Supreme Court Upholds Resumption of Allotted Booth Due to Payment Default: Rajiv Vohra vs. State of Haryana (2019)

Date of the Judgment: 21 February 2019

Citation: (2019) INSC 137

Judges: Dr. Dhananjaya Y Chandrachud, J and Hemant Gupta, J

Can a government authority rightfully reclaim a property if the allottee fails to make payments as per the terms of allotment? The Supreme Court of India addressed this issue in a recent case concerning the resumption of a commercial booth due to non-payment of dues. This case highlights the importance of adhering to the terms and conditions of property allotments. The judgment was delivered by a bench comprising of Dr. Dhananjaya Y Chandrachud, J and Hemant Gupta, J. The judgment was authored by Dr. Dhananjaya Y Chandrachud, J.

Case Background

In 1996, Rajiv Vohra (the appellant) successfully bid for a booth in an open auction conducted by the Haryana Urban Development Authority (HUDA). The booth, measuring 22.68 square meters, was allotted for a sale consideration of Rs. 7,55,000. The appellant paid Rs. 75,500 as initial bid money. As per the auction terms, the appellant was required to pay an additional Rs. 1,13,250 within 30 days of the allotment letter. The remaining amount was to be paid either within 60 days or in ten half-yearly installments with 15% annual interest.

Possession of the booth was given to the appellant on 6 May 1996, and the allotment letter was issued on 10 May 1996. The appellant paid the second installment of Rs. 1,13,250 on time. However, he failed to pay the remaining sale consideration. As a result, on 2 February 2001, HUDA issued a resumption order, reclaiming the booth due to non-payment.

The appellant’s appeal against the resumption order was initially allowed by the Administrator, HUDA, on 4 January 2011, provided he cleared all dues and paid a penalty of Rs. 2 lakhs within 30 days. The appellant paid Rs. 7,00,000 via demand draft on 9 February 2011. However, HUDA’s revision petition was allowed by the first respondent, restoring the resumption order. The appellant then filed a writ petition before the High Court of Punjab and Haryana, which was dismissed on 8 December 2014, leading to the current appeal before the Supreme Court.

Timeline

Course of Proceedings

The Estate Officer, HUDA, initially issued the resumption order on 2 February 2001, due to the appellant’s failure to pay the remaining dues. The appellant’s appeal against this order was initially dismissed in default on 23 April 2002. An application for restoration of appeal was also dismissed in default on 23 October 2007. Subsequently, a belated restoration application was filed on 22 December 2010. The Administrator, HUDA, allowed the appeal on 4 January 2011, setting aside the resumption order, subject to the appellant clearing all dues and paying a penalty of Rs. 2 lakhs within 30 days. However, the revision petition filed by HUDA was allowed, and the resumption order was restored. The High Court of Punjab and Haryana dismissed the appellant’s writ petition on 8 December 2014, primarily because of the long delay of twenty years since the initial allotment and the appellant’s failure to comply with the terms of the allotment.

Legal Framework

The case revolves around the terms and conditions of the allotment letter issued by the Haryana Urban Development Authority (HUDA) and the consequences of non-compliance. The legal framework includes the contractual obligations arising from the allotment letter, which stipulated the payment schedule for the sale consideration. The case also considers the power of HUDA to resume the allotted property in case of default by the allottee. The Supreme Court also considered the provisions of Article 142 of the Constitution of India, which empowers the Supreme Court to pass orders necessary for doing complete justice.

Arguments

Appellant’s Submissions:

• The appellant argued that the default in payment was due to financial constraints and extenuating family circumstances.
• The appellant contended that he had already paid the total sale consideration along with the penalty imposed by the second respondent.
• The appellant requested the Court to exercise its powers under Article 142 of the Constitution to grant relief.

