Re-entry orders and pending litigation cannot bar leasehold-to-freehold conversion under government policy.

The subject property (8, Lady Harding Road, New Delhi) was mutated to Arjun Dev (the deceased petitioner) in 1963

In 1968, the Land & Development Office (L&DO) alleged misuse by tenants. On May 12, 1969, the L&DO issued an order of re-entry/determination of lease effective from April 5, 1969, citing failure to remedy breaches

Between 1970 and 1974, the petitioner repeatedly requested the L&DO to communicate the charges for regularization and restoration, but received no response until 1992, when a demand for ~Rs. 2 crores was raised

Meanwhile, the petitioner successfully evicted the defaulting tenants through seven eviction petitions

In 1999, the petitioner applied for conversion to freehold; however, the L&DO rejected the application on August 14, 2002, and November 20, 2004, citing the re-entry order and pending litigation under the Public Premises Act

1. Whether a conversion application from leasehold to freehold can be rejected solely on the grounds of a prior re-entry order and pending litigation between the lessor and lessee

2. Whether the L&DO acted with procedural and substantive unreasonableness by raising misuse/damage demands after an inordinate delay despite the lessee’s requests for quantification

The court applied Article 226 of the Constitution of India regarding the power to check arbitrary state action

It relied on the Full Bench decision in UOI v. Engineering and Ind. Corporation Pvt. Ltd., which established that re-entry charges (Rs. 3000/annum) are for unauthorized occupation and not for regularizing misuse

The court followed the Division Bench holding in UOI v. Vinay Kumar Agarwal, reading down Clause 18.1 of the Conversion Brochure to allow conversion to original lessees in possession despite re-entry

It further applied the principle from DDA v. Ram Prakash and UOI v. Jor Bagh Association (Regd.), holding that statutory authorities must act within a reasonable time and cannot penalize a lessee for misuse by tenants if the lessee took diligent steps for eviction

The court found that the L&DO’s rejection of the conversion application based on Clause 18 of the brochure was unsustainable.

Following Vinay Kumar Agarwal, it held that a person should not be denied conversion facility simply because the lease was determined, especially when the original lessor remains in possession

Regarding the misuse charges, the court noted that the deceased petitioner had been requesting the quantification of charges since 1968, yet the respondent remained silent for 23 years until 1992

Applying the "procedural fairness" doctrine, the court reasoned that it is inequitable for the State to claim exorbitant damages and interest after its own protracted inaction

Furthermore, since the petitioner had successfully pursued seven eviction petitions against the misusing tenants, the court determined that the misuse was not attributable to the petitioner's conduct, and thus, raising a demand of Rs. 2 crores decades later was arbitrary and substantive unreasonably

It held that the order of re-entry and pending litigation are not impediments to considering a conversion application

The court directed Respondent No. 1 to re-consider the application for conversion from leasehold to freehold afresh within four weeks

It further held that the demand for ~Rs. 2 crores in damages was inequitable due to the respondent's failure to respond to the petitioner's requests for over two decades

The respondent was granted liberty to inspect the property and issue fresh show-cause notices for any current breaches in accordance with law