REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 3020 OF 2018
THE ANDHRA PRADESH INDUSTRIAL
INFRASTRUCTURE CORPORATION
LIMITED AND OTHERS .....APPELLANT(S)
VERSUS
S.N. RAJ KUMAR AND ANOTHER .....RESPONDENT(S)
W I T H
CIVIL APPEAL NO. 2995 OF 2018
CIVIL APPEAL NO. 2994 OF 2018
CIVIL APPEAL NO. 2996 OF 2018
CIVIL APPEAL NO. 2997 OF 2018
CIVIL APPEAL NOS. 2998-3014 OF 2018
CIVIL APPEAL NOS. 2954-2989 OF 2018
CIVIL APPEAL NO. 3015 OF 2018
CIVIL APPEAL NO. 3016 OF 2018
CIVIL APPEAL NOS. 3018-3019 OF 2018
CIVIL APPEAL NO. 2990 OF 2018
CIVIL APPEAL NO. 3017 OF 2018
CIVIL APPEAL NO. 2991 OF 2018
Civil Appeal No. 3020 of 2018 & Ors. Page 1 of 18
CIVIL APPEAL NO. 2992 OF 2018
A N D
CIVIL APPEAL NO. 2993 OF 2018
J U D G M E N T
A.K.SIKRI, J.
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.
2. 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 and conditions.
Civil Appeal No. 3020 of 2018 & Ors. Page 2 of 18
One of 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. The
relevant clauses signifying the aforesaid stipulation are worded as
under:
“10. The allottee should note that the Corporation forfeits
all amounts paid by the allottee if any of the terms and
conditions stipulated in the allotment letter are not complied
with by the allottee.
xx xx xx
17. You should implement the project envisaged within two
years of taking possession of the land/plot/shed. If within
two years from the date of final allotment and taking
possession for the land/plot/shed the project is not
implemented, the allotment will be cancelled.
18. Registration of the sale deed will be made in your
favour only after implementation of the unit in the allotted
plot/shed. An undertaking on Rs.100/- NJS Paper to the
effect that the allottee will take sale deed for the plot/shed/
land allotted within one month of intimation from the APIIC
Limited and to pay the penalties levied by the Corporation
in case of failure should be furnished in the proforma
enclosed.”
3. 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
Civil Appeal No. 3020 of 2018 & Ors. Page 3 of 18
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 these showcause
notices 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.
4. 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
Civil Appeal No. 3020 of 2018 & Ors. Page 4 of 18
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 the appellantCorporation
resulting in conferring upon the respondents absolute
ownership of the plots in question, the appellant-Corporation had
no power to cancel the allotments.
5. 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.
6. In the aforesaid scenario, it becomes clear that the issue before
the High Court was as to whether the appellant-Corporation can
Civil Appeal No. 3020 of 2018 & Ors. Page 5 of 18
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.
7. 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.
8. 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. The appellantCorporation,
feeling aggrieved by the said judgment, preferred
writ appeals before the Division Bench, which have also been
Civil Appeal No. 3020 of 2018 & Ors. Page 6 of 18
dismissed vide the impugned judgment, thereby affirming the
judgment of the learned Single Judge. Not satisfied with this
outcome, the present appeals are preferred.
9. In nutshell, reasoning of the High Court is that the allotment was
made to the respondents followed by agreements of sale and
thereafter sale deeds were also executed by the appellantCorporation
conveying right, title and interest absolutely, to the
respondents. When the contract is concluded and regular sale
deed is executed between the vendor and vendee in respect of
an immovable property, it cannot be said that the dispute arises in
the realm of a statutory contract or non-statutory contract. The
dispute is not with regard to the contract. It is in effect the
question of title which is sought to be nullified by the appellantCorporation
unilaterally based on conditions of allotment and the
same is not permissible in law.
10. It was further held that the appellant-Corporation offered industrial
plots and the respondents/entrepreneurs gave counter offer
which was accepted by it. At that stage, the conditions of offer,
counter offer and acceptance found expression in the allotment
letter (acceptance of offer subject to conditions) and in the
agreement of sale (contract of sale) in terms of Section 54 of the
Civil Appeal No. 3020 of 2018 & Ors. Page 7 of 18
Transfer of Property Act, 1882 (hereinafter referred to as the Act).
This ultimately resulted in the conclusion of contract by way of
execution of the sale deed by vendor in favour of the vendee.
Once the contract is concluded, the allotment conditions or
covenants of agreement of sale ordinarily cannot be enforced
having regard to the various provisions of the Transfer of Property
Act, Indian Contract Act, 1872, the Registration Act, 1908 and the
Specific Relief Act, 1963, which constitute the Civil Code of India
and govern the transfer of immovable property from one person
to another. The allotment letter or the sale agreement does not
survive once the contract is concluded on execution of the
registered sale deed resulting in alienation, conveyance,
assignment and transfer of title.
11. The High Court has referred to Sections 5, 6, 8, 10 and 11 of the
Act as well as Section 23 of the Indian Contract Act, 1872 in
cementing the aforesaid conclusion. The High Court also relied
upon Sections 4 and 55 of the Act. Support of the judgment of
this Court in the case of State of Kerala v. Cochin Chemical
Refineries Ltd.1
and two judgments of its own High Court was
also taken. The matter was looked into by the High Court from
another angle as well. It noted that in these cases, after the
1 (1968) 3 SCR 556
Civil Appeal No. 3020 of 2018 & Ors. Page 8 of 18
allotment was made, all the respondents paid entire sale
considerations. The appellant-Corporation entered into
agreements and long thereafter executed registered sale deeds.
A decade thereafter, when the respondents applied for building
permission, as a statutory authority, accorded such sanction. In
this background, the question posed was whether the harsh
action of cancelling allotment is proportionate to the situation. It
gave the answer in the negative, applying the doctrine of
proportionality as was applied in Teri Oat Estates (P) Ltd. v.
U.T., Chandigarh & Ors.2
12. Another dimension which has been highlighted by the High Court
is that though initially the decision was taken to cancel the
allotment, the appellant-Corporation on its own came forward and
decided to compound the alleged contravention by a novel
method and decided to condone the so-called default on the part
of the respondents by demanding 50% of the prevailing market
value in lump sum towards the costs of the plots. In the opinion
of the High Court, once the sale deed is registered, the seller has
no such enforceable right to demand more money and this
demand was not backed by any law. We may also point out that
the appellant-Corporation had relied upon the judgment of this
2 (2004) 2 SCC 130
Civil Appeal No. 3020 of 2018 & Ors. Page 9 of 18
Court in Indu Kakkar v. Haryana State Industrial Development
Corporation Ltd. & Anr.3
The High Court, however, took the
view that the aforesaid judgment had no application to the facts of
these cases at hand.
13. Before us, arguments of Mr. Basava Prabhu Patil, learned senior
counsel appearing for the appellant-Corporation, remained the
same which were advanced before the High Court. It was
contended that even if there was a sale in favour of the
respondents by execution of the sale deed, the seller (appellantCorporation)
could impose a condition in the said sale deed,
which the buyer was under obligation to fulfill as sale was coupled
with the said condition. It was argued that judgment of this Court
in Indu Kakkar’s case had decided the same question, which
was in favour of the appellant, and the High Court has
distinguished the said judgment on erroneous grounds. It was
also argued that the judgment of this Court in Teri Oat Estates
(P) Ltd., on the doctrine of proportionality, was wrongly applied by
the High Court as the doctrine of proportionality was not at all
applicable in these cases. He also submitted that one of the
conditions contained in the sale deed itself was that the
purchaser shall use the land for the purpose specified therein, i.e.
3 (1999) 2 SCC 37
Civil Appeal No. 3020 of 2018 & Ors. Page 10 of 18
for putting up a factory or factories duly permitted by the
competent authority and for no other purpose and shall also not
put any structure or buildings other than a factory building or
buildings and some of the respondents had violated this condition
as the land was not used for putting up a factory.
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, the appellantCorporation
not 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.
15. Section 5 of the Act defines ‘transfer’ as conveyance of property
from one living person to one or more living persons. Sections 8,
Civil Appeal No. 3020 of 2018 & Ors. Page 11 of 18
10 and 11 thereof attach sanctity and solemnity to a transfer of
immovable property. These provisions read as under:
8. Operation of transfer – Unless a different intention is
expressed or necessarily implied, a transfer of property
passes forthwith to the transferee all the interest which the
transferor is then capable of passing in the property and in
the legal incidents thereof.
