The Supreme Court of India ruled that the Delhi Development Authority (DDA) is entitled to demand unearned increase upon the amalgamation of a company that results in the transfer of leased property. The Court held that such a transfer, even if it occurs through amalgamation, falls under the purview of "transfer" as mentioned in the lease agreement, thereby justifying the demand for unearned increase by the DDA.

1. Background of the Case

• The case concerns four perpetual lease deeds executed by the President of India in favor of M/s. Jaiprakash Associates Pvt Ltd in 1983. These plots were later amalgamated with M/s. Jaypee Rewa Cement Ltd, which subsequently became M/s. Jaiprakash Industries Ltd.
• The Delhi Development Authority (DDA) demanded an unearned increase fee when Jaiprakash Industries sought permission to mortgage these plots in 1991, leading to a legal dispute.

2. Legal Submissions

• Appellant's Argument: Jaiprakash Industries argued that the amalgamation did not constitute a "transfer" under the lease deed, thus no unearned increase was payable. They contended that the transfer occurred by operation of law under Section 394 of the Companies Act, 1956, and should not be treated as a voluntary transfer requiring DDA's consent.
• Respondent's Argument: The DDA maintained that the amalgamation led to a transfer of the plots, justifying their demand for an unearned increase as per the lease agreement.

3. Supreme Court's Ruling

• The Supreme Court upheld the DDA's demand, stating that the amalgamation resulted in the transfer of leasehold rights, which triggered the lease clause requiring the payment of an unearned increase.
• The Court emphasized that the lease agreement covered all types of transfers, including those resulting from amalgamation, thereby making DDA’s demand legally valid.

4. Implications of the Judgment

• This ruling clarifies that companies undergoing amalgamations must account for potential liabilities related to unearned increase demands on leased properties.
• It reinforces the principle that the terms of lease agreements remain binding even in the context of corporate restructuring through amalgamations.