Supreme Court Allows Relief to Allottee Despite Payment Delays in Housing Scheme: Anjana Saraiya vs. State of U.P. (2022)

Introduction

Date of the Judgment: May 12, 2022

Citation: (2022) INSC 475

Judges: M. R. Shah, J., B.V. Nagarathna, J.

Can a housing authority cancel the allotment of a plot to a person who has defaulted on installment payments, even if the allottee later pays the full amount with interest and is willing to pay additional compensation? The Supreme Court of India recently addressed this issue in a case concerning a residential plot allotted under a Middle-Income Group scheme. The court considered whether the cancellation of allotment was justified despite the allottee’s eventual payment of all dues and an offer to pay additional compensation. This judgment highlights the importance of balancing strict adherence to payment schedules with considerations of fairness and equity, especially when the allottee demonstrates a genuine intent to fulfill their obligations. The bench consisted of Justices M.R. Shah and B.V. Nagarathna, with the judgment authored by Justice M.R. Shah.

Case Background

The appellant, Anjana Saraiya, a 55-year-old woman, was allotted a residential plot (Plot No. 415) in Pilkhuwa, Uttar Pradesh, under a Middle-Income Group scheme. The plot, measuring 150 square meters, was priced at Rs. 2,70,000. In 2003, she made an initial payment of Rs. 94,500 and subsequently paid the first three installments on time. However, she defaulted on the next four installments due to her husband’s ill health, which led to a financial crisis.

On June 14, 2006, the Municipal Council issued a notice to Saraiya, informing her that her allotment had been canceled due to the non-payment of installments. However, before receiving the notice on June 19, 2006, she had already deposited the outstanding amount of Rs. 1,39,000 (including interest) on June 16, 2006. This payment included Rs. 1,04,128 towards the principal and Rs. 34,872 towards interest. Despite this, the cancellation of her allotment was not revoked.

Saraiya then filed a writ petition before the High Court of Judicature at Allahabad, seeking the cancellation of the notice dated June 14, 2006, and a direction to the authorities to complete the registration process for the plot. She also sought an order to prevent the allotment of the plot to any other person.

Following an interim order by the High Court, Saraiya deposited an additional Rs. 50,000 on November 21, 2006. By the time the High Court heard the case, she had deposited a total of Rs. 3,84,546, which included interest, against the total cost of the plot (Rs. 2,70,000). The High Court dismissed her petition, stating that she had not fulfilled the terms and conditions of the scheme by failing to deposit installments regularly. The authorities had also refunded the deposited amount after deducting 20%, which Saraiya did not encash.

Timeline:

Course of Proceedings

The High Court of Judicature at Allahabad dismissed the writ petition filed by Anjana Saraiya, observing that she did not adhere to the terms and conditions of the scheme by not depositing the installments regularly. The High Court held that the authorities were within their rights to cancel the allotment due to the default in payments.

Legal Framework

The judgment primarily revolves around the terms and conditions of the allotment scheme under which the plot was allotted to the appellant. The core issue is whether the authorities were justified in canceling the allotment due to the appellant’s failure to pay installments on time, despite her subsequent payment of the full amount with interest and willingness to pay additional compensation. The legal framework involves an interpretation of the contractual obligations between the allottee and the housing authority and the principles of equity and fairness in such cases.

Arguments

Appellant’s Arguments (Anjana Saraiya):

• The appellant’s counsel argued that the appellant had deposited a total of Rs. 3,84,546 (including interest) against the total sale consideration of Rs. 2,70,000, which was lying with the respondent.
• It was submitted that the default in depositing the installments was not deliberate or willful.
• The appellant’s inability to pay on time was due to the ill-health of her husband and resulting financial difficulties.
• The appellant was ready and willing to pay an additional sum of Rs. 2 lakhs as compensation for the delayed payments.
• The appellant contended that her bonafide intention was evident from the fact that she paid the entire amount with interest before receiving the cancellation notice.

Respondents’ Arguments (State of U.P. & Municipal Council):

• The respondents argued that the appellant was required to deposit the installments regularly as per the scheme and allotment letter.
• The respondents contended that the appellant failed to make payments for four installments after the initial three, justifying the cancellation of the allotment.
• The respondents maintained that the authority was within its rights to cancel the allotment due to the appellant’s failure to adhere to the payment schedule.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in a separate section. However, the core issue that the court addressed was:

1. Whether the High Court was justified in dismissing the writ petition filed by the appellant, given that the appellant had paid the entire amount with interest, and was willing to pay additional compensation for the delay in payments?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The judgment does not explicitly cite any previous cases or legal provisions. The decision is primarily based on the specific facts of the case and the principles of equity and fairness. The court’s reasoning emphasizes the appellant’s bonafide intention to fulfill her obligations and the fact that the plot was still vacant.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The judgment does not cite any authorities.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors: the appellant’s demonstrated bonafide intention to fulfill her obligations, the financial difficulties she faced due to her husband’s ill health, her subsequent payment of the full amount with interest, and her willingness to pay additional compensation. The court also took into consideration the fact that the plot was still vacant and not allotted to any other person. The court emphasized that the appellant, a lady from the Middle-Income Group, should not be penalized for a delay in payment that was not deliberate or willful.