Such incidents include, when the property is land, the
easements annexed thereto, the rents and profits thereof
accruing after the transfer, and all things attached to the
earth;
and, where the property is machinery attached to the earth,
the movable parts thereof; and, where the property is a
house, the easements annexed thereto, the rent thereof
accruing after the transfer, and the locks, keys, bars, doors,
windows, and all other things provided for permanent use
therewith;
and, where the property is a debt or other actionable claim,
the securities therefor (except where they are also for other
debts or claims not transferred to the transferee), but not
arrears of interest accrued before the transfer;
and, where the property is money or other property yielding
income, the interest or income thereof accruing after the
transfer takes effect.
10. Condition restraining alienation – Where property is
transferred subject to a condition or limitation absolutely
restraining the transferee or any person claiming under him
from parting with or disposing of his interest in the property,
the condition or limitation is void, except in the case of a
lease where the condition is for the benefit of the lessor or
those claiming under him:
PROVIDED that property may be transferred to or for the
benefit of a women (not being a Hindu, Muhammadan or
Buddhist), so that she shall not have power during her
marriage to transfer or charge the same for her beneficial
interest therein.
Civil Appeal No. 3020 of 2018 & Ors. Page 12 of 18
11. Restriction repugnant to interest created – Where,
on a transfer of property, an interest therein is created
absolutely in favour of any person, but the terms of the
transfer direct that such interest shall be applied or enjoyed
by him in a particular manner, he shall be entitled to
receive and dispose of such interest as if there were no
such direction.
Where any such direction has been made in respect of one
piece of immovable property for the purpose of securing
the beneficial enjoyment of another piece of such property,
nothing in this section shall be deemed to affect any right
which the transferor may have to enforce such direction or
any remedy which he may have in respect of a breach
thereof.”
16. Section 55 of the Act deals with rights and liabilities of buyer and
seller. As per this provision, when the buyer discharges
obligations and seller passes/conveys the ownership of the
property, the contract is concluded. Thereafter, the liabilities,
obligations and rights, if any, between the buyer and seller would
be governed by other provisions of the Contract Act and the
Specific Relief Act, on the execution of the sale deed. The seller
cannot unilaterally cancel the conveyance or sale.
17. Insofar as the judgment in Indu Kakkar’s case is concerned, the
High Court has rightly held that that would not apply to the facts
of this case. On the facts of that case, the Court, in the first
instance, came to the conclusion that clause 7 of the agreement,
which was entered into between the parties, was binding. As per
clause 7, construction of the building for setting up the industry, in
Civil Appeal No. 3020 of 2018 & Ors. Page 13 of 18
respect of which land was given to the appellant in that case, was
to start within a period of six months and the construction had to
be completed with two years from the date of issue of the
allotment letters. Since the appellant had failed to commence or
build the construction within the stipulated time, show-cause
notice has been issued as to why the plot be not resumed as per
clause 7 of the agreement. In this backdrop, the appellant had
challenged the enforceability of clause 7 of the agreement taking
aid of Section 11 of the Act. This contention was repelled in the
following manner:
“16. However, the allottee has contended before the trial
court that clause 7 of the agreement is unenforceable in
view of Section 11 of the TP Act. But that contention was
repelled, according to us, rightly because the deed of
conveyance had not created any absolute interest in favour
of the allottee in respect of the plot conveyed. For a
transferee to deal with interest in the property transferred
“as if there were no such direction” regarding the particular
manner of enjoyment of the property, the instrument of
transfer should evidence that an absolute interest in favour
of the transferee has been created. This is clearly
discernible from Section 11 of the TP Act. The section rests
on a principle that any condition which is repugnant to the
interest created is void and when property is transferred
absolutely, it must be done with all its legal incidents. That
apart, Section 31 of the TP Act is enough 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 in case a specified uncertain event
shall happen, or in case a specified uncertain event
shall not happen”.
Civil Appeal No. 3020 of 2018 & Ors. Page 14 of 18
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 transfer, his interest in the farm shall cease. B
does not go to England within the term prescribed.
His interest in the farm ceases.”
17. All that Section 32 of the Transfer of Property Act
provides 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 of the creation of an interest”. If the
condition is invalid, it cannot be set up as a condition
precedent for crystallization of the interest created. The
condition that the industrial unit shall be established within
a specified period failing which 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.”
