IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Writ Petition No. 1008 of 2008 (M/S) M/s Falcon Contracts Pvt. Ltd. W-25 Greater Kailash, Delhi Through its Director ..……… Petitioner Versus State of Uttarakhand and others ……… Respondents Shri S.K. Agarwal, Senior Advocate assisted by Shri Anurag Bisari, Advocate for the petitioner. Shri L.P. Naithani, Senior Advocate assisted by Shri Vipul Sharma, Advocate for the respondents. Hon’ble Tarun Agarwala, J. The petitioner was allotted plot No. 55 in Sector-II SIDCUL in Pant Nagar vide an allotment order dated 1st June, 2005. As per Clause 3 (a) of the allotment order, 50% of the total cost was to be deposited within 30 days, i.e., upto 30th June, 2005. Under Clause 3 (b), it was stipulated that if the payment was not made within the due date, the plot would be automatically cancelled. Under Clause 4 of the allotment order, the remaining 50% of the amount was to be paid in half yearly instalment alongwith interest @ of 12% per annum. The first instalment was payable on 1st June, 2006. Under Clause 8, the possession was to be handed over after payments were made and the lease deed was executed. Under Clause 11 of the allotment order, it was stipulated that the petitioner was required to utilize 30% of the area of the plot and start commercial production within two years from the date of the allotment order. The petitioner did not deposit the 50% of the cost within 30 days from the date of the allotment order, as a result of which, the respondents issued a notice dated 12th July, 2005 directing the petitioner to deposit the balance 50% amount alongwith interest at the rate of 12% per annum. In spite of this notice, this amount was not deposited and the respondents issued a 2 final notice dated 5th August, 2005, and thereafter, by an order dated 18th August, 2005, the respondents cancelled the allotment order. The petitioner made a representation for the withdrawal of the cancellation order which was duly considered by the respondents. The representation was allowed and the allotment order was restored by an order dated 12th September, 2005. Pursuant to the conditions imposed in the restoration order, the petitioner was required to give an undertaking given by the respondents in the prescribed form which was duly given on 1st October, 2005. Clause (2) of the undertaking stipulated that the petitioner was required to take possession and execute the lease deed within 60 days. Under Clause (3), the petitioner was required to start the construction of the plot within 90 days from the date of the allotment order. Under Clause (6) of the undertaking, it was stipulated that non-performance of the terms and conditions of the undertaking would tantamount to the cancellation of the aforesaid plot and allotment letter. Pursuant to the restoration of the plot, the respondents issued a letter dated 30th November, 2005 directing the petitioner to take steps for the execution of the lease deed. Based on the aforesaid letter, it is alleged that the petitioner purchased the requisite stamp papers amounting to Rs. 96,600/- for the execution of the lease deed. In paragraph 8 of the writ petition, it is contended that the construction on the plot could only start after the possession of the plot was given by SIDCUL to the petitioner and that too after the execution of the lease deed. It was further stated that the lease deed could only be executed upon the issuance of a no objection certificate by the respondents. In paragraph 9, it was stated that inspite of making the payments and 3 following upon with the respondents, no objection certificate was not issued and, eventually, on 28th January, 2006, the no objection certificate was issued by the respondents in which the measurements of the plot was wrongly transcribed. In paragraph 11 of the writ petition, it has been stated that since the no objection certificate described wrong measurements of the plot, it had to be returned to the respondents for necessary correction. Consequently, on account of the aforesaid lacunae being created at the behest of the respondents, the lease deed could not be executed. Eventually, a revised no objection certificate was prepared by the respondents on 24th March, 2006 which the petitioner came to know on 3rd April, 2006. In the meanwhile, the respondents issued notice dated 01/04/2006 for the execution of the lease deed. In this notice, it is alleged that the petitioner was required to start the construction within three months from the date of the allotment order as per the undertaking given by the petitioner which had not been done and, that the petitioner had not taken effective steps for the utilization of the plot. The respondents, by the said notice, was accordingly directed to execute the lease deed within seven days failing which steps would be taken for the cancellation of the plot. Based on the said notice and, upon issuance of the no objection certificate dated 24th March, 2006, a lease deed was executed on 7th April, 2006. On 13th April, 2006, the respondents gave formal possession of the plot to the petitioner. The petitioner contended that upon taking physical possession of the plot, the petitioner started the process of the construction of the building, for which purpose, necessary building plans were prepared but before the submission of the plans, a notice dated 8th June, 2006 was issued for the cancellation of the allotment. In this notice, it was alleged that a substantial 4 period had elapsed and that the petitioner had failed to start the construction and that even after the execution of the lease deed, the petitioner had not taken effective steps for the utilization of the plot. In the said notice, it was also alleged that Clause (3) of the undertaking was not adhered to and, therefore, it was decided to determine the lease provided the petitioner start the construction within 15 days. The petitioner upon receipt of the aforesaid letter, gave a reply dated 15th