# ESTATE OFFICER AND ANR v. CHARANJIT KAUR

- **Citation:** [2021] 6 S.C.R. 120
- **Court:** Supreme Court of India
- **Decided:** 2021-09-07
- **Case number:** Civil Appeal No. 4964 of 2021
- **Bench:** Hemant Gupta, A. S. Bopanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/estate-officer-and-anr-v-charanjit-kaur-35052
- **Pages:** 26

## Headnote

Consumer Protection Act, 1986 - s.2(1)(o) and s.14(1)(e) -
Chandigarh Conversion of Residential Leasehold Land Tenure into
Freehold Land Tenure Rules, 1996 - Respondent-complainant
sought conversion of a plot allotted by Chandigarh administration
from leasehold to freehold site - District Consumer Forum directed
appellant-Estate Officer to convert the plot on acceptance of
requisite conversion fee; to pay compensation; and also costs of
litigation - Order affirmed by State and National Consumer
Commissions - Plea of appellant-Estate Officer that the findings
recorded by National Commission that the respondents are
consumers as charges have been paid for conversion, are not
tenable for the reason that the charges deposited were not for any
services to be rendered but to grant complete title to the allottees
- It was contended that such conversion fee was in fact part of
the sale consideration to confer complete title to an allottee - Held:
The appellant is not charging any fee for conversion of leasehold
property into freehold property except the amount in accordance
with the 1996 Rules - The amount so fixed under the Rules would
form part of the sale consideration and not a fee or charge levied
for providing any kind of service - Appellant is not providing any
services within the meaning of s.2(1)(o) of the Consumer Act - The
expression 'service' includes housing construction and not
allotment of a site or a plot - Since the respondents are already in
possession of the sites as lessee on 99 years basis, it cannot be
said that the appellant was deficient in providing any service, which
even if used in a liberal sense would not include transfer of title
in an immovable property - Thus, the consumer fora under the Act
would not have jurisdiction to entertain the consumer complaints
on the ground of deficiency in service related to transfer of title
of the immovable property - Though it is not a case of the
deficiency in service as contemplated by Consumer Act but, on
 [2021] 6 S.C.R. 120
120
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facts, in exercise of power under Art.142 of the Constitution,
various directions issued to the Chandigarh Administration
including direction to decide the claim of conversion as on the date
when consumer complaints were filed - Chandigarh Lease Hold
of Sites and Building Rules, 1973 - Chandigarh Estate Rules, 2007
- Constitution of India, 1950 - Art. 142.
Administrative Law - Administrative process - Office Notings
- Held: A noting is a part of the decision-making process - Such
noting does not fructify into an order unless the same is
communicated to the affected person.
Disposing of the appeals, the Court
HELD:1. The respondents claim conversion of lease hold
sites to free hold sites on payment of the charges fixed by the
Chandigarh Administration. Such conversion was sought in view
of the fact that as against the limited right in the lease property
for 99 years, the Administration decided to grant freehold rights
on satisfaction of certain conditions mentioned in the Chandigarh
Conversion of Residential Leasehold Land Tenure into Freehold
Land Tenure Rules, 1996. The respondents had paid the
premium amount as fixed under the Chandigarh Lease Hold of
Sites and Building Rules, 1973. Now, the claim is for purchase
of remaining rights of the Central Government to convert the
site into freehold. The Central Government continues to be
owner of the land until the entire consideration money together
with interest or any other amount is paid to the Central
Government on account of transfer of any site or building or both
as provided in Section 3 of the Capital of Punjab (Development
and Regulation) Act, 1952. Therefore, the owner i.e., the Central
Government, cannot be said to be a trader or a service provider.
The appellant is not charging any fee for conversion of leasehold
property into freehold property except the amount in accordance
with the Chandigarh Conversion of Residential Leasehold Land
Tenure into Freehold Land

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SUPREME COURT REPORTS
[2021] 6 S.C.R.
ESTATE OFFICER AND ANR.
v.
CHARANJIT KAUR
(Civil Appeal No. 4964 of 2021)
SEPTEMBER 07, 2021
[HEMANT GUPTA AND A. S. BOPANNA, JJ.]
