IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.1550 OF 2011 (Arising out of SLP(C)NO.12792/2009)

HARYANA STATE AGRICULTURAL MARKETING BOARD & ANR.             ... Appellants  

                VERSUS RAJ PAL ... Respondent  

WITH

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Civil Appeal No.1586 of 2011 @ SLP(C) NO.15260/2009 Civil Appeal No.1587 of 2011 @ SLP(C) NO.21597/2009

O R D E R

R.V.RAVEENDRAN, J.

Leave granted.

2. The first appellant is the Haryana State Agricultural  

Marketing Board ('Board' for short) and second appellant  

is  the  Nigdhu  Market  Committee  ('Market  Committee'  for  

short).  The  Market  Committee  established  a  New  Grain  

Market at Karnal-Pehowa Road, Nighdu, District Karnal. It  

gave public notice of a scheme for the open auction of  

plots, booths and commercial places in the market, to be  

held on 13.1.1999.  The said auction was governed by the  

Haryana  State  Agricultural  Marketing  Board  (Sale  of  

Immovable Property) Rules 1997 (for short ‘the Rules’).

3.   Rule  4  of  the  Rules  requires  the  auction  

purchaser/allottee  to  complete  construction  of  a  shop  

within two years from the date of the allotment order.  

Rule 5 provides that the terms and conditions governing  

sale will be determined by the Board from time to time.  

The following provisions of the Terms & Conditions of Sale  

(by auction), framed by the Board are relevant:

“3. One-fourth amount of the successful bid shall be  required to be deposited on the spot. Failure to do so  

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shall lead to forfeiture of the earnest money.

12. Allottees  shall  deposit  the  remaining  three- fourths amount either in a lump-sum without interest  within  30  days  of  allotment  or  in  six  equal  half  yearly  instalments  alongwith  interest  at  15%  per  annum.

13. The sale/allotment shall remain further subject  to the term and conditions as enumerated in the letter  of allotment.”

The auction Notice also reiterated Conditions (3) and (12)  

extracted above.

4. The  respondent  in  each  of  these  appeals  was  the  

highest bidder in respect of the plot for which he gave  

the  bid.  In  pursuance  of  it,  each  respondent  (auction  

purchaser)  was  issued  a  letter  of  allotment  on  30th  

January,  1999,  specifying  the  particulars  of  the  plot  

purchased by him, the auction sale price, 25% amount paid  

as earnest money and the particulars of the instalments of  

principal and interest, if the auction purchaser wanted to  

pay the 75% amount in six half yearly instalments as also  

the dates on which the instalments had to be paid. We  

extract  below  the  relevant  clauses  of  the  letter  of  

allotment which was issued to the respondent (Rajpal) in  

the first matter:  

“2. The following particulars site is hereby allotted  

to you on the terms and conditions announced at the  spot and mentioned hereunder:  

Kind  of  

Number  of Plot

Area of Plot Price  of  Plot

Name of Purchaser  

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Plot Shops 108 12’x27.5’ 2,55,000/- Sh.Raj Pal

3. The area and number shown above are given in the  respective plan and are subject to variation of the  time of actual possession.  

4. The sum of Rs.63,750/- paid by you as earnest  money has been adjusted in your plot account. You are,  requested to remit a sum of Rs.1,91,250/- on account  of 75% balance sale price either within 30 days of  receipt of this allotment letter without interest or  in six half yearly instalments together with interest  @ 15% p.a. accruing from the date of issue of this  letter as mentioned hereunder.

Number  of  Instal- ments

Due date of  Instalments

Amount  of  Instalments

Interest  @  15%  p.a.

Total  Remarks

1. 1.1.2000 31875 14343.75 46218.75 2. 1.7.2000 31875 11953.10 43828.10 3. 1.1.2001 31875 9562.50 41437.50 4. 1.7.2001 31875 7171.00 39046.90 5. 1.1.2002 31875 4781.25 36656.25 6. 1.7.2002 31875 2390.65 34265.65

5. In case of failure to deposit the instalment(s)  by 10th of every month due, compound interest @ 10%  p.a.  alongwith  penal  interest  @  4%  p.a.  with  instalments shall be charged.

xxx xxx xxx

12. The transferee shall complete the building within  two years from the date of issue of allotment order……… …

xxx xxx xxx

15.The Market Committee Nigdu shall not be responsible  for leveling of uneven sites.”

