AMAN SEMI-CONDUCTORS (PVT.) LTD versus HARYANA STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. & ANR. on 27 February 2023

1. The present appeals, by special leave, are directed againstorders[1] of the National Consumer Disputes Redressal Commission(hereinafter “NCDRC”). The NCDRC allowed a revision petition filedby the respondent corporation.

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2. The brief facts of the case are that the appellant, a proprietaryconcern applied for an industrial plot of the proposed project on28-02-1994 in Industrial State Udyog Vihar, Gurgaon. The respondentcorporation (hereinafter HSIDC”) called the appellant’s proprietor, Modi 1Dated 11.01.2007 in RP No.3125/2003 and order dated 07.11.2008 in Misc. ApplicationHNo. 711/2008 in Revision Petition No. 3125/2003.

Lal Gupta, for an interview on 09-09-1994. A letter of intent was issuedindicating certain conditions on 05-10-1994. The appellant informed thathe could not start the production in time on the ground that there wereno basic infrastructure facilities as electricity, sewerage, telephone andproper road, etc., and requested for extension of time of three months.After sanction of the loan by HSIDC, on 13-09-1995, a letter of allotmentof plot was issued which stipulated certain terms and conditions. On02-11-1995 possession was handed over to the allottee/appellant.

3. The appellant did not fulfil the required conditions of theallotment. No concrete step to set up the industrial unit on the allottedsite was initiated by it. As a result, HSIDC issued a notice, on13-12-1996 asking the appellant to show cause why the plot should notbe resumed on account of its failure to fulfil the terms and conditions ofthe allotment. In response, the appellant, on 12-02- 1998, wrote back tothe HSIDC. The letter or reply alleged that no basic infrastructure facilitiesas electricity, sewerage, telephone and proper road, etc., existed nearthe site, and, as a result, it was not possible to start the construction. Theappellant sought extension of time by a year.

4. On 23-03-1998, HSIDC issued final notice asking why the plotshould not be resumed for the appellant’s failure to fulfil the terms andconditions of allotment. The appellant wrote a letter, again on19-04-1998 requesting for extension of time. Since appellant did not comeforward to satisfy the HSIDC by producing any document in responseto its letter dated 19-04-1998 about the steps taken, HSIDC, on18-09-1998 resumed the plot stating that the appellant was not serious inimplementing the project and that the plot was lying vacant. HSIDCenclosed a cheque for a sum of ` 1,66,425 with the letter towards therefund and the appellant was requested to handover the possession ofthe plot to the Field Officer.

5. The appellant approached the District Forum, Gurgaon[2] with acomplaint. The District Forum, Gurgaon, assumed that since the StateGovernment has changed the policy without referring to the policy, itwent on to hold that the complainant was unable to complete the projectnot on account of negligence on the part of the complainant but becauseof the circumstances which were beyond its control. HSIDC appealedto the State Commission. The State Commission dismissed the appeal[3], 2 In CPA No 1697 of 07.10.1998

3 In First Appeal No 1010 of 29.04.2003

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Aupon which HSIDC filed a revision petition before the NCDRC, whichwas dismissed on the ground of delay[4]. The HSIDC’s special leavepetition to this court succeeded, and an order was made on 10.11.2003[5]directing the NCDRC, to hear and dispose of the appeal on its merits.

6. The NCDRC, after remand, allowed HSIDC’s revisionBapplication. It held that the grounds taken and the reasons given by theappellant were vague and evasive and does not disclose any particulardate or any time frame for taking up and completing construction. It wasalso held that the appellant did not show what concrete steps were takenand that his conduct and correspondence could not be taken to be aproper explanation or sufficient ground for non-completion of theCconstruction and non-installation of the machines and not starting theproduction in terms of the agreement. The NCDRC also held that theplot remained in possession of the complainant from 29-12-1995 till 18-12-1998. Relying on the decision of this court in Indu Kakkad v HaryanaState Industrial Development Corporation Ltd[6], where this court reliedDon a clause similar to clause 6 of the current agreement, the NCDRCheld that the HSIDC was justified in resuming the plot.

Contentions of the appellant

7. Mr. Rajiv K. Garg, learned counsel appearing for the appellant,urged that the appellant did not violate any of the terms of the allotmentEletter and took due steps in terms of the allotment letter. After the allotmentof the plot (No 182-M, Udyog Vihar, Phase - IV, Gurgaon) he took allthe required steps such as:

(a) obtaining the required certificate from the IndustrialDepartment;F(b) applying to the electrical department for grant of powerconnection for which he had deposited the requisite amount withthe HSEB;

(c) applying for financial assistance with the Financial Corporation.

