In a significant legal setback for the Noida Authority, the Allahabad High Court has overturned a substantial lease rent demand and ordered a major refund in a long-standing dispute with a real estate developer. The court ruled that the authority acted illegally by charging lease rent without granting lawful possession of a plot and by levying impermissible charges.
Court's Verdict on Lease Rent and Refund
Justice Prakash Padia, in an order dated December 19, set aside a lease rent demand of approximately Rs 168 crore raised by the Noida Authority against Vision Town Planners. The court also directed the authority to refund around Rs 7.4 crore, which was collected as Change in Constitution (CIC) charges, along with 9% annual interest.
The judgment emphasized that the authority's actions were unlawful on two key counts. First, it charged lease rent without handing over lawful possession of a subdivided commercial plot in Sector 94. Second, it retained CIC charges despite clear judicial precedents declaring such a levy unacceptable.
Background of the Plot Allotment Dispute
The case originated from an original allotment of a massive 3.8 lakh square meter commercial plot to BPTP International Trade Centre Ltd, with a total premium of nearly Rs 5,000 crore. The allottee had paid about Rs 1,115 crore and subsequently requested a reduction in the plot area proportional to the amount deposited.
Accepting this request, the Noida Authority reduced the plot size to approximately 85,700 square meters. A lease deed was executed on February 9, 2009, fixing the annual lease rent at 2.5% of the premium. In February 2010, the authority permitted the subdivision of this plot into two parts—Plot No. 2A (about 28,300 sqm) and Plot No. 2B (about 57,300 sqm)—subject to specific conditions.
Critical Failure on Possession Condition
A pivotal condition mandated the execution of separate sub-lease deeds and the issuance of independent possession certificates for each subdivided plot. However, the authority failed to comply. Instead of fresh lease deeds and possession certificates, it merely executed a correction deed to bifurcate the land.
Plot No. 2A was later transferred to Vision Town Planners with the authority's approval via a registered transfer deed in February 2010. The court found that a separate possession letter was never issued for the subdivided plot, as required. It rejected the authority's argument that possession given to the original allottee before subdivision was sufficient.
The judgment stated that "the respondent development authority cannot take two stands." It held that since independent possession via a certificate was not handed over for Plot No. 2A, lawful possession of the petitioner could not be presumed. Citing consistent rulings, the court reiterated that lease rent can only be charged after actual and lawful possession is granted.
Zero Period and CIC Charges Ruling
The court declared the period from the execution of the sub-lease deed in favor of Vision Town Planners until lawful possession was granted as a "zero period," during which no lease rent can be recovered. This was a crucial relief for the developer.
On the matter of CIC charges, the court took an exceptionally strong stance. After the transfer of Plot No. 2A, there was a change in the shareholding of Vision Town Planners. When the company applied to record these changes, the Noida Authority demanded roughly Rs 7.4 crore, which was deposited in 2010.
The court noted this levy was contrary to settled law, explaining that "merely by change of share holding, the status of the company is not changed, as the company has its separate legal entity." It observed that the authority was fully aware that CIC charges could not be levied for a mere transfer of shares without any change in the entity's form.
The judgment recorded that "the levy of CIC charges... is clearly unfair on the petitioner," adding that the authority's action was "unfair, unreasonable and contemptuous in nature."
Final Orders and Directions
The High Court set aside an October 17, 2024 order from the state's industrial development department that had upheld the lease rent demand and denied the CIC charge refund. It issued clear directives to the Noida Authority:
- Recalculate lease rent only from the date a valid possession certificate for Plot No. 2A is issued.
- Immediately refund any excess amount collected.
- Any balance lease rent found payable must be cleared by the petitioner within two months, failing which the authority may take legal action.
This ruling reinforces critical legal principles for real estate development in the National Capital Region, emphasizing that authorities must follow due process and cannot levy charges without fulfilling their own contractual and legal obligations, particularly regarding lawful possession.
