05 April 2024 Business Laws >> Business & Commercial Law   |   Admiralty, Maritime & Shipping Law >> Miscellaneous   |   Property Law >> Personal Law  

Jaiprakash Associates Ltd (Jaiprakash) finds itself in a legal tussle with the Delhi Development Authority (DDA) over the payment of unearned increase value (UEI) on plots held under perpetual lease. The disagreement stems from a merger between two companies that triggered a clause demanding a share of the increased land value from the lessee (tenant) upon transfer.

Jaiprakash, the resulting entity of a merger between M/s. Jaiprakash Associates Pvt Ltd and M/s. Jaypee Rewa Cement Ltd, sought to mortgage the plots. However, the DDA insisted on UEI payment, citing a clause in the lease agreements restricting transfers without written consent and allowing the DDA a cut of the increased value in such instances.

Jaiprakash argued that the merger doesn't qualify as a transfer under the lease agreement and that the Transfer of Property Act's definition of transfer doesn't apply. They further contended that while the amalgamation order transferred the plots, it didn't involve any sale, negating the UEI requirement.

The DDA countered by stating that the amalgamation order indeed transferred the plots, and the relevant lease clause encompasses all forms of transfers, including involuntary ones. They also pointed to a policy that mandated UEI charges in similar scenarios.

The Court sided with the DDA. The merger, they held, constituted a transfer under the lease agreement's broad definition that included "parting with possession." The Court distinguished this case from a previous one involving a court-ordered amalgamation under a different law (SICA), which might be considered an involuntary transfer. The Court clarified that the Transfer of Property Act's definition didn't restrict the wider definition used in the specific lease agreement.

Consequently, the Court dismissed Jaiprakash's appeal and upheld the DDA's demand for UEI payment. This case highlights the importance of carefully considering the terms of lease agreements, particularly those concerning transfers and potential value increases. Companies involved in mergers or acquisitions affecting leased properties should be mindful of such clauses to avoid disputes with lessors like the DDA.

COMPANIES ACT, 2013    

Transfer of Property Act, 1882    

Sick Industrial Companies (Special Provisions) Repeal Act, 2003