Bombay High Court
M/S. Magma Agro Products Pvt. Ltd vs Maharashtra Industrial ... on 29 June, 2016
Bench: Ranjit More
WP 10014.14
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.10014 OF 2014
M/s. Magma Agro Products Pvt., )
A Registered Pvt. Ltd. Company )
having its head office at )
D-112, Puru Co-op. Hsg. Society, )
Airport Road, Pune - 411 032 )
Thr' Chairman and Managing Director )
Shri Chandrashekar Gaikwad ) ..Petitioner
Versus
1. Maharashtra Industrial Development )
Corporation, )
Thr' Area Manager, ig )
M.I.D.C., H.Q., Udhyog Sarathi, )
Mahakali Caves Road, Andheri (E), )
Mumbai - 400 093. )
2. Maharashtra Industrial Development )
Corporation, )
Thr' Regional Officer, )
M.I.D.C., Regional Office, )
Udyog Bhawan, Nagala Park, )
Kolhapur - 416 003. )
3. The State of Maharashtra, )
Thr' