LEGAL ISSUE: Whether the Haryana State Industrial Development Corporation (HSIDC) was justified in resuming an industrial plot due to the allottee’s failure to construct and commence production within the stipulated time.
CASE TYPE: Real Estate/Contract 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 149
Judges: S. Ravindra Bhat, J., Dipankar Datta, J.
Can a state industrial development corporation resume a plot allotted for industrial purposes if the allottee fails to commence construction and production within the agreed timeframe? The Supreme Court of India recently addressed this question in a case concerning the Haryana State Industrial Development Corporation (HSIDC) and an allottee who failed to establish an industrial unit. The core issue revolved around whether HSIDC was justified in resuming the plot due to the allottee’s inaction, despite the allottee claiming lack of infrastructural facilities. The judgment was delivered by a bench comprising Justice S. Ravindra Bhat and Justice Dipankar Datta, with the opinion authored by Justice S. Ravindra Bhat.
Case Background
On 28 February 1994, Aman Semi-Conductors (Pvt.) Ltd., a proprietary concern, applied for an industrial plot in Udyog Vihar, Gurgaon. The Haryana State Industrial Development Corporation (HSIDC) interviewed the proprietor, Modi Lal Gupta, on 09 September 1994 and issued a letter of intent on 05 October 1994, outlining certain conditions. The appellant informed HSIDC that they could not start production on time due to a lack of basic infrastructure like electricity, sewerage, telephone, and proper roads, requesting a three-month extension. After the loan was sanctioned by HSIDC, a letter of allotment was issued on 13 September 1995 with specific terms and conditions. Possession of the plot was handed over to the appellant on 02 November 1995.
The appellant did not fulfill the required conditions of the allotment. No concrete steps were taken to set up the industrial unit. Consequently, HSIDC issued a notice on 13 December 1996, asking the appellant to show cause why the plot should not be resumed due to failure to comply with the terms of the allotment. In response, the appellant, on 12 February 1998, claimed the lack of basic infrastructure and requested a one-year extension. On 23 March 1998, HSIDC issued a final notice for resumption. The appellant again requested an extension on 19 April 1998. As the appellant failed to provide any satisfactory response, HSIDC resumed the plot on 18 September 1998, stating the appellant was not serious about the project and the plot was vacant. HSIDC enclosed a refund of ₹1,66,425 with the resumption letter and requested the appellant to hand over possession.
Timeline:
| Date | Event |
|---|---|
| 28 February 1994 | Appellant applied for an industrial plot. |
| 09 September 1994 | HSIDC interviewed the appellant’s proprietor. |
| 05 October 1994 | Letter of intent issued by HSIDC. |
| 13 September 1995 | Letter of allotment issued after loan sanction. |
| 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, citing lack of infrastructure. |
| 23 March 1998 | HSIDC issued a final notice for plot resumption. |
| 19 April 1998 | Appellant requested an extension. |
| 18 September 1998 | HSIDC resumed the plot and sent a refund cheque. |
| 30 September 1998 | Appellant approached the District Consumer Forum, Gurgaon. |
| 16 May 2000 | District Consumer Forum allowed the complaint. |
| 29 April 2003 | State Consumer Commission dismissed the HSIDC appeal. |
| 10 November 2003 | NCDRC dismissed HSIDC’s revision petition as time-barred. |
| 20 January 2004 | Supreme Court remitted the matter to NCDRC. |
| 27 February 2023 | Supreme Court dismissed the appeals. |
Course of Proceedings
The appellant initially filed a complaint with the District Forum, Gurgaon, which ruled in favor of the appellant, stating that the project could not be completed due to circumstances beyond the appellant’s control. HSIDC appealed to the State Commission, which also dismissed the appeal. HSIDC then filed a revision petition before the National Consumer Disputes Redressal Commission (NCDRC), which was initially dismissed due to delay. The Supreme Court of India then directed the NCDRC to hear the matter on its merits. After the remand, the NCDRC allowed HSIDC’s revision application, holding that the appellant’s grounds for non-completion were vague and evasive. The NCDRC relied on a similar case, Indu Kakkad v Haryana State Industrial Development Corporation Ltd, where the Supreme Court upheld the resumption of a plot due to non-compliance with similar terms.
Legal Framework
The judgment primarily revolves around the interpretation and application of the terms and conditions of the allotment agreement between HSIDC and the appellant. Key clauses include:
- Clause 4 (iii) of the agreement: This clause stipulates that the allottee’s right of possession is contingent upon compliance with all terms and conditions of the allotment.
- Clause 6 of the agreement: This clause mandates that the allottee must start construction within six months and complete it within one and a half years from the date of possession. It also requires the allottee to complete construction, install machinery, and commence production within two years from the date of possession, with a minimum of 25% of the permissible covered area constructed. Failure to do so makes the plot liable for resumption by HSIDC. The clause also allows for extensions under certain circumstances, with payment of a fee.
The Supreme Court also considered Section 11 of the Transfer of Property Act, 1882, which deals with conditions restraining alienation. The Court referred to its previous judgment in Indu Kakkad v Haryana State Industrial Development Corporation Ltd, which held that such conditions are valid and binding when the transfer is not absolute.
Arguments
Appellant’s Submissions:
- The appellant argued that they did not violate any terms of the allotment letter and took necessary steps, such as obtaining certificates from the Industrial Department, applying for a power connection, and seeking financial assistance.
- The appellant contended that the delay in project implementation was due to a change in government policy, which affected their financial assistance, and the lack of basic infrastructure such as electricity, sewerage, telephone, and proper roads.
- The appellant submitted that the resumption order was issued without granting them a proper opportunity to be heard and was a non-speaking order that did not disclose any application of mind. They relied on the judgment of the Supreme Court in Managing Director, Haryana Industrial Development Corporation & Ors. V. Hari Om Enterprises & Ors., to argue that cancellation of allotment without adherence to principles of natural justice is invalid.
- The appellant, a qualified engineer, wanted to start a business for manufacturing components for FM radios and audios, but the delay in permissions and capital resulted in no construction.
HSIDC’s Submissions:
- HSIDC argued that the appellant was granted sufficient opportunity and show-cause notices were issued, asking why steps were not taken to construct the industrial unit.
- HSIDC contended that the appellant did not show any substantial progress or interest in carrying out industrial activity on the plot, despite several opportunities.
- HSIDC submitted that the object of allotting plots in industrial areas is to promote industrial activity and economic growth, and the appellant’s inaction indicated a lack of interest in fulfilling these objectives.
- HSIDC argued that the allotment letter contained several conditions, and the appellant’s failure to comply justified the resumption of the plot.
- HSIDC highlighted that the appellant’s conduct suggested an intention to speculate on the plot rather than establish an industrial unit.
Submissions Table
| Main Submission | Sub-Submissions of Appellant | Sub-Submissions of HSIDC |
|---|---|---|
| Violation of Allotment Terms | ✓ Took necessary steps like obtaining certificates, applying for power connection, and seeking financial assistance. ✓ Delay due to change in government policy and lack of infrastructure. |
✓ Sufficient opportunity and show cause notices were issued. ✓ No substantial progress or interest in industrial activity. ✓ Allotment letter had several conditions that were violated. |
| Violation of Natural Justice | ✓ Resumption order issued without proper hearing. ✓ Order was non-speaking and did not disclose application of mind. |
✓ Appellant failed to show any inclination to fulfill the objectives of the scheme, despite multiple opportunities. ✓ The appellant’s conduct suggested an intention to speculate on the plot rather than establish an industrial unit. |
| Intention to Set up Industrial Unit | ✓ Appellant is a qualified engineer who wanted to start a business in manufacturing components for FM radios and audios. ✓ Delay in permissions and capital resulted in no construction. |
✓ The object of allotting plots in industrial areas is to promote industrial activity and economic growth, which the appellant did not fulfill. |
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 construct and commence production within the stipulated time.
- Whether the principles of natural justice were violated by HSIDC in resuming the plot without a proper hearing.
- Whether the lack of infrastructural facilities justified the allottee’s failure to comply with the terms of the allotment.
Treatment of the Issue by the Court
| Issue | Court’s Decision | Brief Reasons |
|---|---|---|
| Whether HSIDC was justified in resuming the plot due to the allottee’s failure to construct and commence production within the stipulated time. | Yes | The Court found that the allottee failed to take any concrete steps towards setting up the industrial unit, despite multiple notices and opportunities. The terms of the agreement clearly stipulated deadlines for construction and commencement of production, which were not met. |
| Whether the principles of natural justice were violated by HSIDC in resuming the plot without a proper hearing. | No | The Court held that sufficient opportunity was given to the allottee through multiple show-cause notices. The allottee’s responses were deemed inadequate and did not demonstrate any serious intent to comply with the terms of the allotment. |
| Whether the lack of infrastructural facilities justified the allottee’s failure to comply with the terms of the allotment. | No | The Court found that the allottee did not produce any evidence of a concrete plan for construction or procurement of machinery. The lack of infrastructure was deemed an excuse, and the allottee’s inaction was seen as a lack of genuine intent to set up the industrial unit. |
Authorities
The Supreme Court considered the following authorities:
Cases:
- Indu Kakkad v Haryana State Industrial Development Corporation Ltd, 1999 (2) SCC 375: The Supreme Court relied on this case, where a similar clause in an agreement was held to be valid and binding. The Court in Indu Kakkar had held that the condition that the industrial unit shall be established within a specified period failing which the interest shall cease, is a valid condition.