Consumer Protection Act, 1986 - s.2(1)(o) and s.14(1)(e) -
Chandigarh Conversion of Residential Leasehold Land Tenure into
Freehold Land Tenure Rules, 1996 - Respondent-complainant
sought conversion of a plot allotted by Chandigarh administration
from leasehold to freehold site - District Consumer Forum directed
appellant-Estate Officer to convert the plot on acceptance of
requisite conversion fee; to pay compensation; and also costs of
litigation - Order affirmed by State and National Consumer
Commissions - Plea of appellant-Estate Officer that the findings
recorded by National Commission that the respondents are
consumers as charges have been paid for conversion, are not
tenable for the reason that the charges deposited were not for any
services to be rendered but to grant complete title to the allottees
- It was contended that such conversion fee was in fact part of
the sale consideration to confer complete title to an allottee - Held:
The appellant is not charging any fee for conversion of leasehold
property into freehold property except the amount in accordance
with the 1996 Rules - The amount so fixed under the Rules would
form part of the sale consideration and not a fee or charge levied
for providing any kind of service - Appellant is not providing any
services within the meaning of s.2(1)(o) of the Consumer Act - The
expression 'service' includes housing construction and not
allotment of a site or a plot - Since the respondents are already in
possession of the sites as lessee on 99 years basis, it cannot be
said that the appellant was deficient in providing any service, which
even if used in a liberal sense would not include transfer of title
in an immovable property - Thus, the consumer fora under the Act
would not have jurisdiction to entertain the consumer complaints
on the ground of deficiency in service related to transfer of title
of the immovable property - Though it is not a case of the
deficiency in service as contemplated by Consumer Act but, on
 [2021] 6 S.C.R. 120
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facts, in exercise of power under Art.142 of the Constitution,
various directions issued to the Chandigarh Administration
including direction to decide the claim of conversion as on the date
when consumer complaints were filed - Chandigarh Lease Hold
of Sites and Building Rules, 1973 - Chandigarh Estate Rules, 2007
- Constitution of India, 1950 - Art. 142.
Administrative Law - Administrative process - Office Notings
- Held: A noting is a part of the decision-making process - Such
noting does not fructify into an order unless the same is
communicated to the affected person.
Disposing of the appeals, the Court
HELD:1. The respondents claim conversion of lease hold
sites to free hold sites on payment of the charges fixed by the
Chandigarh Administration. Such conversion was sought in view
of the fact that as against the limited right in the lease property
for 99 years, the Administration decided to grant freehold rights
on satisfaction of certain conditions mentioned in the Chandigarh
Conversion of Residential Leasehold Land Tenure into Freehold
Land Tenure Rules, 1996. The respondents had paid the
premium amount as fixed under the Chandigarh Lease Hold of
Sites and Building Rules, 1973. Now, the claim is for purchase
of remaining rights of the Central Government to convert the
site into freehold. The Central Government continues to be
owner of the land until the entire consideration money together
with interest or any other amount is paid to the Central
Government on account of transfer of any site or building or both
as provided in Section 3 of the Capital of Punjab (Development
and Regulation) Act, 1952. Therefore, the owner i.e., the Central
Government, cannot be said to be a trader or a service provider.
The appellant is not charging any fee for conversion of leasehold
property into freehold property except the amount in accordance
with the Chandigarh Conversion of Residential Leasehold Land
Tenure into Freehold Land Tenure Rules, 1996, which is part
of the sale consideration. It is thus a case of sale of immovable
property on the terms as were fixed in the 1996 Rules. The
amount so fixed under the Rules would form part of the sale
consideration and not a fee or charge levied for providing any
kind of service. [Para 18][137-B-F]
ESTATE OFFICER AND ANR. v. CHARANJIT KAUR
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2. In terms of Section 14(1)(e) of the Consumer Protection
Act, 1986, the District Forum can inter-alia direct removal of
deficiency in the services. The deficiency in service however
does not include the transfer of title in favour of the allottee who
was earlier granted leasehold rights. The appellant is not
providing any services within the meaning of Section 2(1)(o) of
the Consumer Act. The expression 'service' includes housing
construction and not allotment of a site or a plot. [Para 19][137G]
3.1. The Consumer fora had taken into consideration a
noting in the administrative file of the appellant. A noting is
however a part of the decision-making process. Such noting does
not fructify into an order unless the same is communicated to
the affected person. Therefore, the noting by itself cannot be
pressed into service to return a finding of deficiency in service.
However, the fact remains that in terms of 1996 Rules, an
amount of Rs.1710/- per sq.mt. was fixed as conversion charges.