June, 2007 indicating therein that the building plans are in process of finalisation and would be submitted by 24th June, 2006. The petitioner further contended that the production would start by 31st March, 2007. On 21st June, 2006, the building plans were submitted to the respondents and the respondents issued a letter dated 21st June, 2006, i.e., on the same day, permitting the petitioner to start the construction pending sanction of the plans so submitted by them. The petitioner contents that in spite of granting permission to start the construction by 21st June, 2006, the respondents by an order dated 7th July, 2006, cancelled the allotment order. The cancellation order stipulated that Clause (2) and (3) of the undertaking was not adhered to and was violated by the petitioner for not starting the construction within 90 days from the date of the allotment and that inspite of a lapse of 12 months from the date of the allotment order, no effective steps had been taken by the petitioner for utilizing the plot. It was further contended that notices dated 1st April, 2006 and 8th June, 2006 were issued, inspite of which, the petitioner was not interested in setting up the unit and, therefore, the respondents found it fit to forfeit and determine the lease under Clause 1.1 (a) (v) of the lease deed read with Clause (3) and (6) of the undertaking. The petitioner, being aggrieved by the order of cancellation of the plot, filed writ petition No.999 of 2006 which was 5 entertained and an interim order dated 18th August, 2006 was passed permitting the petitioner to raise the construction during the pendency of the writ petition. Subsequently, an Advocate Commissioner was appointed by the Court who submitted a report dated 19th November, 2006, in which, it was indicated that 40 to 50 percent of work had been completed and that the construction activity was in full swing. In the said report, it was also indicated that the adjoining plot No. 54 and 56 were vacant. Based on the said report, the writ petition was allowed by a judgment dated 16/12/2006. The writ court issued a direction directing the petitioner to start the commercial production within six months from the date of the judgment failing which the allotment would be cancelled and that it would be open to the respondents to re- auction the said plot. Based on the aforesaid directions of the writ court, the petitioner alleges that effective steps were taken to complete the construction of the buildings and, in the meanwhile, the respondents by a letter dated 2nd November, 2006 pointed out the shortcomings in the building plans submitted by the petitioner which was duly considered by the petitioner and the shortcomings were removed and intimated to the respondents by a letter of the petitioner dated 22nd February, 2007. While all this activity was going on, the respondents also preferred a Special Leave Petition before the Supreme Court of India, which was admitted and, eventually, the Civil Appeal was allowed by a judgment dated 1st August, 2007. The Supreme Court allowed the appeal of the respondents and set aside the judgment of the High Court directing the petitioner to file a detailed representation before the respondents. The respondents were directed to decide the said representation by a speaking 6 order. For facility, the direction of the Supreme Court is quoted hereunder:- “(1) Each of the entrepreneurs who were respondents before us, shall file independent representation before the Managing Director of the appellant-Corporation within two weeks from date questioning the legality or validity of the order of cancellation of allotment and/or for restoration of the properties, as the case may be. (2) The Managing Director of the appellant- Corporation shall hear the parties or their authorized representative, within two weeks thereafter. It will be open to the entrepreneurs to produce such evidence or evidences before the said authority as they may intend to do. (3) The Department may also produce their evidences before the said authority. (4) If found necessary, the Managing Director may inspect the site himself or cause it to be inspected by some other duly authorized officer in this behalf. (5) The Managing Director shall pass appropriate speaking order in each case separately, within six weeks form the date of filing the respective representations. (6) It will be open to the concerned entrepreneurs also to point out that in their cases, either possession had not been handed over or the lease deed/transfer deed had not been executed. (7) Status quo in respect of the properties shall be maintained by the parties in the meantime. The appeals are disposed of with the aforementioned directions and observations.” Based on the aforesaid direction of the Supreme Court, the petitioner made a representation before the Managing Director of the respondents-Corporation. The said representation was rejected 7 by the respondents by an order dated 10/10/2007. The respondents in the said order contended that the terms and conditions of the undertaking as well as of the allotment order and of the lease deed was violated with impunity by the petitioner and that the petitioner failed to start the construction within the stipulated period and since the plot was not utilized as per the terms and conditions of the undertaking and of the allotment order, the order for cancellation of the plot was justified. The authority further held that the delay on the part of the SIDCUL in issuing the no objection certificate was immaterial. The petitioner, being aggrieved by the said rejection of the representation, has filed the present writ petition. Heard Shri S.K. Agarwal, Senior Advocate duly assisted by Shri Anurag Bisaria, Advocate for the petitioner and Shri L.P. Naithani, Senior Advocate duly assisted by Shri Vipul Sharma, Advocate for the respondents. The learned Senior Counsel, Shri S.K. Agarwal submitted that the action of the respondents in cancelling the