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  show-

cause 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  appellant-

Corporation 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 appellant-

Corporation,  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  appellant-

Corporation 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 appellant-

Corporation 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 (appellant-

Corporation)  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 appellant-

Corporation 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  appellant-

Corporation 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.

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