# 9 S.C.R. 821 ~ _ M.D., H.S.l.D.C. AND ORS v. M/S. HARi OM ENTERPRISES AND ANR

- **Citation:** [2008] 9 S.C.R. 821
- **Court:** Supreme Court of India
- **Decided:** 2008-05-16
- **Case number:** Civil Appeal No. 4089 of 2008
- **Bench:** S.B. Sinha, V.S. Sirpurkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/9-s-c-r-821-m-d-h-s-l-d-c-and-ors-v-m-s-hari-om-enterprises-and-anr-24892
- **Pages:** 49

## Headnote

Industrial development:
Power of the Corporation allotting industrial plots to resort to resumption of plot or forfeiture - Held: Ordinarily such c
power should be exercised only as a last resort - Keeping in
view fact that the Corporation is under obligation to comply
with the principles of natural justice, Corporation is required to
assign reasons as to why plot had to be resumed - While doing so it evidently is required to take into consideration its own
D
conduct - Construction over a plot can commence only when
...
physical possession is handed over or plan for construction
of the building is approved - The Corporation cannot ignore
these relevant factors - However, if allottees fail to abide by
the terms of the contract, the Corporation could resort to reE
sumption with due notice.
Constitution of India, 1950:
Article 226 - Jurisdiction of writ court - Held: Ordinarily
...
J.
in matter of enforcement of contract, writ court shall not exer-
--
cise its jurisdiction under Article 226 - But where action of State
F
is violative of Article 14 and is wholly unfair and unreasonable, writ court would not hesitate to grant relief in favour of
person where both law and equity demand that such relief
should be granted - Each case must be considered on its
own merit - Equity
G
..
Civil Appeal arising out of SLP (C) No.14074 of 2006 .
~
The appellant-Corporation has been set up as a cata821
H
822
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A lyst for promoting economic growth and accelerating the
pace of industrialization and its principal function is allotment of industrial plots. Respondent no.1 applied for
allotment of 1000 sq.m. It was issued letter of allotment
on 10.1.2001. The possession was handed over only on
B 8.12.2003. Respondent no.1 filed an application for construction of the building which was to be granted only by
_...
the Corporation. The Corporation granted permission
only on 20.3.2004 whereafter construction started and it
was completed in May, 2005. The Corporation sent notice
c to respondent no.1 for resumption of plot on the premise
that offer of possession was issued on 1.01.2002 and the
construction activity, thus, was required to be started
within one year therefrom and production of the Unit
should have been started from the date of offer of posD session.
On 3.3.2005, the plot was resumed on the premise
that respondent had violated the terms of agreement.
Appeal preferred thereagainst was dismissed. Respondent filed writ petition before High Court which was alE lowed and the plot was restored back to respondent.
Hence the present appeal by Corporation.
Civil Appeal@ SLP (C) No.19949 of 2006
Respondents are directors of the company which
F was allotted an industrial plot. Corporation provided an
additional facility for allotment of residential plots for their
directors. Payments were made in the name of the Company although allotment had been made in the individual
names of the respondents. The allotment of the said plot
G was cancelled on the premise that payment has not been
made in terms of Clauses 4 and 5 of the offer of allotment
dated 18.07.2003. A proceeding for resumption was initiated and by an order dated 1.06.2004, the said plot was
resumed. Aggrieved respondents filed writ petition. Upon
cancellation of allotment of plots in question, these plots
H
M.D., H.S.l.D.C. AND ORS. v. MIS. HARi OM
823
ENTERPRISES AND ANR.
~ ~
were further allotted. However, the said subsequent allotA
tee were not impleaded as party. The High Court allowed
the writ petition on the premise that the respondents had
deposited a sum of Rs. 1,78,200/- and in view of Clause 3
of offer of allotment, it was for them to make payment in
terms thereof. Hence the appeal.
B
Civil appeal arising out of SLP(C) No.19916 of 2006
Respondent applied for and was allotted an industrial plot by the Appellant Corporation. Indisputably, it deposited a sum of Rs. 3,96,000/- being 10 per cent of the c
total cost of the said plot. It, however, was not s

## Text

_Characters 0–39,862 of 98,084. This is a partial read: ask again with offset=39862 for what follows._

(2008] 9 S.C.R. 821
~ _...
M.D., H.S.l.D.C. AND ORS.
A
v
M/S. HARi OM ENTERPRISES AND ANR.
(Civil Appeal No. 4089 of 2008)
MAY 16, 2008
B
[S.B. SINHA AND V.S. SIRPURKAR, JJ.]
Industrial development:
Power of the Corporation allotting industrial plots to resort to resumption of plot or forfeiture - Held: Ordinarily such c
power should be exercised only as a last resort - Keeping in
view fact that the Corporation is under obligation to comply
with the principles of natural justice, Corporation is required to
assign reasons as to why plot had to be resumed - While doing so it evidently is required to take into consideration its own
D
conduct - Construction over a plot can commence only when
...
physical possession is handed over or plan for construction
of the building is approved - The Corporation cannot ignore
these relevant factors - However, if allottees fail to abide by
the terms of the contract, the Corporation could resort to reE
sumption with due notice.
