AMAN SEMI-CONDUCTORS (PVT.) LTD. VERSUS HARYANA STATE INDUSTRIAL DEVLOPMENT CORPORATION LTD. & ANR

AMAN SEMI-CONDUCTORS (PVT.) LTD. VERSUS HARYANA STATE INDUSTRIAL DEVLOPMENT CORPORATION LTD. & ANR 

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

 CIVIL APPEAL NO(S). 572-573 OF 2010

AMAN SEMI-CONDUCTORS (PVT.) LTD. …APPELLANT(S)

VERSUS

HARYANA STATE INDUSTRIAL

DEVLOPMENT CORPORATION LTD. & ANR. …RESPONDENT(S)

J U D G M E N T

S. RAVINDRA BHAT, J.

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.

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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

allottee/appellant.

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

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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

merits.

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

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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

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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

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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,

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there was nothing abhorrent or reprehensible in HSIDC’s action in resuming the

plot.

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

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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

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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.

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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

regard.

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

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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

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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

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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

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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.

.....................................................J.

[S. RAVINDRA BHAT]

.....................................................J.

[DIPANKAR DATTA]

New Delhi,

February 27, 2023.