THE ANDHRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED can not order for payment of 50% on the market value from the allotees after registering the sale deed and in the absence of plea of violation of conditions of the deed= 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.” – 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. = It is to be borne in mind, as rightly held by the High Court, that the appellant-Corporation had withdrawn the action of cancellation of the plots.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.

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