Brief:

The appeal arose from a long-term Licence Deed dated 22.04.1982 executed between New Delhi Municipal Committee (“NDMC”) and Bharat Hotels Limited for development of a five-star hotel, providing for a licence fee subject to a capped enhancement clause. Disputes emerged when NDMC, relying on market valuation, issued a demand notice dated 13.02.2020 raising substantial arrears and simultaneously terminated the licence alleging breach of its terms. The judgment examines whether such enhancement beyond the contractual cap is permissible under the New Delhi Municipal Council Act, 1994 (“NDMC Act”) and whether the termination of the said deed is legally sustainable.

Facts:

• In 1973, the subject land was allotted by the Government of India to New Delhi Municipal Committee (erstwhile municipal body constituted under the Punjab Municipal Act, 1911).
• New Delhi Municipal Council (“Appellant”), governed by the New Delhi Municipal Council Act, 1994, is the successor to the erstwhile New Delhi Municipal Committee.
• Pursuant to a tender, M/s Delhi Automobiles Pvt. Ltd. was selected and a licence agreement dated 11.03.1981 was executed for development of the hotel project.
• As per the agreed terms, the Respondent Company Bharat Hotels Limited (“Respondent”) was incorporated and a fresh Licence Deed dated 22.04.1982 (“1982 Deed”) was executed for a term of 99 years at a licence fee of Rs. 1.45 crore per annum.
• Clause 48 of the 1982 Deed mandated fee enhancements every 33 years but explicitly capped any increase at 100% of the preceding fee.
• Clauses 11, 29, and 30 permitted limited sub-licensing (e.g., shops, parking, banks) but prohibited transfer or assignment of rights without prior approval of NDMC.
• In 1994, the Respondent sub-licenced commercial space to M/s. Sonia Farms Private Limited. Decades later, nominees of Sonia Farms executed four “Full and Final Agreement of Sale, Purchase and Transfer” documents on 01.05.2016 in favour of M/s Indian Wind Power Association (“IWPA”) for shop/office spaces within the property. 
• These four documents executed on 01.05.2016 by Ms. Ghazala Shameem and Mr. Owais Usmani (nominees of Sonia Farms) were presented before the Sub-Registrar for their registration and were temporarily registered by the Sub-Registrar on 15.11.2016
• In 2017, the Collector of Stamps initiated proceedings regarding deficient stamp duty on both the 2016 transfer documents and the original 1982 Deed. In 2018, the Collector passed an order classifying the 1982 Deed as a ‘lease’ rather than a ‘licence’ and imposed a penalty of over Rs. 5.1 Crore, though this was later remanded in 2024 by the Revisional Authority for fresh adjudication.
• As the initial 33-year term expired in 2014, NDMC engaged SBI Capital Markets Limited (SBICAPS) to determine the new fee based on current market rates, pursuant to its meeting held on 28.09.2017. In April 2019, the SBICAPS report, relying on two sub-consultants, CBRE and Knight Frank, estimated the property’s likely annual market-based licence fee to be between Rs. 87 crore and Rs. 98 crore.
• Relying on the upper limit of this valuation report, NDMC issued a demand notice on 13.02.2020 requiring the Respondent to pay a massive Rs. 1,063.74 crore in arrears. This figure was calculated by applying the Rs. 98 crore annual rate from 11.03.2014.
• On the same date (13.02.2020), NDMC issued a separate communication terminating the 1982 Licence Deed with immediate effect and ordering the Respondent to vacate the premises within 90 days. This termination was justified by NDMC on the grounds that the 2016 sub-licence “sale” transfers constituted a fundamental breach of the deed’s terms.
• The demand notice was challenged by W.P.(C) 2496/2020 and the termination was challenged by W.P.(C) 2497/2020. 
• Exacerbating the dispute, the Government of India (L&DO) in 2023 demanded a revised ground rent from NDMC at Rs. 15,45,45,615/- per annum applied retroactively from 2013. This demand from the Government highlighted a massive financial disparity, as the Respondent argued it was only liable to pay a capped fee of Rs. 2.90 crore per annum, leaving NDMC to absorb the massive financial burden.