GHowever, on account of change in policy of the Government, thesame was not granted, therefore, the appellant arranged the same from 4 In Revision Petition No 3125 of 2003

5 In Civil Appeal No 5672/2004

6 Indu Kakkad v Haryana State Industrial Development Corporation Ltd, 1999 (2)HSCC 37

outside. Thus, the appellant took all effective steps for implementationof the project which were within his power and control.

8. It was urged that the appellant is a duly qualified engineer, whowanted to be an entrepreneur, and acted upon the novel idea ofmanufacturing components for FM radios and audios. However, the delayin granting permission and not releasing capital resulted in no construction.

9. Learned counsel further submitted that the NCDRC’s impugnedorder is in error, because it overlooked the fact that the resumption orderwas issued without granting any opportunity to the appellant; furthermore,the order was also vitiated as it was non-speaking. Learned counselrelied on the judgment of this court in Managing Director, HaryanaIndustrial Development Corporation & Ors. V. Hari Om Enterprises& Ors.[7], in support of the argument that cancellation of allotment withoutadherence to principles of natural justice vitiates the action of HSIDC.

Contentions of HSIDC

10. Mr. Alok Sangwan, learned Additional Advocate General forHaryana, urged this court not to interfere with the findings of theNCDRC. He submitted that the record would show that sufficientopportunity was granted to the appellant, and show cause notice toowas issued to him, asking him why steps were not taken to construct theindustrial unit upon the plot. Counsel relied on several letters exchangedbetween the parties. He argued that the appellant did not show any,much less substantial progress or interest in carrying on industrial activityon the plot.

11. Mr. Sangwan submitted that the object behind allotment ofplots in industrial areas, was to promote industrial activity, especially byqualified engineers. He highlighted that allotment is based on appraisalof the project proposed by applicants, and having regard to their feasibility.The overall objective of the scheme under which plots were allottedwas to promote industrialization and thereby promote economic growth,and also ensure employment. The persistent inaction of the appellantand his inability to show any inclination to fulfil these objectives, despitegrant of several opportunities, and most importantly his inability to takeany initiative despite lapse of five years from allotment, meant that hewas not interested in constructing upon, or using the plot for any industrial 7 Managing Director, Haryana Industrial Development Corporation & Ors. v HariOm Enterprises & Ors, 2009 (16) SCC 208

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Aactivity, but rather to speculate and wait for its value to increase, andthereafter dispose it off.

12. Learned counsel relied upon several conditions in the allotmentletter and stated that the appellant was obliged to not only take swift andtimely action towards putting up the unit, but also the allotment wasBhedged with several conditions, many of which, upon violation, entailedcancellation. Therefore, there was nothing abhorrent or reprehensible inHSIDC’s action in resuming the plot.

Analysis and Reasoning

13. The record in this case indicates that the appellant had appliedCfor allotment of the industrial plot on 28-02-1994. After he was interviewedand his credentials verified, he was issued with the letter of intent on 09-09-1994. The final payment was made in respect of the plot on 06-09-1995. Later the next month on 27-10-1995, an agreement was executedbetween HSIDC and the appellant in which he agreed to complete theDproject in 2 years. The agreement also contained the condition thatextension could be granted upon payment of a fee. The appellant tookpossession of the plot on 29-12-1995. The appellant was called upon toshow cause why he did not complete construction and set up the unit, in1997. Upon receiving this notice, he replied on 12-02- 1998 that he couldnot start the unit due to lack of infrastructural facilities. He alleged thatEroad and electricity facilities were not adequate, which had hindered hisproject. The HSIDC issued a show cause notice to the appellant, againon 23-03-1998. Yet again on 29-04-1998, another show cause noticewas issued by HSIDC, asking the appellant to indicate the steps that hehad taken to put up the industrial unit and start production. However, theFappellant did not apparently respond to this. Finally, on 18-09-1998, theHSIDC communicated that it had resumed the plot and cancelled theallotment. It refunded the sum of ` 1,66,425, through a cheque, whichwas sent to the appellant. The latter upon receipt of this intimation didnot accept the cheque and returned it back on 06-10-1998.

G14. In the meanwhile, the appellant approached the DistrictConsumer Forum, Gurgaon, on 30-09-1998. The District ConsumerForum allowed the complaint on 16-05-2000 and directed the HSIDC towithdraw the resumption order. It also directed HSIDC, not to allot theplot to any other person; HSIDC was granted 3 months’ time to complywith the requirement of allotting the plot to the appellant. The HSIDC’sHappeal was rejected on 29-04-2003 by the State Consumer Commission.

It approached the NCDRC belatedly. On 10-11-2003 NCDRC dismissedits revision petition as time-barred. Subsequently, the HSIDC approachedthis court, which remitted the matter by its order dated 20- 01-2004 tothe NCDRC for fresh consideration on merits. By the impugned order,the revision petition was allowed.

