Conversion of leasehold to freehold: SC junks Chandigarh’s objections, asks it to do ‘needful’
UT had raised eight objections to its own proposal of allowing conversion, but SC termed all of these as “untenable” and pointed flaws in each of the UT’s arguments
Ripping apart the Chandigarh administration’s objections to allowing conversion of leasehold commercial and industrial properties to freehold, the Supreme Court on Monday directed UT and ministry of home affairs to do the “needful” within three weeks.
UT had raised eight objections to its own proposal of allowing conversion, but SC termed all of these as “untenable” and pointed flaws in each of the UT’s arguments. The apex court further directed that if the needful was not done before September 16 (next date of hearing in the case), then, “Ajay Kumar Bhalla, Union home secretary, shall remain present in court”.
SC’s directions came in the “Estate Office versus Charanjit Kaur” case.
In response to MHA’s directions, UT had listed eight objections against allowing conversion. These were also submitted with the SC as part of the action taken report on the recommendations of 11-member committee headed by Chandigarh MP Kirron Kher on estate office related matters.
Taking a serious note of the administration passing the buck to the MHA on long-pending policy matters, the SC on July 20 had asked the UT adviser to meet the MHA joint secretary and sort them out within a month. Thereafter, the two met on August 8, but there was no resolution. Instead, the MHA sought a detailed project proposal from the UT.
The issue of allowing conversion of industrial and commercial properties has been hanging fire for more than two decades. UT allowed conversion of residential properties in 1996.
On the UT’s argument that allowing conversion would result in shortage of property with it, the SC bench of justice Hemant Gupta and Justice Sudhanshu Dhulia, stated, “The properties, whether they are leasehold or freehold, are not available with the administration for use according to their own choice. It has to be used in terms of the Capital of Punjab (Development & Regulation) Act, 1952 and the rules made thereunder.”
On the administration’s contention that conversion would lead to financial loss, the SC observed that if the property is converted to freehold, it will lead to its transfer and invite attractive stamp duty on the sale documents.
Contrary to administration’s claims, the apex court contended that free hold property might increase investment in the industrial or service industry, giving employment to the citizen, more revenue and taxes - direct and indirect.
“The long-term benefit would outweigh the projected income from the ground rent. In any case, the Chandigarh administration can factor in this aspect when raising demand for the budget with the central government,” observed the bench.
The SC further stated that allowing conversion would lead to ease of doing business, which will attract not only capital investment, but also human resource leading to the overall development of the city.
SC termed “imaginary” the administration’s contention that conversion would lead to legal conflicts. “In fact, non-conversion leads to more problems, as the financial needs of an individual are inevitable. The needs of an individual should be easily met,” stated the SC order.
On administration’s objection that allowing conversion for industrial and commercial properties would entail similar demands in other categories, SC directed that the conversion has to be in respect of all industrial, commercial and institutional plots, which are not many.
Allowing more MSME activities
On allowing more activities under MSME Act in industrial area, SC observed that a negative list can be introduced, which prohibit certain activities, but permits other activities.
“The administration itself allowed commercial properties to be used for different purposes on March 31, 2006. Such policy has a negative list, which are not permitted in plots or building allotted for use of commercial purposes. The same process can be adopted for the industrial sites,” the SC order states.
Admn versus SC
it will lead to shortage of properties with Admn
Will lose rental income, unearned increase
will increase legal conflict
Windfall gain for allottees at cost of exchequer
Properties are to be used as per law not the administration’s discretion
Revenue will be generated from stamp duty on property transfer; more revenue and taxes from industrial growth; admn can seek budgetary allocation from central government in lieu of any ground rent loss
Non-conversion leads to more problems
Attracts more capital investment