order to consider the central question as to whether  

the impugned order is void and unenforceable, it is just and  

necessary to notice the relevant provisions of the Act.  

SCHEME OF THE ACT  :

8. The Act intends to regulate the use of land in order to  

prevent ill planned and haphazard urbanization in or around  

towns in the State of Haryana.  The Act applies to all urban  

areas in the State of Haryana.  We shall notice the relevant  

provisions of the Act and the Rules which are as under :   

“ Section 2.  Definitions  

(a) …………………………

(aa)……………………….. (b) …………………………   (c) "colony" means an area of land divided or proposed to  be divided into plots or flats for residential, commercial,  industrial,  cyber  city  or  cyber  park  purposes  or  for  the  construction of flats in the form of group housing or for the  construction of integrated commercial complexes, but an  area of land divided or proposed to be divided—

(i) for the purpose of agriculture ; or

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(ii)  as  a  result  of  family  partition,  inheritance,  succession or partition of joint holding not with the  motive of earning profit ; or

(iii) in furtherance of any scheme sanction under any other law; or

(iv)  by the owner of a factory for setting up of a housing colony for the labourers or the employees working  in the factory; provided there is no profit motive ; or

(v)  when  it  does  not  exceed  one  thousand  square  metres or such less area as may be decided from  time  to  time  in  an  urban  area  to  be  notified  by  Government for the purposes of this sub-clause. shall not be a colony ,  

(d)      "colonizer"  means an individual,  company or  association  or  body  of  individuals,  whether  incorporated  or  not,  owning land  for  converting  it  into  a  colony  and  to  whom  a  licence  has  been  granted under this Act ;

(dd)  "cyber  city"  means  self  contained  intelligent  city  with  high  quality  of  infrastructure,  attractive  surrounding and high speed communication access  to  be  developed  for  nucleating  the  Information  Technology  concept  germination  of  medium  and  large  software  companies  and  Information  Technology  enabled  services,  wherein  no  manufaturing units shall be permitted ;

(ddd) "cyber park" means an area developed exclusively  for  locating  software  development  activities  and  Information Technology Enabled Services, wherein  no manufacturing of any kind (including assembling  activities) shall be permitted ;

(e)  "development  works"  means  internal  and  external  development works ;

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(f)   ……………………….

(g) "external development works" include water supply,  sewerage, drains, necessary provisions of treatment  and disposal of sewage, sullage and storm water,  roads,  electrical  works,  solid  waste  management  and disposal, slaughter houses, colleges, hospitals,  stadium/sports  complex,  fire  stations,  grid  sub- stations etc. and any other work which the Director  may specify to be executed in the periphery of or  outside  colony/area  for  the  benefit  of  the  colony/area;

(gg) "flat" means a part of any property, intended to be  used for residential purposes, including one or more  rooms  with  enclosed  spaces  located  on  one  or  more floors, with direct exit to a public street or road  or to a common area leading to such streets or road  and includes any garage or  room whether  or  not  adjacent to the building in which such flat is located  provided by the coloniser/owner of such property for  use by the owner of such flat for parking any vehicle  or  for  residence of  any person employed  in  such  flat, as the case may be ;

(h) ……………………..

(i) "internal development works" mean—

(i) metalling of roads and paving of footpaths; (ii) turfing and plantation with trees of open spaces; (iii) street lighting ; (iv) adequate and wholesome water-supply ; (v)  sewers and drains both for  storm and sullage  water                and necessary provision for their  treatment and disposal ; and (vi)  any  other  work  that  the  Director  may  think  necessary in the interest of proper development of a  colony ;

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(j) ……………………

k)  "owner" includes a person in whose favour a lease  of land in an urban area for a period of not less than  ninety nine years has been granted ;

(l) …………………………….