18. This legal position is not disputed. However, in the instant case,
there was no such stipulation in the agreement to sell or the sale
deed. It was in the allotment letter. On the contrary, insofar as
clause 7 of the sale deeds executed is concerned, the only
condition imposed is that the purchaser shall use the land for the
purpose of putting up a factory or factories duly permitted by the
competent authority and for no other purpose. This makes all the
difference between the two cases. Here, the undisputed fact is
that the agreements/sale deeds entered into between the
appellant-Corporation and the respondents do not contain any
clause which can be construed as ‘condition super-added’.
Civil Appeal No. 3020 of 2018 & Ors. Page 15 of 18
19. 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 Law ‘proportionality’ is 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 permissible priorities4
. De
Smith5
also states that ‘proportionality’ involves ‘balancing test’
and ‘necessity test’. The ‘balancing test’ permits scrutiny of
excessive onerous penalties or infringement of rights or interests
and a manifest imbalance of relevant considerations.
20. 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 the appellantCorporation
in 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, this
4 Union of India v. G. Ganayutham, (1997) 7 SCC 463
5 Judicial Review of Administrative Action (1995) para 13.085, 601-605; see also, Wade,
Administrative Law (2009) 157-158, 306-308
Civil Appeal No. 3020 of 2018 & Ors. Page 16 of 18
oral 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. This Court in the case
of Mohinder Singh Gill & Anr. v. The Chief Election
Commissioner, New Delhi & Ors.6 held as under:
“8. The second equally relevant matter is that 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. We may here draw attention to the
observations of Bose, J. in Gordhandas Bhanji
(Commissioner of Police, Bombay v. Gordhandas Bhanji,
AIR 1952 SC 16):
“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.”
Orders are not like old wine becoming better as they grow
older.”
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
6 (1978) 1 SCC 405
Civil Appeal No. 3020 of 2018 & Ors. Page 17 of 18
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.
22. As a result, all these appeals are dismissed with costs.
.............................................J.
(A.K. SIKRI)
.............................................J.
(ASHOK BHUSHAN)
NEW DELHI;
APRIL 10, 2018.
Civil Appeal No. 3020 of 2018 & Ors. Page 18 of 18
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 3020 OF 2018
THE ANDHRA PRADESH INDUSTRIAL
INFRASTRUCTURE CORPORATION
LIMITED AND OTHERS .....APPELLANT(S)
VERSUS
S.N. RAJ KUMAR AND ANOTHER .....RESPONDENT(S)
W I T H
CIVIL APPEAL NO. 2995 OF 2018
CIVIL APPEAL NO. 2994 OF 2018
CIVIL APPEAL NO. 2996 OF 2018
CIVIL APPEAL NO. 2997 OF 2018
CIVIL APPEAL NOS. 2998-3014 OF 2018
CIVIL APPEAL NOS. 2954-2989 OF 2018
CIVIL APPEAL NO. 3015 OF 2018
CIVIL APPEAL NO. 3016 OF 2018
CIVIL APPEAL NOS. 3018-3019 OF 2018
CIVIL APPEAL NO. 2990 OF 2018
CIVIL APPEAL NO. 3017 OF 2018
CIVIL APPEAL NO. 2991 OF 2018
Civil Appeal No. 3020 of 2018 & Ors. Page 1 of 18
CIVIL APPEAL NO. 2992 OF 2018
A N D
CIVIL APPEAL NO. 2993 OF 2018
J U D G M E N T
A.K.SIKRI, J.
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.
2. 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 and conditions.
Civil Appeal No. 3020 of 2018 & Ors. Page 2 of 18
One of 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. The
relevant clauses signifying the aforesaid stipulation are worded as
under:
“10. The allottee should note that the Corporation forfeits
all amounts paid by the allottee if any of the terms and
conditions stipulated in the allotment letter are not complied
with by the allottee.
xx xx xx
17. You should implement the project envisaged within two
years of taking possession of the land/plot/shed. If within
two years from the date of final allotment and taking
possession for the land/plot/shed the project is not
implemented, the allotment will be cancelled.
18. Registration of the sale deed will be made in your
favour only after implementation of the unit in the allotted
plot/shed. An undertaking on Rs.100/- NJS Paper to the
effect that the allottee will take sale deed for the plot/shed/
land allotted within one month of intimation from the APIIC
Limited and to pay the penalties levied by the Corporation
in case of failure should be furnished in the proforma
enclosed.”