- Managing Director, Haryana Industrial Development Corporation & Ors. v Hari Om Enterprises & Ors, 2009 (16) SCC 208: The appellant relied on this case to argue that cancellation of allotment without adherence to principles of natural justice is invalid. However, the Supreme Court distinguished this case, noting that in Hari Om, the allottee had taken concrete steps towards setting up the industrial unit, which was not the case here.
Legal Provisions:
- Section 11 of the Transfer of Property Act, 1882: This section deals with conditions restraining alienation. The Court referred to its previous judgment in Indu Kakkad which held that such conditions are valid when the transfer is not absolute.
Authorities Table
| Authority | Court | How it was Considered |
|---|---|---|
| Indu Kakkad v Haryana State Industrial Development Corporation Ltd, 1999 (2) SCC 375 | Supreme Court of India | Followed. The Court relied on this case to uphold the validity of the clause in the agreement that allowed for resumption of the plot due to non-compliance with construction timelines. |
| 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 concrete steps towards setting up the industrial unit, which was not the case here. |
| Section 11, Transfer of Property Act, 1882 | Indian Parliament | Considered. The Court considered this provision in light of the Indu Kakkad judgment, concluding that the condition for resumption was valid since the transfer was not absolute. |
Judgment
The Supreme Court dismissed the appeals, upholding the NCDRC’s decision to allow HSIDC’s revision application. The Court held that the appellant had failed to take any concrete steps towards setting up the industrial unit, despite multiple opportunities and show-cause notices. The Court found that the appellant’s claims of lack of infrastructure were not substantiated and that the appellant’s conduct indicated a lack of genuine intent to establish the industrial project.
Treatment of Submissions
| Submission | How the Court Treated the Submission |
|---|---|
| Appellant’s submission that they took necessary steps and delay was due to policy change and lack of infrastructure. | The Court rejected this submission, finding that the appellant did not produce any evidence of a concrete plan for construction or procurement of machinery. The lack of infrastructure was deemed an excuse, and the allottee’s inaction was seen as a lack of genuine intent to set up the industrial unit. |
| Appellant’s submission that the resumption order was issued without a proper hearing and was a non-speaking order. | The Court rejected this submission, holding that sufficient opportunity was given to the appellant through multiple show-cause notices. The appellant’s responses were deemed inadequate and did not demonstrate any serious intent to comply with the terms of the allotment. |
| HSIDC’s submission that the appellant did not show any substantial progress or interest in carrying out industrial activity. | The Court accepted this submission, noting that the appellant never made any genuine effort to start the unit. The Court inferred that the allottee’s intention was perhaps never to set up any industrial unit but to speculatively deal with the plot. |
| HSIDC’s submission that the object of allotting plots is to promote industrial activity and economic growth. | The Court accepted this submission, emphasizing that the stipulation in the allotment letter, requiring allottees to construct their respective projects and start it, was essential. The Court noted that the appellant had furnished a project report, but did not take any steps to implement it. |
How each authority was viewed by the Court?
- Indu Kakkad v Haryana State Industrial Development Corporation Ltd, 1999 (2) SCC 375*: The Court followed this authority, holding that the condition that the industrial unit shall be established within a specified period failing which the interest shall cease, is a valid condition.
- Managing Director, Haryana Industrial Development Corporation & Ors. v Hari Om Enterprises & Ors, 2009 (16) SCC 208*: The Court distinguished this authority, noting that in Hari Om, the allottee had taken concrete steps towards setting up the industrial unit, which was not the case here.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the lack of genuine effort on the part of the appellant to set up the industrial unit. The Court emphasized the following points:
- The appellant’s failure to take any concrete steps towards construction or procurement of machinery, despite multiple opportunities and show-cause notices.
- The lack of any genuine intent to establish the industrial project, as evidenced by the absence of any plans or actions to set up the unit.
- The importance of promoting industrial activity and economic growth, which was the primary objective behind the allotment of industrial plots.
- The validity and binding nature of the terms of the allotment agreement, which stipulated clear deadlines for construction and commencement of production.
Sentiment Analysis Table
| Reason | Sentiment | Percentage |
|---|---|---|
| Failure to take concrete steps towards construction | Negative | 35% |
| Lack of genuine intent to establish the industrial project | Negative | 30% |
| Importance of promoting industrial activity | Positive | 20% |
| Validity of allotment agreement terms | Neutral | 15% |
Fact:Law Ratio Table
| Category | Percentage |
|---|---|
| Fact | 70% |
| Law | 30% |
Logical Reasoning:
Allotment of Industrial Plot to Appellant
Appellant Fails to Start Construction within Stipulated Time
HSIDC Issues Multiple Show Cause Notices
Appellant Fails to Provide Satisfactory Response or Take Concrete Action
HSIDC Resumes the Plot
Supreme Court Upholds HSIDC’s Decision
The court’s reasoning was based on the following:
- The court emphasized that the allotment of industrial plots is intended to promote industrialization and economic growth.
