Aman Semi- Conductors (Pvt.) Ltd v. Haryana State

AMAN SEMI-CONDUCTORS (PVT.) LTD v. HARYANA STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. & ANR. (Civil Appeal No(s). 572-573 of 2010) FEBRUARY 27, 2023 [S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.] Consumer Protection – Industrial plot was alloted in fa vour of the appellant by respondent-Corporation – Howeve r, the allotment was cancelled and the respondent resumed the plot stat ing that the appellant was not serious in implementing the proposed project and that the plot was lying vacant – Justificatio n of – Held: The idea behind development of industrial plots and allot ting them to deserving applicants is to act as a catalyst to promote economic growth – In the present case, the development of in dustrial areas was part of the State’s overall project for promoting in dustries and growth of its economy with the objective of providing livelihood – Agreement entered into between the respondent and t he appellant stipulated that the allottee would enjoy the right of p ossession as long as he complied with all terms and conditions o f allotment contained in the agreement – The stipulation in the allotment le tter requiring allottees to construct their respective projects and start it, was essential – However, the appellant was always i nsincere and perhaps never intended to follow up and set up the industri al project, which he proposed to the respondent, as the basis for al lotment of his plot – Impugned order of NCDRC holding that the re spondent was justified in resuming the plot does not call for inte rference. Dismissing the appeals, the Court HELD: 1.1 The allotment made in favour of the appellant by HSIDC contains several conditions. The HSIDC and the appellant entered into an agreement. Clause 4 (iii) of the agreement stipulates that the allottee would enjoy t he right of possession as long as he complied with all terms and condi tions of allotment contained in the agreement. Besides this, t here were other mandatory stipulations. The development of industrial areas, was part of the state’s overall project for promoting in dustries and growth of its economy, with the objective of pr oviding livelihood. The HSIDC therefore, correctly contends that the stipulation in the allotment letter, requiring allottees to construct their respective projects and start it, was essential. T he appellant too had furnished a project report, proposing to set up an FM radio and audio component manufacturing unit. This project was appraised, he was interviewed and after satisfying itse lf about its feasibility, HSIDC allotted the plot. There is no denial o f the fact that the allottee did not take any step towards settin g up the unit he proposed. His pleading, before the District Consumer For um, was that the infrastructural facilities, such as road and e xternal development had not come up. He claims to have appl ied for electricity connection. On the other hand, there is nothing on the record-even till date-pointing to any plan to construct a factory or industrial unit. He did not supply any plans for approval; nor did he ever show inclination to procure the needed machinery and equipment required for his proposed industrial uni t. Other steps such as securing tax registration, etc., too were not s hown to have been done. Thus, the appellant was always insincer e and perhaps never intended to follow up and set up the i ndustrial project, which he proposed to HSIDC, as the basis for all otment of his plot. [Paras 16-18][137-E; 138-E,G-H; 138-A-C] Indu Kakkad v. Haryana State Industrial Development Corporation Ltd 1999 (2) SCC 37 : [1998] 3 Suppl. SCR 277– referred to.

1.2 The idea behind development of industrial plots and allotting them to deserving applicants is to act as a catalyst to promote economic growth. In the present case, the f acts are stark; the appellant never made any genuine effort t o start its unit. There is no material to disclose that upon receipt of no less than three show cause notices, the appellant showed an y sense of urgency in taking steps to live up to the bargain, (of set ting up an industrial unit). 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 contrar y, and speculatively deal with the plot. Having regard to these f acts and circumstances, the court is of the opinion that the impugned order does not call for interference. In view of the above concl usions, INDUSTRIAL DEVELOPMENT CORP . L TD. this court would have been justified in holding that the appellant is only entitled to refund of the sum of 1,66,425/- which was paid for the plot. However, there is no denial of the fact that the cheque issued to him was returned and HSIDC had the ben efit of those monies all these years. In these circumstances, HSIDC to refund the sum of 1,66,425/- with interest at 6% p.a. from

18.09.1998 till date. [Paras 21-23][140-H; 141-D-F] Managing Director, Haryana Industrial Development Corporation & Ors. v Hari Om Enterprises & Ors 2009