(m) "plot/flat holder" means a person in whose favour a  plot/flat in a colony has been transferred or agreed  to be transferred by the coloniser ;

(n)     . ………………

(o) …………………

Section 3  Application for licence :

(1) Any owner  desiring  to  convert  his  land into  a  colony shall, unless exempted under section 9,  make an application to the Director, for the grant  of  a  licence  to  develop  a  colony  in  the  prescribed  from  and  pay  for  it  such  fee  and  conversion charges as may be prescribed. The  application shall be accompanied by an income- tax clearance certificate :

Provided  that  if  the  conversion  charges  have  already been paid under  the provisions  of  the  Punjab Scheduled Roads and Controlled Areas  Restriction  of  Unregulated  Development  Act,  1963  (41  of  1963),  no  such  charges  shall  be  payable under this section.]

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(2) On receipt of the application under sub-section  (1), the Director shall, among other things,  enquire into the following matters, namely :— (a) title to the land ; (b) extent and situation of the land ; (c) capacity to develop a colony ; (d) the layout of a colony ; (e) plan regarding the development works to be  executed in a colony ; and (f)  conformity  of  the  development  schemes  of  the colony land to those of the neighbouring areas

(3) After the enquiry under sub-section (2), the Director,  by an order in writing, shall—

(a)  grant  a  licence  in  the  prescribed  form,  after  the  applicant  has  furnished  to  the  Director  a  bank  guarantee  equal  to  twenty-five  per  centum of  the  estimated  cost  of  development  works  in  case  of  area of land divided or proposed to be divided into  plots or flats for residential, commercial or industrial  purposes  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  or  cyber  park  purposes  as  certified  by  the  Director and has undertaken—

(i) to  enter  into  an  agreement  in  the  prescribed  form  for  carrying  out  and  completion  of  development  works  in  accordance  with  the  licence granted ;

(ii) to pay proportionate development charges in the external  development  works  as  defined  in  clause(g) of section 2 are to be carried out by  the government or any other local authority. The  proportion in which  and the time within  which,  

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such payment is to be made shall be determined  by the Director ;

(iii) the  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 local authority, as the case may be ;

(iv) to construct at his own cost, or get constructed  by any other institution or individual at its cost,  schools, hospitals, community centres and other  community buildings on the lands set apart for  this purpose, or to transfer to the Government at  any time, if so desired by the Government, free  of cost the land set apart for schools, hospitals,  community centres and community buildings, in  which case the Government shall be at liberty to  transfer such land to any person or institutions  including  a  local  authority  on  such  terms  and  conditions as it may deem fit ;

(v) to  permit  the  Director  or  any  other  officer  uthorized by him to inspect the execution of the  layout and the development works in the colony  and to carry out all directions issued by him for  ensuring due compliance of the execution of the  layout  and  development  works  in  accordance  with the licence granted :

(4) The licence so granted shall be for a period of 2  years an will be renewable from time to time for  

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a period of one years, on payment of prescribed  fee.

Provided that the Director, having regard to the  amenities  which  exit  or  are  proposed  to  be  provided in the locality, is of the opinion that it is  not  necessary  or  possible  to  provide  one  or  more such amenities, may exempt the licencee  from providing such amenities either wholly or in  part ;

(b) refuse  to  grant  a  licence,  by  means  of  a  speaking order, after affording the applicant an  opportunity of being heard.

[Provided that in the licensed colony permitted  as  a  special  project  by  the  Government,  the  licence shall be valid for a maximum period of  five years and shall be renewable for a period as  decided by the Government.]

(5) A  separate  licence  shall  be  required  for  each  colony.

3-A . Establishment of Fund  

(1) Any colonizer whom a licence has been given  under this Act shall deposit as service charges a  sum [at such rate as may be prescribed by the  Government from time to time, per square metre  of the gross area and of the covered area of all  the  floors  in  case  of  flats  proposed  to  be  developed  by  him into  a  colony]  in  two  equal  instalments.  The  first  instalment  shall  be  deposited within  60 days from the date of  the  

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grant of the licence and the second instalment to  be deposited within six months from the date of  grant of the licence.

(2) The  Haryana  Urban  Development  Authority  local  authorities,  firms,  undertakings  of  Government  and  other  authorities  involved  in  land development shall also be liable to deposit  the service charges and shall be deemed to be  colonizers for this purpose only. The date of first  inviting  applications  for  sale  of  plots  in  any  colony by it shall be deemed to be the date of  granting of licence under this Act for the purpose  of deposit of service charges.

