Case: The Andhra Pradesh Industrial Infrastructure Corporation Limited and Ors Vs. S.N. Raj Kumar and Ors

Appellant No.1, Andhra Pradesh Industrial Infrastructure Corporation Limited, is a public sector undertaking incorporated under the Companies Act, 1956. Appellant Nos. 2 and 3 are its office bearers. The main object of the appellant-Corporation is to develop industrial areas at various places in the State of Andhra Pradesh and allot them to the needy entrepreneurs for the purpose of establishing industries.During 1996-97, the appellant-Corporation allotted industrial plots to the respondents/ entrepreneurs herein at Visakhapatnam and other places in the State of Andhra Pradesh. All the respondents are transport companies with their headquarters all over India and they got allotted the aforesaid plots in Visakhapatnam or other places in the State with the purpose of having branch offices. Intention was to construct transport offices and godowns. The allotment letters vide which allotments were made by the appellant-Corporation contained certain terms andof the conditions, which is the bone of contention in these appeals, was that the respondents were supposed to establish their units within two years from the date of taking possession of their plots allotted to them for industrial purposes. It was also stipulated that contravention of any of the terms and conditions of the allotment would result in cancellation of such allotment.Though initial allotments were made by issuing allotment letters as above, these were followed by agreements of sale which were entered between the appellant-Corporation and the respondents on different dates between 1997 and 1999. During this period, sale deeds were also executed by the appellant-Corporation in favour of the respondents, after receiving full consideration of the plots in question, thereby transferring the ownership rights in favour of the respondents herein. Almost six years after the execution of the sale deed, show-cause notices were issued to the respondents for cancellation of the plots on the ground that the respondents had failed to establish their industrial units on the said plots within the stipulated period and had kept them idle which was detrimental to the industrial development. The respondents submitted their separate replies to thesenotices wherein, broadly speaking, the position was taken that the appellant-Corporation did not provide basic infrastructure facilities like roads, water, electricity and, therefore, the plots could not be utilised for the purpose of construction of godowns.Interestingly, the aforesaid facilities were provided in the year 2006 only, i.e. after the issuance of show-cause notices and replies thereto by the respondents. In these circumstances, the respondents applied for permission to construct the godowns. Vide letter dated January 20, 2006, the appellant-Corporation approved the building plans, in pursuance whereof the respondents commenced construction. However, thereafter, the appellant-Corporation passed orders dated March 28, 2006 stating therein that there was no justification for not establishing industrial/business units within the time specified in the allotment letters and passed orders cancelling the allotments made to the respondents. Challenging these cancellation orders, batch of writ petitions came to be filed by the respondents. In these writ petitions, one of the primary contentions of the respondents was that once sale deeds had been executed by theresulting in conferring upon the respondents absolute ownership of the plots in question, the appellant-Corporation had no power to cancel the allotments.While these writ petitions were pending, there was a change of heart, to a little extent, insofar as the appellant-Corporation is concerned. It revised its decision of cancelling the allotments and instead decided to give one more opportunity to the respondents herein, subject to certain conditions. One of the conditions was that the respondents pay 50% of the prevailing market value for condoning the delay in raising the construction. Challenging this position, fresh writ petitions came to be filed.In the aforesaid scenario, it becomes clear that the issue before the High Court was as to whether the appellant-Corporation can demand 50% of the prevailing market value as a condition for giving extension/another opportunity to the respondents to raise construction on the plots sold to them.The challenge of the respondents to the aforesaid condition was predicated on the same ground, namely, after the execution of the sale deed, the appellant-Corporation had no power to cancel the allotment or demand payment of 50% of the prevailing market value. The appellant-Corporation, on the other hand, took up the plea that the allotments were subject to certain terms and conditions made therein and any contravention thereof was liable to be cancelled. Therefore, mere execution of the sale deeds did not absolve the respondents from compliance with the terms and conditions of the allotment.The matters were heard by the learned Single Judge who allowed the writ petitions vide common judgment dated July 16, 2010 accepting the plea of the respondents, namely, once the sale deeds were executed, the appellant-Corporation was denuded of any power to cancel the allotments or to make demand of 50% amount of the prevailing market value of the plots. Thefeeling aggrieved by the said judgment, preferred writ appeals before the Division Bench, which have also been dismissed vide the impugned judgment, thereby affirming the judgment of the learned Single Judge. Not satisfied with this outcome, the present appeals are preferred.

Court's reasoning:
14. We do not find any merit in any of the aforesaid arguments. In the first instance, it needs to be emphasised that there is no such condition of completion of construction within a period of two years in the sale deed. Such a condition was only in the allotment letter. However, after the said allotment, thenot only received entire consideration but executed the sale deeds as well. In the sale deeds no such condition was stipulated. Therefore, the High Court is right in holding that after the sale of the property by the appellant-Corporation to the respondents, whereby the respondents acquired absolute marketable title to the property, the appellant-Corporation had no right to insist on the conditions mentioned in the allotment letter, which cease to have any effect after the execution of the sale deed.Insofar as the judgment in Inducase is concerned, the High Court has rightly held that that would not apply to the facts of this case.We do not agree with the contention of the appellant-Corporation that the doctrine of proportionality is not applicable in these cases. In the realm of Administrative Lawis a principle where the Court is concerned with the process, method or manner in which the decision-maker has ordered his priorities and reached a conclusion or arrived at a decision. The very essence of decision-making consists in the attribution of relative importance to the factors and considerations in the case. The doctrine of proportionality thus steps in focus true nature of exercise – the elaboration of a rule of permissiblealso states thatand ‘necessitypermits scrutiny of excessive onerous penalties or infringement of rights or interests and a manifest imbalance of relevant considerations.Insofar as the argument that the land is not used for putting a factory building but was used for some other purpose is concerned, no such case was pleaded by thein the High Court or even in these appeals. This was not the reason for initially cancelling the allotment or demanding payment of 50% of the prevailing market value. Therefore, thisoral argument advanced at the time of hearing cannot be accepted without any material on record and when it was not the basis of cancellation/demand of payment.21. In view of the above, it is not necessary to deal with the argument as to whether doctrine of proportionality is applicable in the instant case or not. It is to be borne in mind, as rightly held by the High Court, that the appellant-Corporation had withdrawn the action of cancellation of the plots. Instead, it demanded 50% of the prevailing market value in lump sum towards the cost of the plots. There is no legal basis for such a demand, more so, after the registration of the sale deeds in favour of the respondents thereby transferring the ownership in these plots in their favour.