Supreme Court Upholds Resumption of Industrial Plot Due to Non-Commencement of Production: Dalip Singh vs. State of Haryana (25 October 2018)

Introduction

Date of the Judgment: 25 October 2018
Citation: (2018) INSC 981
Judges: R. Banumathi, J. and Indira Banerjee, J.
Can a government authority resume an industrial plot if the allottee fails to start production for a prolonged period? The Supreme Court of India recently addressed this question, focusing on the balance between industrial development and adherence to allotment conditions. This case revolves around the resumption of an industrial plot in Haryana due to the allottee’s failure to commence production for twenty years. The Supreme Court upheld the decision of the lower authorities, emphasizing the importance of fulfilling the terms of allotment and the objectives of industrial development.

Case Background

In 1984, Industrial Plot No. 306 in Panchkula was allotted to Rabinder Nath, the Managing Director of M/s. Shiva Dairy & Oil Mills. The possession of the plot was handed over on 19 September 1984. The allotment was subject to the Haryana Urban Development Authority (HUDA) Act, 1977, and its rules, along with the industrial policy of Haryana. According to the allotment letter, the allottee was required to complete construction within two years of receiving possession. Failure to do so would result in the plot’s resumption and forfeiture of the money paid. Rabinder Nath did not commence production within the stipulated time. A show cause notice was issued on 26 August 2003 under Section 17(4) of the HUDA Act, 1977. Rakesh Sarna, claiming to be the Power of Attorney, replied on 14 November 2003, stating that the original documents were missing and requesting duplicate copies, while also promising to construct the building within six months of receiving the missing documents. The Estate Officer, not satisfied with the reply, resumed the plot on 25 February 2004, forfeiting 10% of the consideration money.

Satyawati, Rabinder Nath’s wife, filed an appeal through her GPA Rakesh Sarna before the Administrator, HUDA, under Section 17(5) of the HUDA Act, 1977. During the pendency of the appeal, an application was moved stating that Satyawati had passed away on 3 October 2005, leaving a will in favor of her four children, who were then impleaded as parties. The appeal was dismissed on 11 January 2008, as the appellants had not started construction or production for twenty years. The Revisional Authority dismissed the revision on 15 April 2014, noting that the allotment was at concessional rates to generate employment and that the appellants had not commenced production for twenty years, thus defeating the purpose of the allotment. Furthermore, the revision was filed after a delay of one year and three months without any condonation application. The High Court dismissed the writ petition on 16 September 2014, agreeing with the Revisional Authority that the failure to start production defeated the purpose of the concessional allotment.

Timeline

Legal Framework

The case is governed by the Haryana Urban Development Authority (HUDA) Act, 1977. Section 17 of the HUDA Act, 1977, deals with the powers of the Estate Officer to resume a plot in case of a breach of the terms and conditions of the allotment. The allotment letter, specifically Condition No. 18, required the allottee to complete construction within two years of the offer of possession. Clause 11 of the allotment letter stipulates that in the event of breach of any other condition of transfer, the Estate Officer may resume the land in accordance with the provisions of Section 17 of the HUDA Act, 1977.

Clause 18 of the allotment letter states:
“You will have to complete the construction within two years of the date of offer of possession, after getting the plans of the proposed building approved from the competent authority in accordance with the regulations governing the erection of buildings. This time limit is extendable by the Estate Officer if he is satisfied the non-construction of the building was due to reasons beyond your control, otherwise this plot is liable to be resumed and the whole or part of the money paid if any, in respect of it forfeited in accordance with the provisions of the said Act. You shall not erect any building or make any alteration/addition without prior permission of the Estate Officer, no fragmentation of any land or building shall be permitted.”

Clause 11 of the allotment letter states:
“In the event of breach of any other condition of transfer the Estate Officer may resume the land in accordance with the provisions of Section 17 of the Act.”

The allotment was also subject to the industrial policy of the State of Haryana, which aimed at economic development and employment generation. The allotment of industrial plots at concessional rates was intended to incentivize industrial growth and create employment opportunities.

Arguments

Appellants’ Submissions:

• The appellants contended that Rabinder Nath, the original allottee, suffered from cancer and passed away in 1987, and his wife, Satyawati Devi, also suffered from cancer and was disabled, which prevented them from taking any action from 1985 to 2003.
• They argued that the default was not willful and that the extreme step of resumption should not have been taken.
• The appellants claimed that they had constructed a building on the plot, though without a completion certificate.
• They argued that the opportunity for a personal hearing was a mere formality and that the resumption order was based on non-construction of the building, while the show cause notice was based on non-commencement of production.
• The appellants relied on Teri Oat Estates (P) Ltd. v. U.T. Chandigarh and others, (2004) 2 SCC 130 to argue that resumption should be a last resort.
• The appellants also relied on the judgment of High Court of Punjab and Haryana at Chandigarh passed in CWP No.15672 of 2008 Anup Chauhan v. The Financial Commissioner & Secretary and others and Haryana Urban Development Authority, Faridabad & Another v. Mrs. Manu Gupta and another in RSA No.908 of 2012 to argue that the resumption order should be set aside.
• The appellants expressed their willingness to pay the current market value of the plot.

Respondents’ Submissions:

• The respondents argued that the allotment was made at concessional rates to generate employment and economic development.
• They contended that the allottee failed to commence production for twenty years, defeating the purpose of the allotment.
• The respondents pointed out that the reply to the show cause notice did not mention the illness of Satyawati and only cited missing documents as the reason for delay.
• They submitted that the construction of the building was not completed within the stipulated time, and the appellants did not produce a completion certificate.
• They argued that the appellants failed to show how they stepped into the shoes of the partnership firm, M/s Shiva Dairy & Oil Mills.
• The respondents stated that there is no HUDA policy to allot resumed industrial plots at the current market price and that allotments are governed by the Estate Management Procedure (EMP), 2011 and 2015.

