Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

 CIVIL APPEAL NO(S). 572-573 OF 2010

1. The present appeals, by special leave, are directed against orders1
 of the
National Consumer Disputes Redressal Commission (hereinafter “NCDRC”).
The NCDRC allowed a revision petition filed by the respondent corporation.
2. The brief facts of the case are that the appellant, a proprietary concern
applied for an industrial plot of the proposed project on 28-02-1994 in Industrial
State Udyog Vihar, Gurgaon. The respondent corporation (hereinafter
“HSIDC”) called the appellant’s proprietor, Modi Lal Gupta, for an interview
1 Dated 11.01.2007 in RP No.3125/2003 and order dated 07.11.2008 in Misc. Application No.
711/2008 in Revision Petition No. 3125/2003.
on 09-09-1994. A letter of intent was issued indicating certain
conditions on 05-10-1994. The appellant informed that he could not
start the production in time on the ground that there were no basic infrastructure
facilities as electricity, sewerage, telephone and proper road, etc., and
requested for extension of time of three months. After sanction of the loan by
HSIDC, on 13-09-1995, a letter of allotment of plot was issued which stipulated
certain terms and conditions. On 02-11-1995 possession was handed over to the
3. The appellant did not fulfil the required conditions of the allotment. No
concrete step to set up the industrial unit on the allotted site was initiated by it.
As a result, HSIDC issued a notice, on 13-12-1996 asking the appellant to show
cause why the plot should not be resumed on account of its failure to fulfil the
terms and conditions of the allotment. In response, the appellant, on 12-02-
1998, wrote back to the HSIDC. The letter or reply alleged that no basic
infrastructure facilities as electricity, sewerage, telephone and proper road, etc.,
existed near the site, and, as a result, it was not possible to start the construction.
The appellant sought extension of time by a year.
4. On 23-03-1998, HSIDC issued final notice asking why the plot should
not be resumed for the appellant’s failure to fulfil the terms and conditions of
allotment. The appellant wrote a letter, again on 19-04-1998 requesting for
extension of time. Since appellant did not come forward to satisfy the HSIDC
by producing any document in response to its letter dated 19-04-1998 about the
steps taken, HSIDC, on 18-09-1998 resumed the plot stating that the appellant
was not serious in implementing the project and that the plot was lying vacant.
HSIDC enclosed a cheque for a sum of 1,66,425 with the letter towards the ₹
refund and the appellant was requested to handover the possession of the plot to
the Field Officer.
5. The appellant approached the District Forum, Gurgaon2
 with a complaint.
The District Forum, Gurgaon, assumed that since the State Government has
changed the policy without referring to the policy, it went on to hold that the
complainant was unable to complete the project not on account of negligence on
the part of the complainant but because of the circumstances which were
beyond its control. HSIDC appealed to the State Commission. The State
Commission dismissed the appeal3
, upon which HSIDC filed a revision petition
before the NCDRC, which was dismissed on the ground of delay4
. The
HSIDC’s special leave petition to this court succeeded, and an order was made
on 10.11.20035
 directing the NCDRC, to hear and dispose of the appeal on its
6. The NCDRC, after remand, allowed HSIDC’s revision application. It
held that the grounds taken and the reasons given by the appellant were vague
2 In CPA No 1697 of 07.10.1998
3 In First Appeal No 1010 of 29.04.2003
4 In Revision Petition No 3125 of 2003
5 In Civil Appeal No 5672/2004
and evasive and does not disclose any particular date or any time frame for
taking up and completing construction. It was also held that the appellant did
not show what concrete steps were taken and that his conduct and
correspondence could not be taken to be a proper explanation or sufficient
ground for non-completion of the construction and non-installation of the
machines and not starting the production in terms of the agreement. The
NCDRC also held that the plot remained in possession of the complainant from
29-12-1995 till 18-12-1998. Relying on the decision of this court in Indu
Kakkad v Haryana State Industrial Development Corporation Ltd6
, where this
court relied on a clause similar to clause 6 of the current agreement, the
NCDRC held that the HSIDC was justified in resuming the plot.
Contentions of the appellant
7. Mr. Rajiv K. Garg, learned counsel appearing for the appellant, urged that
the appellant did not violate any of the terms of the allotment letter and took due
steps in terms of the allotment letter. After the allotment of the plot (No 182-M,
Udyog Vihar, Phase - IV, Gurgaon) he took all the required steps such as:
(a) obtaining the required certificate from the Industrial Department;
(b) applying to the electrical department for grant of power connection
for which he had deposited the requisite amount with the HSEB;
(c) applying for financial assistance with the Financial Corporation.