Constitution of India, 1950:
Article 226 - Jurisdiction of writ court - Held: Ordinarily
...
J.
in matter of enforcement of contract, writ court shall not exer-
--
cise its jurisdiction under Article 226 - But where action of State
F
is violative of Article 14 and is wholly unfair and unreasonable, writ court would not hesitate to grant relief in favour of
person where both law and equity demand that such relief
should be granted - Each case must be considered on its
own merit - Equity
G
..
Civil Appeal arising out of SLP (C) No.14074 of 2006 .
~
The appellant-Corporation has been set up as a cata821
H
822
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A lyst for promoting economic growth and accelerating the
pace of industrialization and its principal function is allotment of industrial plots. Respondent no.1 applied for
allotment of 1000 sq.m. It was issued letter of allotment
on 10.1.2001. The possession was handed over only on
B 8.12.2003. Respondent no.1 filed an application for construction of the building which was to be granted only by
_...
the Corporation. The Corporation granted permission
only on 20.3.2004 whereafter construction started and it
was completed in May, 2005. The Corporation sent notice
c to respondent no.1 for resumption of plot on the premise
that offer of possession was issued on 1.01.2002 and the
construction activity, thus, was required to be started
within one year therefrom and production of the Unit
should have been started from the date of offer of posD session.
On 3.3.2005, the plot was resumed on the premise
that respondent had violated the terms of agreement.
Appeal preferred thereagainst was dismissed. Respondent filed writ petition before High Court which was alE lowed and the plot was restored back to respondent.
Hence the present appeal by Corporation.
Civil Appeal@ SLP (C) No.19949 of 2006
Respondents are directors of the company which
F was allotted an industrial plot. Corporation provided an
additional facility for allotment of residential plots for their
directors. Payments were made in the name of the Company although allotment had been made in the individual
names of the respondents. The allotment of the said plot
G was cancelled on the premise that payment has not been
made in terms of Clauses 4 and 5 of the offer of allotment
dated 18.07.2003. A proceeding for resumption was initiated and by an order dated 1.06.2004, the said plot was
resumed. Aggrieved respondents filed writ petition. Upon
cancellation of allotment of plots in question, these plots
H
M.D., H.S.l.D.C. AND ORS. v. MIS. HARi OM
823
ENTERPRISES AND ANR.
~ ~
were further allotted. However, the said subsequent allotA
tee were not impleaded as party. The High Court allowed
the writ petition on the premise that the respondents had
deposited a sum of Rs. 1,78,200/- and in view of Clause 3
of offer of allotment, it was for them to make payment in
terms thereof. Hence the appeal.
B
Civil appeal arising out of SLP(C) No.19916 of 2006
Respondent applied for and was allotted an industrial plot by the Appellant Corporation. Indisputably, it deposited a sum of Rs. 3,96,000/- being 10 per cent of the c
total cost of the said plot. It, however, was not satisfied
with the said allotment. A prayer was made to change the
plot which was accepted by the appellant Corporation.
He was allotted an alternate plot. They were, however, not
satisfied with the said allotment and made another repreD
'
sentation for change of plot. On or about 21.9.2004, the
~ -t
respondent deposited an amount of Rs. 6,00,000/- towards
15% of the total price of the plot. He was, however, required to deposit the said amount by 22.7.2004 which was
extendable by another 30 days on interest at 11% per E
annum after 22.7.2004, but he failed to do so. Appellant
took a stand that the letter of allotment elapsed automatically. The amount of Rs. 3,96,000/- was directed to be re-
\
funded. The bank draft sent by the respondent for an
-.....
amount of Rs. 6,00,000/- was also returned. The respon-
-"'
dent filed a Writ Petition which was allowed. Hence the
F
appeal.
Civil appeal arising out of SLP(C) no.19833 of 2006
Respondent was issued a letter of allotment in respect of a plot. On the premise that respondent has not G
,,..
complied with the terms and conditions of the agreement,
)
a notice was issued on 17.4.2003. Respondent, however,
was asked to take physical possession of the land and
also to apply for extension for the purpose of starting construction by the Estate Manager of the appellant CorpoH
824
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A ration by a letter dated 24.4.2003. Pursuant thereto physical possession was handed over on 6.5.2003. Respondent, thereafter applied for grant of water connection on
1.7.2004. He submitted his building plan on 10.7.2004. Alleging that the ownership is in dispute, the plan was not
B sanctioned. The Town Planner of the appellant asked the
Corporation to ascertain ownership status before the
building plans could be cleared. From an internal communication dated 21.7.2004, however, it appears that
building plans were not processed on the premise that
c ownership clearance had not come from the Corporation.
By a letter dated 23.8.2004, respondent informed the concerned authority that the request of clearance of ownership status was being pursued with the authorities of the
appellant.