3. 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
Civil Appeal No. 3020 of 2018 & Ors. Page 3 of 18
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 these showcause
notices 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.
4. 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
Civil Appeal No. 3020 of 2018 & Ors. Page 4 of 18
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 the appellantCorporation
resulting in conferring upon the respondents absolute
ownership of the plots in question, the appellant-Corporation had
no power to cancel the allotments.
5. 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.
6. In the aforesaid scenario, it becomes clear that the issue before
the High Court was as to whether the appellant-Corporation can
Civil Appeal No. 3020 of 2018 & Ors. Page 5 of 18
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.
7. 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.
8. 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. The appellantCorporation,
feeling aggrieved by the said judgment, preferred
writ appeals before the Division Bench, which have also been
Civil Appeal No. 3020 of 2018 & Ors. Page 6 of 18
dismissed vide the impugned judgment, thereby affirming the
judgment of the learned Single Judge. Not satisfied with this
outcome, the present appeals are preferred.
9. In nutshell, reasoning of the High Court is that the allotment was
made to the respondents followed by agreements of sale and
thereafter sale deeds were also executed by the appellantCorporation
conveying right, title and interest absolutely, to the
respondents. When the contract is concluded and regular sale
deed is executed between the vendor and vendee in respect of
an immovable property, it cannot be said that the dispute arises in
the realm of a statutory contract or non-statutory contract. The
dispute is not with regard to the contract. It is in effect the
question of title which is sought to be nullified by the appellantCorporation
unilaterally based on conditions of allotment and the
same is not permissible in law.
10. It was further held that the appellant-Corporation offered industrial
plots and the respondents/entrepreneurs gave counter offer
which was accepted by it. At that stage, the conditions of offer,
counter offer and acceptance found expression in the allotment
letter (acceptance of offer subject to conditions) and in the
agreement of sale (contract of sale) in terms of Section 54 of the
Civil Appeal No. 3020 of 2018 & Ors. Page 7 of 18
Transfer of Property Act, 1882 (hereinafter referred to as the Act).
This ultimately resulted in the conclusion of contract by way of
execution of the sale deed by vendor in favour of the vendee.
Once the contract is concluded, the allotment conditions or
covenants of agreement of sale ordinarily cannot be enforced
having regard to the various provisions of the Transfer of Property
Act, Indian Contract Act, 1872, the Registration Act, 1908 and the
Specific Relief Act, 1963, which constitute the Civil Code of India
and govern the transfer of immovable property from one person
to another. The allotment letter or the sale agreement does not
survive once the contract is concluded on execution of the
registered sale deed resulting in alienation, conveyance,
assignment and transfer of title.
11. The High Court has referred to Sections 5, 6, 8, 10 and 11 of the
Act as well as Section 23 of the Indian Contract Act, 1872 in
cementing the aforesaid conclusion. The High Court also relied
upon Sections 4 and 55 of the Act. Support of the judgment of
this Court in the case of State of Kerala v. Cochin Chemical
Refineries Ltd.1
and two judgments of its own High Court was
also taken. The matter was looked into by the High Court from
another angle as well. It noted that in these cases, after the
1 (1968) 3 SCR 556
Civil Appeal No. 3020 of 2018 & Ors. Page 8 of 18
allotment was made, all the respondents paid entire sale
considerations. The appellant-Corporation entered into
agreements and long thereafter executed registered sale deeds.
A decade thereafter, when the respondents applied for building
permission, as a statutory authority, accorded such sanction. In
this background, the question posed was whether the harsh
action of cancelling allotment is proportionate to the situation. It
gave the answer in the negative, applying the doctrine of
proportionality as was applied in Teri Oat Estates (P) Ltd. v.
U.T., Chandigarh & Ors.2
12. Another dimension which has been highlighted by the High Court
is that though initially the decision was taken to cancel the
allotment, the appellant-Corporation on its own came forward and
decided to compound the alleged contravention by a novel
method and decided to condone the so-called default on the part
of the respondents by demanding 50% of the prevailing market
value in lump sum towards the costs of the plots. In the opinion
of the High Court, once the sale deed is registered, the seller has
no such enforceable right to demand more money and this
demand was not backed by any law. We may also point out that
the appellant-Corporation had relied upon the judgment of this
2 (2004) 2 SCC 130
Civil Appeal No. 3020 of 2018 & Ors. Page 9 of 18
Court in Indu Kakkar v. Haryana State Industrial Development
Corporation Ltd. & Anr.3
The High Court, however, took the
view that the aforesaid judgment had no application to the facts of
these cases at hand.