The land rates were to be fixed by the Administration from time
to time under Rule 5 of 1996 Rules. The rates were revised only
in 2017. The request could not be kept pending when the
statutory Rules were in force. The executive authority could not
by an administrative order keep the matter pending, when there
was no other reason not to accept the conversion except
impending increase in the conversion charges. The action of the
appellant in rejecting the request for conversion is arbitrary and
discriminatory. [Paras 20, 21][137-H; 138-A; 139-F-G]
3.2. On the date when the letter was issued by the
administration on 10.05.2013, the statutory 1996 Rules were in
force. Such Rules were kept in abeyance on the basis of
communication on behalf of the Finance Secretary to the Estate
Officer. Such communication cannot be countenanced. The
statutory rules could not be put to hold because the issue of
revision of rates of conversion was under consideration of the
Administration. Even after the said letter the rates were fixed
only in 2017. In the face of valid statutory Rules, an
administrative decision cannot be sustained. [Para 23][140-CD]
4. Since the respondents are already in possession of the
sites as lessee on 99 years basis, it cannot be said that the
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appellant was deficient in providing any service, which even if
used in a liberal sense would not include transfer of title in an
immovable property. Thus, the consumer fora under the Act
would not have jurisdiction to entertain the consumer complaints
on the ground of deficiency in service related to transfer of title
of the immovable property. [Para 24][140-E]
5. Though it is not a case of the deficiency in service as
contemplated by Consumer Act but definitely a case of exercise
of jurisdiction in an arbitrary and discriminatory manner. In
exercise of the power conferred on this Court under Article 142,
the Chandigarh Administration is directed to decide the claim
of conversion as on the date when consumer complaints were
filed. [Para 25][140-F-G]
6.1. The difficulty in the Administration is that the senior
officers in the Chandigarh Administration are on deputation from
the States of either Punjab or Haryana. The officers revert to
their parent cadre after completion of deputation period of
approximately three years. However, the officials continue to
work at the Estate Office. Though the Administration has done
commendable work to maintain the character of Chandigarh as
City Beautiful, but the Estate Office has underbelly, that is, the
action of the officials cannot be said to be bona fide, as is apparent
in the present case. On the other hand, the officers are unable
to take decisions which are citizen friendly. Even no attempt is
made to remove the bottlenecks in the working of the Estate
Office. [Para 26][140-H; 141-A-B]
6.2. Many cases of alleged misuse have been initiated but
not concluded by the Estate Office. The residents of Chandigarh
are widely harassed while seeking no-objection certificate for
sale of leasehold property as the procedure for grant of
no-objection certificate and of deposit of unearned increase is
interpreted in different manners by the different officials, which
the officers of the Administration has failed to control. Another
area of concern is the unreasonable procedure adopted by the
Administration for affecting mutation after the demise of the
leaseholder or the allottee and of completing other formalities
at the offices of the appellant. The difficult and near impossible
procedure leads to arbitrary and discriminatory action by the
ESTATE OFFICER AND ANR. v. CHARANJIT KAUR
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officials of the Estate Office. Therefore, the Chandigarh
Administration is directed to constitute a Committee which may
include a Member of Parliament; an architect; an advocate, who
is or has represented Chandigarh Administration before the
High Court; two representatives of the Municipal Corporation
being representatives of the citizens of Chandigarh, apart from
such officers which the Administration may think fit, so as to
review and streamline the processes of sanction of mutation,
grant of occupancy certificate, no-objection certificate and other
citizen-centric requirements including calculation of unearned
profit under the 1973 Rules or under Chandigarh Estate Rules,
2007. [Para 29][143-E-H; 144-A-B]
Lucknow Development Authority v. M.K. Gupta (1994)
1 SCC 243 : [1993] 3 Suppl. SCR 615 ; Ghaziabad
Development Authority v. Balbir Singh (2004) 5 SCC
65 : [2004] 3 SCR 68 ; Chandigarh Housing Board
v. Avtar Singh and Ors. (2010) 10 SCC 194 : [2010]
12 SCR 96 ; UT Chandigarh Administration and
Another v. Amarjeet Singh and Others (2009) 4 SCC
660 : [2009] 4 SCR 541 ; Chandigarh Administration
v. Jagjit Singh (1995) 1 SCC 745 : [1995] 1 SCR 126;
Amritpal Singh v. Chandigarh Administration 2012
SCC OnLine P&H 9310; Dheera Singh v. U.T.
Chandigarh Admn. and Ors. 2012 SCC Online P&H
21473 - referred to.
Bachhittar Singh v. State of Punjab AIR 1963 SC
395 : [1962] Suppl. SCR 713 - relied on.
Case Law Reference
[1993] 3 Suppl. SCR 615
referred to
Para 3
[2004] 3 SCR 68
referred to
Para 13
[2010] 12 SCR 96
referred to
Para 14
[2009] 4 SCR 541
referred to
Para 15
[1962] Suppl. SCR 713
relied on
Para 20
[1995] 1 SCR 126
referred to
Para 23
CIVIL APPELLATE JURISDICTION : Civil Appeal No.4964
of 2021.
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From the Judgment and Order dated 24.05.2017 of the National
Consumer Disputes Redressal Commission at New Delhi in Revision
Petition No.2126 of 2016.
With
Civil Appeal Nos. 4965 and 4966 of 2021.
Ankit Goel, Adv. for the Appellants.
Vikas Jain, M. C. Dhingra, Gaurav Dhingra, Himanshu Sharma,
Siddharth Mittal, Ms. Archana Pathak Dave, Gautam Diwan, Advs. for
the Respondent.
