LETTERS PATENT APPEAL NO. 76 OF 2008 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. DATE OF DECISION: January 16, 2009. Parties Name M/s Raja Mechanical Works ...APPELLANT. VERSUS State of Punjab and others ...RESPONDENTS CORAM: HON'BLE MR. JUSTICE T.S.THAKUR, CHIEF JUSTICE HON'BLE MR. JUSTICE JASBIR SINGH PRESENT: Mr. J.S. Puri, Advocate, for the appellant. Ms. Madhu Dayal, Addl. A.G., Punjab, for respondents No. 1 and 2. Mr. Amit Rawal, Advocate, for respondent No.3. 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? JASBIR SINGH, J. JUDGMENT This judgment will dispose of Letters Patent Appeals No. 76 and 222, both of the year 2008, arising out of common judgment, passed by the learned Single Judge on October 31, 2007. For facility of dictating judgment, facts are being mentioned from LPA No. 76 of 2008. The above said appeal was filed by M/S Raja Mechanical Works, to whom an industrial plot in Focal Point at Ludhiana was allotted LETTERS PATENT APPEAL NO. 76 OF 2008 -2- on 99 years' lease hold basis on January 31, 1976. Tentative price of the plot was fixed at Rs. 55,000/-. An amount of Rs. 11,000/-, i.e., 20% of the premium price of the plot was to be paid within a period of 30 days from the date of allotment order. Option was left with the allottee to pay the balance 80% amount of the price, either in lump sum within 60 days from the date of issuance of allotment letter without interest or in 5 equated instalments along with interest. Ist instalment was to be paid within two years from the date of taking over possession of the plot. It was further stipulated that in case of default in payment of price, penal interest @ 4% per annum, in addition to the normal rate of interest, till the amount was paid, shall be charged. Admittedly, normal rate of interest, fixed by the Punjab State Small Industries Corporation (for short the Corporation) was 12% per annum. The appellant paid Rs. 11,000/- towards 20% amount of price of the plot and he opted to pay the balance amount in instalments, as provided in the allotment letter dated January 31, 1976 (P-1). It is not in dispute that possession of the plot was delivered to the appellant on March 11, 1977. Appellant also executed lease deed (P-4) in favour of the Corporation as per terms and conditions of the allotment letter. Thereafter, the appellant received one notice dated August 28, 1980, asking him to show cause why the plot, allotted to it, be not cancelled, for the reason that it had failed to deposit three instalments due. An amount of Rs. 47,907/- was claimed towards price and interest thereon. Appellant submitted its reply to the show cause notice, which was found unsatisfactory and consequently lease of the plot was cancelled vide order dated May 8, 1981. The appellant was directed to hand over vacant possession of the plot in LETTERS PATENT APPEAL NO. 76 OF 2008 -3- dispute to the Corporation. On October 21, 1981, the appellant deposited an amount of Rs. 40,000/- with the Corporation and prayed that cancellation notice be withdrawn. The building plan was also submitted for approval. In response to the letter, referred to above, the Corporation issued letter dated December 17, 1981, to the appellant, stating that an amount of Rs. 8819/- was still outstanding (4th instalment). The appellant was directed to deposit the amount indicated above so that its request for restoration of the plot be considered. The appellant also deposited the above said amount on January 19, 1982. Appellant's request for restoration of the plot was considered and vide letter dated October 14, 1982, it was intimated that the plot in question shall be restored to it subject to payment of an amount of Rs. 31,610/- towards payment of the outstanding dues, by October 31, 1982. The appellant replied that he had already deposited an amount of Rs. 69,819/-, which was more than the price, at which the plot was allotted. It was further averred that penal interest @ 16% per annum has wrongly been charged. Prayer was made to recalculate the amount as per terms and conditions of the lease deed so that it be deposited with the Corporation. Prayer was rejected and demand to deposit an amount of Rs. 31,610/- was reiterated by the Corporation vide letter dated October 4, 1983. At that stage, appellant came to this Court by filing CWP No. 5835 of 1983. Even during the pendency of that writ petition, appellant again received a notice for cancellation of the plot on December 24, 1985, to which he replied by taking the defece as stated earlier. In the meantime, building plan submitted by the appellant was also returned, by the Corporation, to the Architect of the appellant. Notice for cancellation of LETTERS PATENT APPEAL NO. 76 OF 2008 -4- allotment was again sent to the appellant on September 30, 1987. Petitioner replied the same by stating that his case was pending in this Court. In response to the averments, made by the appellant in its writ petition, the Corporation averred that on account of non-deposit of Rs. 31,610/-, allotment of plot had rightly been cancelled. It was further submitted that as per terms and conditions of the lease deed, the appellant was duty bound to deposit that amount along with interest to be compounded annually. The learned Single Judge by taking note of facts of the case, as referred to in the earlier part of this order, came to a conclusion that cancellation of plot, allotted to the appellant, was wrong. It was further opined that the Corporation was not justified in demanding compound interest. However, taking a lenient view of the entire matter, while setting aside action of cancellation of plot, the learned Single Judge ordered the appellant to pay an amount of Rs. 31,610/- along with interest @ 12% per annum to be compounded annually w.e.f. October 14, 