13. Before us, arguments of Mr. Basava Prabhu Patil, learned senior
counsel appearing for the appellant-Corporation, remained the
same which were advanced before the High Court. It was
contended that even if there was a sale in favour of the
respondents by execution of the sale deed, the seller (appellantCorporation)
could impose a condition in the said sale deed,
which the buyer was under obligation to fulfill as sale was coupled
with the said condition. It was argued that judgment of this Court
in Indu Kakkar’s case had decided the same question, which
was in favour of the appellant, and the High Court has
distinguished the said judgment on erroneous grounds. It was
also argued that the judgment of this Court in Teri Oat Estates
(P) Ltd., on the doctrine of proportionality, was wrongly applied by
the High Court as the doctrine of proportionality was not at all
applicable in these cases. He also submitted that one of the
conditions contained in the sale deed itself was that the
purchaser shall use the land for the purpose specified therein, i.e.
3 (1999) 2 SCC 37
Civil Appeal No. 3020 of 2018 & Ors. Page 10 of 18
for putting up a factory or factories duly permitted by the
competent authority and for no other purpose and shall also not
put any structure or buildings other than a factory building or
buildings and some of the respondents had violated this condition
as the land was not used for putting up a factory.
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, the appellantCorporation
not 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.
15. Section 5 of the Act defines ‘transfer’ as conveyance of property
from one living person to one or more living persons. Sections 8,
Civil Appeal No. 3020 of 2018 & Ors. Page 11 of 18
10 and 11 thereof attach sanctity and solemnity to a transfer of
immovable property. These provisions read as under:
8. Operation of transfer – Unless a different intention is
expressed or necessarily implied, a transfer of property
passes forthwith to the transferee all the interest which the
transferor is then capable of passing in the property and in
the legal incidents thereof.
Such incidents include, when the property is land, the
easements annexed thereto, the rents and profits thereof
accruing after the transfer, and all things attached to the
earth;
and, where the property is machinery attached to the earth,
the movable parts thereof; and, where the property is a
house, the easements annexed thereto, the rent thereof
accruing after the transfer, and the locks, keys, bars, doors,
windows, and all other things provided for permanent use
therewith;
and, where the property is a debt or other actionable claim,
the securities therefor (except where they are also for other
debts or claims not transferred to the transferee), but not
arrears of interest accrued before the transfer;
and, where the property is money or other property yielding
income, the interest or income thereof accruing after the
transfer takes effect.
10. Condition restraining alienation – Where property is
transferred subject to a condition or limitation absolutely
restraining the transferee or any person claiming under him
from parting with or disposing of his interest in the property,
the condition or limitation is void, except in the case of a
lease where the condition is for the benefit of the lessor or
those claiming under him:
PROVIDED that property may be transferred to or for the
benefit of a women (not being a Hindu, Muhammadan or
Buddhist), so that she shall not have power during her
marriage to transfer or charge the same for her beneficial
interest therein.
Civil Appeal No. 3020 of 2018 & Ors. Page 12 of 18
11. Restriction repugnant to interest created – Where,
on a transfer of property, an interest therein is created
absolutely in favour of any person, but the terms of the
transfer direct that such interest shall be applied or enjoyed
by him in a particular manner, he shall be entitled to
receive and dispose of such interest as if there were no
such direction.
Where any such direction has been made in respect of one
piece of immovable property for the purpose of securing
the beneficial enjoyment of another piece of such property,
nothing in this section shall be deemed to affect any right
which the transferor may have to enforce such direction or
any remedy which he may have in respect of a breach
thereof.”
16. Section 55 of the Act deals with rights and liabilities of buyer and
seller. As per this provision, when the buyer discharges
obligations and seller passes/conveys the ownership of the
property, the contract is concluded. Thereafter, the liabilities,
obligations and rights, if any, between the buyer and seller would
be governed by other provisions of the Contract Act and the
Specific Relief Act, on the execution of the sale deed. The seller
cannot unilaterally cancel the conveyance or sale.