Relevant Clauses & Provisions of Law:

1982 Deed:

• Clause 11: The licencees shall not be at liberty in any way to sublet, underlet, encumber, assign or transfer their rights and interest or part with possession of the land and the building thereon or any part thereof or share therein to any person, directly or indirectly without the previous written consent of the licensor, But the licences shall have the right to sub licence the licenced property as stipulated in clause 29 of this licence agreement.
• Clause 29: The licencees shall run the Five Star Hotel themselves, However, the licencees may allow sub-licencees within the period of licence for running car parking, cycle scooter stand for parking and shopping arcado, banks, office, within the shopping arcade etc. The licencees shall be further responsible for the conduct of various sub-licencees shall be further responsible to answer that the sub-licencees shall not get any right over and above the rights and privileges of the licencees
• Clause 30: Save as provided in the preceding area, the licencees during the tenure of the licence shall not transfer, assign or part with the building any portion thereof permanently or temporarily to anybody else.
• Clause 48: The licence fee will be enhanced after every 33 years provided that the increase in the licence fee at each such time shall not exceed 100% of that immediately before the enhancement is due. For determination of the increase the percentages increase would depend on the market value of the plot at the relevant time. In this regard, decision of the licensor shall be final and binding on the licencees.
• Clause 42: In the event of breach of any of the terms and conditions of the licence, the licensor shall terminate and revoke the licence. On the revocation being made, it shall be the duty of the licencees to quit and vacate the premises without any resistances and obstruction and give the complete control of the premises to the licensor.

Punjab Municipal Act, 1911

• 18. Incorporation of Committee: Every committee shall be a body corporate by the name of the municipal committee of its municipality; and shall have perpetual succession and a common seal, with power to acquire and hold property, both movable and immovable, and subject to the provisions of this Act, or of any rules made thereunder to transfer any property held by it to contract and to do all other things necessary for the purposes of its constitution; and may sue and be sued in its corporate name.

The New Delhi Municipal Act, 1994

• 141. Disposal of immovable property: (2) …The consideration for which any immovable property may be sold, leased or otherwise transferred shall not be less than the value at which such immovable property could be sold, leased or otherwise transferred in normal and fair competition.
• 416. Repeal and savings: … (2) Notwithstanding the provisions of sub-section (1) of this section,                                                  

 (a) any appointment, notification, order, scheme, rule, form, notice or bye-law made or issued, and any licence or permission       granted under the Act referred to in sub-section (1) of this section and in force immediately before the establishment of the Council, shall, in so far as it is not inconsistent with the provisions of this Act continue in force and be deemed to have been made, issued or granted, under the provisions of this Act, unless and until it is superseded by any appointment, notification, order, scheme, rule, form, notice or bye-law made or issued or any licence or permission granted under the said provisions;

(b) all debts, obligations and liabilities incurred, all contracts entered into and all matters and things engaged to be done by, with or for the New Delhi Municipal Committee before the establishment of the Council shall be deemed to have been incurred, entered into or engaged to be done by, with or for the Council under this Act;

Contentions:

On Behalf of Appellant – 

• Relying on the Supreme Court’s ruling in Natural Resources Allocation, IN RE, Special Reference no. 01 of 2012 [(2012) 10 SCC 1], the NDMC argued that when scarce natural resources (like public land) are alienated for commercial, profit-making purposes, the State must adopt competitive methods to maximize revenue.
• Section 141(2) of the NDMC Act mandates that public immovable property cannot be transferred for consideration less than its market value under fair competition. As the 100% fee enhancement cap in Clause 48 of the 1982 Deed prevents charging current market rates, it is inconsistent with Section 141(2) and cannot continue to operate.
• The 1982 Deed was a “licence or permission” saved under Section 416(2)(a) of the NDMC Act, which only protects past instruments if they are consistent with the new Act. It did not qualify as a “contract” under Section 416(2)(b), which would have saved it without qualification, because it did not create debts or liabilities against the NDMC.
• The NDMC also pointed out an anomalous situation where it is required to pay the Government of India (L&DO) a revised ground rent of Rs. 15.45 crore per annum for the land, while the Respondent was only willing to pay a capped fee of Rs. 2.90 crore per annum. Thus, this massive deficit is opposed to public interest as the financial burden would ultimately fall on the tax-paying public.
• The termination was justified as the Respondent’s sub-licencees illegally executed “Sale, Purchase and Transfer” agreements with a third party (M/s IWPA). The Respondent had knowledge of these permanent transfers, which severely breached Clauses 11 and 29 of the 1982 Deed, and that simply withdrawing the registration of the sale documents later did not cure the fundamental breach.
• The Ld. Single Judge incorrectly relied on the S.S. Sobti v. Union of India & Ors. (1981 SCC OnLine Del 254) judgment, clarifying that the earlier case challenged the initial 1981 agreement, not the 1982 Deed which is at the center of the current dispute.
• Further, the noscitur a sociis doctrine restricts the word “contract” in Section 416(2)(b) to agreements creating “debts” or “obligations” meaning the 1982 Deed does not qualify as a protected contract.