(16) SCC 208 : [2008] 9 SCR 821– held inapplicable. Case Law Reference [1998] 3 Suppl. SCR 277 referred to Para 19 [2008] 9 SCR 821 held inapplicable Para 20 CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.572-573 of 2010. From the Judgment and Order dated 07.11.2008 and 11.01.2007 of the National Consumer Dispures Redressal Commission, New Delhi in MA No.711 of 2008 in RP No.3125 of 2003. Rajiv K. Garg, Ashish Garg, Lalit Nagar, T. L. Garg, Advs. for the Appellant. Alok Sangwan, Sr. AAG, Ravindra Bana, Sumit Sharma, Samar Vijay Singh, Sanjay Kumar Visen, Advs. for the Respondents. The Judgment of the Court was delivered by

S. RAVINDRA BHAT, J.

¶1The present appeals, by special leave, are directed a gainst orders 1 of the National Consumer Disputes Redressal Commiss ion (hereinafter “NCDRC”). The NCDRC allowed a revision petition filed by the respondent corporation.

¶2The brief facts of the case are that the appellant, a proprietary concern applied for an industrial plot of the propo sed project on 28-02-1994 in Industrial State Udyog Vihar, Gurgaon. The respondent corporation (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. Application No. 711/2008 in Revision Petition No. 3125/2003. Lal Gupta, for an interview on 09-09-1994. A letter of intent was issued indicating certain conditions on 05-10-1994. The appellant informed that he could not start the production in time on the ground that there we re no basic infrastructure facilities as electricity, sewerage, telephone and proper 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 allotment of plot was issued which stipulated certain terms and condit ions. On 02-11-1995 possession was handed over to the allottee/appellant.

¶3The appellant did not fulfil the required condition s of the allotment. No concrete step to set up the industrial unit on t he allotted site was initiated by it. As a result, HSIDC issued a notice, on 13-12-1996 asking the appellant to show cause why the plot should not be resumed on account of its failure to fulfil the terms and conditions of the allotment. In response, the appellant, on 12-02-1998, wrote back to the HSIDC. The letter or reply alleged that no basic infrastructure facilities as electricity, sewerage, telephone and proper road, etc., ex isted near the site, and, as a result, it was not possible to start the construction. The appellant sought extension of time by a year.

¶4On 23-03-1998, HSIDC issued final notice asking why the plot should not be resumed for the appellant’s failure to fulfil the terms and conditions of allotment. The appellant wrote a lett er, again on 19-04-1998 requesting for extension of time. Since appellant did not come forward to satisfy the HSIDC by producing any document in response to its letter dated 19-04-1998 about the steps take n, HSIDC, on 18-09-1998 resumed the plot stating that the appellant was not serious in implementing the project and that the plot was lying vaca nt. HSIDC enclosed a cheque for a sum of ` 1,66,425 with the letter towards the refund and the appellant was requested to handover the possessi on of the plot to the Field Officer.

¶5The appellant approached the District Forum, Gurgaon2 with a complaint. The District Forum, Gurgaon, assumed that since the Sta te Government has changed the policy without referring to the polic y, it went on to hold that the complainant was unable to complete the project not on account of negligence on the part of the complainant but because of the circumstances which were beyond its control. HSIDC app ealed to the State Commission. The State Commission dismissed the appeal3, 2 In CPA No 1697 of 07.10.1998 3 In First Appeal No 1010 of 29.04.2003 upon which HSIDC filed a revision petition before the NCDRC, which was dismissed on the ground of delay 4. The HSIDC’s special leave petition to this court succeeded, and an order was made on 10.11.20035 directing the NCDRC, to hear and dispose of the appeal on its merits.

¶6The NCDRC, after remand, allowed HSIDC’s revisio n application. It held that the grounds taken and the reasons given by the appellant were vague and evasive and does not disclose any particula r date or any time frame for taking up and completing construction. It was also held that the appellant did not show what concrete steps were taken and that his conduct and correspondence could not be taken to be a proper explanation or sufficient ground for non-comple tion of the construction and non-installation of the machines and not starting t he production in terms of the agreement. The NCDRC also held t hat the plot 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 Haryana State Industrial Development Corporation Ltd6, where this court relied on a clause similar to clause 6 of the current agreement, the NCDRC held that the HSIDC was justified in resuming the plot. Contentions of the appellant

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

(a) obtaining the required certificate from the Ind ustrial Department;

(b) applying to the electrical department for grant of power connection for which he had deposited the requisite amount with the HSEB;

(c) applying for financial assistance with the Financial Corporation. However, on account of change in policy of the Government, the same 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) SCC 37 outside. Thus, the appellant took all effective steps for implementation of the project which were within his power and control.