17. Insofar as the judgment in Indu Kakkar’s case is concerned, the
High Court has rightly held that that would not apply to the facts
of this case. On the facts of that case, the Court, in the first
instance, came to the conclusion that clause 7 of the agreement,
which was entered into between the parties, was binding. As per
clause 7, construction of the building for setting up the industry, in
Civil Appeal No. 3020 of 2018 & Ors. Page 13 of 18
respect of which land was given to the appellant in that case, was
to start within a period of six months and the construction had to
be completed with two years from the date of issue of the
allotment letters. Since the appellant had failed to commence or
build the construction within the stipulated time, show-cause
notice has been issued as to why the plot be not resumed as per
clause 7 of the agreement. In this backdrop, the appellant had
challenged the enforceability of clause 7 of the agreement taking
aid of Section 11 of the Act. This contention was repelled in the
following manner:
“16. However, the allottee has contended before the trial
court that clause 7 of the agreement is unenforceable in
view of Section 11 of the TP Act. But that contention was
repelled, according to us, rightly because the deed of
conveyance had not created any absolute interest in favour
of the allottee in respect of the plot conveyed. For a
transferee to deal with interest in the property transferred
“as if there were no such direction” regarding the particular
manner of enjoyment of the property, the instrument of
transfer should evidence that an absolute interest in favour
of the transferee has been created. This is clearly
discernible from Section 11 of the TP Act. The section rests
on a principle that any condition which is repugnant to the
interest created is void and when property is transferred
absolutely, it must be done with all its legal incidents. That
apart, Section 31 of the TP Act is enough 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 in case a specified uncertain event
shall happen, or in case a specified uncertain event
shall not happen”.
Civil Appeal No. 3020 of 2018 & Ors. Page 14 of 18
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 transfer, his interest in the farm shall cease. B
does not go to England within the term prescribed.
His interest in the farm ceases.”
17. All that Section 32 of the Transfer of Property Act
provides 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 of the creation of an interest”. If the
condition is invalid, it cannot be set up as a condition
precedent for crystallization of the interest created. The
condition that the industrial unit shall be established within
a specified period failing which 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.”
18. This legal position is not disputed. However, in the instant case,
there was no such stipulation in the agreement to sell or the sale
deed. It was in the allotment letter. On the contrary, insofar as
clause 7 of the sale deeds executed is concerned, the only
condition imposed is that the purchaser shall use the land for the
purpose of putting up a factory or factories duly permitted by the
competent authority and for no other purpose. This makes all the
difference between the two cases. Here, the undisputed fact is
that the agreements/sale deeds entered into between the
appellant-Corporation and the respondents do not contain any
clause which can be construed as ‘condition super-added’.
Civil Appeal No. 3020 of 2018 & Ors. Page 15 of 18
19. 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 Law ‘proportionality’ is 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 permissible priorities4
. De
Smith5
also states that ‘proportionality’ involves ‘balancing test’
and ‘necessity test’. The ‘balancing test’ permits scrutiny of
excessive onerous penalties or infringement of rights or interests
and a manifest imbalance of relevant considerations.
20. 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 the appellantCorporation
in 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, this
4 Union of India v. G. Ganayutham, (1997) 7 SCC 463
5 Judicial Review of Administrative Action (1995) para 13.085, 601-605; see also, Wade,
Administrative Law (2009) 157-158, 306-308
Civil Appeal No. 3020 of 2018 & Ors. Page 16 of 18
oral 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. This Court in the case
of Mohinder Singh Gill & Anr. v. The Chief Election
Commissioner, New Delhi & Ors.6 held as under:
“8. The second equally relevant matter is that 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. We may here draw attention to the
observations of Bose, J. in Gordhandas Bhanji
(Commissioner of Police, Bombay v. Gordhandas Bhanji,
AIR 1952 SC 16):
“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.”
Orders are not like old wine becoming better as they grow
older.”
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
6 (1978) 1 SCC 405
Civil Appeal No. 3020 of 2018 & Ors. Page 17 of 18
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.
22. As a result, all these appeals are dismissed with costs.
.............................................J.
(A.K. SIKRI)
.............................................J.
(ASHOK BHUSHAN)
NEW DELHI;
APRIL 10, 2018.
Civil Appeal No. 3020 of 2018 & Ors. Page 18 of 18