- The court noted that the appellant had failed to take any concrete steps towards setting up the industrial unit, despite multiple opportunities and show-cause notices.
- The court found that the appellant’s claims of lack of infrastructure were not substantiated and that the appellant’s conduct indicated a lack of genuine intent to establish the industrial project.
- The court relied on its previous judgment in Indu Kakkad, which upheld the validity of similar clauses in allotment agreements.
- The court distinguished the case from Hari Om Enterprises, where the allottee had taken concrete steps towards setting up the industrial unit.
- The court concluded that the appellant’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 considered the argument that the appellant did not receive a fair hearing but rejected it, stating that multiple show-cause notices were issued, and the appellant failed to provide a satisfactory response or take concrete action. The Court also considered the argument that the lack of infrastructural facilities was a valid reason for the appellant’s inaction but rejected it, finding that the appellant had not shown any genuine intent to set up the 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 also noted that, “the appellant never made any genuine effort to start its unit.” and that, “the appellant was always insincere and perhaps never intended to follow up and set up the industrial project.”
There was no dissenting opinion.
Key Takeaways
- Allottees of industrial plots must take prompt and concrete steps to set up their units within the stipulated time.
- Failure to comply with the terms of the allotment agreement, including timelines for construction and commencement of production, can lead to resumption of the plot by the concerned authority.
- Claims of lack of infrastructure will not be considered a valid excuse for inaction unless there is clear evidence of genuine intent and effort to set up the industrial unit.
- Industrial development corporations have a right to resume plots if allottees fail to comply with the terms of allotment and do not show genuine intent to set up the industrial unit.
- The court emphasized the importance of promoting industrial activity and economic growth, which is the primary objective behind the allotment of industrial plots.
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. The amount was to be paid to the appellant within six weeks from the date of the judgment.
Development of Law
The ratio decidendi of this case is that allottees of industrial plots must strictly adhere to the terms of the allotment agreement, particularly the timelines for construction and commencement of production. The case reinforces the principle that industrial development corporations have the right to resume plots if allottees fail to comply with these terms and do not show a genuine intent to set up the industrial unit. This judgment does not change the previous position of law but reinforces it, particularly the principles laid down in the Indu Kakkad case.
Conclusion
The Supreme Court’s judgment in Aman Semi-Conductors vs. Haryana State Industrial Development Corporation upholds the right of industrial development corporations to resume plots when allottees fail to comply with the terms of allotment and do not demonstrate a genuine intent to establish an industrial unit. The judgment emphasizes the importance of promoting industrial activity and economic growth and serves as a reminder to allottees to take their obligations seriously. The court directed the refund of the initial amount with interest, acknowledging the time value of money.
Category
Parent category: Real Estate Law
Child categories: Contract Law, Industrial Development, Plot Allotment, Resumption of Plot, Haryana State Industrial Development Corporation
Parent category: Transfer of Property Act, 1882
Child category: Section 11, Transfer of Property Act, 1882
FAQ
Q: What was the main issue in the Aman Semi-Conductors vs. Haryana State Industrial Development Corporation case?
A: The main issue was whether the Haryana State Industrial Development Corporation (HSIDC) was justified in resuming an industrial plot due to the allottee’s failure to construct and commence production within the stipulated time.
Q: What did the Supreme Court decide in this case?
A: The Supreme Court upheld the resumption of the plot by HSIDC, finding that the allottee had failed to take any concrete steps towards setting up the industrial unit, despite multiple opportunities.
Q: What are the key obligations of an allottee of an industrial plot?
A: The key obligations include adhering to the timelines for construction and commencement of production as specified in the allotment agreement. Allottees must also show a genuine intent to set up the industrial unit.
Q: Can an industrial plot be resumed if the allottee fails to comply with the terms of the allotment?
A: Yes, industrial plots can be resumed by the concerned authority if the allottee fails to comply with the terms of the allotment agreement, including the timelines for construction and commencement of production.
Q: What if the allottee claims that they could not start construction due to lack of infrastructure?
A: The court held that claims of lack of infrastructure will not be considered a valid excuse for inaction unless there is clear evidence of genuine intent and effort to set up the industrial unit. The allottee must demonstrate concrete steps taken towards setting up the unit.
Q: What was the significance of the Indu Kakkad case in this judgment?
A: The Supreme Court relied on its previous judgment in Indu Kakkad v Haryana State Industrial Development Corporation Ltd, which upheld the validity of similar clauses in allotment agreements allowing for resumption of the plot due to non-compliance with construction timelines.