Kiran Raj

The Delhi High Court High Court has delivered a judgment in a dispute concerning the physical possession of a hospital plot, clarifying the obligations regarding ground rent and directing the responsible authority to execute the necessary lease deed. The case revolved around the incorrect handover of land, leading to complications in construction and payment obligations.

The case arose from an auction conducted by the Delhi Development Authority (DDA) on March 18, 2009, where the petitioner, Flourish Hospitals Pvt. Ltd., emerged as the highest bidder for a plot measuring 9970 square meters, located at FC-50, Shalimar Bagh. The plot was designated for the construction of a hospital, and the allotment was formalized through a demand-cum-allotment letter dated April 29, 2009. The petitioner paid the full premium amount of Rs. 38,73,25,050/- along with additional delayed interest.

On August 5, 2011, the petitioner was handed physical possession of the plot. However, upon taking possession, it discovered that the allotted plot contained an additional 2230 square meters beyond the stipulated 9970 square meters. This discrepancy arose due to a lack of precise demarcation by the DDA. Furthermore, the petitioner found encroachments in the form of temporary sheds and jhuggis erected by labourers from a neighbouring construction project.

The petitioner repeatedly approached the DDA for rectification of the allotment, offering either to purchase the excess land at the original auction rate or have the surplus land removed. Letters were sent on August 21, 2018, November 12, 2018, and November 14, 2018, seeking resolution. However, the matter remained unaddressed by the DDA.

On September 3, 2019, the petitioner formally proposed two solutions: (1) allotment of the excess land to it upon payment, or (2) the removal of the excess portion by the DDA. Instead of resolving the issue, the DDA allotted the excess 2230 square meters to the Directorate General of Health Services, Government of NCT of Delhi, without a clear demarcation.

Despite being aware of the issue since at least October 31, 2014, as recorded in internal file noting, the DDA took no corrective steps for several years. It was only on June 14, 2021, that the Screening Committee of the DDA approved modifications to the layout plan to resolve the issue.

Subsequently, on January 3, 2022, the DDA raised a demand for ground rent amounting to Rs. 6,28,09,388/-, calculated at 2.5% per annum from April 29, 2014. The petitioner contended that this demand was unjustified, as it had not been provided with proper possession of the correctly demarcated plot, and the delay was due to the inaction of the DDA.

The court observed that although possession was officially handed over in 2011, it was not in the form required for proper utilization of the land. The court recorded:

“Since there is no demarcation of exact area, it could not have even got any plan sanctioned.”

The court further noted that the DDA had acknowledged the excess area issue as early as 2014 but failed to take any corrective action for seven years. The judgment stated:

“DDA seems to have slept over the matter for around 7 years.”

The court pointed out that despite repeated requests from the petitioner, the DDA neither rectified the demarcation nor issued a revised letter of possession. Instead, it proceeded to demand ground rent retroactively, without providing clarity on the plot boundaries.

Examining the statutory provisions, the court referred to Rule 42 of the DDA (Disposal of Developed NAZUL Land) Rules, 1981, which stipulates that ground rent is payable from the date of allotment. However, the court held that in cases where possession is not correctly demarcated, ground rent should not accrue until proper handover. It stated:

“The date of allotment cannot be taken as a ritualistic formula.”

The court cited precedents, including Pramod Kumar & Anr. v. Lt. Governor of Delhi & Ors., where it was held that ground rent liability should only begin when possession is delivered in a manner enabling construction. The court further referenced Vivekanand Pratisthan Parishad (Regd) v. Delhi Development Authority, which distinguished between formal and actual possession, stating that ground rent is payable only from actual possession.

The court observed that the petitioner's inability to commence construction was due to the authority’s failure to execute a lease deed and clarify the exact plot dimensions. It noted that DDA had not issued any notice of cancellation for non-completion of construction, indicating that it was aware of the unresolved issues surrounding the plot. The judgment recorded:

“Had the petitioner company proceeded with construction, without obtaining the requisite approvals, it would have, undoubtedly, resulted in further legal complexities.”

The court concluded that the petitioner should not be penalized for the authority’s inaction and that the demand for ground rent from 2014 was unsustainable.

The Delhi High Court directed that ground rent shall be calculated at Re. 1 per annum until June 14, 2021, when the modified layout plan was approved. From June 15, 2021, the ground rent shall be levied at 2.5% per annum. The DDA was instructed to issue a revised demand for ground rent in accordance with these directions and to adjust any payments already made.

The court further directed the DDA to provide a copy of the modified layout plan to the petitioner within eight weeks if it had not already been provided. A lease deed must also be executed in favor of the petitioner within eight weeks, subject to the completion of the necessary formalities. The petitioner was expected to extend full cooperation to the DDA in completing the required documentation and was instructed to commence construction without further delay.

The court noted that it was expected that after complying with these directions, the DDA would ensure that no further delay occurred in the construction of the hospital.

Case Title: Flourish Hospitals Pvt. Ltd. v. Delhi Development Authority
Case Number: W.P.(C) 15333/2022 
Bench: Justice Manoj Jain

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