Allowed

Hsidc v. M/S Bajaj Mechanicals Pvt. Ltd.

Punjab & Haryana HC17 Jan 2012LPA/1286/2011

Case brief

AI extract

What is this about?

This appeal challenged an order quashing a plot resumption. The High Court allowed the appeal, holding the allottee failed to take possession or start construction, sought interest on application money unfairly, and the resumption was legally sustainable despite previous delays.

What did the court decide?

The order of the learned Single Judge setting aside the resumption was set aside; the appeal was allowed.

Hsidc Vs M/S Bajaj Mechanicals Pvt. Ltd. — Property and Title | Punjab & Haryana HC (2012)

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L.P.A. No.1286 of 2011

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IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH

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L.P.A. No.1286 of 2011

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Date of decision: January 17, 2012

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The Haryana State Industrial Development Corporation Limited and another

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..Appellants

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Vs.

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M/s Bajaj Mechanicals Pvt. Ltd. ..Respondent

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CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE A.N.JINDAL

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Present: Mr. Aman Chaudhary, Advocate, for the appellants.

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Mr. Ashwani Chopra, Senior Advocate, with Ms. Rupa Pathania, Advocate, for the respondent.

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HEMANT GUPTA, J.

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Challenge in the present letters patent appeal under Clause X of the Letter Patent is to an order passed by the learned Single Judge on 28.04.2011, whereby the writ petition filed by the respondent was allowed and the orders dated 16.10.1989 (Annexures P-12) and 26.02.1990 (Annexure P-14) were set aside.

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The brief facts out of which the present appeal arises are that on 16.06.1981, predecessor-in-interest of the respondent i.e. M/s Sain Steel Products, applied for a 3 acre industrial plot in Udyog Vihar, Gurgaon for setting up an industrial unit alongwith the application money of Rs.20,634/-. On 27.12.1982, the respondent was called upon to deposit another sum of Rs.1,23,366/- so as to make 10% of the total cost of the plot. On 27.10.1983, the respondent was intimated about the approval by the appellants for allotment of plot measuring 1/2 acre. It

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was on 27.12.1984, a provisional letter of allotment allotting industrial plot No.13-14 measuring 1/2 acre was issued. In the said letter, it was also stated that Rs.60,000/- towards 25% of the cost has already been received and the balance 75% would be payable in 10 equated annual installments. The respondent vide its letter dated 11.01.1985 claimed refund of Rs.84,000/- out of the application money of Rs.1,44,000/- paid at the time for submitting an application for allotment of plot measuring 3 acres. Subsequently, it was found that the plot allotted to the respondent is not available, thus, another provisional letter of allotment was issued to the respondent on 21.06.1985 (Annexure P-2) allotting industrial plot No.UV-92-93 measuring 1/2 acre in Udyog Vihar, Phase IV, Gurgaon. In the letter dated 21.06.1985, it was again stated that a sum of Rs.60,000/- towards 25% of the cost of the plot has already been received and the balance 75% would be payable in 10 equated annual installments alonwith interest at the rate of 13.5% p.a. The final letter of allotment was issued on 30.06.1986 (Annexure P-3).

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The case set up by the respondent is that the respondent vide communication dated 13.08.1986 (Annexure P-4) sought the conversion of the firm into a Private Limited Company by the name and style of “Bajaj Mechanicals (India) Private Limited”. It was on 10.10.1988, the appellants addressed a letter to M/s Bajaj Mechanical (India) Private Limited. In pursuance of such letter, the respondent sought information; whether such letter can be taken to be deemed change of constitution. After prolonged correspondence, it was on 02.02.1989 vide communication Annexure P-7, the appellants informed the respondent

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that change in constitution has been accepted. It is the case of the respondent that before the change in constitution, it was not possible for it to take further steps regarding implementation of the project nor it could execute the agreement and take possession of the plot due to nonsupply of revised proforma of the agreement. The respondent has also made a grievance that a sum of Rs.84,000/- was not refunded and that the respondent is entitled to the said amount alongwith interest at the rate of 17.5%, paid by the respondent to the Bank.

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It was on 10.08.1989, a show cause notice was served upon the respondent to show cause as to why recommendations be not made for cancellation of the plot on account of failure to set up the unit within the stipulated period or to seek extension by remitting fee in order to regularize the allotment and on account of non-payment of Rs.26,137.47 as demanded vide letter dated 26.05.1989. The respondent is said to have submitted a reply on 09.09.1989 giving reasons for non-implementation of the project. The respondent was also called upon to pay an additional amount of Rs.1,15,000/- towards enhanced price of acquisition of land vide communication dated 18.08.1989. It was on 13.09.1989, another show cause notice was served upon the respondent for resumption on the ground of non-payment of 3^rd installment. On 16.10.1989, the order of resumption of the plot was passed on account of failure of the respondent to pay the installments and to start production. Thereafter, the respondent submitted a representation that the plot should be restored as delay in implementing the project occurred due to the denial on the part of Gurgaon office regarding execution of agreement and giving possession

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of the plot. The respondent also filed an appeal before the Managing Director of the appellants, exercising the powers of the Chief Administrator under the Haryana Industries Estate (Development & Regulations) Act, 1974. The Managing Director vide order dated 26.02.1990 (Annexure P-14) dismissed the appeal without affording an opportunity of hearing to the respondent and without considering the merits.