On Behalf of Respondent – 

• The demand notice was entirely illegal because Clause 48 of the 1982 Deed explicitly restricts any fee enhancement (made every 33 years) to a maximum of 100% of the preceding fee, meaning the new fee could not exceed Rs. 2.90 crore per annum.
• The 1982 Deed was a valid commercial “contract” saved under Section 416(2)(b) of the NDMC Act. The phrase “licences and permissions” in Section 416(2)(a) refers only to statutory licences (like driving or hawking licences) and not to property transfer contracts. Therefore, the contract remains fully binding, even if some clauses conflict with the newer NDMC Act.
• The noscitur a sociis doctrine should apply to Section 416(2)(a), requiring the word “licence” to be interpreted alongside neighbouring administrative terms like “appointment,” “notification,” and “rule”. By doing so, the provision would only apply to statutory licences, legally classifying the 1982 commercial agreement as a protected “contract” saved unconditionally under Section 416(2)(b).
• Section 141(2) of the NDMC Act only applies to fresh leases or transfers made after the Act was enforced. The law cannot be applied retrospectively to alter vested rights or rewrite specific clauses of an agreement finalized in 1982.
• When the 1982 Deed was signed, NDMC urgently needed a five-star hotel for the Asian Games, and the hotel made massive investments based on the agreed terms, hence the “rules of the game” cannot be changed decades later.
• The L&DO’s massive ground rent demand (Rs. 15.45 crore per annum) was issued in December 2023, well after the Ld. Single Judge had already ruled in the Respondent’s favour, meaning it could not serve as the lawful basis for NDMC’s original 2020 fee demand. 
• The Respondent had no active participation in, or knowledge of, the unauthorized 2016 sale agreements executed by their sub-licencees. They only became aware of the transfers through the Stamp Collector’s order in 2018 and immediately forced the sub-licencees to withdraw the registrations. Thus, no fundamental breach occurred.
• Further, the NDMC failed to provide a preliminary notice of intent to terminate the licence to allow them to address the alleged breach, which was a mandatory requirement under Clause 6 of the Licence Deed.

Findings:

Issue I: Whether Clause 48 of the Licence Deed dated 22.04.1982, which caps licence fee enhancement at 100% after 33 years, continues to be valid in light of Section 416(2)(a) of the NDMC Act, considering its alleged inconsistency with Section 141(2).

• There is a clear distinction between Section 416(2)(a) and (b) of the NDMC Act. While “contracts, debts, and obligations” are saved unconditionally under sub-section (b), “licences and permissions” are saved under sub-section (a) only to the extent that they are not inconsistent with the provisions of the new NDMC Act. In other words, contracts, debts, and obligations are saved even if they are found to be inconsistent with the provisions of the NDMC Act. 

• The 1982 Deed is a licence as the said document does not transfer any right in the subject land in favour of the Respondent, rather it only grants certain permissions, such as permission to construct and commission a five-star hotel and ancillary building. 
• It is a settled law that noscitur a sociis can be employed only if meaning of a word or phrase is unclear. The phrase “licence or permission” under Section 416(2)(a) is disjoined by the word “and” and preceded by a comma, removing any ambiguity that would warrant using any other interpretive rule. Hence, “licence or permission” occurring in Section 416(2)(a) has to be interpreted not as a statutory licence as would be the case with appointment, notification, order, scheme, rule, form, notice and bye-law.
• Even accepting the 1982 Deed is not a statutory licence within the meaning Section 188 of the Punjab Act, i.e., the licence granted by the New Delhi Municipal Committee under the Punjab Act for certain things, the said instrument was a “licence or permission” which permitted the Respondent to construct and commission a five-star hotel and other ancillary buildings on payment of an annual licence fee. Therefore, the deed falls squarely under Section 416(2)(a).
• The permission accorded to the Respondent to construct and commission a hotel on the subject land, by way of the Licence Deed dated 22.04.1982, is referable to Section 18 of Punjab Act for the reason that granting a licence or permission to do certain act by a third party is intrinsic in its power to hold immovable property.
• Clause 48 of the 1982 Deed capped the 33-year fee enhancement at 100%, limiting the new fee to a maximum of Rs. 2.90 crore annually. However, Section 141(2) of the NDMC Act mandates that public property must not be transferred, leased, or licenced for a consideration less than its fair market value. Relying on precedents such as Aggarwal & Modi Enterprises (P) Ltd. v. New Delhi Municipal Council, (2007) 8 SCC 75 and Indian Hotels Company Ltd. v. New Delhi Municipal Council, 2016 SCC OnLine Del 5733, the Court affirmed that Section 141(2) applies to licences and imposes a fiduciary duty on the NDMC to secure the maximum possible revenue for public property in a fair competition.
• Hence, Clause 48 of the 1982 Deed, to the extent it puts a cap of 100% increase in licence fee at the time of its enhancement after completion of 33 years, is inconsistent with Section 141 (2) of the NDMC Act and the same cannot be saved under Section 416 of the NDMC Act.
• Further, the issue of prospective or retrospective application of Section 141 is misplaced in the present case. Section 416(2)(a) saves past acts of the New Delhi Municipal Committee only to the extent they are consistent with the NDMC Act. Consistency/inconsistency has to be tested on the basis of the provisions of the NDMC Act which is in currency as on today and in the instant case on the date when enhancement of licence fee became due after completion of 33 years.