Issues Framed by the Supreme Court

The Supreme Court considered the following issue:

1. Whether the concurrent findings recorded by the authorities and the High Court, that the allottee had not commenced production for twenty years and had breached the terms of allotment, suffer from any serious infirmity warranting interference by the Court?

Treatment of the Issue by the Court

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

Authorities

The following authorities were considered by the Court:

Judgment

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

How each authority was viewed by the Court?

• The Court distinguished Teri Oat Estates (P) Ltd. v. U.T. Chandigarh and others, (2004) 2 SCC 130, stating that the facts of that case were different. In *Teri Oat Estates*, the default was in payment of installments and was found to be not wilful, while in the present case, the allottee failed to complete construction and commence production for twenty years.
• The Court distinguished Anup Chauhan v. The Financial Commissioner & Secretary and others (CWP No.15672 of 2008), noting that in that case, the petitioner had applied for an extension and paid the fee, whereas in the present case, there was a long delay without any valid explanation.
• The Court distinguished Haryana Urban Development Authority, Faridabad & Another v. Mrs. Manu Gupta and another (RSA No.908 of 2012), noting that in that case, HUDA was trying to take advantage of its own wrong, whereas in the present case, the appellants defaulted in fulfilling the terms of allotment.
• The Court followed State of Orissa and another v. Mamata Mohanty (2011) 3 SCC 436, stating that Article 14 is a positive concept and cannot be enforced in a negative manner.
• The Court considered Section 17 of the HUDA Act, 1977, which deals with the powers of the Estate Officer to resume a plot.
• The Court considered Clause 11 of the allotment letter, which stipulates that in the event of breach of any condition, the Estate Officer may resume the land.
• The Court considered Clause 18 of the allotment letter, which requires the allottee to complete construction within two years of the offer of possession.

The Supreme Court upheld the decision of the lower authorities, emphasizing that the allottee had failed to commence production for twenty years, breaching the terms of allotment. The Court noted that the allotment of industrial plots at concessional rates was intended to incentivize industrial growth and create employment opportunities, and the allottee had defeated this purpose. The Court also highlighted that the appellants had failed to provide a satisfactory explanation for the delay and that the authorities were justified in resuming the plot.

The Court observed that the industrial plots were allotted at concessional rates with the twin objectives of economic development and generation of adequate employment. The Court stated that “sympathy cannot be the ground for considering the case of the appellants as to their non-compliance of the terms and conditions of allotment especially for twenty long years after the allotment.”

The Court further noted that the appellants had not commenced industrial production on the plot for twenty years after allotment and delivery of possession. The Court stated, “The appellants seem to have woken upon only after issuance of the Show Cause Notice. Evidently, there is breach of condition of allotment of the plot.”

The Court also pointed out that the appellants had failed to show how they stepped into the shoes of the partnership firm, M/s Shiva Dairy & Oil Mills. The Court stated, “The plot was thus allotted to the partnership firm. The appellants have not been able to show as to how they stepped into the shoes of the partnership firm, apart from the mere fact that they are legal heirs of Rabinder Nath.”

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the following factors:

• Non-Commencement of Production: The primary factor was the allottee’s failure to commence production for twenty years, which defeated the very purpose of the allotment.
• Breach of Allotment Terms: The allottee failed to complete construction within the stipulated two years, violating the terms of the allotment letter.
• Lack of Justification: The appellants’ explanations for the delay, such as the illness of the allottee and missing documents, were not considered sufficient.
• Economic Development and Employment: The Court emphasized that the allotment of industrial plots was intended to promote economic development and generate employment, which the allottee failed to achieve.
• Adherence to Policy: The Court noted that the allotment was governed by the industrial policy of the State of Haryana and the HUDA Act, 1977, and the allottee had failed to comply with these provisions.
• No HUDA Policy for Resumed Plots: The Court observed that there was no HUDA policy to allot resumed industrial plots at the current market price.

Sentiment Analysis of Reasons Given by the Supreme Court

Fact:Law Ratio

The ratio of fact to law in this case is as follows:

Logical Reasoning

Key Takeaways

• Importance of Compliance: Allottees of industrial plots must strictly adhere to the terms and conditions of the allotment, including the timeline for construction and commencement of production.
• Purpose of Allotment: The allotment of industrial plots is intended to promote economic development and generate employment. Failure to fulfill these objectives can lead to resumption.
• No Sympathy for Non-Compliance: The Court emphasized that sympathy cannot be a ground for considering non-compliance with allotment terms, especially when there is a long delay.
• Authority’s Power to Resume: The authorities have the power to resume plots if the allottee breaches the terms of allotment, especially if the purpose of the allotment is defeated.
• No Automatic Right for Resumed Plots: There is no automatic right for allottees to get back resumed plots by paying the current market rate. The allotment of industrial plots is governed by the prevailing policy.

Directions

No specific directions were given by the Supreme Court in this case.

Development of Law

The ratio decidendi of this case is that the authorities are justified in resuming an industrial plot if the allottee fails to commence production within the stipulated time, breaching the terms of allotment and defeating the purpose of the allotment. This case reinforces the principle that allottees must strictly adhere to the terms of allotment and that the authorities have the power to resume plots in case of non-compliance. There is no change in the previous position of law.

Conclusion

The Supreme Court dismissed the appeal, upholding the resumption of the industrial plot. The Court emphasized that the allottee’s failure to commence production for twenty years and the breach of allotment terms justified the resumption. The judgment underscores the importance of adhering to the terms of allotment and the objectives of industrial development. The Court’s decision reinforces the principle that authorities have the power to resume plots if allottees fail to comply with the terms of allotment, especially when the purpose of the allotment is defeated.