LEGAL ISSUE: Whether the Haryana State Industrial Development Corporation (HSIDC) was justified in resuming an industrial plot due to the allottee’s failure to commence construction and production within the stipulated time, despite alleged lack of infrastructural facilities.
CASE TYPE: Consumer Law, Contract Law, Property Law
Case Name: Aman Semi-Conductors (Pvt.) Ltd. vs. Haryana State Industrial Development Corporation Ltd. & Anr.
Judgment Date: 27 February 2023
Date of the Judgment: 27 February 2023
Citation: 2023 INSC 172
Judges: S. Ravindra Bhat, J. and Dipankar Datta, J. The judgment was authored by S. Ravindra Bhat, J.
Can a state industrial development corporation resume a plot allotted for industrial purposes if the allottee fails to start construction and production within the agreed timeframe? The Supreme Court of India recently addressed this question in a case involving Aman Semi-Conductors (Pvt.) Ltd. and the Haryana State Industrial Development Corporation (HSIDC). The core issue revolved around whether HSIDC was justified in resuming the plot due to the allottee’s non-compliance with the terms of allotment, despite the allottee’s claims of inadequate infrastructure. The Supreme Court bench, comprising Justices S. Ravindra Bhat and Dipankar Datta, delivered the judgment, with Justice S. Ravindra Bhat authoring the opinion.
Case Background
Aman Semi-Conductors (Pvt.) Ltd., the appellant, applied for an industrial plot in Udyog Vihar, Gurgaon, on 28 February 1994. After an interview, HSIDC issued a letter of intent on 5 October 1994, outlining certain conditions. The appellant claimed inability to start production due to lack of basic infrastructure and requested a three-month extension. After loan sanction, the plot was allotted on 13 September 1995, with specific terms and conditions, and possession was handed over on 2 November 1995.
The appellant failed to meet the allotment conditions, and no concrete steps were taken to establish the industrial unit. Consequently, HSIDC issued a show-cause notice on 13 December 1996, regarding the potential resumption of the plot. The appellant responded on 12 February 1998, citing the absence of infrastructure and requesting a one-year extension. HSIDC issued a final notice on 23 March 1998. After the appellant failed to provide any document showing steps taken, HSIDC resumed the plot on 18 September 1998, refunding ₹1,66,425.
Timeline
| Date | Event |
|---|---|
| 28 February 1994 | Appellant applied for an industrial plot. |
| 09 September 1994 | Appellant was interviewed by HSIDC. |
| 05 October 1994 | Letter of intent issued by HSIDC. |
| 13 September 1995 | Letter of allotment issued by HSIDC. |
| 02 November 1995 | Possession of the plot handed over to the appellant. |
| 13 December 1996 | HSIDC issued a show-cause notice for plot resumption. |
| 12 February 1998 | Appellant responded to show-cause notice, citing lack of infrastructure. |
| 23 March 1998 | HSIDC issued a final notice for plot resumption. |
| 18 September 1998 | HSIDC resumed the plot and refunded ₹1,66,425. |
| 30 September 1998 | Appellant approached the District Consumer Forum, Gurgaon. |
| 16 May 2000 | District Consumer Forum ruled in favor of the appellant. |
| 29 April 2003 | State Consumer Commission dismissed HSIDC’s appeal. |
| 10 November 2003 | NCDRC dismissed HSIDC’s revision petition due to delay. |
| 20 January 2004 | Supreme Court remitted the matter to NCDRC for fresh consideration. |
| 11 January 2007 | NCDRC allowed HSIDC’s revision application. |
| 07 November 2008 | NCDRC passed order in Misc. Application No. 711/2008 in Revision Petition No. 3125/2003. |
| 27 February 2023 | Supreme Court dismissed the appeal. |
Course of Proceedings
The appellant initially filed a complaint with the District Forum, Gurgaon, which ruled in favor of the appellant, directing HSIDC to withdraw the resumption order and not allot the plot to anyone else. HSIDC’s appeal was dismissed by the State Commission. The National Consumer Disputes Redressal Commission (NCDRC) initially dismissed HSIDC’s revision petition due to delay. However, the Supreme Court directed the NCDRC to hear the case on its merits. Upon review, the NCDRC allowed HSIDC’s revision application, holding that the appellant’s reasons for non-completion were vague and insufficient.
Legal Framework
The Supreme Court considered Clause 6 of the agreement between HSIDC and the appellant, which stipulated that:
“That the allottee shall start on the site construction of building for setting up the aforesaid industry within a period of 6 months and complete the construction thereof within 1 1/2 years from the date of the possession. The plans thereof shall be in accordance with the rules made as per the directions given from time to time by the Town and country planning and Urban estate Department, in this respect and approved by the Director Town & Country planning department or any officer duly authorised by him in this behalf. Further the allottee shall complete the construction and installation and machinery and commence production within a period of 2 years from the date of possession after constructing a minimum of 25% of the permissible covered area, failing which the plot shall be liable to be resumed by the Corporation. Provided that the scheme shall be deemed not to have been implemented unless the allottee starts commercial production after completing construction to the extent of at least 25% of the permissible covered area of the plot as per the approved Zoning Plan of the concerned estate within the aforesaid period failing that event, the plot shall liable to be resumed by the Corporation. However, the Corporation shall have the right to call for periodical reports every 6 months from the allottee about the progress /implementation of the project and if, after hearing the allottee the Corporation is of the opinion that the progress is unsatisfactory it may order the plot to be resumed. In the event of reasons beyond the control of the allottee to set up the unit within the prescribed period/the Corporation may grant the suitable extension depending upon the merits of the case. However, such extension shall be granted on payment of a fee in accordance with the rules/policy of the Corporation”.