The Judgment of the Court was delivered by
HEMANT GUPTA, J.
1. This order shall dispose of three appeals bearing Civil Appeal
No. 4964 of 2021 - Estate Officer v. Charanjit Kaur, Civil Appeal No.
4965 of 2021 - Estate Officer v. Kamlesh and Civil Appeal No. 4966
of 2021 - Estate Officer v. D.K. Khanna raising identical questions of
law.
2. In Civil Appeal No. 4964 of 2021, the order of the National
Consumer Disputes Redressal Commission1 dated 24.05.2017 is the
subject matter of challenge. By the aforesaid order, the NCDRC has
dismissed the revision petition filed by the appellant against an order
dated 16.05.2016 passed by the State Consumer Disputes Redressal
Commission2 affirming the order of the District Consumer Disputes
Redressal Forum3. The respondent had sought conversion of Plot No.
4059, Sector 46 D, Chandigarh, from leasehold to freehold site on
acceptance of the requisite conversion fee. The learned District Forum
directed the appellant to convert the said plot in question from leasehold
to freehold site on acceptance of requisite conversion fee; to pay an
amount of Rs. 10,000/- as compensation for mental agony and physical
harassment; and to pay Rs.5,000/- as costs of litigation.
3. The learned NCDRC relied upon the judgment of this Court
reported as Lucknow Development Authority v. M.K. Gupta4 to hold
that the respondent would be considered to be a consumer as fee had
1 For short the 'NCDRC'
2 For short the 'SCDRC'
3 For short the 'DCDRF'
4 (1994) 1 SCC 243
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SUPREME COURT REPORTS
[2021] 6 S.C.R.
been charged by the appellant for conversion. The NCDRC further held
that the administrator had put a note on the file that he would not like
to take any decision till he gets clear directions from the Central
Government. It was held that the appellant had not produced any public
notification suspending all conversions of plots from leasehold to
freehold, at least on 28.03.2013 when the application was received in
the office of Estate Officer.
4. In Civil Appeal No. 4965 of 2021, the impugned order was
passed by NCDRC on 17.11.2017 relying upon the order passed in
Charanjit Kaur. In the said case, the respondent was allotted a site
under Chandigarh Milk Colony Allotment of Site Rules, 19755 on
08.08.1977 measuring 143 sq. yards on a leasehold basis for a period
of 30 years for the purposes of cowshed cum dairy. The Chandigarh
Conversion of Residential Leasehold Land Tenure into Freehold Land
Tenure Rules, 19966 were extended to the sites allotted under the 1975
Rules. The lease period of 30 years was extended by four years so
that 1996 Rules could be made applicable. The request of the respondent
for conversion of leasehold to freehold was not accepted which led to
filing of a complaint before the District Forum. The District Forum
passed an order on the same lines as in Charanjit Kaur. The NCDRC
also dismissed the revision filed by the appellant on 17.11.2017 relying
upon Charanjit Kaur.
5. In the third appeal herein i.e., Civil Appeal No. 4966 of
2021, the order under challenge is that of the NCDRC passed on
21.03.2018 in respect of conversion of a residential site bearing no. 719,
Sector-43A, Chandigarh, from leasehold to freehold. The order in
Charanjit Kaur was followed in this matter as well.
6. Some of the statutory provisions need to be reproduced before
examining the respective contentions of the parties. Section 3 of the
Capital of Punjab (Development and Regulation) Act, 19527 reads as:-
"3. Power of Central Government in respect of transfer of land
and building in Chandigarh. - (1) [Subject to the provisions of
this section, the Central Government may] sell, lease or otherwise
transfer, whether by auction, allotment or otherwise, any land or
5 For short '1975 Rules'
6 For short '1996 Rules'
7 For short '1952 Act'
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building belonging to the Government in Chandigarh on such terms
and conditions as it may subject to any rules that may be made
under this Act, think fit to impose.
(2) The consideration money for any transfer under sub-section
(1) shall be paid to the [Central Government] in such manner
and in such instalments and at such rate of interest as may be
prescribed.
(3) Notwithstanding anything contained in any other law for the
time being in force, until the entire consideration money together
with interest or any other amount, if any, due to the Central
Government on account of the transfer of any site or building,
or both, under sub-action (12) is paid, such site or building, or
both, as the case may be, shall continue to belong to the Central
Government."