The court’s emphasis on the appellant’s bonafide intention and the lack of any deliberate delay indicates a focus on equity and fairness. The court was inclined to provide relief to the appellant considering the circumstances of the case and the fact that the plot was still available.

Sentiment Analysis of Reasons Given by the Supreme Court

Fact:Law

The Supreme Court’s decision was more influenced by the factual aspects of the case, such as the appellant’s financial difficulties, her subsequent payments, and the fact that the plot was still vacant. Legal considerations, such as the terms of the allotment scheme, played a secondary role.

Logical Reasoning

The Court considered the specific facts of the case, including the appellant’s financial difficulties and her subsequent payment of the full amount with interest. The Court acknowledged the respondent’s argument that the appellant had defaulted on the payment schedule. However, the Court gave more weight to the fact that the appellant had demonstrated her bonafide intention by making the payment before receiving the notice of cancellation and her willingness to pay additional compensation. The Court also considered that the plot was still vacant and not allotted to any other person. Based on these considerations, the Court concluded that the appellant should be granted relief and the allotment should be restored.

The court’s reasoning was based on the principles of equity and fairness, emphasizing that the appellant, a lady from the Middle-Income Group, should not be penalized for a delay in payment that was not deliberate or willful. The court found that the offer made by the appellant was fair and that the cancellation of the allotment should be set aside.

The Supreme Court did not discuss any alternative interpretations of the facts or legal issues. The Court’s decision was primarily based on a straightforward application of equitable principles to the specific circumstances of the case.

The Supreme Court allowed the appeal, set aside the High Court’s judgment, and quashed the cancellation order. The court directed the respondents to hand over the vacant possession of the plot to the appellant and execute the necessary documents, provided that the appellant deposited an additional sum of Rs. 2,00,000 within six weeks.

The court’s decision was based on the following reasons:

• The appellant had demonstrated a bonafide intention to fulfill her obligations.
• The delay in payment was due to financial difficulties arising from her husband’s ill health.
• The appellant had subsequently paid the full amount with interest.
• The appellant was willing to pay an additional sum of Rs. 2,00,000 as compensation for the delay.
• The plot was still vacant and not allotted to any other person.

The judgment did not have any dissenting opinions. The bench consisted of two judges, and both concurred with the decision.

The Supreme Court’s decision emphasizes the importance of considering the specific circumstances of each case, especially when dealing with issues of equity and fairness. The court’s reasoning highlights that a strict adherence to contractual terms should not override the principles of justice and fairness when there is a genuine intent to fulfill obligations.

The decision may have implications for future cases involving similar issues of delayed payments in government housing schemes. It suggests that courts may be inclined to provide relief to allottees who demonstrate a genuine intention to fulfill their obligations, particularly when the delay is not deliberate or willful and the allottee is willing to compensate for the delay.

Key Takeaways

• Allottees under government housing schemes may be granted relief even if they have defaulted on installment payments, provided they subsequently pay the full amount with interest and are willing to pay additional compensation.
• The courts will consider the bonafide intention of the allottee and the reasons for the delay in payment, such as financial difficulties.
• Strict adherence to contractual terms may be relaxed in favor of equity and fairness, particularly when the allottee demonstrates a genuine intent to fulfill their obligations.
• Housing authorities should consider the specific circumstances of each case before canceling allotments due to payment delays.

Directions

The Supreme Court directed the respondents to:

• Accept the additional sum of Rs. 2,00,000 from the appellant within six weeks.
• Hand over the vacant possession of the plot to the appellant.
• Execute the necessary documents within four weeks after the payment of Rs. 2,00,000.

Development of Law

The ratio decidendi of this case is that in cases of delayed payments in government housing schemes, the courts may provide relief to allottees who demonstrate a genuine intention to fulfill their obligations, particularly when the delay is not deliberate or willful, and the allottee is willing to compensate for the delay. This case reinforces the principle that equity and fairness should be considered alongside strict contractual terms. There is no change in the previous position of the law, but it does provide a clear application of equitable principles in a specific context.

Conclusion

The Supreme Court’s decision in Anjana Saraiya vs. State of U.P. & Ors. provides significant relief to an allottee who had defaulted on installment payments for a residential plot. By considering the specific circumstances of the case, the court emphasized the importance of equity and fairness, especially when an allottee demonstrates a genuine intent to fulfill their obligations. The court’s decision sets a precedent for similar cases, highlighting that housing authorities should consider the individual circumstances of allottees before canceling allotments due to payment delays.