D
A show cause notice for resumption of the plot, however, was issued on 21.9.2004 alleging that construction
work had not been started within a period of one and a
half year of the handing over of the possession and some
amount was outstanding. Respondents requested that the
E excess period for starting construction may be waived
by imposing some penalty. An assurance was given to
start construction on clearance of building plan and ownership status. A sum of Rs. 14,30,940/- had already been
deposited. Respondent filed a further reply on 22.12.2004.
F No opportunity of personal hearing was granted. By an
order dated 7.3.2005, an order of resumption was issued.
However, despite the same, letters were written by the appellant communicating the respondent in respect of certain errors in the building plans as would appear from the
G letters dated 8.4.2005and10.11.2005. Building plans were
re-submitted by the respondent on 14.12.2005 whereto
again some defects were pointed out therein. In the meantime, the appellant preferred an appeal which was dismissed. A Writ Petition was filed which was allowed.
H
Civil appeal arising out of SLP (C) No.20235 of 2006.
~ ~
..,.. "'
..
~
~
....
'===
I
j
M.D., H.S.1.D.C. AND ORS. v. M/S. HARi OM
825
ENTERPRISES AND ANR.
-
.....
Respondent applied for and was allotted an indusA
trial plot on 29.8.2001. Thereafter, a final Agreement was
entered into between the parties on 24.9.01. On 4.11.01,
physical possession was offered to the respondent, which
was not taken. Allegedly, no construction was started by
the respondent.
B
..A.
On 16.7.02, the appellant issued a show cause notice to the respondent for its failure to take possession
and set up the industrial unit.
Respondent by its letter dated 24.2.03 requested the c
appellant for handing over the possession. In response
thereto, the respondent was asked to clear the outstanding dues in regard to the second installment. Subsequently, the appellant by its letter dated 14.5.03, asked the
respondent to attend its office to take over the possesD
-. '"Y'
sion of the plot. Despite being handed the possession on
17.6.03, no construction was commenced by the respondent. On 29.10.03, a show cause notice was issued to the
respondent for failure to commence construction. Respondent by its letter dated 7 .11.2003, requested for six
E
months extension. Thereafter, on 7.10.2004, a show cause
notice was issued to the respondent as to why an order
of resumption should not be passed against him. On the
failure of the respondent to satisfy ttie concerned author-
--.,..
ity with regard to the delay in commencement of the con-
.j.
struction, the plot was ordered to be resumed vide letter F
'
dated 28.2.05. An appeal filed against the resumption or-
-1
der was dismissed. Respondent filed writ petition which
was allowed. Hence the present appeal.
Civil appeal arising out of SLP (C) No.16541, 16708, G
16711, 17426, 18011of2006,2331, 2702, 2343, 2891 of2007.
;.
)
In these cases, the High Court set aside the resumption orders. Hence these appeals.
Disposing of the appeals, the Court
H
826
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A
HELD:
+ -
Civil Appeal arising out of SLP (C) No.1407 4 of 2006.
1.1 Allotment of industrial plot keeping in view the
object and purport for which the Corporation had been
B constituted and incorporated must be held to be a governmental function. In a case of this nature where the aim
and object of the Corporation as also the State is to encourage industrialization while adjusting equity, the purpose for which the Sc:ieme was made would be a relevant
c factor. Only because allotment of land has been effected
through a letter, the same by itself does not make such
allotment and/ or th~ provisions contained therein to be
matters within 'private law domain' as contra-distinguished from 'public law domain'. The State exercises
D deep and pervasive control over the activities of the Corporation. The parties themselves agreed that despite the
fact that the Corporation is a juristic person, an appeal
~ "
againc;t its decision shall lie to the Financial Commission
of the State. Indisputably, the function of the appellant is
E a sovereign function. It, in any event is a State, within the
meaning of Article 12 of the Constitution of India. Its action, therefore, must be fair and reasonable so as to
subserve the requirements of Article 14 of the Constitution. [Paras 17,18] [840-B-F]
1.2. The letter of allotment dated 10.01.2001 indisput-
.,..._
F
....
ably sets out the terms and conditions thereof. But, the
same is not exhaustive. The terms and conditions were
supplemented by the Corporation itself in its letter dated
20.12.2001 when offer of handing over physical possesG sion was made, by reason whereof not only a period of
two years was provided for deposit of instalment along
with interest@ 18% per annum but also a provision had
...
been made that in the event of failure to adhere to the
1
schedule enumerated therein, penalty equivalent to 10%
H of the amount due would be levied. It was furthermore
M.D., H.S.l.D.C. AND ORS. v. M/S. HARi OM
827
ENTERPRISES AND ANR
-
~
laid down that in the event of failure of the 'firm' to pay the
A
amount penalty within the prescribed period, the plot
would be liable for resumption. The terms and conditions
of letter of allotment would clearly show that resumption
of the plot is not automatic. The question as to whether the
allottee had failed to comply with the terms and conditions B
was required to be determined. The terms of the contract
"'
would have to be construed having regard to the respective rights and obligations of the parties to perform their part
of contract. It provides for issuance of a show cause notice.