1982. By filing this appeal, the appellant has laid challenge to the latter portion of the order, passed by the learned Single Judge regarding payment of compound interest @ 12% per annum. The Corporation has also filed Letters Patent Appeal No. 222 of 2008, wherein no challenge has been made to the order, passed by the learned Single Judge, granting restoration of the plot in question. However, claim has only been raised with regard to grant of compound interest @ 16% per annum. Counsel for the parties heard. Admittedly, there is no challenge to the order passed by the learned Single Judge so far as restoration of Industrial plot to the appellant LETTERS PATENT APPEAL NO. 76 OF 2008 -5- is concerned. Dispute remains only with regard to rate of interest, to be awarded, in favour of the respondent. Following terms and conditions of the lease deed dated January 31, 1976, (P-4) need to be looked into: “i) The tentative price of plot has been calculated at Rs. 55,000/- (Rupees fifty five thousand only). This is, however, subject to adjustment when the works are completed and accounts closed finally. A sum of Rs. 11,000/- (Eleven thousand only) being 20% amount of premium price of plot is payable within a period of 30 days from the date of this allotment order through a demand draft drawn on any scheduled Bank at Chandigarh and in favour of the Managing Director, Punjab State Small Industries Corporation Ltd., Chandigarh. xxx v) Balance 80% of the total tentative price shall be payable either in lump sum within 60 days from the date of issue of allotment letter without interest or in five equated instalments, along with interest, the first instalment being payable two years from the date of taking over possession, interest, being charged at a rate determined by Punjab State Small Industries Corporation from time to time. xxx ix) In the event of non-payment of premium price of the plot or interest due thereon, a penal interest of 4% per annum shall be charged, in addition to the normal interest until the outstanding arrears are fully cleared.” LETTERS PATENT APPEAL NO. 76 OF 2008 -6- Perusal of the conditions of allotment, referred to above, clearly indicates that 20% of the price of the plot was to be deposited within 30 days from the date of allotment order. Option was left with the allottee to deposit balance 80% of the total price either in lump sum within 60 days from the date of issuance of allotment letter without interest or in five equated instalments with interest. In case of default, it was stipulated that penal interest @ 4% per annum shall be charged, in addition to the normal interest, until the outstanding amount was cleared. Record reveals that tentative price of the plot was fixed at Rs. 55,000/-. When the appellant received notice to deposit an amount of Rs. 31,610/- on October 14, 1982, by that time, it had already deposited an amount of Rs. 69,819/- towards price of the plot. Vide letter dated October 4, 1983 (P-18) appellant was directed to deposit the above said amount, but despite request, detail as to how the amount was calculated was not supplied to the appellant. Even before us, counsel for the Corporation has failed to justify claim for grant of penal interest @ 16% (compound) on the amount demanded by the Corporation. Qua the above said dispute, the learned Single Judge has held as under: “It appears that during the pendency of the petition, some calculations were filed, which showed compounding of interest, which was not permissible under the terms of the allotment letter.” Despite giving the above said finding, the learned Single Judge decided to grant interest @ 12% per annum to be compounded annually LETTERS PATENT APPEAL NO. 76 OF 2008 -7- w.e.f. October 14, 1982. We feel that grant of compound interest was not justified. Admittedly, at that time, normal rate of interest, on payment due, was 12% per annum. As per clause ix of the lease deed, in case of default in payment, the Corporation was entitled to get penal interest @ 4% per annum in addition to the normal rate of interest till such time the due amount was paid. In view of facts and circumstances, as above, we feel that besides claiming interest @ 12% per annum, respondent – the Corporation was entitled to get additional penal interest @ 4% per annum. In all, the Corporation was entitled to simple interest @ 16% per annum and no more. Consequently, both the appeals are partly allowed and it is ordered that the Corporation shall be entitled to get from the appellant, interest @ 16% per annum (simple) on the claimed amount, i.e., Rs. 31610/- w.e.f. October, 1982. At the time of arguments, it was brought to our notice that in compliance with the order, passed by the learned Single Judge, the appellant had already deposited the amount. If it is so, the Corporation shall refund the excess amount within a period of 30 days from the date of receipt of copy of this order. It is further directed that the appellant shall submit building plan for approval and deposit requisite fee, if any, within a period of four weeks from the date of receipt of certified copy of this order, failing which, the Corporation will be at liberty to resume the plot in question. The Corporation is directed to sanction the building plan within a period of three months from the date of its receipt. The appellant shall, in the meantime if any objection is raised, remove the same forthwith. The appellant is directed to complete the building within two years thereafter, as is required under the lease deed (P-4), failing which liberty is granted to the Corporation to LETTERS PATENT APPEAL NO. 76 OF 2008 -8- take action as per law. With above mentioned observations, both the appeals stand disposed of. (JASBIR SINGH) JUDGE ( T.S.THAKUR) January 16, 2009. CHIEF JUSTICE DKC