¶8It was urged that the appellant is a duly qualified engineer, who wanted to be an entrepreneur, and acted upon the no vel idea of manufacturing components for FM radios and audios. However, the delay in granting permission and not releasing capital resulted in no construction.

¶9Learned counsel further submitted that the NCDRC’s impugned order is in error, because it overlooked the fact that the resumption order was issued without granting any opportunity to the appellant; furthermore, the order was also vitiated as it was non-speaking. Learn ed counsel relied on the judgment of this court in Managing Director, Haryana Industrial Development Corporation & Ors. V. Hari Om Enterp rises & Ors.7, in support of the argument that cancellation of allotment without adherence to principles of natural justice vitiates the action of HSIDC. Contentions of HSIDC

¶10Mr. Alok Sangwan, learned Additional Advocate General for Haryana, urged this court not to interfere with the fi ndings of the NCDRC. He submitted that the record would show that sufficient opportunity was granted to the appellant, and show cause notice too was issued to him, asking him why steps were not taken to construct the industrial unit upon the plot. Counsel relied on several letters exchanged between the parties. He argued that the appellant did not sho w any, much less substantial progress or interest in carrying on industrial activity on the plot.

¶11Mr. Sangwan submitted that the object behind allotment of plots in industrial areas, was to promote industrial activity, especially by qualified engineers. He highlighted that allotment is based on appraisal of the project proposed by applicants, and having regard to their feasibility. The overall objective of the scheme under which plots wer e allotted was to promote industrialization and thereby promote economic growth, and also ensure employment. The persistent inaction of the ap pellant and his inability to show any inclination to fulfil these objectives, despite grant of several opportunities, and most importantly his inability to take any initiative despite lapse of five years from allotment, meant that he was not interested in constructing upon, or using the plot for any industrial 7 Managing Director, Haryana Industrial Development Corporation & Ors. v Hari Om Enterprises & Ors, 2009 (16) SCC 208 activity, but rather to speculate and wait for its value t o increase, and thereafter dispose it off.

¶12Learned counsel relied upon several conditions in the allotment letter and stated that the appellant was obliged to not only take swift and timely action towards putting up the unit, but also the al lotment was hedged with several conditions, many of which, upon violation, entailed cancellation. Therefore, there was nothing abhorrent or reprehensible in HSIDC’s action in resuming the plot. Analysis and Reasoning

¶13The record in this case indicates that the appellant had applied for allotment of the industrial plot on 28-02-1994. After he was interviewed and 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 executed between HSIDC and the appellant in which he agreed to complete the project in 2 years. The agreement also contained the conditi on that extension could be granted upon payment of a fee. The appellant took possession of the plot on 29-12-1995. The appellant was called upon to show cause why he did not complete construction and set up the unit, in 1997. Upon receiving this notice, he replied on 12-02-1998 that he could not start the unit due to lack of infrastructural facilities. He alleged that road and electricity facilities were not adequate, which had hindered his project. The HSIDC issued a show cause notice to the appellant, again on 23-03-1998. Yet again on 29-04-1998, another show cause notice was issued by HSIDC, asking the appellant to indicate the steps that he had taken to put up the industrial unit and start production. However, the appellant did not apparently respond to this. Finally, on 18-09-1998, the HSIDC communicated that it had resumed the plot and cancelled the allotment. It refunded the sum of ` 1,66,425, through a cheque, which was sent to the appellant. The latter upon receipt of this intimation did not accept the cheque and returned it back on 06-10-1998.

¶14In the meanwhile, the appellant approached the D istrict Consumer Forum, Gurgaon, on 30-09-1998. The District Consumer Forum allowed the complaint on 16-05-2000 and directed the HSIDC to withdraw the resumption order. It also directed HSIDC, not to allot the plot to any other person; HSIDC was granted 3 months’ time to comply with the requirement of allotting the plot to the appellant. The HSIDC’s appeal was rejected on 29-04-2003 by the State Consumer Commission. It approached the NCDRC belatedly. On 10-11-2003 NCDRC dismissed its revision petition as time-barred. Subsequently, the HSIDC approached this court, which remitted the matter by its order dated 20-01-2004 to the NCDRC for fresh consideration on merits. By the impugned order, the revision petition was allowed.