7. In terms of power conferred on the Central Government under
Section 3, initially Chandigarh (Sale of Sites and Buildings) Rules, 19608
were published on 08.03.1960. Such rules contemplated sale of sites
by auction or allotment. The Chandigarh Lease Hold of Sites and
Building Rules, 19739 were thereafter published on 20.08.1973
authorizing Chandigarh Administration to demise sites and buildings at
Chandigarh on lease for 99 years by allotment or by auction. Rule 13
mandates that in addition to the premium i.e., price paid or promised
for the transfer of a right to enjoy an immovable property under 1973
Rules, an annual rent would be payable which shall be 21⁄2% of the
premium for 33 years which may be enhanced by the Chandigarh
Administration to 3.75% for the next 33 years and 5% of the premium
for the remaining period of lease. In terms of Rule 17, the property
could be transferred on payment of unearned increase in terms of Rule
17. The relevant provisions of 1973 Rules read thus:
"3. (1) Unless the context otherwise requires, the words and
expressions used in these rules shall have the meaning assigned
to them in the Capital of Punjab (Development and Regulation)
Act, 1952 and the rules made thereunder.
(2)"Premium" means the price paid or promised for the transfer
of a right to enjoy immovable property under these rules.
8 For short '1960 Rules'
9 For short '1973 Rules'
ESTATE OFFICER AND ANR. v. CHARANJIT KAUR
[HEMANT GUPTA, J.]
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["Prescribed mode of payment" means payment in cash or by
demand draft drawn on any Scheduled Bank situated at
Chandigarh in favour of the Estate Officer, Chandigarh
Administration or in cash upto Rs.500/- or the amount paid in
cash representing 25% of the premium at the time of auction].
13. Rent and consequences of non-payment- In addition to the
premium, whether in respect of site or building, the lessee shall
pay rent as under:
(i) Annual rent shall be 2-1⁄2 % of the premium for the 33 years
which may be enhanced by the Chandigarh Administration to
3-3/4% of the premium for the next 33 years and to 5% of the
premium for the remaining period of the lease.
17. General Conditions of lease. - (1) Lease may be jointly taken
by more than one person. The liability to pay the premium as
well as the rent and any penalty imposed under these rules shall
be joint and several:
(10) The lessee will not be entitled to transfer the site or the
building without the prior permission of the Estate Officer. Such
permission shall not be given until the lessee has paid full premium
and the rent due under the lease for the site, unless in the opinion
of the Estate Officer exceptional circumstances exist for the
grant of such permission. The lessee shall be liable to pay such
transfer charges as are notified by the Chandigarh Administration
from time to time."
Provided that where the property was leased out by allotment,
or at a reserve price or at any other concessional rate, or by
hire-purchase, then transfer shall be allowed on payment of 1/
3rd of the unearned increase in value. The unearned increase will
be assessed by the Estate Officer by determining the difference
between the current market value of the property and the present
value of the premium paid for the property. The current market
value of the property shall be assessed in view of the average
of auction price over the last three financial years for property
of the same category or such other evidence as the Estate Officer
deems to be appropriate. The present value of the original
premium shall be calculated by enhancing the premium by 9%
per annum, compounded annually, from the date(s) of payment.
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The difference between these two values shall be the unearned
increase. During assessment, notice shall be issued to the lessee
and he shall be afforded an opportunity of being heard."
8. The Chandigarh Administration framed 1996 Rules permitting
conversion of residential leasehold properties to freehold properties.
Some of the conditions of the said Rules are as follows:
"5. Land rates will be the rates as notified by the Chandigarh
Administration from time to time.
6. Conversion charges to be paid shall be as provided in
Annexure "A" annexed to these rules, from time to time.
8. The conversion shall also be allowed in the cases where
the lessees/sub-lessees/allottees have parted with the
possession of the property, provided that-
(a) The application for Conversion is made by a person
holding registered and valid power of attorney and
there is also an agreement to sell from the lessee
to sub-lessee to alienate (sell/transfer) the property
and proper linkage with the original allottee/lessee
is established.
9. In all cases of Conversion, the Conveyance-deeds shall
be got registered on payment of requisite Stamp Duty
and Registration Charges. The Consideration amount for
this purpose shall be the "Conversion Fee" and the
"Surcharge" wherever applicable. However, in cases
where lease deed has not been executed, the Price/
Premium of the site as reflected in the letter of allotment
or last agreement for sale or the predetermined rate as
prescribed by the Competent Authority on the date of
allotment/transfer shall also be added for the purpose
of calculation of Stamp Duty."
ANNEXURE "A"
Part - I
STATEMENT SHOWING ONE TIME CONVERSION,
CHARGES/FEE FOR VARIOUS SITES ALLOTTED BY THE
ESTATE OFFICER, UNION TERRITORY, CHANDIGARH.
ESTATE OFFICER AND ANR. v. CHARANJIT KAUR
[HEMANT GUPTA, J.]
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[2021] 6 S.C.R.
Site area in Sq.
