CWP No.11536 of 1990 -1- IN THE HIGH COURT FOR THE STATE OF PUNJAB AND HARYANA AT CHANDIGARH CWP No.11536 of 1990 Date of Decision: 13.05.2011 Micron Instruments (Private) Limited, 143-B, Industrial Area, Chandigarh through its Director, Mr. Vikram Sahgal and another .......Petitioners Versus The State of Haryana through the Secretary, Industries Department, Chandigarh and another ......Respondents Present: Mr. M.L. Sarin, Senior Advocate with Mr. Nitin Sarin, Advocate for the petitioners. Mr. S.S. Gorakhpuria, DAG, Haryana for respondent No.1. Mr. Rajvir Singh Sihag, Advocate for respondent No.2. CORAM: HON'BLE MR. JUSTICE K. KANNAN 1. Whether Reporters of local papers may be allowed to see the judgment? Yes 2. To be referred to the Reporters or not? Yes 3. Whether the judgment should be reported in the Digest? Yes K. KANNAN J. I. The relief claimed in the writ petition 1. The writ petition has been filed challenging the order passed by the Haryana State Industrial Development Corporation cancelling the allotment of industrial plot and seeking for the plot allotted to the petitioner or in the alternative, for refund of the amount of Rs.2,40,000/- paid as earnest with interest @ 18% from the date of payment till the date of return. CWP No.11536 of 1990 -2- II. The course of judgement 2. The case examines the action of the ‘state’ functionary cancelling an allotment of industrial plot to the petitioner. The cancellation order does not set out the reasons but explanations come-forth in pleadings in writ petition. The confirmation of allotment sets some pre-requisites which the state explains as have been breached by the petitioner. To what extent does the alleged breach affect the allotment process, the appropriate forum for enforcement and how the petitioner has, by his conduct, disentitled himself to the reliefs is the course of this judgment. III. The basis of claim 3. The averments in the petition are to the effect that the petitioner is an industrial unit and for expansion purpose, it had applied for an industrial plot at Gurgaon, Palam Road. It had initially applied for 4 acre plot but later on applied for 2 acre plot. The property, which had been originally applied in two plots appeared to have been involved in litigation before the Hon'ble Supreme Court and when the Corporation could not deliver the property, it offered two adjacent plot numbers 376-377 for a stipulated price on 23.12.1986. In terms of the Provisional Letter of Allotment (hereinafter referred to as the “PLA”), the petitioner deposited Rs.2,40,000/- being 25% of the total consideration of two plots. Since it was not a composite plot but in two different plots, the petitioner had applied for a joint zoning to be made so that the petitioner could erect an industrial shed to its specifications. There had been several communications between the petitioner and the Corporation making specific request for such a joint zoning. In the letter dated 23.12.1986, the CWP No.11536 of 1990 -3- Corporation had made four stipulations, purporting to be necessary pre- requisites for getting a confirmed sale: (i) to get the unit registered with the General Manager, District Industries Centre as a small scale unit or if it was a medium scale unit to register it from the Director General Technical Development, Government of India; (ii) to get the drawings of the unit approved by the Senior Town Planner/Divisional Town Planner; (iii), to get the loan required to meet the cost of land, building and machinery, sanctioned from Haryana Financial Corporation/Scheduled Bank or approved financial institution; (iv) proof of having completed the above- mentioned pre-requisites within 120 days from the date of letter of issue of the allotment letter. The letter specifically provided that failure to comply the four pre-requisite formalities would result in the offer of allotment being withdrawn unless the validity itself was extended in writing by the Corporation. In response to the communication by the petitioner and giving an explanation as to the status of the pre-requisites, the petitioner stated that (i) the unit had been registered with the General Manager, DIC as a small scale unit; (ii) he had written to the Manager (IA), Gurgaon for providing zoning plans of Plot Nos.376 and 377 and to make a joint zoning of these plots; (iii) the petitioner would meet the cost of the buildings from its own fund and would not require any institutional funding; (iv) price of the plant and machinery had already been furnished in its earlier communication dated 20.03.1987. The attempt of the petitioner was, therefore, to show that there had been no lapse on the part of the petitioner. Without reference to the response made by the petitioner on 08.06.1987, there was a fresh communication stating that if all the formalities had not been fulfilled by 31.07.1987, it would be presumed that CWP No.11536 of 1990 -4- the petitioner-unit was no longer interested in making use of the property. Later on, an extension was granted till 15.12.1987 by the Corporation and warned the petitioner that no further extension will be given. Simultaneous to this letter, the District Town Planner had sent a letter on 26.10.1987, requiring petitioner's presence at their office for obtaining combined zoning of plot Nos.376 and 377. On 21.12.1987, soon after the time stipulated by the Corporation, the petitioner had nominated two persons to collect the zoning plans from the District Town Planner. On 17.03.1988, the Corporation served a letter of withdrawal of the allotment purporting to be in continuation of the letter written on 01.10.1987 withdrawing the allotment and returning the cheque drawn for Rs.2,40,000/- which was earlier paid by the petitioner as earnest money. It is this final communication dated 17.03.1988 (Annexure P-27), which is subject of challenge in this writ petition. IV. The principal area of conflict 4. The petitioner sent a notice on 21.11.1988 to the Ministry of Industries and to the Chief Minister of the State contending that there had been no lapse on the part of the petitioner and all the pre-requisites had been complied with and if the plans could not be given and approval taken, it was only on account of the fact that joint zoning had not been done. There had been no response to the same and the petitioner, therefore, filed the writ petition after notices, impugning the decision withdrawing the allotment. Initially after the writ petition was filed, it appears that a Bench of this Court dismissed the prayer on 24.08.1990 except the claim for interest on the amount of Rs.2,40,000/-. This order was recalled suo motu by another Bench on 30.05.1991 and stated that when the written CWP No.11536 of 1990 -5- statement was filed, it was seen that the conduct of the respondents was not justified and the order had been recalled and the writ petition was to be considered on merits on the points raised in the writ petition. The respondents also filed an additional affidavit giving out the reasons as to why the cancellation had been done. In the reply given by the Corporation, it was contended that the petitioner had obtained a provisional letter of two plots by representing that it was going to set up a medium scale industry, in which case, it was necessary that the registration must have been done with Director to Industries, if such a representation had been made. If it was intended that only a small scale industry was going to be set up, there was not even a need for allotment of two large one acre plots. It was not merely, therefore, the issue of zoning but even the fact of registration with appropriate authority had not been done. It was further contended that the petitioner had not disclosed any details of the funding of the project and the petitioner could not have merely scaled down its unit as small scale industry and stated that they would make their own financial arrangements and no institutional funding was necessary. It was therefore the contention that the petitioner had not complied with the pre-requisites and therefore, the provisional allotment had to be cancelled. It was stated in the additional affidavit that zoning plans were available with the HSIDC and DTP at the time of issue of PLA and that further petitioner himself did not take any action for sanction of loan that might be necessary for establishing a medium scale unit and registration of the unit with the appropriate authority. It was specifically contended that the project envisaged by the petitioner initially was not a small scale unit and report made available by the HSIDC estimated the cost of the project as CWP No.11536 of 1990 -6- Rs.189 lacs and the petitioner had not approached the Director for registration. When it approached the Director for registration, it was pointed out by the Director that the project details furnished by the petitioner was less than Rs.1 crore and therefore, the registration could not be done. The project report furnished by the party to the Director was at variance with the project report submitted to HSIDC. Since the project cost was less than Rs.1 crore, the petitioner on its own approached the GM, DIC, for registration of the unit as small scale industry. The registration itself was made only on 08.06.1987 that was after the expiry of 120 days stipulated in the provisional allotment. The cost of the plant and machinery in respect of the SSI itself was only Rs.20 to 30 lacs and no reasons had been given by the party at any stage to HSIDC to change the outlay of the project. It was only after ascertaining the land requirement on the basis of project report that two acres land had been earmarked to them and there was no need to allot a plot of two acres, if the project was a mere Rs.30 lacs. V. The validity of order of cancellation, how tested? 5. The learned Senior Counsel for the petitioners contends that withdrawal of PLA set out no reason and the several reasons which are now given by the respondents through the additional affidavit cannot buttress the lack of details in the impugned order. An illegal order cannot be supported by reasons only through the reply in the writ petition. The further contention is that the State Corporation that works on public funds must address all its decision with reasonableness and the summary withdrawal of PLA betrayed lack of fairness and violated Article 14 of the Constitution of India and draws strength from the decisions of the Hon'ble CWP No.11536 of 1990 -7- Supreme Court and of this Court respectively in Km. Neelima Misra Vs. Dr. Harinder Kaur Paintal and others AIR 1990 SC 1492 and M/s India Navigation Co. Gurgaon Vs. Haryana State Industrial Development Corporation AIR 2006 Punjab and Haryana 29. The decision of the Hon'ble Supreme Court was on the issue of requirement of fairness component to State action but the latter decision of this Court was in the context of a decision by the very same Corporation in Haryana in yet another situation. The learned Senior Counsel would make pointed reference to the observations of this Court dealing with an identical situation of cancellation of allotment for non-fulfillment of pre-requisites. The Court held that in that case all the formalities had been complied with but if there was some delay in registration of the unit to the DIC, it was on account of delay in transit. The Court, therefore, held that all the pre- requisites had been substantially complied with and therefore, there was no justification for cancellation of allotment. 