(3) The service charges shall  be deposited by the  colonizer with such officer or person as may be  appointed by the Government in this behalf.

(4) The colonizer shall in turn be entitled to pass on  the  service  charges  paid  by  him  to  the  plot  holder.

(5) The amount of service charges if not paid within  the  prescribed  period  shall  be  recoverable  as  arrears of land revenue.

(6) The amount of service charges so deposited by  the colonizer  shall  constitute a fund called the  Haryana Urban Development Fund (hereinafter  referred to as the Fund) which shall vest in the  State Government.

(7) The Fund shall be administered by such officers  of the State Government as may be appointed  by it for this purpose.

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(8) The amount of service charges deposited by the  colonizers and grants from the Government or  the local authority shall be credited to the Fund.

(9)  The  Fund  shall  be  utilized  by  the  State  Government  for  the  benefit  of  the  urban  development and for creation and improvement  of urban infrastructure in the State of Haryana.  The Fund may also be utilized to meet the cost  of administering the Fund.

(10) The  Government  shall  publish  annually  in  the  Official  Gazette  the  report  of  the  activities  financed  from  the  fund  and  the  statement  of  accounts.

Section 3  …………….

Section 4………………

Section 5. Cost of Development Works  

(1) The colonizer shall deposit thirty per centum of  the amount realised, from time to time, by him,  from the plot-holders within a period of ten days  of  its  realisation  in  a  separate  account  to  be  maintained  in  a  scheduled  bank.  This  amount  shall only be utilised by him towards meeting the  cost of internal development works in the colony.  After  the  internal  development  works  of  the  colony have been completed to the satisfaction  of the Director, the coloniser shall be at liberty to  withdraw  the  balance  amount.  The  remaining  seventy per centum of the said amount shall be  deemed to have been retained by the coloniser,  inter alia, to meet the cost of land and external  development works.

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(2)  The  colonizer  shall  maintain  accounts  of  the  amount  kept  in  the  scheduled  bank,  in  such  manner as may be prescribed :

Provided that where the licence under section 3  is granted for setting up a colony for cyber city or  cyber  park  purposes,  the  provisions  of  sub- sections (1) and (2) shall not be applicable.

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Rule 2.   Definitions      (a)    ……………………       (b) “amenity” includes roads, water supply,  

street lighting, drainage, sewerage, public  parks,  schools,  play grounds,   hospitals,  community centers and other community  buildings , horticulture, land scaping and  any other public utility service;  

Rule 3…………..

Rule 4 …………..

Rule 5. Development works to be provided in  colony [Section 3(3)]—

The designs and specifications of the development  works to be provided  in a colony shall include—       (a) metalling of roads and paving of footpaths;  

   (b)  turfing  and  plantation  of  trees  in  open  spaces;  

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   (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.  

11.  Conditions  required  to  be  fulfilled  by  applicant [Section 3 (3)]—  

 (1) the applicant  shall—   (a) furnish  to  the  Director  a  bank  guarantee  

equal  to  twenty  five  percent  of   the  estimated cost of the development works as  certified  by  the  Director  and  enter  into  an  agreement in form LC-IV for carrying out and  completion  of  development  works  in  accordance with the licence  finally granted;  

(b)  undertake  to  deposit  fifty  percent  of  the  amount to be realized by him from the plot- holders, from time to time, within ten days of  its  realization in a separate account  to be  maintained  in  a  scheduled  bank  and  this  amount  shall  only  be  utilized  towards  meeting  the  cost  of  internal  development  works in the colony;  

(c) undertake to pay proportionate  development  charges if the main lines of roads, drainage,  

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sewerage, water  supply and electricity are to  be  laid  out  and  constructed  by  the  Government or any other local authority. The  proportion in which and the time within which  such  payment  is  to  be  made   shall  be  determined by the Director;  

(d) undertake 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  under  rule  16  unless  earlier  relieved  of  this  responsibility  and  there upon to transfer all  such roads, open  spaces,  public  parks  and  public  health  services  free of  cost  to  the Government  or  the local authority, as the case may be;  