Metres
Conversion
charges/fee to be
calculated as under
Formula for calculating
charges/conversion charges/fee
1
2
3
Upto 50
Nil
Nil
The land rate has been fixed at Rs.1710/- per Square Metre and
the same shall be applicable for a period of one year from the
date as notified by the Estate Officer, Union Territory,
Chandigarh. The land rate applicable for calculating the
Conversion Charges shall be notified from time to time by the
Administrator, Union Territory, Chandigarh."
9. The grievance of the allottees was that conversion was allowed
on pick and choose basis rather than on the basis of either the date of
receipt of the application or the date of decision. Reference was made
to the letter dated 10.5.2013 on behalf of the Finance Secretary to the
Estate Officer. The said letter reads as: -
"To
The Estate Officer
U.T. Chandigarh
Memo No. 11/1/18-UTFI(2)-2013/3520
Dated: 10-5-2013
Subject:
Re-fixation of rate for conversion of lease hold
residential sites into free hold.
Reference your memo No.7610/MA/Conversion Policy/2013
dated 4.3.13, on the subject cited above.
The issue of revision of rate for conversion under the scheme
"Chandigarh Conversion of residential lease hold land tenure into
freehold land tenure, Rule 1996" is under consideration of the
Administration.
You are directed not to allow any conversion under the said
scheme till further orders.
Sd/-
Joint Secretary (Estates)
For Finance Secretary
Chandigarh Administration"
10. Mr. Ankit Goel, learned counsel for the appellant argued that
the title of leasehold property vests with the Central Government in
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terms of Section 3 of the Act and the Rules framed thereunder. The
Central Government had granted lease of residential plots for a period
of 99 years under the 1973 Rules. The conversion fee fixed to convert
leasehold property leased for 99 years to freehold property, if allowed,
would absolve the allottees from payment of annual rent in terms of
Rule 13 as well as the payment of unearned increase in the case of
transfer of leasehold rights in terms of Rule 17(10) of the 1973 Rules.
Thus, an un-encumbered title would pass on to the purchaser as against
99-year lease to an allottee under the 1973 Rules. Therefore, the findings
recorded by the NCDRC that the respondents are consumers as charges
have been paid for conversion are not tenable for the reason that the
charges deposited were not for any services to be rendered but to grant
complete title to the allottees. Such conversion fee was in fact part of
the sale consideration to confer complete title to an allottee.
11. Still further, it was argued that the reliance on the judgment
in M.K. Gupta was clearly erroneous inasmuch as that was a case
wherein the allotment of flats was considered to be "service" within
the meaning of Section 2 (1) (o) of the Consumer Protection Act, 198610.
Some of the provisions from the Consumer Act as are relevant for the
decision of the present case are as under:
(c) "complaint" means any allegation in writing made by a
complainant that-
(i) xxx
xxx
 xxx
(iii) the services hired or availed of or agreed to be hired
or availed of by him suffer from deficiency in any
respect;
(d) "consumer" means any person whoxxx
xxx
 xxx
(ii) hires or avails of any services for a consideration
which has been paid or promised or partly paid and
partly promised, or under any system of deferred
payment and includes any beneficiary of such
services other than the person who [hires or avails
of] the services for consideration paid or promised,
or partly paid and partly promised, or under any
10 For short 'Consumer Act'
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system of deferred payment, when such services
are availed of with the approval of the first
mentioned person [but does not include a person
who avails of such services for any commercial
purpose;
(g) "deficiency" means any fault, imperfection,
shortcoming or inadequacy in the quality, nature and
manner of performance which is required to be
maintained by or under any law for the time being in
force or has been undertaken to be performed by a
person in pursuance of a contract or otherwise in relation
to any service;
(o) "service" means service of any description which is
made available to potential users and includes, but not
limited to, the provision of facilities in connection with
banking, financing insurance, transport, processing,
supply of electrical or other energy, board or lodging or
both, housing construction, entertainment, amusement or
the purveying of news or other information, but does not
include the rendering of any service free of charge or
under a contract of personal service;
14. Finding of the District Forum.-(1) If, after the proceeding
conducted under Section 13, the District Forum is satisfied that
the goods complained against suffer from any of the defects
specified in the complaint or that any of the allegations contained
in the complaint about the services are proved, it shall issue an
order to the opposite party directing him to do one or more of
the following things, namely:
(a) xxx
xxxx
(e) to remove the defects in goods or deficiencies in the
services in question;
(f) xxx
xxxx
12. In M.K. Gupta, the question posed was as to the word
"service" extends to the deficiency in construction of a house or flat.