It provides for refund of the principal amount, of course, with- c
out any interest. [Paras 19-20] [840-F,G, 841-A,B,C]
1.3. The jurisdiction of a 'State' to resort to the drastic power of resumption and forfeiture ordinarily should
be undertaken as a last resort. Keeping in view the fact
that the Corporation was obligated to comply with the D
... -y
principles of natural justice and, particularly, in view of
the fact that it was required to determine the capacity as
also bona fide of an entrepreneur to start an industrial
undertaking on the plots, the Corporation was required
to assign some reasons as to why the plot in question
E
had to be resumed. While doing so, it evidently was required to take into consideration its own conduct. A party
cannot take advantage of its own wrong. While a State
takes penal action against the allottee, its bona fide would
_;.
be one of the relevant factors before an order of resumpF
tion and forfeiture of the amount deposited is passed. The
particulars contemplated in the letter of allotment as also
the letter of offer of possession and the procedures laid
down therefor were required to be scrupulously complied
with. The letter of allotment as also the letter of offer of G
possession must be read conjointly. The very fact that
;
not only the amount specified therein was required to be
•
paid in instalments but also with interest at the rate of 18%
per annum, was required to be borne in mind. Thus, in a
case where the allottee had complied with the terms of
H
828
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A allotment in the matter of payment of instalments, the
+. -
same would be a relevant factor for exercising the enabling clause of resumption by a 'State'. Not only that, a
further opportunity was required to be given to the allottee even if there was some .default on its part inasmuch
B as the appellant itself provides for levy of penalty. The
power of resumptio~ thus, must be resorted to only in a
)>
case where despite grant of the opportunities contemplated in terms of the letter of intent were violated. [Paras
23,24] [841-E-H, 842-A-C]
c
1.4. Despite issuance of letter of offer of physical possession dated 20.1 ~.2001, the fact that actual possession
had not been handed over for a period of two years is not
in dispute. The Corporation did not say that actual possession was not taken by the respondent despite offer
D having been made in that behalf. It, in its anxiety to set a
time limit for ensuring that the commercial production
y
...
starts at an early date, was expected at least to send a
reminder. It failed and/ or neglected to do so. For the purpose of approval of the building plan, the time taken by it
E also would have been a relevant factor for passing an order of resumption. While judging the conduct of the parties, the appellant was obligated to judge its own conduct
in the matter. [Paras 25, 26] [842-D-G]
1.5. A law far less a contract does not warrant com-
,..
F pliance of the contractual or statutory obligations where
it is otherwise impossible to do. An entrepreneur may start
raising constructions over a plot only when the physical
possession thereof is handed over and/ or plan for construction of the building is approved. A State cannot igG nore these relevant factors. It may be true that ordinarily
in a matter of enforcement of a contract qua contract, a
....
writ court shall not exercise its jurisdiction under Article
~
226 of the Constitution of India. But, it is also trite that
where the action of a State is violative of Article 14 of the
H Constitution of India as being wholly unfair and unrea-
M.D., H.S.l.D.C. AND ORS. v. M/S. HARi OM
829
ENTERPRISES AND ANR.
- .+
sonable, the writ court would not hesitate to grant relief A
in favour of a person, where both law and equity demands
that such relief should be granted. Appellant being a
"State" within the meaning of Article 12 of the Constitution of India, it without a justification cannot make any discrimination when the parties are similarly situated. MoreB
over, the act on the part of the respondent must be a reasonable one. When two remedies to enforce a contract
are available, the power should be exercised in reasonable manner. So construed, a harsher remedy may not
ordinarily be resorted to. [Paras 27,28,29,30,35] [842-G, c
843-A,8,C,D, 846-G]
Mahabir Auto Stores and Ors. v. Indian Oil Corporation
and Ors. (1990) 3 SCC 752; Bharat Petroleum Corporation
Ltd. v. Maddula Ratnavalli and Ors. (2007) 6 SCC 81; ABL
International Ltd. and Anr. v. Export Credit Guarantee CorpoD
~ 'f
ration of India Ltd. and Ors. (2004) 3 SCC 553; Sanjana M.
Wig v. Hindustan Petroleum Corpn. Ltd. (2005) 8 SCC 242;
Noble Resources Ltd. v. State of Orissa and Anr. (2006) 10
SCC 236; Kumari Shrilekha Vidyarthi and Ors. v. State of UP
and Ors. (1991) 1 SCC 212; M/s Dwarkadas Marfatia and Sons E
v. Board of Trustees of the Port of Bombay (1989) 3 SCC
293; Mis. Jagdish Chand Radhey Shyam v. The State of
__,..-
Punjab and Ors. (1973) 3 sec 428 - relied on.
lndu Kakkar v. Haryana State Industrial Development CorA
poration Ltd. and Anr. (1999) 2 SCC 37 - held inapplicable.
F
Orissa State Financial Corporation v. Narsingh Ch.
Na yak and Ors. (2003) 10 SCC 261; Teri Oat Estates (P) Ltd.
v. U. T, Chandigarh and Ors. (2004) 2 SCC 130; Sandeep
Subhash Parate v. State of Maharashtra & Ors. (2006) 8 G
SCALE 503; Jitendra Kumar & Ors. v. State of Haryana &
,,.