plot was wholly arbitrary and not bonafide. The petitioner did not violate any terms and conditions of the lease deed or of the allotment order or of the undertaking and that the construction of the building could not start within the stipulated period as it was beyond the control of the petitioner. The learned counsel submitted that the no objection certification was not issued within the stipulated period which resulted in the delay in the execution of the lease deed and, consequently, there was a delay in taking possession. The learned counsel submitted that immediately after taking possession, the plans were submitted and construction started immediately after permission to start the construction was given, but within 15 days from the grant of such permission, the 8 cancellation order was passed on 7th July, 2006, which was wholly arbitrary and illegal. The learned counsel submitted that pursuant to the order of the writ court in the earlier round of litigation, the petitioner had already started the construction and had spent a sum of Rs.35 lacs which fact was not considered by the respondents while rejecting the representation. The learned counsel submitted that in the similar circumstances writ petition No. 2483 of 2007 (M/S) in the case of M/s Haldiram Snacks Pvt. Ltd. Vs. State of Uttarakhand and others was allowed by a judgment dated 18/12/2008 and the plot was restored. In response, Shri L.P. Naithani, the learned Senior Counsel for the respondents submitted that the writ petition was not maintainable and that the petitioner had an alternate remedy by invoking the arbitration Clause under the lease deed. The learned counsel submitted that the dispute relating to contracts could not be agitated under Article 226 of the Constitution of India and that a contractual dispute could not be adjudicated in a writ court. The learned Counsel submitted that the interpretation and implementation of a clause in a Contract could not be a subject matter of a writ petition and, in any case, even assuming that the term of the contract was violated, the remedy was not a writ court and that the matter could only be adjudicated in a civil court or in an arbitration proceedings. In support of his submission, the learned counsel placed reliance upon the decisions of the Supreme Court in the cases of Pimpri Chinchwad Municipal Corporation and others Vs. Gayatri Construction Company and another, (2008) 8 SCC 172, Midi Extrusions Limited, Noida Vs. U.P. Industrial Development Corporation Ltd., Lakhanpur, Kanpur Nagar and others, 2007 (4) AWC 3835 and Kisan Sahkari Chini Mills Limited and others Vs. Vardan Linkers and others, (2008) 12 SCC 500. 9 The learned counsel further submitted that in any case, the order for cancellation of the allotment of the plot was perfectly legal and valid since the petitioner did not comply with the terms and conditions of the allotment letter or of the undertaking. Having heard the learned counsel for the parties at some length and having perused the record and having pondered over the matter, this Court finds that the plea of the respondents that the writ petition is not maintainable is not tenable. The Court finds that in the facts and circumstances of the case, the petitioner could invoke the writ jurisdiction and that the Court was justified in entertaining the writ petition. No doubt, there is a provision of an arbitration in the lease deed and that the parties could be relegated to an arbitration proceedings but after one round of litigation, this Court finds that substantial justice was required to be done between the parties and that there would be a travesty of justice if the parties were relegated to an alternate remedy by raising a dispute before an Arbitrator. If the arbitration clause was required to be invoked, the Supreme Court itself could have issued such a direction when the respondents had filed the special leave petition before the Supreme Court. The Supreme Court did not choose to relegate the parties to the arbitration proceedings at that stage but directed the petitioner to file a representation before the Managing Director of the Corporation. The Supreme Court was conscious that the dispute was required to be resolved and consciously relegated the parties to approach the authority by filing a representation. The Supreme Court directed the authorities to pass a reasoned and speaking order and decide the representation within a stipulated period. Once, this representation was rejected, in my opinion, the petitioner had no other efficacious alternate and effective remedy but to approach the writ court and invoke the 10 extra-ordinary jurisdiction under Article 226 of the Constitution of India. The decision of the authority rejecting the representation could not be a matter of dispute to be decided in an arbitration proceedings under Clause 9.2 of the lease deed. The arbitration is only confined to the terms and conditions and the rights and obligations of the parties arising under the lease deed. The representation which was rejected by the respondents was outside the arbitration proceedings. For facility, Clause 9.2 of the lease deed is quoted hereunder:- “9.2. All disputes and differences in relation to the applicability, interpretation, rights and obligations of the parties hereunder and/or arising under these presents, shall be referred to a sole Arbitrator, to be nominated by the Managing Director of the Lessor. Within thirty (30) days from the date of receipts of a request for nomination of sole Arbitrator, the Managing Director of the Lessor shall, nomination of Sole Arbitrator and issue communication in respect of the same to the parties. In case, the Sole Arbitrator is not nominated within the period stipulated hereinabove, the parties will be at liberty to invoke the provision of the Arbitration and Conciliation Act, 1996 and any subsequent amendments thereto or enactment(s) in substitution thereof, for appointment of Sole Arbitrator.” Further, the