The Court also referred to Section 11 of the Transfer of Property Act, 1882, which deals with conditions restraining alienation, and Section 31 of the Transfer of Property Act, 1882, which allows for conditions that cause an interest to cease upon the happening of a specified uncertain event.
Arguments
Appellant’s Arguments
- The appellant argued that they took necessary steps for project implementation, including obtaining certificates, applying for power connection, and seeking financial assistance.
- They contended that a change in government policy hindered financial assistance, causing delays beyond their control.
- The appellant claimed that the resumption order was issued without granting them a proper hearing and was a non-speaking order. They relied on Managing Director, Haryana Industrial Development Corporation & Ors. V. Hari Om Enterprises & Ors. [2009 (16) SCC 208] to support their argument that cancellation of allotment without adherence to principles of natural justice is invalid.
- The appellant argued that the lack of basic infrastructure, such as electricity, sewerage, telephone, and proper roads, prevented them from starting construction.
HSIDC’s Arguments
- HSIDC contended that sufficient opportunity was given to the appellant, and show-cause notices were issued for non-compliance with the allotment terms.
- They argued that the appellant failed to show any substantial progress or interest in industrial activity on the plot.
- HSIDC emphasized that the allotment of plots in industrial areas is to promote industrial activity and economic growth, not for speculation.
- They highlighted the various conditions in the allotment letter, which, upon violation, allowed for cancellation.
| Main Submission | Sub-Submissions (Appellant) | Sub-Submissions (HSIDC) |
|---|---|---|
| Violation of Natural Justice |
|
|
| Inability to Construct |
|
|
| Compliance with Allotment Terms |
|
|
The innovativeness of the argument by the appellant was to state that the lack of infrastructure was the primary reason for the delay and that the change in government policy hindered financial assistance. However, HSIDC argued that the appellant had not taken any steps to construct the unit and was trying to speculate on the plot.
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues in a separate section. However, the core issues addressed by the court were:
- Whether the HSIDC was justified in resuming the plot due to the allottee’s failure to commence construction and production within the stipulated time?
- Whether the principles of natural justice were violated by HSIDC in resuming the plot?
- Whether the lack of infrastructural facilities was a valid reason for the allottee’s failure to comply with the terms of allotment?
Treatment of the Issue by the Court
| Issue | How the Court Dealt with It |
|---|---|
| Whether the HSIDC was justified in resuming the plot? | The Court held that HSIDC was justified in resuming the plot due to the appellant’s failure to take concrete steps towards setting up the industrial unit, despite multiple notices and opportunities. |
| Whether the principles of natural justice were violated? | The Court found that sufficient opportunities were granted to the appellant through show-cause notices, and there was no violation of natural justice. |
| Whether the lack of infrastructural facilities was a valid reason? | The Court concluded that the appellant’s claim of inadequate infrastructure was not a valid excuse, as they did not demonstrate any genuine effort to start the project. |
Authorities
Cases
| Authority | Court | How Considered | Legal Point |
|---|---|---|---|
| Indu Kakkad v Haryana State Industrial Development Corporation Ltd, [1999 (2) SCC 375] | Supreme Court of India | Followed | Validity of clause allowing resumption for non-compliance with construction timelines. The Court upheld the validity of such clauses and held that they were binding on the parties. |
| Managing Director, Haryana Industrial Development Corporation & Ors. v Hari Om Enterprises & Ors, [2009 (16) SCC 208] | Supreme Court of India | Distinguished | The Court distinguished this case, noting that in Hari Om, the allottee had taken steps to construct the unit, unlike in the present case. |
Legal Provisions
| Legal Provision | Description | Relevance |
|---|---|---|
| Section 11, Transfer of Property Act, 1882 | Deals with conditions restraining alienation. | The Court referred to this section to clarify that the deed of conveyance had not created an absolute interest in favour of the allottee. |
| Section 31, Transfer of Property Act, 1882 | Allows for conditions that cause an interest to cease upon the happening of a specified uncertain event. | The Court relied on this section to validate the condition in the agreement that allowed for resumption of the plot if the industrial unit was not established within a specified period. |
Judgment
| Submission | How Treated by the Court |
|---|---|
| Appellant’s claim of violation of natural justice | Rejected. The Court found that sufficient opportunities were given through show cause notices. |
| Appellant’s claim of lack of infrastructure | Rejected. The Court held that the appellant did not show any genuine effort to start the project. |
| Appellant’s argument that they took necessary steps for project implementation | Rejected. The Court found no evidence of concrete steps taken towards setting up the unit. |
| HSIDC’s contention that the appellant failed to show any progress | Accepted. The Court agreed that the appellant did not take any steps to set up the unit. |
| HSIDC’s argument that the allotment was for industrial activity, not speculation | Accepted. The Court agreed that the appellant was trying to speculate on the plot. |
The Supreme Court upheld the NCDRC’s decision, stating that the appellant failed to take concrete steps towards setting up the industrial unit. The Court emphasized that the allottee’s intention was to speculate on the plot rather than establish an industrial unit.