Anr. (2007) 14 SCALE 125; State of Bihar and Ors. v.
~
Kameshwar Prasad Singh and Anr. (2000) 9 SCC 94 -r e -
ferred to.
1.6. Indisputably, the court can balance the equities H
:·~
830
SUPREME COURT REPORTS
[2008] 9 S.C.R.
-'
A between the parties but the same does not necessarily
..... -
mean that in all cases this Court should refuse to exercise its discretionary jurisdiction. Each case must be considered on its own merit and no hard and fast rule can be
laid down therefor. In a case of this nature, this Court in
;;
B exercise of its jurisdiction under Article 142 of the Constitution of India may also consider rendition of individual-
;,..
ized justice. [Paras 43, 45] [850-A-C]
Shyam Nandan Prasad and Ors. v. State of Bihar and
Ors. (1993) 4 SCC 255 - relied on.
c
State of Kera/a and Ors. v. PT Thomas (2005) 12 SCC
347 - referred to
Civil Appeal @ SLP (C) No.19949 of 2006
D
2. The High Court was right in holding that Clause 3
of the order of allotment dated 18.07 .2003, on the one
hand, and Clauses 4 and 5, on the other, are irreconcily
4..
able. Payment to be made under Clause 3 cannot be subject to the stipulations contained in Clauses 4 and 5. They
E are independent of each other. The allottee in terms of
Clause 3 had an option. Mode of payment in terms of
Clause 3, on the one hand, and Clauses 4 and 5, on the
other, are distinct and different. However, the High Court -
was not correct when it directed that re-allotment of land
F
would be subject to the final decision of the case. Can-
.....
cellation of plot as also reallotment thereof had been made
in June 2004. The writ petition was filed in July, 2005. The
subsequent allottee, therefore, was a necessary party and
in his absence the writ petition should have been dismissed as not maintainable. By reason of the judgment
G of the High Court, the right of a third party has been affected. He without having been impleaded as a party in
....
the writ petition cannot suffer an adverse order for which
"1
he is no way responsible. However, the respondents were
not to be blamed for not depositing the amount. lnvocaH tion of Clause 4 is clearly illegal. Therefore, the respon-
M.D., H.S.l.D.C. AND ORS. v. M/S. HAR! OM
831
ENTERPRISES AND ANR.
~ ...;..
dent should be suitably compensated on monetary terms. A
The appellant is directed to pay a sum of Rs. 1,00,000/- to the
respondents. However, keeping in view the statements made
at the Bar, as and when any residential plot becomes available, the same should be allotted to the respondents on the
same terms. [Paras 58, 59, 61] [854-E-H, 855-F-H, 856-A,B]
B
..
Rash mi Mishra v. M. P Public Service Commission and
Ors. (2006) 12 SCC 724 - referred to .
....-
Civil appeal arising out of SLP(C) No.19916 of 2006
3. it is a clear case where the respondents have failed c
to abide by any of the terms of contract. It did not deposit
even the initial amount in time, there was no reason for it
not to do so. Even interest payable on the said amount
had not been paid. [Para 65] [857-E] .
Civil appeal arising out of SLP(C) no.19833 of 2006
D
....
-...,
4. In this case, the respondent has clearly been discriminated against. Appellant's action is clearly unfair and
unreasonable. In any event, it has waived its right. Furthermore, it was a case where the principles of natural
E
justice should have been complied with. The High Court
~ has taken care to see that the object for grant of allotment
were fulfilled being promotion of industrial growth. Applying the principles of law, no case has been made out
J.
for interference with the impugned judgment. [Paras 74F
76] [860-8,C,D]
Civil appeal arising out of SLP (C) No.20235 of 2006,
5. Respondent had already appointed an architect
for construction of the building. It had already started constructions. The fact is that it was the Department which G
....
did not grant any license. The Appellate Committee, how-
..
ever, did not consider this aspect of the matter at all and
thus the appellate orders suffered from total non-application of mind. [Para 81] [861-D,E]
H
832
SUPREME COURT REPORTS
[2008] 9 S.C.R
A
Civil appeal arising out of SLP (C) No.16541, 16708,
..... .._
16711,17426,18011 of2006,2331,2702,2343,2891 of2007
6. The High Court passed an order without assigning sufficient and cogent reasons. It did not arrive at a
B
finding of fact that the action on the part of the appellants
was unfair and unjust. The order of High Court cannot be
upheld. But a general offer was made by the Additional
)..
Solicitor General that those who intend to obtain reallotment of plot may do so on payment of the price as per the
current rate as on the date of the order of the High Court.
c Several allottees had categorically made a statement that
they are ready and willing to pay the prevailing price as
fixed by the appellant- Corporation. Keeping in view the
facts and circumstances of these cases, in the event, respondents offer the prevailing price as on the date of judgD ment of the High Court, the plot, in question, shall stand
re-allotted and should be subject to the same terms and
...,.
