Supreme Court rules High Court holds no power to amend registered lease deed

Supreme Court rules High Court holds no power to amend registered lease deed

The Madras High Court had directed the appellants to execute the lease deed (already executed) in favor of the respondent

The Supreme Court has observed that in the exercise of its jurisdiction under Article 226 of the Constitution of India, the High Court cannot alter or amend the lease deed registered under Section 17 of the Registration Act, 1908.

In the Gwalior Development Authority and Another vs Bhanu Pratap Singh case, a division bench of Justice Ajay Rastogi and Justice Bela M Trivedi held that when the lease deed was already executed without demur and the transaction was concluded, the High Court could not alter it.

The bench was hearing an appeal challenging an order of the Madhya Pradesh High Court, which under Article 226 directed the appellants to execute the lease deed (already executed) in favor of the respondent.

The case pertains to the appellants issuing an advertisement and inviting bids for the grant of leases of different plots. The respondent was one of the bidders for a plot area of 27,887.50 sq. mts. The respondent’s offer of Rs.725 per sq. mt. being the highest bid, was accepted.

The appellants informed the respondent that it had decided to lease out the plot area of 27887.50 sq. mts. for consideration of Rs.2.06 crores and directed the respondent to deposit a sum of Rs.1.91 crores by 31 October 1999. This was in addition to the earnest money.

Importantly, the construction was to be completed within two years. On failure to deposit the instalments, the security amount would be forfeited.

The respondent deposited the sum from September 1997 to the last instalment on 25 August 2005.

But despite the respondent failing to deposit the instalments by October 31, 1999, no action was taken by the appellants either for cancellation of the bid or forfeiture of the amount deposited by the respondent. The lease deed was executed by the respondent.

However, after three-and-a-half years, the respondent moved the High Court seeking a mandamus against the appellants to execute the lease deed for the remaining area of 9625.50 sq. mts in addition to the lease executed earlier in its favor. The High Court allowed it.

Aggrieved by the Court’s order, the appellants appeal before the apex court.

They argued that the lease deed was executed on 29 March 2006 between the parties without demur, and they were signatories for 18262.89 sq. mts. The appellants emphasized that the auction proceedings initiated in March 1997 culminated in the execution of the lease deed and the transaction was made. Therefore, there was no reason for the respondent to move the Court and reopen the transaction which concluded three years ago.

The appellants further argued that no justification allowed invoking the jurisdiction under Article 226 with a direction to execute the lease deed for the remaining 9625.50 sq. mt. area of land. Also, under the law, an amendment to the lease deed was not permissible.

Opposing the plea, the respondent submitted that once the tender was floated by the appellants for 27887.50 sq. mts. land and the respondent’s bid was accepted, the last instalment was submitted in 2005. The appellants had no justification to segregate the land put to auction into two parcels. Keeping away the remainder of the land had compelled the respondent to move the Court.

At the outset, the Supreme Court expressed strong displeasure on the undue indulgence shown by the appellants by allowing the respondent to deposit the instalment eight years after the due date, and not forfeiting the claim on default.

It further stated, "We have a strong reservation and such exercise of power by the authority is a clear abuse of discretion, which is not only violative of Article 14 of the Constitution, but also smacks of an undue favor, which is to be avoided. Whenever there is such a business/commercial transaction, it is always to be examined on the commercial principles where equity has no role to play.”

On the High Court interference, the Apex Court cleared that when the parties had already executed the lease deed, it was not open for the High Court to alter or amend it.

Setting aside the High Court order, the judges ruled, "The fact is that the parties sitting across the table, got the lease deed executed for 18262.89 sq. meters without demur on 29 March 2006 and the transaction stood concluded after execution of the lease deed, initiated pursuant to a tender floated by the appellant on 13 March 1997. Since the lease deed was to be compulsorily registered under Section 17 of the Registration Act, 1908, it was nowhere open to be altered or amended even by the high court in the exercise of its jurisdiction under Article 226 of the Constitution.”

However, considering the pendency of the case and the escalation in the value of the property, the bench asked the appellants to provide an opportunity to the respondent to pay for the remaining area on the prevalent circle rate notified by the government, on a priority basis.