6. In Commissioner Of Police, Bombay vs Gordhandas Bhanji 1952 AIR SC 16, 1952 SCR 135 , the Supreme Court has held, "Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to, do. Public orders made by public authorities are meant to have public effect and are intended to affect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself" (underlining mine). CWP No.11536 of 1990 -8- 7. In Mohinder Singh Gill and Anr. Vs. The Chief Election Commissioner, New Delhi & Ors. 1978 AIR 851, 1978 SCR (3) 272 “When a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out.” 8. In Chandra Singh v. State of Rajasthan (2003) 6 SCC 545: AIR 2005 SC 2889, it has been reiterated by the Supreme Court: “The legality or otherwise of an order passed by a statutory authority must be judged on the face thereof as the reason contained therin cannot be supplemented by any affidavit. In other words the authority cannot travel beyond the order and bring other materials to sustain or justify the validity of the order.” 9. In Union of India vs Mario Cabreless S.A., AIR 1982 SC 691: 1982 (3) SCC 282 , it was stated that: “Grounds justifying an order as originally taken by the Government cannot be allowed to be subsequently changed and a new ground taken before the Court. Legality of the Governmental action must be adjudged on the reasons stated in the order.” 10. If we must look for justification of the order itself, there exists none. On the face of it, a summary cancellation of the PLA was unjustified. If appropriate reasons had been given, the petitioner could have either corrected himself or could have given an alternative proposal or could have elected to settle himself to a lesser size of plot. By not divulging any reasons for cancellation, the Corporation had caused substantial prejudice CWP No.11536 of 1990 -9- to the petitioner that has compelled the petitioner to resort to this Court for redress. VI. Deficiency in cancellation order, notwithstanding, conduct of the petitioner was not above board to merit favourable allotment. 11. In this case, we have a slightly different situation of one of the major components of the pre-requisites of allotment not having been satisfied. The requirement of registration of the unit had been done as a SSI with the General Manager, DIC. The Corporation points out in its reply that in the original project plan submitted with the Corporation, it had been shown as a project for Rs.180 lacs but ultimately when the plans had been drawn up submitting the details of plant and machinery, the project cost was shown to fall less than Rs.100 lacs and therefore, the Director himself did not register the unit. The petitioner subsequently registered as a small scale unit. It has been brought through the reply in the additional affidavit that there was an obvious discrepancy between the project which had been originally furnished with the Corporation and the subsequent change in the project outlay and the registration of the unit as a small scale unit. This discrepancy is not irrelevant, for the Corporation has explained in the reply that the allotment of size of the plot was dependent on the size of the project and there was no justification for making an allotment of two plots for a SSI Unit. Of course, yet another objection has also been taken by the Corporation that the petitioner had not given the details of loan requirements. I find the reason to be meaningless for if the petitioner was providing his own funds, there was no necessity for divulging any details for arrangement of loan. The petitioner was even justified in saying that plans could not be shown, since the joint zoning had not been done and CWP No.11536 of 1990 -10- therefore, it was not possible for them to submit the plans for construction. The last formality was really dependent on the size of the project itself and I have already observed that there was no justification for the petitioner to scale down the size of the project as a small scale industry at variance with the initial requisition made and the details given to the Corporation on the basis of which a two acres plot had been provisionally allotted. On the conspectus of all the details disclosed through the pleadings, it has become evident that the petitioner himself had been responsible in some way for not securing a full-fledged allotment to its logical end and was making alterations in the project size that led the Corporation to withdraw the PLA. However, if all these details had been put through in the letter of withdrawal/ cancellation, it could have satisfied the legal requirements. VII. Balancing the scales and making audit of relative merits and demerits 12. If the petitioner had been guilty of scaling down the size of the project at variance with the initial