court finds that the petitioner has not prayed for the quashing of the cancellation of the allotment order dated 7th July, 2006 and has only prayed for the quashing of the order dated 10th October, 2007 by which the representation of the petitioner pursuant to the directions of the Supreme Court was rejected by the respondents. Against the rejection of the representation, the Court is of the opinion that the writ was maintainable. In the light 11 of the aforesaid, the objection of the respondents on the maintainability of the writ petition is rejected. With regard to the findings of the authority justifying their stand for cancelling the plot and lease deed, the Court is of the opinion that the action of the respondents was wholly arbitrary. Reliance on Clause (2) and (3) of the undertaking was perverse and could not be taken into consideration. The reason is not far to see. In my opinion, Clause (2) and (3) could not be acted upon by the petitioner. For ready reference, Clause (2) and (3) of the undertaking is quoted hereunder:- “2. That I/ We shall take the possession of the plot within 60 days of allotment after executing the lease deed and fulfilling the other requirements. 3. That I/We shall start construction on the plot within 90 days of the allotment and comply with the pre-requisites rules and regulations for such construction.” The undertaking was given on 01/10/2005 and under Clause (3), construction was to start within 90 days from the date of the allotment order. This clause could never be enforced, in as much as, the period of 90 days had long expired on or before the date of the undertaking. Such clause, in my opinion, is a void clause and could not be enforced. Similarly, Clause (2) required the petitioner to take possession of the plot within 60 days. The petitioner was not at fault. No doubt, initially, the petitioner did not deposit the requisite amount and, consequently, could not take possession nor execute the lease deed. The respondents took action and cancelled the plot. But subsequently, it was restored on payment of certain charges. Thereafter, notice dated 1st April, 12 2006 was issued directing the petitioner to execute the lease deed within a week and based on that notice, the lease deed was executed on 7th April, 2006. At this stage, the delay, if any, in the execution of the lease deed stood condoned and obliterated and such delay prior to 7th April, 2006 could no longer be considered by the respondents as a ground for cancellation of the allotment as well as of the lease deed. In the light of the aforesaid, the Court is of the opinion that Clause (2) and (3) of the undertaking could no longer be invoked. The undertaking was only operative till the date of the execution of the lease deed which had been executed subsequently. The undertaking comes to an end and the terms of the lease deed comes into play, which alone could be invoked. Even otherwise, the Court is of the opinion that the petitioner had no choice and was made to sign on the dotted line giving the undertaking which was given to the petitioner on a prescribed format on the dictation of the respondents at the time when the plot was being restored. In my view, such undertaking being demanded by the respondents is opposed to public policy as defined u/S 23 of the Contract Act. The Supreme Court in a case of Central Inland Water Transport Corporation Ltd. and another Vs. Brojo Nath Ganguly and another, AIR 1986 SC 1571 has held that a weaker party who has no choice in the matter and is made to give his assent and is made to sign on the dotted line in the prescribed standard form or to accept a set of rules as part of the contract, howsoever unfair, or unreasonable and unconscionable a Clause in that contract or form or rules may be, such type of contracts are unfair and unreasonable which shocks the conscience of the Court and since it is opposed to public policy, such, terms are to be adjudged void. In the light of the aforesaid, this Court is of the opinion that the reliance on the undertaking given by the petitioner 13 could not be invoked or relied upon which in any case had come to an end upon the execution of the lease deed. At this stage, the necessary provisions of the lease deed are required to be considered. The plot of the petitioner was cancelled by invoking the provision of Clause 1.1 (a) of the lease deed. For facility, Clause 1.1 (a) (i), (ii) (iii) (iv) and (v) are quoted hereunder:- “(a) (i) Within the period of Twenty Four (24) months from the date of letter of allotment of the Demised Land i.e. 01.06.2005 (“Stipulated Period”) the Lessee shall built and erect construction, execute works and complete installation of plant and machinery and commence production in its Unit. (ii) However, in case the Lessee is unable to commence the production in its Unit, within the Stipulated Period for reasons attributable to the Lessor or any State / Central Government authority or any local authority/body having jurisdiction, on an application from the Lessee with supporting documents, the Lessor shall extend the Stipulated Period, by such period (s). (iii) In addition, in case the Lessee is unable to commence production in its Unit, within the Stipulated Period, for reasons not covered under the preceding sub- clause, on an application from the Lessee, the Lessor shall consider such application, on merits and may grant such extension(s), as it may deem appropriate, subject to payment of Extension Fee, as may be specified by the Lessor. In case, the Lessor grants extension, the Stipulated Period shall stand extended and thereupon the obligation hereunder of the Lessee to complete the building shall be taken to such extended period. 14 In case, the Lessor is inclined to reject the application for extension, the same shall be communicated to the Lessee, by a reasoned Order, Passed by the person, having authority, on behalf of the Lessor. (iv) In case the Lessor, takes a decision not to grant extension