It was held that such construction was for the benefit of person for
whom it was to be constructed. The allottee may do so himself or hire
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services of a builder or contractor. When a statutory authority develops
land or allots a site or constructs a house for the benefit of common
man, it is a statutory service. But if such service is provided by a builder
or contractor, it would be a contractual service. The Court held as under:
"4. What is the meaning of the word 'service'? Does it extend
to deficiency in the building of a house or flat? Can a complaint
be filed under the Act against the statutory authority or a builder
or contractor for any deficiency in respect of such property. The
answer to all this shall depend on understanding of the word
'service'. The term has variety of meanings. It may mean any
benefit or any act resulting in promoting interest or happiness. It
may be contractual, professional, public, domestic, legal, statutory
etc. The concept of service thus is very wide. How it should be
understood and what it means depends on the context in which
it has been used in an enactment. Clause (o) of the definition
section defines it as under:
"'service' means ......................."
It is in three parts. The main part is followed by inclusive clause
and ends by exclusionary clause. The main clause itself is very
wide. It applies to any service made available to potential users.
The words 'any' and 'potential' are significant. Both are of wide
amplitude. .......
6. Construction of a house or flat is for the benefit of person for
whom it is constructed. He may do it himself or hire services of
a builder or contractor. The latter being for consideration is
service as defined in the Act. Similarly when a statutory authority
develops land or allots a site or constructs a house for the benefit
of common man it is as much service as by a builder or
contractor. The one is contractual service and other statutory
service. If the service is defective or it is not what was
represented then it would be unfair trade practice as defined in
the Act. Any defect in construction activity would be denial of
comfort and service to a consumer. When possession of property
is not delivered within stipulated period the delay so caused is
denial of service. Such disputes or claims are not in respect of
immoveable property as argued but deficiency in rendering of
service of particular standard, quality or grade. Such deficiencies
or omissions are defined in sub- clause (ii) of clause (r) of
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Section 2 as unfair trade practice. If a builder of a house uses
substandard material in construction of a building or makes false
or misleading representation about the condition of the house then
it is denial of the facility or benefit of which a consumer is entitled
to claim value under the Act. When the contractor or builder
undertakes to erect a house or flat then it is inherent in it that he
shall perform his obligation as agreed to. A flat with a leaking
roof, or cracking wall or substandard floor is denial of service.
Similarly when a statutory authority undertakes to develop land
and frame housing scheme, it, while performing statutory duty
renders service to the society in general and individual in
particular. The entire approach of the learned counsel for the
development authority in emphasising that power exercised under
a statute could not be stretched to mean service proceeded on
misconception. It is incorrect understanding of the statutory
functions under a social legislation. A development authority while
developing the land or framing a scheme for housing discharges
statutory duty the purpose and objective of which is service to
the citizens. As pointed out earlier the entire purpose of widening
the definitions is to include in it not only day to day buying of
goods by a common man but even such activities which are
otherwise not commercial but professional or service-oriented in
nature. The provisions in the Acts, namely, Lucknow
Development Act, Delhi Development Act or Bangalore
Development Act clearly provide for preparing plan, development
of land, and framing of scheme etc. Therefore if such authority
undertakes to construct building or allot houses or building sites
to citizens of the State either as amenity or as benefit then it
amounts to rendering of service and will be covered in the
expression 'service made available to potential users'. A person
who applies for allotment of a building site or for a flat constructed
by the development authority or enters into an agreement with a
builder or a contractor is a potential user and nature of transaction
is covered in the expression 'service of any description'. It further
indicates that the definition is not exhaustive. The inclusive clause
succeeded in widening its scope but not exhausting the services
which could be covered in earlier part. So any service except
when it is free of charge or under a constraint of personal service
is included in it. Since housing activity is a service it was covered
in the clause as it stood before 1993."
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13. The judgment in Ghaziabad Development Authority v.
Balbir Singh11 was in the context of grant of interest at the rate of
18%. Such grant of interest was not interfered with. This Court
approved the judgment in M.K. Gupta and held as under:
"We are in full agreement with what is observed herein. Thus
the law is that the Consumer Protection Act has a wide reach
and the Commission has jurisdiction even in cases of service
rendered by statutory and public authorities. Such authorities
become liable to compensate for misfeasance in public office i.e.
an act which is oppressive or capricious or arbitrary or negligent
provided loss or injury is suffered by a citizen. The word
compensation is of a very wide connotation. It may constitute
actual loss or expected loss and may extend to compensation for
physical, mental or even emotional suffering, insult or injury or
loss."