._
conditions. [Paras 83, 97, 98] [861-F, 869-B,C,D]
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 4089
E
of 2008
From the Judgment and final Order dated 28/4/2006 of
the High Court of Punjab and Haryana at Chandigarh in C.W.P .
......
No. 8106/2005
.
WITH
F
.lo
C.A. Nos. 4090, 4130, 4091, 4092, 4093, 4094, 4095,
4097, 4098, 4099, 4100, 4101 and 4102 of 2008
A. Sharan, A.S.G., P.S. Patwalia, Jaspal Singh, Balwant
Singh Malik, Rajiv Dhawan, Ravindra Bana, Pinky Anand, D.N.
G Goburdhan, Rajesh Ranjan, Shuruti Kakkar, Pawan S. Bindra,
Kavita Wadia, Vipin Gogia, Jaspreet Gogia, Jyoti Mendiratta,
Puneet Bali, Prabhjit Jauhar, Hittan Nehra, S.S. Jauhar, Ajay
-1
Jain, Jinendra Jain, Garima Ailawadhi, Ravi Shankar Garg,
Abha R. Sharma, Aruna Singh, Kamlendra Misra, Anjali Sharma,
H J.S. Narana, Santosh Singh, Sharda Hooda, Rekesh Mudgal.
'
M.D., H.S.l.D.C. AND ORS. v. M/S. HARi OM
833
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ENTERPRISES AND ANR. [S.B. SINHA, J]
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Ravindra Kumar Pandey, Satya Mitra, Shish Pal Laler, A
Subromonium Prasad, Veruna Bhandari Gugnani, Rameshwar
Prasad Goyal, Prasenjit Keswani, S.K. Sharma, Ajay Verma,
Gaurav Agrawal, Praveen Agrawal, Gaurav Puri, Arun Kumar
Beriwal, Gaurav Bhatia, Samir Ali Khan, Abhishck Chaudhary,
Ajay Kumar Srivastav, Sushma Manchanda and Madhu B
Moolchandani for the Apperaing Parties.
The Judgment of the Court was delivered by
S.8. SINHA, J : 1. Leave granted.
2. Validity of orders of resumption of allotment of industrial c
plots and resumption thereof by the appellants herein is in question in this batch of appeals.
3. With a view to appreciate the questions involved herein,
the factual matrix of the matter, however, would be noticed from D
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Civil Appeal arising out of SLP (C) No. 14074 of 2006.
Appellant - Corporation is a public sector undertaking. 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 pC;lce of industrialization. It E
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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 exerJ...
cise of its functions, it also allots industrial plots to entrepreF
neurs 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 G
price.
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Respondent No. 1 is a partnership firm. It was previously
known as M/s. Dysa International (Firm). It applied for allotment
of 1000 sq. m. size plot in IMT, Manesar. The Allotment ComH
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SUPREME COURT REPORTS
(2008) 9 S.C.R.
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A
mittee of the Corporation having found the respondent to be
eligible for allotment, allotted plot No. 177 in Sector 6, IMT,
Manesar measuring 1012.50 sq. m. wherefor a letter of allotment was issued on 10.01.2001.
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4. We may notice the relevant clauses thereof.
Note appended to Clause 3 of the said letter of allotment
states that in the event of failure to comply with the terms and
conditions by the Regular Letter of Appointment (RLA) holder,
the allotment of an Industrial ploU shed, within the stipulated
c period, the RLA shall automatically lapse and 10% application
money deposited towards the cost of the ploUshed shall be refunded without any interest. However, if the allottee makes a
request for the surrender of the ploUshed after complying with
the terms and conditions, then the Principal amount will be reD funded without any interest after making a deduction of 10% of
the cost of the plot/shed.
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Clause 4 provides for other Terms and Conditions governing schedule of payment of the balance 75% of the price of
plot/shed.
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Clause 6 provides for the consequences of non-payment r
of the balance amount or non-fulfillment of the terms and con ditions of the Letter of AllotmenUAgreement. In such an event, the
RLA shall stand withdrawn with the resumption of the plot/shed
and refund of the deposit without any interest with 10% deducA
F tion.
Clause 8 provides for the Schedule of Construction and
"Going into Production". It mandates the allottee to commence
construction of building as per the approved building plans within
G a period of one year from the date of the offer of possession.
The allottee will be required to start commercial production within
a period of three years from the date of offer of possession.
.....
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Extension for commencement of construction can be granted
for 6 months maximum if circumstances were beyond the conH
trol of the allottee. Similarly, extension of one year can be granted
M.D., H.S.l.D.C. AND ORS. v. MIS. HARi OM
835
ENTERPRISES AND ANR. [S.B. SINHA, J]
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for commencement of commercial production for reasons beA
yond its control and only if 10% of the permissible area has
been constructed and effective steps taken for completion of
project subject to payment of the extension fee.
An allottee will be deemed to have completed the project
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if he constructs minimum 25% of the permissible covered area
and starts commercial production within the period specified
therein.
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Clause 14 provides for consequences of non-adherence
to the schedule of payment and schedule of implementation. In c
such an event and on an unsatisfactory reply to the show cause
notice, the HSIDC is empowered to the plot/shed and the principal amount is to be refunded without payment of interest and
after deduction of the 10% of the plot/shed.