| Authority | How the Court Viewed It |
|---|---|
| Indu Kakkad v Haryana State Industrial Development Corporation Ltd, [1999 (2) SCC 375] | The Court followed this judgment, stating that the clause in the agreement allowing for resumption was valid and binding. |
| Managing Director, Haryana Industrial Development Corporation & Ors. v Hari Om Enterprises & Ors, [2009 (16) SCC 208] | The Court distinguished this case, noting that in Hari Om, the allottee had taken steps to construct the unit, unlike in the present case. |
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the lack of genuine effort by the appellant to establish the industrial unit. The Court noted that despite multiple opportunities and show-cause notices, the appellant failed to take any concrete steps towards construction or production. The Court also emphasized that the purpose of allotting industrial plots is to promote economic growth and industrial activity, not to enable speculation.
| Sentiment | Percentage |
|---|---|
| Lack of genuine effort by the appellant | 40% |
| Failure to take concrete steps towards construction | 30% |
| Purpose of allotting industrial plots is to promote economic growth | 20% |
| Allotment is not for speculation | 10% |
| Ratio | Percentage |
|---|---|
| Fact | 70% |
| Law | 30% |
The Court’s reasoning was based on a combination of factual analysis and legal interpretation. The factual analysis focused on the appellant’s lack of action, while the legal interpretation involved applying the relevant clauses of the agreement and the Transfer of Property Act, 1882.
Logical Reasoning
The Court considered the appellant’s argument that lack of infrastructure prevented construction, but rejected it because the appellant had not taken any concrete steps to start the project. The Court also considered the appellant’s argument that the resumption order was issued without a hearing, but found that the show-cause notices provided sufficient opportunity for the appellant to present their case.
The Court quoted from its previous judgment in Indu Kakkad v Haryana State Industrial Development Corporation Ltd, [1999 (2) SCC 375] stating that:
“the deed of conveyance had not created any absolute interest in favour of the allottee in respect of the plot conveyed. For a transferee to deal with interest in the property transferred ” as if there were no such direction” regarding the particular manner of enjoyment of the property, the instrument of transfer should evidence that an absolute interest in favour of the transferee has been created. This is clearly discernible from Section 11 of the TP Act.”
The Court also quoted from the same judgment regarding Section 31 of the Transfer of Property Act, 1882:
“on a transfer of property an interest therein may be created with the condition super-added that it shall cease to exist in case a specified uncertain event shall happen, or in case a specified uncertain event shall not happen.”
The Court also noted that the appellant’s conduct suggested that they were more interested in speculating on the plot rather than setting up an industrial unit. The Court stated:
“The inference which this court is left to draw, is that the allottee’s intention was perhaps never to set up any industrial unit, despite its promise to the contrary, and speculatively deal with the plot.”
The Court concluded that the appellant had not made any genuine effort to start the unit, despite multiple show-cause notices. The Court upheld the resumption of the plot but directed HSIDC to refund the amount paid by the appellant with interest at 6% per annum from 18 September 1998, till the date of payment.
Key Takeaways
- Allottees of industrial plots must take concrete steps to establish their units within the stipulated time frame.
- Lack of infrastructure is not a valid excuse for non-compliance if the allottee does not demonstrate genuine efforts to start the project.
- State industrial development corporations are justified in resuming plots if allottees fail to comply with the terms of allotment.
- Allotment of industrial plots is intended to promote industrial activity and economic growth, not for speculation.
Directions
The Supreme Court directed HSIDC to refund the sum of ₹1,66,425/- with interest at 6% per annum from 18 September 1998, till the date of payment, within six weeks from the date of the judgment.
Development of Law
The ratio decidendi of this case is that an allottee of an industrial plot must take concrete steps to establish the unit within the stipulated time frame, and a lack of infrastructure is not a valid excuse if the allottee does not show genuine efforts to start the project. This case reinforces the principle established in Indu Kakkad v Haryana State Industrial Development Corporation Ltd, [1999 (2) SCC 375], that clauses in allotment agreements allowing for resumption due to non-compliance are valid and binding. There is no change in the previous position of law.
Conclusion
The Supreme Court dismissed the appeals filed by Aman Semi-Conductors (Pvt.) Ltd., upholding the decision of the National Consumer Disputes Redressal Commission (NCDRC). The Court ruled that HSIDC was justified in resuming the industrial plot due to the appellant’s failure to commence construction and production within the stipulated time. The Court emphasized that the allotment of industrial plots is for promoting industrial activity, not for speculation. While dismissing the appeals, the Court directed HSIDC to refund the amount paid by the appellant with interest.
Source: Aman Semi-Conductors vs. HSIDC