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In the written statement filed on behalf of the appellants, it was pointed out that the draft agreement was enclosed with letter of allotment and the respondent was under obligation to enter into agreement. The respondent was to start construction of the factory building on the plot within six months from the date of allotment and to commission the unit thereon within three years from the date of allotment. In respect of change of firm's name into a Private Limited Company, it was asserted in para 9 of the written statement that the respondent requested for change in the constitution vide communication dated 13.08.1986. The respondent was asked to supply certain information/documents on 03.09.1986 followed by reminders on 07.10.1986 and 23.10.1986. The respondent submitted an undertaking and the resolution by its Board of Directors on 20.12.1986. But the appellants again sought certain information on 09.01.1987. The respondent was asked to submit certificate copy of the resolution passed by the Board of Directors. It was clarified that the essential condition for change in constitution of allottee-partnership concern is that more than 50% shares are allotted to the original allottee i.e. the partners of M/s

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Sain Steel Products. Such compliance was made on 12.10.1987, when a certified copy of the resolution dated 16.09.1987 was submitted. Accordingly, on 04.11.1987, the appellants conveyed the necessary approval for change of constitution from a partnership concern to a Private Limited Company to the respondent. It was on 29.03.1988, the respondent again sought change of name of the Company from 'Bajaj Mechanicals (India) Pvt. Ltd.' to 'Bajaj Mechanicals Pvt. Ltd.', which was also allowed by the appellants. It is pointed out that letter dated 02.02.1989 was only in respect of change of the name of the Company i.e. from 'Bajaj Mechanicals (India) Pvt. Ltd.' to 'Bajaj Mechanicals Pvt. Ltd.', whereas change from the partnership concern to the Private Limited Company was allowed earlier i.e. on 04.11.1987. It is also pointed out that the respondent has failed to take possession of the plot, so as to implement the project and to execute the agreement. It is also pointed out that the excess amount deposited by the respondent has been adjusted towards subsequent installments of the price of the plot and the benefit of interest was also allowed and that the demand of annual installments has been raised by the appellants after adjusting the amount already paid by the respondent.

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In response to the written statement filed on behalf of the appellants, the respondent filed a rejoinder. A perusal of the rejoinder shows that the respondent is claiming interest on Rs.84,000/- prior to the date of final allotment i.e. for the period between 27.10.1973 and 30.06.1986. The respondent denied the receipt of letter dated 04.11.1987 and asserted that the appellants addressed the communications to the

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respondent in the name of M/s Sain Steel Products. Therefore, it was on account of the inaction of the appellants, the respondent could not enter into an agreement, so as to avail financial assistance to start construction and to set up industrial unit.

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Learned Single Judge allowed the writ petition filed by the respondent on the ground that the appellants have not offered possession of the plot; considerable delay has been caused by the appellants in granting approval regarding change in constitution and that the refund of Rs.84,000/- was not allowed.

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Learned counsel for the appellants, before this Court, has vehemently argued that each of the reasoning given by the learned Single Judge is not sustainable in law. It is contended that there was some difficulty in handing over possession of plot No.13-14, Udyog Vihar, Gurgaon, which led to change of plot allotted to plot No.UV-92-93, Udyog Vihar, Phase-IV, Gurgaon vide communication dated 21.06.1985 (Annexure P-2). The draft agreement containing terms and conditions of allotment was enclosed with the final letter of allotment dated 30.06.1986 (Annexure P-3). It was on execution of the agreement, the possession of the plot could be delivered to the respondent. Thus, the possession of the plot allotted to the respondent was in deliverable state but the respondent has not taken possession for the reason that it wanted change in its constitution.

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The request for change in constitution was submitted on 13.08.1986, but the resolution that the original partners having more than 50% of the shares allotted to them was passed on 16.09.1987 and

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communicated to the appellants on 12.10.1987. The communication dated 04.11.1987 accepting change in constitution is appended with the written statement as Annexure R-1. In the rejoinder filed, the respondent has not denied the detailed assertions of the appellants, as mentioned in para 9 of the written statement referring to the various communications issued by them from time to time. The respondent has denied the receipt of letter dated 04.11.1987, but has not stated a word controverting any of the averments contained in para 9 of the written statement. Therefore, there is no reason to infer that the resolution in terms of the essential conditions regarding change in constitution was submitted only on 12.10.1987 and soon thereafter on 04.11.1987 the communication was addressed approving the change in constitution.