15. As the previous discussion reveals the appellant’s argumentsare twofold. The first is that HSIDC violated principles of natural justice,did not grant him a hearing and unilaterally cancelled the allotment. Theadded point made was that the allotment was followed by payment offull consideration and that, in these circumstances, some minimum hearingought to have been given before adverse action of resumption was taken.It was also alleged in this regard that cancellation order did not discloseany application of mind; no reasons are forthcoming. The secondsubstantial argument made was that in the absence of essentialinfrastructural facilities such as roads, overall development of the industrialarea availability of electricity and other amenities, HSIDC could nothave expected the appellant or any other allottee to construct the plotwithin the time granted, i.e two years.

16. The allotment made in favour of the appellant by HSIDCcontains several conditions. The HSIDC and the appellant entered intoan agreement on 27-10-1995. Clause 4 (iii) of the agreement stipulatesthat the allottee would enjoy the right of possession as long as he compliedwith all terms and conditions of allotment contained in the agreement.Clause 6 which is important in the present context reads as follows:

“6. That the allottee shall start on the site construction ofbuilding for setting up the aforesaid industry within a periodof 6 months and complete the construction thereof within 1 1/2 years from the date of the possession. The plans thereofshall be in accordance with the rules made as per thedirections given from time to time by the Town and countryplanning and Urban estate Department, in this respect andapproved by the Director Town & Country planningdepartment or any officer duly authorised by him in this behalf.

Further the allottee shall complete the construction andinstallation and machinery and commence production withina period of 2 years from the date of possession afterconstructing a minimum of 25% of the permissible coveredarea, failing which the plot shall be liable to be resumed by A

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Athe Corporation.

Provided that the scheme shall be deemed not to have beenimplemented unless the allottee starts commercial productionafter completing construction to the extent of at least 25% ofthe permissible covered area of the plot as per the approvedBZoning Plan of the concerned estate within the aforesaidperiod failing that event, the plot shall liable to be resumedby the Corporation.

However, the Corporation shall have the right to call forperiodical reports every 6 months from the allottee about theCprogress /implementation of the project and if, after hearingthe allottee the Corporation is of the opinion that the progressis unsatisfactory it may order the plot to be resumed.

In the event of reasons beyond the control of the allottee toset up the unit within the prescribed period/the CorporationDmay grant the suitable extension depending upon the meritsof the case. However, such extension shall be granted onpayment of a fee in accordance with the rules/policy of theCorporation”.

17. Besides this, there were other mandatory stipulations such asEthat regular payment of maintenance charges, proportional conservationcharges, proportionate external development charges as could bedetermined by HSIDC and importantly the condition that the allotteecould not change its constitution and if it did so, it should in any event,hold not less than 51 % shareholding in its concern. Similarly, any requestof the allottee for transfer of plot, could be considered where the finalFallotment letter had been issued and the project had been completed andapproved by the HSIDC. The embargo on transfer was subject to thecondition that the HSIDC had the final say or approval, in this regard.

18. The development of industrial areas, was part of the state’soverall project for promoting industries and growth of its economy, withGthe objective of providing livelihood. The HSIDC therefore, correctlycontends that the stipulation in the allotment letter, requiring allottees toconstruct their respective projects and start it, was essential. The appellanttoo had furnished a project report, proposing to set up an FM radio andaudio component manufacturing unit. This project was appraised, hewas interviewed and after satisfying itself about its feasibility, HSIDCH

allotted the plot. There is no denial of the fact that the allottee did nottake any step towards setting up the unit he proposed. His pleading,before the District Consumer Forum, was that the infrastructural facilities,such as road and external development had not come up. He claims tohave applied for electricity connection. On the other hand, there is nothingon the record- even till date- pointing to any plan to construct a factoryor industrial unit. He did not supply any plans for approval; nor did heever show inclination to procure the needed machinery and equipmentrequired for his proposed industrial unit. Other steps such as securingtax registration, etc., too were not shown to have been done. In thesecircumstances, the conclusion which this court is compelled to draw isthat the appellant was always insincere and perhaps never intended tofollow up and set up the industrial project, which he proposed to HSIDC,as the basis for allotment of his plot.