proposals and had inveigled the Corporation for allotment of larger plot, the respondent was also guilty for not letting them know as to why the cancellation was being made. The petitioner, by his conduct, surely forfeited the right of finalization of and more so, at this length of time. Allotment of industrial plots through Corporation are made only for industrial development and places are identified in industrial estates for a wholesale improvement in a particular area with all necessary infrastructure. If an allottee does not put the property allotted to him to use immediately within the prescribed period, there cannot be a direction to the Corporation to make an allotment CWP No.11536 of 1990 -11- leisurely after two decades. The petitioner himself was partly to blame and for any lapse on the part of the respondent, the petitioner can only be granted the relief of refund of the amount with interest. 13. There is another reason why I cannot compel the respondent to make an allotment of the property. The allotment made was purely provisional and the Corporation did not grant to the petitioner a vested right. If it was to be treated as an agreement to allot the property, remedy for the petitioner must have been only to file a civil suit for enforcement of the contract. In Divisional Forest Officer v. Biswanath Tea Co. (1981) 2 SCC 238: AIR 1981 SC 1368, the Supreme Court observed, “Ordinarily, where a breach of contract is complained of, a party complaining of such breach may sue for specific performance of the contract, is the contract is capable of being specifically performed, or the party may sue for damages. The High Court in its extraordinary jurisdiction would not entertain a petition either for specific performance of contract or for recovering damages. A right to relief flowing from a contract has to be claimed in a civil court where a suit for specific performance of contract or for damages could be filed”(underlining mine). In the case of Kerala State Electricity Board and Anr. v. Kurien E. Kalathi and Ors. MANU/SC/0435/2000 : AIR 2000 SC 2573 the Supreme Court had held, “If a term of a contract is violated, ordinarily the remedy is not the writ petition under Article 226. A contract would not become statutory simply because it is for construction of a public utility and it has been awarded by a statutory body (underlining mine). A statute may expressly or impliedly confer power on a statutory body to enable it to discharge its functions. Dispute arising CWP No.11536 of 1990 -12- out of the terms of such contracts or alleged breaches have to be settled by the ordinary principles of law of contract. The fact that one of the parties to the agreement is a statutory or public body will not of itself affect the principles to be applied.” VIII. Relief & raison d’être 14. If the appropriate action would have been through a specific performance of contract, I will use the yardstick that will still apply under section 20 of the Specific Relief Act. This is certainly not a case where there shall be enforcement of the contract in favour of the petitioner. The appropriate remedy relief will be damages. I will not, therefore, make a direction for allotment of the property and for transfer of the same but I will grant an alternative relief of recovery of the amount with interest. 15. It has been contended in one of the responses that the Corporation is not a profit making institution and therefore, it will not be liable for interest. Even if there was no stipulation of interest, the provisions of Interest Act would enable a Court to levy interest for the amount retained by the Corporation. In this case, it is informed that the amount had been returned by the Corporation to the petitioner but the petitioner has chosen not to encash the same. It is the petitioner's own responsibility as to how it was using the amount. He could have encashed the cheque without prejudice but if he chose not to do so, that ought not to be a ground for saddling Corporation with interest for the amount from the date when the amount was sent till date. The Corporation would be responsible for interest, which I will fix @18% on Rs. 2,40,000, being commercial lending rate from the date when the amount was received by the Corporation till CWP No.11536 of 1990 -13- the date when the cheque was sent by the Corporation along with its letter dated 17.03.1988. If the cheque sent by the Corporation has not been encashed, and if the same is returned to the Corporation, the same shall be taken back and a fresh draft shall be made for the same amount to the petitioner along with interest at 6%, as the component of damages from the date of petition till the date of payment. I hold the award of damages as justified for the wrongful conduct of the respondent in passing a non- speaking order that compelled the petition for seeking for redress through court. The differential rates of interest at 18% and 6% are respectively for the benefit retained by the corporation by retaining the amount initially and when it found a justification for its return, and a relatively lower rate of interest as a component of damages for the non-speaking order of cancellation. The amounts shall be calculated and paid by the respondents within a period of 8 weeks from the date when the draft is returned by the petitioner. 16. The writ petition is disposed of on the above terms. (K. KANNAN) JUDGE May 13, 2011 Pankaj*