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Learned counsel for the respondent has sought to dispute the receipt of such letter as the subsequent letter dated 27.05.1988 (Annexure R-2) was also addressed to the partnership firm. In fact, the said letter is the communication addressed to the firm in response to the letter written by the firm on 02.05.1988. Once, a letter is written by the firm, it is expected from the appellants to reply to the said firm alone. Since the response was to a letter addressed by a firm, therefore, we do not find any merit in the argument of learned counsel for the respondent that the change in constitution was not communicated to the respondent. Therefore, the argument and reasoning that the letter dated 04.11.1987 (Annexure R-1) was not received by the respondent is not tenable.

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It may be further seen that letter dated 22.11.1988 (Annexure P-5) was addressed by the respondent to the appellants acknowledging

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letter dated 10.10.1988 addressed to the respondent i.e. Bajaj Mechanical (India) Private Limited. In fact, the communication dated 02.02.1989 (Annexure P-7) is confirmatory letter to the communication dated 29.03.1988 on behalf of the respondent that the request of change of name from M/s Bajaj Mechanical (India) Private Limited to Bajaj Mechanicals Private Limited has been considered and acceded to. Therefore, we are of the opinion that the findings recorded by the learned Single Judge that there was delay on the part of the appellants to effect change in the constitution of the respondent is not made out from the documents available on record. Such findings are not sustainable in law.

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A perusal of letter dated 09.09.1989 (Annexure P-9) shows that the respondent has received the communication dated 10.08.1989 to the effect that the respondent is delaying the execution of the project. In the said communication, the respondent claimed interest on the sum of Rs.84,000/- from 27.10.1983 to 30.06.1986 and sought extension for one year to set up the unit. The respondent also sought a revised draft agreement to enable the respondent to take possession. It is, thereafter, in response to the show cause notice dated 13.09.1989 (Annexure P-10), the respondent has approached the appellants through telex on 14.01.1989 and subsequently, the order Annexure P-12 was passed for resuming the plot.

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We find that except change in constitution of the allottee i.e. from partnership firm to Bajaj Mechanical (India) Private Limited or Bajaj Mechanical Private Limited would not warrant a revised draft agreement, as the name of the allottee could very well be substituted in

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the final agreement. It appears that the respondent was not interested in initiating manufacturing activities and, therefore, raising such frivolous and untenable grounds for delaying the act of taking possession. The intention of the respondent seems to be more in profiteering rather than to raise construction and start production i.e. purpose of allotment of plot.

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Still further, the respondent is seeking interest on the amount of Rs.84,000/- for the period prior to date of letter of allotment. The respondent has deposited Rs.1,44,000/-. The said amount is an application money for allotment of a plot. The regular allotment letter was issued on 30.06.1986 (Annexure P-3). Therefore, prior to the said date, the said amount of Rs.1,44,000/- was only an application money. No interest could be claimed by the respondent on said amount. It may be noticed that the appellants have pointed out that the said amount and the interest on the said amount, has been adjusted. Therefore, the argument based on interest on the said amount, prior to date of allotment, is not a justified excuse not to make payment of the balance amount.

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Learned counsel for the respondent has relied upon a Full Bench judgment of this Court reported as Ram Puri Vs. Chief Commissioner, Chandigarh AIR 1982 P&H 301 and Hon'ble Supreme Court judgment reported as M/s Teri Oat Estates (P) Ltd. Vs. U.T., Chandigarh and others (2004) 2 SCC 130 to contend that the resumption of the plot is a last resort. There is no dispute with the proposition that resumption is a last resort. But such argument is not available to the respondent. In M/s Teri Oat Estates (P) Ltd. case (supra), the purchaser was handed over possession and has raised six

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storey building. During the pendency of the proceedings before this Court, the substantial amount together with interest at the rate of 12% was paid. It was, in these circumstances, the Court applied the doctrine of proportionality. In the aforesaid case, the Court has observed that mere sympathy or sentiment by itself cannot be a ground for passing an order in relation whereto the appellant miserably failed to establish legal right.

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We are of the opinion that the respondent has failed to take any substantial step for construction of plot and to start the unit except making some payments and also raising dispute regarding interest on the already deposited application money. We find that the respondent was not keen to set up industry, which is made out from the circumstances available on record. It was a case of speculative investment to make profit by sale of the plot in the area of Gurgaon with the passage of time.

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In view of the above, we find that the order passed by the learned Single Judge cannot be said to be sustainable in law. Consequently, the same is set aside and the present appeal is allowed.

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(Hemant Gupta) Judge

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(A.N. Jindal) Judge

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January 17, 2011 Vimal

Hsidc v. M/S Bajaj Mechanicals Pvt. Ltd.

Case brief

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Hsidc v. M/S Bajaj Mechanicals Pvt. Ltd.

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