5. In pursuance of the said letters of allotment, most  

of  the  allottees/auction-purchasers  paid  only  the  

instalments  of  the  auction  price  and  did  not  pay  the  

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interest.  Some of the allottees also committed default in  

paying  the  instalment  of  even  the  auction  price.  Some  

allottees  however  took  possession  and  constructed  the  

shops and commenced their business. Some allottees took  

possession and constructed merely sheds. Some allottees  

did not take possession at all contending that the Market  

Committee  did  not  offer  them  possession.  In  this  

background, the Market Committee sent Demand Notices to  

all the allottees on 9th July, 2007 calling upon them to  

pay the balance sale price and interest on the instalments  

at 15% per annum, as also the penal interest. At that  

stage,  the  allottees/auction  purchasers  approached  the  

Punjab & Haryana High Court by filing writ petitions for  

quashing  the  demand  notices  dated  9.7.2007  claiming  

interest and penal interest, and sought a direction to the  

appellants to accept only the actual sale price without  

any interest. They contended that the Market Committee had  

not provided the basic amenities and facilities in the  

market; that the Market Committee, in fact, did not offer  

possession  of  the  plots  because  the  infrastructural  

facilities and even basic amenities were not ready when  

the  plots  were  auctioned;  and  that  when  the  Market  

Committee was not in a position to offer the possession  

for  lack  of  amenities  and  facilities,  it  could  not  

obviously charge interest on the plot value, let alone  

penal interest. They also contended that when the basic  

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amenities  and  infrastructure  were  not  available,  they  

could not take possession or construct the buildings. In  

its counter to the writ petition, the Market Committee  

admitted that the roads, drainage and certain other works  

relating  to  the  market  were  not  ready  at  the  time  of  

auction, and were completed only on 15.4.1999. It was also  

admitted  that  the  work  relating  to  water  supply  was  

started in February, 2001 and sewerage disposal work was  

started in January, 2002 and they were in progress till  

2007.

6. The High Court allowed the writ petitions by a common  

order dated 15.10.2008. It referred to some of its earlier  

decisions  where  directions  were  issued  not  to  charge  

interest  or  penal  interest  until  the  water,  sewerage  

disposal  and  other  facilities  were  provided.  It,  

therefore, disposed of the petitions with the following  

directions:

(i) The writ petitioners were permitted to deposit the  instalments within a period of one month.

(ii) The Market Committee was directed not to charge any  interest or penal interest on the original price of  plots/booth.

(iii) The Market Committee was directed to provide the  remaining basic facilities in Nighdu Grain Market  within a period of six months.

7. The  said  order  is  challenged  in  these  appeals  by  

special  leave.  The  appellants  contend  that  the  Market  

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Committee  had  not  undertaken  to  provide  any  specific  

facilities as on the date of auction sale; that the basic  

infrastructural  facilities  were  available  in  the  market  

and works relating to other facilities were in progress;  

that the public notice regarding auction and the allotment  

letters made it clear that interest was chargeable from  

the date of allotment; that it was clear from the letters  

of allotment, that on receipt of the same, the allottees  

were  entitled  to  approach  the  Market  Committee  for  

possession; that in the absence of any provision that the  

Market Committee will not be entitled to charge interest  

until the basic facilities were provided, the terms of  

allotment  providing  for  payment  of  interest  and  penal  

interest were enforceable; and that the issue of payment  

of interest/penal interest/cannot be linked to providing  

of all facilities in the market. Reliance was placed by  

the  appellants  on  the  following  observations  in  UT  

Chandigarh  Administration  vs.  Amarjeet  Singh  and  others  

2009 (4) SCC 660:

“20. Where there is a public auction without  assuring any specific or particular amenities,  and  the  prospective  purchaser/lessee  participates  in  the  auction  after  having  an  opportunity of examining the site, the bid in  the  auction  is  made  keeping  in  view  the  existing situation, position and condition of  the site.  If all amenities are available, he  would offer a higher amount.  If there are no  amenities,  or  if  the  site  suffers  from  any  disadvantages, he would offer a lesser amount,  or may not participate in the auction.  Once  with  open  eyes,  a  person  participates  in  an  auction, he cannot thereafter be heard to say  that  he  would  not  pay  the  balance  of  the  

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price/premium or the stipulated interest on the  delayed  payment,  or  the  ground  rent,  on  the  ground  that  the  site  suffers  from  certain  disadvantages or on the ground that amenities  are not provided”.

8. On the other hand, the respondents contended that the  

State Government and the Board realized the futility and  

the arbitrariness in demanding interest before providing  

the basic amenities and consequently amended the Rules in  

2002 providing for payment of interest only from the date  

of offer of possession.  The said amended Rule 4(5) and  

Rule 5 are extracted below:

“Rule 4(5):- The balance seventy five percent of the  price  of  plot  may  either  be  deposited  without  interest within thirty days from the date of issue  of  allotment  letter  or  in  six  half  yearly  instalments, with may be specified by the Board from  time to time.  The first such instalment shall fall  due  after  six  months  from  the  date  of  allotment  letter.   However,  interest  on  instalments  shall  accrue from the date of offer of possession.

Rule 5:- The possession of the plot shall be offered  to  the  allottee  by  the  Executive  Officer  cum  Secretary, Market Committee within thirty days from  the date of issuance of allotment letter if minimum  basic facilities i.e. Roads, Water Supply, Sewerage  and electrification are existing and if the said  basic  facilities  are  not  existing,  then  after  providing the said basic facilities.”

They also contended that in regard to the New Grain and  

Vegetable  Market,  Mahem,  during  the  pendency  of  these  

matters, the Board considered the representations of the  

allottees for relief regarding interest and had made an  

order dated 17.4.2009 directing that the Market Committee  

not to charge interest, penalty or time extension fees in  

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respect  of  plots  with  effect  from  5.3.2002,  when  the  

amended Rules came into effect even in regard to the plots  

which were sold before the amendment; and that similar  

relief should be extended to them.

9. In  Municipal Corporation, Chandigarh vs. Shantikunj  

Investment (P) Ltd. 2006 (4) SCC 109, this court held:

“38. ...We make it clear that though it was  not  a  condition  precedent  but  there  is  obligation on the part of the Administration to  provide necessary facilities for full enjoyment  of the same by the allottees.  We therefore,  remit the matter to the High Court for a very  limited  purpose  to  see  that  in  cases  where  facilities like kutcha road, drainage, drinking  water, sewerage, street lighting have not been  provided, then in that case, the High Court may  grant the allottees some proportionate relief.  Therefore, we direct that all these cases be  remitted to the High Court and the High Court  may consider that in case where kutcha road,  drainage, sewerage, drinking water facilities  have been provided, no relief shall be granted  but in case any of the facilities had not been  provided, then the High Court may examine the  same and consider grant of proportionate relief  in the matter of payment of penalty under Rule  12(3)  and  interest  for  delay  in  payment  of  equated  instalment  or  ground  rent  or  part  thereof under Rule 12 (3-A) only.  We repeat  again that in case the above facilities had not  been granted then in that case consider grant  of proportionate relief and if the facilities  have been provided then it will not be open on  the part of the allottees to deny payment of  interest and penalty.  So far as payment of  instalment is concerned, this is a part of the  contract and therefore, the allottees are under  obligation to pay the same.  However, so far as  the question of payment of penalty and penal  interest in concerned, that shall depend on the  facts of each case to be examined by the High  Court.   The  High  Court  shall  examine  each  individual  case  and  consider  grant  of  proportionate relief.”