Issue II: Whether communication dated 13.02.2020 terminating the licence agreement dated 22.04.1982 for breach of the terms of the licence is unlawful.

• Clause 11 strictly prohibited the transfer of rights or possession without prior consent. It was undisputed that on 01.05.2016, the Respondent’s sub-licencees (Ms. Ghazala Shameem and Mr. Owais Usmani) executed four documents titled “Full and Final Agreement of Sale, Purchase and Transfer” in favour of M/s IWPA. 
• The Collector of Stamps’ order from June 2018, explicitly recorded that the transfers were made with the “confirmation by the Respondent No.1”. Furthermore, the Respondent’s representative had actively participated in the hearings before the Collector.
• Even keeping aside the issue of direct knowledge, Clause 29 placed the entire responsibility for the conduct of the sub-licencees squarely on the Respondent. The Respondent was legally bound to ensure that sub-licencees did not acquire or transfer rights exceeding its own. The execution of definitive sale deeds constituted a fundamental breach of Clauses 11 and 29.
• As the execution of the permanent sale deeds was undeniable, granting a prior notice or hearing would not have improved the Respondent’s case.
• There was absolutely no evidence on record demonstrating that possession of the property was ever returned, or that the sale consideration of over Rs. 3 crore was refunded to the buyer.
• Based on these undeniable breaches, the Respondent was in fundamental breach of the agreement, and the NDMC was entirely justified in terminating the licence under Clause 42.

Alternate viewpoint on Issue No. 1 

• The law distinguishes between a lease and a licence. A lease under Section 105 of the Transfer of Property Act, 1882 involves transfer of a right to enjoy immovable property for consideration, thereby creating an interest in the property. In contrast, a licence under Section 52 of the Indian Easements Act, 1882 merely permits use of the property without creating any proprietary interest, and remains revocable in accordance with law. Even applying this distinction, the 1982 Deed clearly qualifies as a licence.

Disagreement with the Impugned Judgment

• While disagreeing with the impugned judgment, the Division Bench cited the principles governing alienation or parting of rights in natural resources to a third party by State or its instrumentalities.
• The Court, relying on the principles laid down in the Presidential Reference (supra), reiterated that though alienation of such resources is a policy decision,  when such a decision is not backed by a social or welfare purpose and precious and scarce natural resources are alienated for commercial pursuits of profit maximizing by private entrepreneurs, adoption of means other than those which are competitive and maximise revenue may be arbitrary and violative of Article 14 of the Constitution of India.
• Clause 48 of the 1982 Deed permits maximum licence fee of Rs.2.90 crores annually, whereas, the L&DO has demanded from the appellant a sum of Rs. 98 crore per annum towards the ground rent. The huge difference between the licence fee permissible under Clause 48 and the ground rent being demanded by L&DO by the appellant will have to be ultimately borne by the public at large, who are residents of New Delhi and are paying taxes in various forms to the NDMC.
• Land in New Delhi is a scarce public resource managed by NDMC on behalf of L&DO; any transaction causing substantial loss ultimately burdens taxpayers and cannot be sustained, being violative of Article 14.

Decision:

In its final decision, the Division Bench of the High Court ruled in favour of the appellant, New Delhi Municipal Council (NDMC), by allowing both appeals and setting aside the earlier judgment passed by the Ld. Single Judge on December 6, 2023. The Court expressed its clear disagreement with the Single Judge’s decision to quash the NDMC’s February 13, 2020 demand notice for enhanced licence fees as well as its communication terminating the 1982 Licence Deed, thereby validating the NDMC’s actions against Bharat Hotels Ltd.

Written by : Saksham Singh