   (e) undertake to construct at his own cost or get  constructed   by  any  other  institution  or  individual  at  its  cost,  schools,  hospitals,  community  centers  and  other  community  buildings  on  the  land  set  apart  for  this  purpose,  or  undertake  to  transfer  to  the  government at any time, if so desired by the  Government free of cost, the land set apart  for  schools,  hospitals,  community  centers  and community buildings, in which case the  Government  shall  be  at  liberty  to  transfer  such  land  to  any  person  or  institution  including a local authority on such terms and  conditions as it may deem fit;  and

(f) undertake to permit the Director or any other  officer  authorized  by  him  to  inspect  the  execution of the layout and the development  works  in  the  colony  and  to  carry  out  all  directions  issued  by him for  ensuring   due  

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compliance of the execution of the layout and  development  works in accordance with the  licence granted.

(2) If   the  Director,  having  regard  to  the  amenities which exist or are proposed to be  provided  in the locality, decides that it is not  necessary   or  possible  to  provide  such  amenity  or  amenities,  the  applicant  will  be  informed thereof and clauses (c), (d) and  (e)  of sub-rule (1) shall be deemed to have been  modified to that extent.  

12. Grant of licence [ Section 3 (3) and (4)]—  

 (1)After  the  applicant  has  fulfilled  all  the  conditions  laid  down  in  rule  11  to  the  satisfaction of the Director , the Director shall  grant the licence in form LC-V.

   (2)The licence granted under sub-rule (1) shall  

be valid for a period of two years from the  date  of  its  grant  during  which  period  all  development  works  in  the  colony  shall  be  completed  and  certificate  of  completion  obtained  from  the  Director  as  provided  in  rule 16.

16.  Completion  certificate/Part  Completion  Certificate [Section 24]—

   (1)After the colony has been laid out according  

to  approved layout plans and development  works have been executed according to the  approved  designs  and  specifications  the  colonizer  shall  make  an  application  to  the  Director in form LC-VIII.

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 (2)After such (scrutiny), as may be necessary,  the  Director  may  issue  a   completion  certificate/part completion certificate in  form  LC-IX  or  refuse  to  issue  such  certificate  stating the reasons for such refusal;  

Provided that the colonizer  shall be afforded  an  opportunity  of  being  heard  before  such  refusal.

 18. Cancellation of licence [Section 8(1)]—  

 (1) If the Director determines at any time that  the  execution  of  the  layout  plans  and  the  construction   or  other  works  is  not  proceeding according to the licence granted  under rule 12 or is below  specification or is  in violation of the provisions of these rules or  of  any  law  or  rules  for  the  time  being  in  force,  he shall by notice in form LC-X require  the  colonizer to remove the various defects  within the time specified  in the notice.

   (2)  If  the  colonizer  fails  to  comply  with  the  

requirements  detailed  in  the  notice  issued  under  sub-rule  (1),  the  Director  shall  issue  him a further notice in  form LC-XI to afford  him an opportunity to show cause within a  period of one month why the licence granted  should not be cancelled.

   (3) After hearing the colonizer and considering  

such  representation  as  he  may  make  the  Director  may  either  cancel  the  licence  or  grant him further time for complying with the  requirements of the notice issued under sub- rule (1). If, however, the colonizer does not  comply  with  the  said  requirements  within  

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such  extended  period,  the  Director  shall  cancel the licence  and thereafter, within one  month, shall  cause a proclamation made in  the  locality  about  the  cancellation  of   the  licence by beat of drum within thirty days of  cancellation of licence.

   (4)  On  cancellation  of  the  licence,  no  further  

work shall  be undertaken or carried out by  the colonizer,

   [(5) Deleted.]  