14. In Chandigarh Housing Board v. Avtar Singh and Ors.12,
the Cooperative Housing Societies submitted an application for allotment
of plots advertised by Chandigarh Housing Board. The Societies
collected 10% of the tentative price from their members and deposited
the same in a bank specified in the scheme. If any member was to
seek refund, then 10% out of the 25% of the earnest money was to be
deducted. The dispute before the High Court was in respect of the
direction of 10% of the amount. This Court held as under:
"51. If the final order passed by the High Court is read in
conjunction with the interim order dated 11-5-1992, it becomes
clear that the Societies were to deposit the remaining amount
with interest at the rate of 18% per annum only if they were to
accept allotment of flats under the Scheme. Although, the writ
petitions were filed by the Societies, the language of the interim
order passed by the High Court shows that the learned Judges
were thinking of imposing liability of 18% interest only on those
members who were to accept allotment of flats to be constructed
by the Societies. The members of the Societies did not get an
opportunity to accept the allotment because even after deposit
of full earnest money and 18% interest, the Board did not allot
land to the Societies on which they could construct dwelling units/
11 (2004) 5 SCC 65
12 (2010) 10 SCC 194
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flats. The Finance Secretary misinterpreted the orders of the High
Court and issued wholly arbitrary and unjust directive to the
Board not to refund 18% interest to the members of the Societies
who had applied for refund before allotment of land by the
Board."
15. In fact, the precise issue as to whether the auction of sites
under the 1973 Rules involves sale of goods or of rendering of service
came up for consideration in UT Chandigarh Administration and
Another v. Amarjeet Singh and Others13. This Court considered the
judgments of this Court in M.K. Gupta and Balbir Singh. One of the
arguments raised was as under-
"When the auction of sites (for grant of a lease for 99 years)
was in exercise of the power of the Government (the UT
Chandigarh Administration) under the provisions of the
Development Act in accordance with the Leasehold Rules, it
involves neither sale of goods nor rendering of any service. The
act of leasing plots by auction by the appellants therefore did not
result in the successful bidder becoming a "consumer" or the
appellants becoming "service providers". In the absence of hiring
or availing of any service, the question of deficiency in service
or unfair or restrictive trade practice with reference to a service,
did not arise and the complaint under the Act was not
maintainable."
16. In respect of the abovementioned question posed, it was held
as under:
"21. With reference to a public auction of existing sites (as
contrasted from sites to be "formed"), the purchaser/lessee is
not a consumer, the owner is not a "trader" or "service provider"
and the grievance does not relate to any matter in regard to
which a complaint can be filed. Therefore, any grievance by the
purchaser/lessee will not give rise to a complaint or consumer
dispute and the fora under the Act will not have jurisdiction to
entertain or decide any complaint by the auction-purchaser/lessee
against the owner holding the auction of sites."
17. The second question was in respect of lack of amenities i.e.,
roads, water supply lines, drainage system, rainwater drainage and
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electricity etc. This Court held that since the sites were put to public
auction, therefore, no grievance regarding amenities could be entertained
as the bidder had the opportunity to verify the sites before participating
in the auction.
18. In the present case, the allotment of residential sites on lease
hold basis for 99 years is not in issue. It has not come on record as to
whether such sites were allotted in an auction or by inviting applications.
Even if the site had been allotted after inviting applications, the fact
remains that the respondents claim conversion of such lease hold sites
to free hold sites on payment of the charges which are fixed by the
Administration. Such conversion was sought in view of the fact that
as against the limited right in the lease property for 99 years, the
Administration has decided to grant freehold rights on satisfaction of
certain conditions mentioned in the 1996 Rules. The fact is that the
respondents had paid the premium amount as fixed under the 1973
Rules. Now, the claim is for purchase of remaining rights of the Central
Government to convert the site into freehold. The Central Government
continues to be owner of the land until the entire consideration money
together with interest or any other amount is paid to the Central
Government on account of transfer of any site or building or both as
provided in Section 3 of the Act. Therefore, the owner i.e., the Central
Government, cannot be said to be a trader or a service provider. The
appellant is not charging any fee for conversion of leasehold property
into freehold property except the amount in accordance with the 1996
Rules, which is part of the sale consideration. It is thus a case of sale
of immovable property on the terms as were fixed in the 1996 Rules.
The amount so fixed under the Rules would form part of the sale
consideration and not a fee or charge levied for providing any kind of
service.
19. In terms of Section 14(1)(e) of the Consumer Act, the District
Forum can inter-alia direct removal of deficiency in the services. The
deficiency in service however does not include the transfer of title in
favour of the allottee who was earlier granted leasehold rights. As noted
above, appellant is not providing any services within the meaning of
Section 2(1)(o) of the Consumer Act. The expression 'service' includes
housing construction and not allotment of a site or a plot.
20. The Consumer fora had taken into consideration a noting in
the ad- ministrative file of the appellant. A noting is however a part of
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the decision-making process. Such noting does not fructify into an
order unless the same is communicated to the affected person. The
reference may be made to Bachhittar Singh v. State of Punjab14,
wherein this Court held as under:-
"9. The question, therefore, is whether he did in fact make such
an order. Merely writing something on the file does not amount
to an order. Before something amounts to an order of the State
Government two things are necessary.