Clause 26 provides for the resumption of plots by HSIDC D
in the event of non-compliance of the terms and conditions after
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giving show-cause notice therefor. The principal amount will be
refunded without payment of interest and after deduction of the
10% of the plot/shed without interest. The allottee will be free to
remove the structure/debris within a period of 2 months of reE
sumption order at his own cost. The allottee will not be entitled
to any payment/compensation for building constructed by it on
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the resumed plot.
Clause 27 provides that no restoration of resumed plots
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shall be allowed.
5. The agreement also provides for an appeal against the
order of the competent authority of the Corporation before the
Commissioner, Industries, Goveirnment of Haryana.
6. An offer of physical possession was made to the firm by G
the Corporation by a letter dated 20.12.2001 wherein the sched-
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ule of payment in five instalments beginning from 1.07.2002 to
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1.07.2004 was specified.
It was furthermore stipulated:
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SUPREME COURT REPORTS
[2008] 9 S.C.R
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" ... You are, therefore, requested to deposit the installments
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along with interest @ 18% per annum from the date of
offer of possession on the due dates otherwise you would
be liable to pay penalty equivalent to 10% of the amount
due and if you fail to pay the penalty within the prescribed
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period which would be specified by the Estate Manager,
the plot would be liable for resumption after affording you
opportunity of personal hearing before MD/HSIDC."
7. It, however, appears that handing over of actual pos-
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session took some time and possession was handed over only
c on 8.12.2003. At the time of handing over of possession, the
area of the land, measurement thereof as also the boundaries
were delineated.
8. Indisputably, Respondent No. 1 herein filed an applicaD tion for construction of the building on 19.12.2003. Indisputably,
again the permission for construction of the buildings was to be
granted only by the Corporation. The Corporation itself granted
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permission only on 20.03.2004 whereafter the construction
started. It was completed in May, 2005.
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9. The Corporation, however, by a letter dated 13.07.2004
asked the firm as to what steps had been taken by it for con- ·
structions of the plot in question with documentary proof as also
need to apply for extension on the premise that offer of posses___,,
sion was issued on 1.01.2002 and the construction activity, thus,
F was required to be started within one year therefrom and proA
duction of the Unit should have been started from the date of
offer of possession.
10. Respondent No. 1 intimated about the change of the
constitution of its firm. It by a letter dated 30.11.2004 categoriG cally stated:
"We could not start the construction on the above mentioned
...
plot, due to some financial constraints. We are pleased to
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inform you that we have been able to arrange sufficient
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funds for the construction and have already started the
M.D., H.S.l.D.C. AND ORS. v. M/S. HARi OM
837
ENTERPRISES AND ANR. [S.B. SINHA, J]
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construction of your factory at the above mentioned plot.
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The factory will be operational within three months. Since
we have the building plans approved by your department
and have obtained temporary connections for water and
electricity, the construction is going on in full swing.
Regarding the balance amount, enclosed please find
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Demand Draft No. 000433 for Rs. 908461/- drawn on
HDFC Bank. This clears our account as mentioned in
your letter. Copy of the approval of the building plan is
attached herewith for your reference."
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11. Despite the same, as no action was taken, a legal notice was issued by the Respondent No. 1 through its lawyer dated
1.03.2005 inter alia drawing its attention to :
(i)
Actual physical possession had been handed over
on 9.12.2003 and the building plans were approved D
....
"(
by the Corporation on or about 20.03.2004 .
(ii)
Steps for construction had been intimated to the
Corporation together with a letter for extension of
time.
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(iii) Pursuant to the show cause notice dated 2.11.2004,
a sum of Rs. 9,08,461/- had been remitted.
(iv)
25% of the construction had been completed and
despite the same the land was said to have been
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resumed without issuing any show cause notice
although the respondent had already deposited the
said sum.
12. The Corporation was asked to withdraw the said notice of resumption.
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13. By an order dated 3.03.2005, however, the plot was
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said to have been resumed inter alia on the premise that Respondent no. 1 had violated Clause 4 of the said Agreement. A
demand draft of Rs. 9,08,461 /-was not accepted and a cheque
for a sum of Rs. 6,83,349/- towards the refundable amount as
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838
SUPREME COURT REPORTS
[2008] 9 S.C.R
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also the demand draft for the said sum of Rs. 9,08,461/- were
returned.
14. Admittedly, an appeal preferred thereagainst has been
dismissed.
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Respondent No. 1 aggrieved by and dissatisfied therewith filed a writ petition before the Punjab and Haryana High
Court. A Division Bench of the High Ccurt by reason of the impugned judgment while setting aside the order of resumption
as also the order of the appellate authority dated 27.05.2005,
c directed:
''. .. The plot in question stands restored back to the
petitioner. The amount refunded by the Corporation to the
petitioner shall be repaid to the Corporation within a period
of two weeks from the date a certified copy of this order
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is received.