¶15As the previous discussion reveals the appellant’s arguments are twofold. The first is that HSIDC violated principles of natural justice, did not grant him a hearing and unilaterally cancelled the allotment. The added point made was that the allotment was followed by pa yment of full consideration and that, in these circumstances, some minimum hearing ought to have been given before adverse action of resumption was taken. It was also alleged in this regard that cancellation order did not disclose any application of mind; no reasons are forthcoming. Th e second substantial argument made was that in the absence o f essential infrastructural facilities such as roads, overall development of the industrial area availability of electricity and other amenities, HS IDC could not have expected the appellant or any other allottee to constr uct the plot within the time granted, i.e two years.

¶16The allotment made in favour of the appellant by HSIDC contains several conditions. The HSIDC and the appellant entered into an agreement on 27-10-1995. Clause 4 (iii) of the agreement stipulates that the allottee would enjoy the right of possession as long as he complied with all terms and conditions of allotment contained in the agreem ent. Clause 6 which is important in the present context reads as follows: “6. That the allottee shall start on the site const ruction of building for setting up the aforesaid industry within a p eriod 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 t he directions given from time to time by the Town and c ountry planning and Urban estate Department, in this respec t 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 constructio n and installation and machinery and commence production wi thin a period of 2 years from the date of possession aft er constructing a minimum of 25% of the permissible cov ered area, failing which the plot shall be liable to be resu med 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 approve d Zoning Plan of the concerned estate within the afor esaid period failing that event, the plot shall liable to be resumed by the Corporation. However, the Corporation shall have the right to ca ll for periodical reports every 6 months from the allottee about t he progress /implementation of the project and if, after hearing the allottee the Corporation is of the opinion that the progr ess is unsatisfactory it may order the plot to be resumed. In the event of reasons beyond the control of the all ottee to set up the unit within the prescribed period/the Co rporation may grant the suitable extension depending upon the merits of the case. However, such extension shall be grant ed on payment of a fee in accordance with the rules/policy of the Corporation”.

¶17Besides this, there were other mandatory stipulations such as that regular payment of maintenance charges, proportional conservation charges, proportionate external development charges as could be determined by HSIDC and importantly the condition that the al lottee could 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 request of the allottee for transfer of plot, could be considered where t he final allotment letter had been issued and the project had been completed and approved by the HSIDC. The embargo on transfer was subject t o the condition that the HSIDC had the final say or approval, in this regard.

¶18The development of industrial areas, was part of the st ate’s overall project for promoting industries and growth of its economy, with the objective of providing livelihood. The HSIDC therefore, c orrectly contends that the stipulation in the allotment letter, requiring allottees to construct their respective projects and start it, was essential. The appellant too had furnished a project report, proposing to set up an FM radio and audio component manufacturing unit. This project was appraised, he was interviewed and after satisfying itself about its fe asibility, HSIDC allotted the plot. There is no denial of the fact that the al lottee did not take 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 to have applied for electricity connection. On the other hand, there is nothing on the record-even till date-pointing to any plan to construct a factory or industrial unit. He did not supply any plans for approval; nor did he ever show inclination to procure the needed machinery and equipment required for his proposed industrial unit. Other steps such as se curing tax registration, etc., too were not shown to have been done. In these circumstances, the conclusion which this court is compelled to draw is that the appellant was always insincere and perhaps never i ntended to follow up and set up the industrial project, which he proposed to HSIDC, as the basis for allotment of his plot.