Respondent’s Submissions:

• The respondent argued that the market value of the booth had significantly increased since the initial allotment.
• The respondent contended that the appellant had never been ready and willing to pay the dues.
• The respondent submitted that the appellant was a rank defaulter and not entitled to any relief.
• The respondent highlighted the execution of a General Power of Attorney (GPA) by the appellant as an attempt to assign the litigation.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in a separate section. However, the core issue before the Court was whether the High Court was correct in upholding the resumption order passed by HUDA, given the appellant’s default in payment and the subsequent actions.

Treatment of the Issue by the Court

Authorities

Judgment

How each authority was viewed by the Court?

• The Supreme Court relied on Smrita Jain v HUDA, SLP (C) No. 14864 of 2013 to state that a rank defaulter is not entitled to any relief.
• The Supreme Court referred to Ved Prakash Kathuria v HUDA, SLP (C) No. 31841 of 2011 to note the frequency of General Power of Attorney transactions as an attempt by unscrupulous buyers to succeed with the higher authorities.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the appellant’s repeated defaults in payment, his lack of genuine intent to settle the dues, and the significant increase in the market value of the property. The Court also considered the appellant’s attempt to assign the litigation through a General Power of Attorney. The Court emphasized that Article 142 of the Constitution cannot be used to protect unscrupulous buyers who default on their obligations.

The Court considered the appellant’s conduct throughout the proceedings, noting that he had been given multiple opportunities to pay the dues but had failed to do so. The Court also took into account the significant appreciation in the market value of the booth, which made it unjust to allow the appellant to retain the property after paying only a small portion of the total consideration. The Court found that the appellant was a rank defaulter and was not entitled to any relief.

The Supreme Court observed, “The jurisdiction of this Court under Article 142 cannot be invoked to protect an unscrupulous buyer who took possession of a commercial property by paying only 25% of the sale consideration and willfully defaulted on the amount of money payable.”

The Court further noted, “Despite being afforded multiple opportunities by the third respondent to effect payment, the appellant continued to default on payments due.”

The Court also stated, “In Ved Prakash Kathuria v HUDA, a two judge Bench of this Court noted the frequency of such transactions as an attempt by unscrupulous buyers to succeed with the higher authorities.”

Key Takeaways

• Allottees must adhere to the payment schedules specified in allotment letters.
• Government authorities have the right to resume properties in case of non-payment of dues.
• Courts will not protect unscrupulous buyers who default on their obligations.
• The power under Article 142 of the Constitution cannot be used to protect defaulters.
• General Power of Attorney transactions can be viewed as an attempt to assign litigation.

Directions

The Supreme Court directed that the amount of Rs. 20 lakhs deposited by the appellant before the Registry of the Court, along with accrued interest, be given to the third respondent (HUDA) towards charges for unauthorized occupation. HUDA was directed to compute occupation charges from 6 May 1996 and adjust the dues from the deposited amount within two months. Any surplus amount should be returned to the appellant with 6% annual interest. If the occupation charges exceed the deposited amount, HUDA is at liberty to initiate recovery proceedings.

Development of Law

The ratio decidendi of this case is that a rank defaulter who fails to adhere to the payment schedule of an allotment and attempts to assign litigation through a General Power of Attorney is not entitled to any relief. The Supreme Court upheld the principle that authorities have the right to resume properties when allottees fail to meet their payment obligations. This judgment reinforces the importance of contractual obligations in property allotments and clarifies that Article 142 of the Constitution cannot be used to protect unscrupulous buyers who default on their commitments.

Conclusion

The Supreme Court dismissed the appeal, upholding the High Court’s decision to restore the resumption order passed by HUDA. The Court found that the appellant was a rank defaulter who had failed to comply with the terms of the allotment and had attempted to assign the litigation through a General Power of Attorney. The Court emphasized that Article 142 of the Constitution cannot be used to protect unscrupulous buyers who default on their obligations. The Court directed HUDA to adjust the occupation charges from the deposited amount and return any surplus to the appellant with interest.