19. The judgment of this court in Indu Kakkar had concludedthat Clause 7 of the agreement, entered into between the parties (in thatcase), was binding. That condition required construction of the buildingfor setting up the industry, in respect of which land was allotted to theappellant, to start within a period of six months. Construction had to becompleted with two years from the date of issue of the allotment letter.Since the appellant failed to commence construction within the stipulatedtime, show-cause notice was issued as to why the plot be not resumed interms of the agreement; that was in challenge and relied on Section 11of the Transfer of Property Act, 1882. This court negatived the plea inthe following manner:

“16. However, the allottee has contended before the trial courtthat Clause 7 of the agreement is unenforceable in view ofSection 11 of the TP Act. But that contention was repelled,according to us, rightly because the deed of conveyance hadnot created any absolute interest in favour of the allottee inrespect of the plot conveyed. For a transferee to deal withinterest in the property transferred “as if there were no suchdirection” regarding the particular manner of enjoyment ofthe property, the instrument of transfer should evidence thatan absolute interest in favour of the transferee has beencreated. This is clearly discernible from Section 11 of the TPAct. The Section rests on a principle that any condition whichis repugnant to the interest created is void and when propertyis transferred absolutely, it must be done with all its legal A

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Aincidents. That apart, Section 31 of the TP Act is enough tomeet the aforesaid contention. The Section provides that “ona transfer of property an interest therein may be created withthe condition super-added that it shall cease to exist in casea specified uncertain event shall happen, or in case aspecified uncertain event shall not happen.”

BIllustration (b) to the Section makes the position clear, and itreads:

(b) A transfers a farm to B, provided that, if B shall not go toEngland within three years after the date of the transfer, hisinterest in the farm shall cease. B does not go to EnglandCwithin the term prescribed. His interest in the farm ceases.

17. All that Section 32 of the Transfer of Property Act providesis that “in order that a condition that an interest shall ceaseto exist may be valid, it is necessary, that the event to which itrelates be one which could legally constitute the condition ofDthe creation of an interest”. If the condition is invalid, it cannotbe set up as a condition precedent for crystallization of theinterest created. The condition that the industrial unit shallbe established within a specified period failing which theinterest shall cease, is a valid condition. Clause 7 of theagreement between the parties is, therefore, valid and isEbinding on the parties thereto.”

20. The decision in Hari Om in this court’s opinion, does not inany manner assist the appellant. In that case, the court had dealt withseveral appeals. In the main appeal, the allotment was offered on20.12.2001; however actual possession was handed over on 08.12.2003.FThe appellant applied for approval of building plan, thereafter, whichwas given by HSIDC on 20.03.2004. The construction of the industrialunit was completed in May 2005. In the meanwhile, alleging noncompliance with the terms of allotment, the plot was resumed on03.03.2005. Having regard to these facts, the High Court had set asidethe resumption order. This court repelled the HSIDC’s argument thatGwrit proceedings were not maintainable, and held in the facts andcircumstances, that the setting aside of the resumption was justified.

21. The idea behind development of industrial plots and allottingthem to deserving applicants is to act as a catalyst to promote economicgrowth; this aspect was underlined in Hari Om in the following manner,Hwhile describing the functions of HSIDC:

“4. […] Its principal function is allotment of industrial plotsbelonging to the State of Haryana. It was set up as a catalystfor promoting economic growth and accelerating the pace ofindustrialization. It not only provides financial assistance tothe industrial concerns by way of term loans; it also developsinfrastructure for setting up of industrial units. TheCorporation also invests money in developing the industrialestates at strategic locations. In exercise of its functions, italso allots industrial plots to entrepreneurs for setting up theirindustries on “no profit no loss” basis. The entrepreneurs,according to the Corporation, must be the deserving ones.For the said purpose, it keeps in mind the principle thatallotment of land should not be made to speculators who investin property for getting high returns on escalation of price.”

22. In the present case, as discussed earlier, the facts are stark;the appellant never made any genuine effort to start its unit. There is nomaterial to disclose that upon receipt of no less than three show causenotices, the appellant showed any sense of urgency in taking steps tolive up to the bargain, (of setting up an industrial unit). The inferencewhich this court is left to draw, is that the allottee’s intention was perhapsnever to set up any industrial unit, despite its promise to the contrary, andspeculatively deal with the plot. Having regard to these facts andcircumstances, the court is of the opinion that the impugned order doesnot call for interference.

23. In view of the above conclusions, this court would have beenjustified in holding that the appellant is only entitled to refund of the sumof ` 1,66,425/- which was paid for the plot. However, there is no denialof the fact that the cheque issued to him was returned and HSIDC hadthe benefit of those monies all these years. In these circumstances,HSIDC is directed to refund the sum of ` 1,66,425/- with interest at 6%p.a. from 18.09.1998 till date. The amounts shall be paid to the appellant,within six weeks from today.

24. The appeals are dismissed, but subject to directions containedin the previous paragraph; there shall be no order on costs.

Divya Pandey(Assisted by : Anirudh Agrawal and Rakhi, LCRAs)

Appeals dismissed.

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