20. Release of Bank guarantee [Section 24]—            After  the layout and development works or  

part thereof in respect of the colony or part  thereof  have  been  completed  and  a  completion  certificate  in  respect  thereof  issued, the Director may, on an application in  this behalf from the colonizer, release bank  guarantee or  part  thereof  as the case may  be;

Provided  that if the completion of the colony  is taken in parts only , the part of the bank  guarantee corresponding to the part  to  the  colony completed shall be released;  

    Provided  further  that  the  bank  guarantee  equivalent to 1/15th amount thereof shall be  kept  unreleased  to  ensure  upkeep  and  maintenance of the colony or part thereof, as  the case may be, for a period  of five years  from  the  date  of  issue  of  the  completion  certificate  under rule 16 or earlier, in case  the  colonizer   is  relieved  of  the  responsibilities in this behalf.

20

21………………………

22…………………………..

23……………………………

24……………………………

25………………………………

26. maintenance and submission of accounts  [Section 5 and 6]—  

 (1) The colonizer shall—  

(i)  issue regular receipts to the plot holders  in respect of the money received by him  and  maintain  counterfoils  of  the  receipts  so issued;  

(ii) maintain separate ledger account of each  plot-holder;  

(iii)  maintain  a register  containing authenticated  copies  of  each  of  the  agreements  entered  into  between  him  and  each  of  the  plot  holders; and  

(iv)  maintain  accounts  books  showing  details  of  expenses  incurred  by  him  on  various  development works in the colony.  

 (2) The  colonizer shall within a period of three  months  after  the  close  of  every  financial  year,  submit  to  the  director  through  registered post with acknowledgement  due a  statement of accounts indicating the amount  

21

realized   from  each  plot-holders,  the  expenditure incurred on internal and external  development works separately of the colony  with details thereof together with the amount  due  from  each  plot  holder  indicating  their  postal  address.  This  statement  should  be  duly  audited,  certified  and  signed  by  a  chartered accountant.  

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  

22

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 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 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  

23

of  the  contract  and  the  circumstances  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  regarded  as  a  

reasonable, social,  ideal only to the extent that equality of  

bargaining  power  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  

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  

University Press].

24

Extension Fee:

12. Whether  the  Director  is  empowered  to  issue  any  

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  

approval of his building plans from the competent authority,  

“be 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  

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same.”  This clause enables 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 “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  

26

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  

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 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 clause in the agreement to be entered  

27

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 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 11B read with  

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  

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  

28

the colony. After the completion of the internal development  

works  to  the  satisfaction  of  the  Director,  the  colonizer  is  

entitled to 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.

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  

29

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.

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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 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  of  a  plot  or  other  immovable  property,  such deed  

31

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 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 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 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.     

32

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 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 maintenance charges is void?

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  

33

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  

34

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 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:

(a) metalling of roads and paving of footpaths;

(b) turfing and plantation of trees in open spaces;

35

(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  

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 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  

electrical system and its upgradation.  

36

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  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  

37

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.  

38

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 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  

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  

Director  has  not  taken  into  consideration  the  said  

maintenance  expenses  for  the  purpose  of  computing  the  

39

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  

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 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  

charges.  The payment of maintenance charges by the plot  

buyer 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  

40

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  

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  

41

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  

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  

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writing, shall grant a licence in the prescribed form, after the  

application  is  furnished  to  the  Director,  a  bank  guarantee  

equal to 25 per 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  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  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  appropriate  

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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  

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 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.

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  

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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  

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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 W.B. and others  [(1987) 3 SCC 82] upon which  

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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,  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 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  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  

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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.L.F.  Qutab  Enclave  Complex  Educational  

Charitable Trust vs. State of Haryana and others [(2003)  

5 SCC 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  and  

handing  over  of  such  construction,  such  power  does  not  

encompass within itself the right to exercise power in manner  

that  inhibits   terms  and  contracts  and  freedom  granted  

therein.

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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.  

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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 may 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.  

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The judgment  of  the  High court  is,  accordingly,  set  aside.  

The  appeals  are,  accordingly,  allowed  subject  to  the  

observations made hereinabove.  

44. All  interlocutory  applications  and  contempt  cases  

are, accordingly, disposed of in terms of this order.  

----------------------------J. [B.SUDERSHAN REDDY]

----------------------------j. [SURINDER SINGH NIJJAR]

New Delhi, November 19, 2010  

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