The respondent- Corporation would be at liberty to inform
the petitioner through a written communication, if there
are still any outstanding dues against the petitioner- firm.
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On receipt of the aforesaid communication, the petitioner
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firm shall be required to clear all the aforesaid
outstanding dues also, within a further period of two weeks
thereof. It is made clear that if the payments as notice
above are not made by the petitioner - firm, the present
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petition shall be deemed to have been dismissed."
15. Mr. A. Saran, the learned Additional Solicitor General
appearing on behalf of the appellants, would submit:
(i)
Respondent No. 1 admittedly having violated the
terms and conditions of contract, the High Court acted
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illegally and without jurisdiction in issuing the
impugned directions.
(ii)
The High Court could not have entertained a writ
petition in a matter arising out of a contract qua
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contract. It in any event it could not have condoned
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M.D., H.S.l.D.C. AND ORS. v. M/S. HARi OM
839
ENTERPRISES AND ANR. [S.B. SINHA, J]
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the delay in making payments.
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(iii) The High Court could not have re-written the contract.
(iv)
Respondents were not only aware of the terms of
contract, they acted thereupon and as such they are
estopped and precluded from contending that the B
date of actual handing over of physical possession
would be the relevant date.
(v)
In any event, as before the High Court the appellants
in their counter-affidavit categorically denied and
disputed the assertions made in that behalf by the c
respondents herein, such disputed question of fact
could not have been gone into by the High Court in
exercise of its writ jurisdiction.
(vi)
Taking any view of the matter, the High Court should D
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have considered as to who was to be blamed; the
allottees or the Corporation and only upon arriving at
a finding of fact that the respondents were not handed
over actual physical possession despite all attempts
made by them to obtain the same, the date of E
handing over of actual possession could have been
held to be a relevant one.
16. Mr. Puneet Bali, learned counsel appearing on behalf
of the respondent no. 1, on the other hand, would submit:
(i)
Appellant in its list of dates has suppressed the fact
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that actual physical possession had been handed
over only on 8.12.2003 and despite the fact that within
a period of seven days, the 'Firm' applied for sanction
of the building plan, the same had been issued only
on 20.03.2004, thus, the building having been G
completed within a period of 14 months and
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commercial production having been started, the
terms of the contract had not been violated.
(ii)
In any event of the matter, the show cause in respect
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SUPREME COURT REPORTS
[2008] 9 S.C.R.
of resumption of land could be issued only upon
demand of penalty and not prior thereto.
(iii) The action for resumption of land and/ or forfeiture
being draconian in nature could have been taken
recourse to by the Corporation only as a last resort.
17. Allotment of industrial plot keeping in view the object
and purport for which the Corporation had been constituted and
incorporated must be held to be a governmental function. In a
case of this nature where the aim and object of the Corporation
c as also the State is to encourage industrialization while adjusting equity, the purpose for which the Scheme was made would
be a relevant factor. Only because allotment of land has been
effected through a letter, the same by itself does not make such
allotment and/ or the provisions contained therein to be matters
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within 'private law domain' as contra-distinguished from 'public
law domain'. The State exercises deep and pervasive control
over the activities of the Corporation.
18. The parties themselves agreed that despite the fact
that the Corporation is a juristic person, an appeal against its
E decision shall lie to the Financial Commission of the State. Indisputably, the function of the appellant is a sovereign function.
It, in any event is a State, within the meaning of Article 12 of the
Constitution of India. Its action, therefore, must be fair and reasonable so as to subserve the requirements of Article 14 of the
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Constitution.
19. In the aforementioned backdrop, the issue involved in
the matter must be determined.
The letter of allotment dated 10.01.2001 indisputably sets
G out the terms and conditions thereof. But, the same is not exhaustive. The terms and conditions were suppl~mented by the
Corporation itself in its letter dated 20.12.2001 when offer of
handing over physical possession was made, by reason
whereof not only a period of two years was provided for deposit
H of instalement along with interest at the rate of 18% per annum
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MD, H.S.l.D.C. AND ORS. v. MIS. HARi OM
841
ENTERPRISES AND ANR. [S.B. SINHA, J]
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but also a provision had been made that in the event of failure A
to adhere to the schedule enumerated therein, penalty equivalent to 10% of the amount due would be levied. It was furthermore laid down that in the event of failure of the 'firm' to pay the
amount penalty within the prescribed period, the plot would be
liable for resumption. The terms and conditions of letter of allotB
ment would clearly show that resumption of the plot is not auto-
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matic.
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20. The question as to whether the allottee had failed to
comply with the terms and conditions was required to be determined. The terms of the contract would have to be construed c
having regard to the respective rights and obligations of the
parties to perform their part of contract. It provides for issuance
of a show cause notice. It provides for refund of the principal
amount, of course, without any interest.
21. Resumption of plot, it is trite, would not be automatic.
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22. Clause 26 provides for an enabling clause. The decision of the Corporation is not final. An appeal lay thereagainst.
23. The jurisdiction of a 'State' to resort to the drastic power
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of resumption and forfeiture ordinarily should be undertaken as
a last resort.