Referring  to  the  said  decision,  this  Court  in  UT  

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Chandigarh Administration vs. Amarjeet Singh and others  

(supra) observed as follows:

“46. As  noticed  above,  in  Shantakunj, the  auction was of the year 1989.  The lessee had  approached  the  High  court  in  its  writ  jurisdiction  in  the  year  1999  seeking  amenities.  Even in 2006 when this Court heard  the matter, it was alleged that the amenities  had not been provided.  It is in those peculiar  facts that this Court obviously thought it fit  to give some reliefs with reference to penal  interest  wherever  amenities  had  not  been  provided at all even after 17 years.  In fact,  this Court made it clear while remanding to the  High Court that wherever facilities/ amenities  had  been  provided  before  the  date  of  the  judgment (28.2.2006), the lessees will not be  entitled  to  any  reliefs  and  where  the  facilities/amenities had not been granted even  in  2006,  the  High  Court  may  consider  giving  some relief by proportionate reduction in the  penal interest.  This direction was apparently  on the assumption that in case of penalty, the  court can grant relief in writ jurisdiction.

In  Sector  6,  Bahadurgarh  Plot  Holders’  Association  vs.  

State of Haryana (1996) 1 SCC 485, this court held that  

where the Rules required delivery of possession within a  

reasonable  time  after  payment  of  29%  of  the  price,  

interest cannot be demanded till the offer of possession  

is made. But where the advertisement stated that modern  

amenities “will be provided”, interest cannot be denied  

merely  because  all  amenities  had  not  become  fully  

functional and interest will be payable from the date of  

the  offer  of  possession  of  the  plot,  though  not  fully  

developed.  

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10. The aforesaid decisions, when read with reference to  

the provisions of the rules applicable make it clear that  

the  allottees  were  liable  to  pay  the  instalments  and  

simple  interest  thereon  in  terms  of  the  letters  of  

allotment. However, having regard to the admitted position  

emerging  from  the  counter  affidavit  filed  by  the  

appellants before the High Court, the basic amenities of  

water and sewerage disposal were not available when the  

allotment  letters  were  issued  and  the  said  works  were  

commenced only in 2001 and 2002 and were in progress even  

in  the  year  2007.  It  is  in  these  circumstances,  

apparently,  some  of  the  allottees  did  not  commence  

construction or did not commence their business.  Be that  

as it may.  

11. In view of the principles laid down in  Bahadurgarh  

Plot Holders’ Association (supra), Shantikunj (supra) and  

Amarjeet Singh  (supra), it is clear that the allottees  

cannot postpone the payment of instalments merely on the  

ground that some of the amenities were not ready. If they  

were not entitled for postponement of the instalments, it  

follows  that  they  will  be  liable  to  pay  the  normal  

interest on the delayed instalments up to date of payment.  

However, having regard to the fact that the Rules did not  

contemplate compound interest and penal interest and the  

Market  Committee  was  yet  to  complete  certain  

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infrastructural  work  like  water,  sewerage  disposal,  as  

held in Shantikunj (supra), the Market Committee will not  

be  entitled  to  claim  any  compound  interest  or  penal  

interest.  

12. We, therefore, allow these appeals in part and permit  

the  Market  Committee  to  issue  revised  Demand  Notices  

claiming only simple interest at the rate 15% per annum.  

The respective respondent shall pay the interest within  

three months from the date of receipt of the demand notice  

from the Market Committee. If the amount of interest is  

not paid, the Market Committee will be entitled to take  

such action as may permissible in terms of the rules in  

accordance with law.

12. As it is stated that in case of Mahem Grain Market,  

the Board has given some concession even in regard to the  

normal interest with effect from the date (5.3.2002) when  

the  amended  rules  came  into  force,  it  is  open  to  the  

respondent-allottees to give a representation to the Board  

or pursue their pending representation in that behalf for  

similar relief. The decision in these appeals will not  

come  in  the  way  of  the  Board  considering  such  

representation  and  granting  appropriate  relief.  Having  

regard  to  the  fact  that  we  have  permitted  the  Market  

Committee to issue revised demands, we request the Board  

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to  dispose  of  the  representation  of  the  respondents  

expeditiously so that the decision thereon can be taken  

note of by the Market Committee for finalizing the demand.

...................J. [ R.V. RAVEENDRAN ]

NEW DELHI ...................J. FEBRUARY 10, 2011 [ A.K. PATNAIK ]

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