6 Indu Kakkad v Haryana State Industrial Development Corporation Ltd, 1999 (2) SCC 37
However, on account of change in policy of the Government, the same was not
granted, therefore, the appellant arranged the same from outside. Thus, the
appellant took all effective steps for implementation of the project which were
within his power and control.
8. It was urged that the appellant is a duly qualified engineer, who wanted to
be an entrepreneur, and acted upon the novel idea of manufacturing components
for FM radios and audios. However, the delay in granting permission and not
releasing capital resulted in no construction.
9. Learned counsel further submitted that the NCDRC’s impugned order is
in error, because it overlooked the fact that the resumption order was issued
without granting any opportunity to the appellant; furthermore, the order was
also vitiated as it was non-speaking. Learned counsel relied on the judgment of
this court in Managing Director, Haryana Industrial Development Corporation
& Ors. V. Hari Om Enterprises & Ors.7
, in support of the argument that
cancellation of allotment without adherence to principles of natural justice
vitiates the action of HSIDC.
Contentions of HSIDC
10. Mr. Alok Sangwan, learned Additional Advocate General for Haryana,
urged this court not to interfere with the findings of the NCDRC. He submitted
that the record would show that sufficient opportunity was granted to the
7 Managing Director, Haryana Industrial Development Corporation & Ors. v Hari Om
Enterprises & Ors, 2009 (16) SCC 208
appellant, and show cause notice too was issued to him, asking him why steps
were not taken to construct the industrial unit upon the plot. Counsel relied on
several letters exchanged between the parties. He argued that the appellant did
not show any, much less substantial progress or interest in carrying on industrial
activity on the plot.
11. Mr. Sangwan submitted that the object behind allotment of plots in
industrial areas, was to promote industrial activity, especially by qualified
engineers. He highlighted that allotment is based on appraisal of the project
proposed by applicants, and having regard to their feasibility. The overall
objective of the scheme under which plots were allotted was to promote
industrialization and thereby promote economic growth, and also ensure
employment. The persistent inaction of the appellant and his inability to show
any inclination to fulfil these objectives, despite grant of several opportunities,
and most importantly his inability to take any initiative despite lapse of five
years from allotment, meant that he was not interested in constructing upon, or
using the plot for any industrial activity, but rather to speculate and wait for its
value to increase, and thereafter dispose it off.
12. Learned counsel relied upon several conditions in the allotment letter and
stated that the appellant was obliged to not only take swift and timely action
towards putting up the unit, but also the allotment was hedged with several
conditions, many of which, upon violation, entailed cancellation. Therefore,
there was nothing abhorrent or reprehensible in HSIDC’s action in resuming the
Analysis and Reasoning
13. The record in this case indicates that the appellant had applied for
allotment of the industrial plot on 28-02-1994. After he was interviewed and his
credentials verified, he was issued with the letter of intent on 09-09-1994. The
final payment was made in respect of the plot on 06-09-1995. Later the next
month on 27-10-1995, an agreement was executed between HSIDC and the
appellant in which he agreed to complete the project in 2 years. The agreement
also contained the condition that extension could be granted upon payment of a
fee. The appellant took possession of the plot on 29-12-1995. The
appellant was called upon to show cause why he did not complete construction
and set up the unit, in 1997. Upon receiving this notice, he replied on 12-02-
1998 that he could not start the unit due to lack of infrastructural facilities. He
alleged that road and electricity facilities were not adequate, which had hindered
his project. The HSIDC issued a show cause notice to the appellant, again on
23-03-1998. Yet again on 29-04-1998, another show cause notice was issued
by HSIDC, asking the appellant to indicate the steps that he had taken to put up
the industrial unit and start production. However, the appellant did not
apparently respond to this. Finally, on 18-09-1998, the HSIDC
communicated that it had resumed the plot and cancelled the allotment. It
refunded the sum of 1,66, 425, through a cheque, which was sent to the ₹
appellant. The latter upon receipt of this intimation did not accept the cheque
and returned it back on 06-10-1998.
14. In the meanwhile, the appellant approached the District Consumer
Forum, Gurgaon, on 30-09-1998. The District Consumer Forum allowed the
complaint on 16-05-2000 and directed the HSIDC to withdraw the resumption
order. It also directed HSIDC, not to allot the plot to any other person; HSIDC
was granted 3 months’ time to comply with the requirement of allotting the plot
to the appellant. The HSIDC's appeal was rejected on 29-04-2003 by the State
Consumer Commission. It approached the NCDRC belatedly. On 10-11-2003
NCDRC dismissed its revision petition as time-barred. Subsequently, the
HSIDC approached this court, which remitted the matter by its order dated 20-
01-2004 to the NCDRC for fresh consideration on merits. By the impugned
order, the revision petition was allowed.