¶19The judgment of this court in Indu Kakkar had concluded that Clause 7 of the agreement, entered into between the parties (in that case), was binding. That condition required construction of the building for setting up the industry, in respect of which land was allotted to the appellant, to start within a period of six months. Construction had to be completed with two years from the date of issue of the allotment letter. Since the appellant failed to commence construction within the stipulated time, show-cause notice was issued as to why the plot be not resumed in terms of the agreement; that was in challenge and relied on Section 11 of the Transfer of Property Act, 1882. This court negatived the plea in the following manner: “16. However, the allottee has contended before the trial court that Clause 7 of the agreement is unenforceable in v iew of Section 11 of the TP Act. But that contention was rep elled, according to us, rightly because the deed of conveyance had not created any absolute interest in favour of the allott ee in respect of the plot conveyed. For a transferee to d eal with interest in the property transferred “as if there wer e no such direction” regarding the particular manner of enjoym ent of the property, the instrument of transfer should evid ence that an absolute interest in favour of the transferee ha s been created. This is clearly discernible from Section 11 of the T P Act. The Section rests on a principle that any condition which is repugnant to the interest created is void and when propert y is transferred absolutely, it must be done with all its legal incidents. That apart, Section 31 of the TP Act is en ough to meet the aforesaid contention. The Section provides that “ on a transfer of property an interest therein may be created with the condition super-added that it shall cease to exist i n case a specified uncertain event shall happen, or in cas e a specified uncertain event shall not happen.” Illustration (b) to the Section makes the position clear, and it reads:

(b) A transfers a farm to B, provided that, if B shall not go to England within three years after the date of the transf er, his interest in the farm shall cease. B does not go to England within the term prescribed. His interest in the farm cea ses.

¶17All that Section 32 of the Transfer of Property Act provi des is that “in order that a condition that an interest shall cease to exist may be valid, it is necessary, that the event to which it relates be one which could legally constitute the condition o f the creation of an interest”. If the condition is invalid, it cannot be set up as a condition precedent for crystallizati on of the interest created. The condition that the industrial unit shall be established within a specified period failing wh ich the interest shall cease, is a valid condition. Clause 7 of the agreement between the parties is, therefore, valid and is binding on the parties thereto.”

¶20The decision in Hari Om in this court’s opinion, does not in any manner assist the appellant. In that case, the court ha d dealt with several appeals. In the main appeal, the allotment was offered on

20.12.2001; however actual possession was handed over on 08.12.2003. The appellant applied for approval of building plan, thereaft er, which was given by HSIDC on 20.03.2004. The construction of the industrial unit was completed in May 2005. In the meanwhile, allegin g non compliance with the terms of allotment, the plot was resumed on

03.03.2005. Having regard to these facts, the High Court had set aside the resumption order. This court repelled the HSIDC’s argume nt that writ proceedings were not maintainable, and held in th e facts and circumstances, that the setting aside of the resumption was justified.

¶21The idea behind development of industrial plots and allotting them to deserving applicants is to act as a catalyst to promote economic growth; this aspect was underlined in Hari Om in the following manner, while describing the functions of HSIDC: “4. […] Its principal function is allotment of industrial plo ts belonging to the State of Haryana. It was set up as a ca talyst for promoting economic growth and accelerating the pace of industrialization. It not only provides financial assist ance to the industrial concerns by way of term loans; it also d evelops infrastructure for setting up of industrial units. The Corporation also invests money in developing the indust rial estates at strategic locations. In exercise of its f unctions, it also allots industrial plots to entrepreneurs for setting up their industries on “no profit no loss” basis. The entrep reneurs, according to the Corporation, must be the deserving ones. For the said purpose, it keeps in mind the principl e that allotment of land should not be made to speculators who inves t in property for getting high returns on escalation of pr ice.”

¶22In the present case, as discussed earlier, the facts are stark; the appellant never made any genuine effort to start its unit. There is no material to disclose that upon receipt of no less than three s how cause notices, the appellant showed any sense of urgency in taking s teps to live up to the bargain, (of setting up an industrial unit). T he 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. Having regard to thes e facts and circumstances, the court is of the opinion that the impugned order does not call for interference.

¶23In view of the above conclusions, this court would have been justified in holding that the appellant is only entitled to refund of the sum of ` 1,66,425/- which was paid for the plot. However, there is no denial of the fact that the cheque issued to him was returned and HSIDC h ad the benefit of those monies all these years. In these cir cumstances, 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.

¶24The appeals are dismissed, but subject to directions contained in the previous paragraph; there shall be no order on costs. Divya Pandey Appeals dismissed. (Assisted by : Anirudh Agrawal and Rakhi, LCRAs)