15. As the previous discussion reveals the appellant's arguments are twofold.
The first is that HSIDC violated principles of natural justice, did not grant him a
hearing and unilaterally cancelled the allotment. The added point made was that
the allotment was followed by payment of full consideration and that, in these
circumstances, some minimum hearing ought to have been given before adverse
action of resumption was taken. It was also alleged in this regard that
cancellation order did not disclose any application of mind; no reasons are
forthcoming. The second substantial argument made was that in the absence of
essential infrastructural facilities such as roads, overall
development of the industrial area availability of electricity and other amenities,
HSIDC could not have expected the appellant or any other allottee to construct
the plot within the time granted, i.e two years.
16. The allotment made in favour of the appellant by HSIDC contains several
conditions. The HSIDC and the appellant entered into an agreement on
27-10-1995. Clause 4 (iii) of the agreement stipulates that the allottee would
enjoy the right of possession as long as he complied with all terms and
conditions of allotment contained in the agreement. Clause 6 which is important
in the present context reads as follows:
“6. That the allottee shall start on the site construction of building for
setting up the aforesaid industry within a period of 6 months and
complete the construction thereof within 1 1/2 years from the date of
the possession. The plans thereof shall be in accordance with the rules
made as per the directions given from time to time by the Town and
country planning and Urban estate Department, in this respect and
approved by the Director Town & Country planning department or
any officer duly authorised by him in this behalf.
Further the allottee shall complete the construction and installation
and machinery and commence production within a period of 2 years
from the date of possession after constructing a minimum of 25% of
the permissible covered area, failing which the plot shall be liable to
be resumed by the Corporation.
Provided that the scheme shall be deemed not to have been
implemented unless the allottee starts commercial production after
completing construction to the extent of at least 25% of the
permissible covered area of the plot as per the approved Zoning Plan
of the concerned estate within the aforesaid period failing that event,
the plot shall liable to be resumed by the Corporation.
However, the Corporation shall have the right to call for periodical
reports every 6 months from the allottee about the progress
/implementation of the project and if, after hearing the allottee the
Corporation is of the opinion that the progress is unsatisfactory it may
order the plot to be resumed.
In the event of reasons beyond the control of the allottee to set up the
unit within the prescribed period/the Corporation may grant the
suitable extension depending upon the merits of the case. However,
such extension shall be granted on payment of a fee in accordance
with the rules/policy of the Corporation”.
17. Besides this, there were other mandatory stipulations such as that regular
payment of maintenance charges, proportional conservation charges,
proportionate external development charges as could be determined by HSIDC
and importantly the condition that the allottee could not change its constitution
and if it did so, it should in any event, hold not less than 51 % shareholding in
its concern. Similarly, any request of the allottee for transfer of plot, could be
considered where the final allotment letter had been issued and the project had
been completed and approved by the HSIDC. The embargo on transfer was
subject to the condition that the HSIDC had the final say or approval, in this
18. The development of industrial areas, was part of the state’s overall project
for promoting industries and growth of its economy, with the objective of
providing livelihood. The HSIDC therefore, correctly contends that the
stipulation in the allotment letter, requiring allottees to construct their respective
projects and start it, was essential. The appellant too had furnished a project
report, proposing to set up an FM radio and audio component manufacturing
unit. This project was appraised, he was interviewed and after satisfying itself
about its feasibility, HSIDC allotted the plot. There is no denial of the fact that
the allottee did not take any step towards setting up the unit he proposed. His
pleading, before the District Consumer Forum, was that the infrastructural
facilities, such as road and external development had not come up. He claims to
have applied for electricity connection. On the other hand, there is nothing on
the record- even till date- pointing to any plan to construct a factory or industrial
unit. He did not supply any plans for approval; nor did he ever show inclination
to procure the needed machinery and equipment required for his proposed
industrial unit. Other steps such as securing tax registration, etc., too were not
shown to have been done. In these circumstances, the conclusion which this
court is compelled to draw is that the appellant was always insincere and
perhaps never intended to follow up and set up the industrial project, which he
proposed to HSIDC, as the basis for allotment of his plot.
19. The judgment of this court in Indu Kakkar had concluded that Clause 7 of
the agreement, entered into between the parties (in that case), was binding. That
condition required construction of the building for setting up the industry, in
respect of which land was allotted to the appellant, to start within a period of six
months. Construction had to be completed with two years from the date of issue
of the allotment letter. Since the appellant failed to commence construction
within the stipulated time, show-cause notice was issued as to why the plot be
not resumed in terms of the agreement; that was in challenge and relied on
Section 11 of the Transfer of Property Act, 1882. This court negatived the plea
in the following manner:
“16. However, the allottee has contended before the trial court that
Clause 7 of the agreement is unenforceable in view of Section 11 of
the TP Act. But that contention was repelled, according to us, rightly
because the deed of conveyance had not created any absolute interest
in favour of the allottee in respect of the plot conveyed. For a
transferee to deal with interest in the property transferred "as if there
were no such direction" regarding the particular manner of enjoyment
of the property, the instrument of transfer should evidence that an
absolute interest in favour of the transferee has been created. This is
clearly discernible from Section 11 of the TP Act. The Section rests
on a principle that any condition which is repugnant to the interest
created is void and when property is transferred absolutely, it must be
done with all its legal incidents. That apart, Section 31 of the TP Act
is enough to meet the aforesaid contention. The Section provides that
“on a transfer of property an interest therein may be created with the
condition super-added that it shall cease to exist in case a specified
uncertain event shall happen, or in case a specified uncertain event
shall not happen.”
Illustration (b) to the Section makes the position clear, and it reads:
(b) A transfers a farm to B, provided that, if B shall not go to England
within three years after the date of the transfer, his interest in the farm
shall cease. B does not go to England within the term prescribed. His
interest in the farm ceases.
17. All that Section 32 of the Transfer of Property Act provides is that
"in order that a condition that an interest shall cease to exist may be
valid, it is necessary, that the event to which it relates be one which
could legally constitute the condition of the creation of an interest". If
the condition is invalid, it cannot be set up as a condition precedent
for crystallization of the interest created. The condition that the
industrial unit shall be established within a specified period failing
which the interest shall cease, is a valid condition. Clause 7 of the
agreement between the parties is, therefore, valid and is binding on
the parties thereto.”
20. The decision in Hari Om in this court’s opinion, does not in any manner
assist the appellant. In that case, the court had dealt with several appeals. In the
main appeal, the allotment was offered on 20.12.2001; however actual
possession was handed over on 08.12.2003. The appellant applied for approval
of building plan, thereafter, which was given by HSIDC on 20.03.2004. The
construction of the industrial unit was completed in May 2005. In the
meanwhile, alleging non compliance with the terms of allotment, the plot was
resumed on 03.03.2005. Having regard to these facts, the High Court had set
aside the resumption order. This court repelled the HSIDC’s argument that writ
proceedings were not maintainable, and held in the facts and circumstances, that
the setting aside of the resumption was justified.
21. The idea behind development of industrial plots and allotting them to
deserving applicants is to act as a catalyst to promote economic growth; this
aspect was underlined in Hari Om in the following manner, while describing the
functions of HSIDC:
“4. […] Its principal function is allotment of industrial plots
belonging to the State of Haryana. It was set up as a catalyst for
promoting economic growth and accelerating the pace of
industrialization. It not only provides financial assistance to the
industrial concerns by way of term loans; it also develops
infrastructure for setting up of industrial units. The Corporation also
invests money in developing the industrial estates at strategic
locations. In exercise of its functions, it also allots industrial plots to
entrepreneurs for setting up their industries on "no profit no loss"
basis. The entrepreneurs, according to the Corporation, must be the
deserving ones. For the said purpose, it keeps in mind the principle
that allotment of land should not be made to speculators who invest in
property for getting high returns on escalation of price.”
22. In the present case, as discussed earlier, the facts are stark; the appellant
never made any genuine effort to start its unit. There is no material to disclose
that upon receipt of no less than three show cause notices, the appellant showed
any sense of urgency in taking steps to live up to the bargain, (of setting up an
industrial unit). The inference which this court is left to draw, is that the
allottee’s intention was perhaps never to set up any industrial unit, despite its
promise to the contrary, and speculatively deal with the plot. Having regard to
these facts and circumstances, the court is of the opinion that the impugned
order does not call for interference.
23. In view of the above conclusions, this court would have been justified in
holding that the appellant is only entitled to refund of the sum of 1,66,425/- ₹
which was paid for the plot. However, there is no denial of the fact that the
cheque issued to him was returned and HSIDC had the benefit of those monies
all these years. In these circumstances, HSIDC is directed to refund the sum of
₹ 1,66,425/- with interest at 6% p.a. from 18.09.1998 till date. The amounts
shall be paid to the appellant, within six weeks from today.
24. The appeals are dismissed, but subject to directions contained in the
previous paragraph; there shall be no order on costs.
New Delhi,
February 27, 2023.


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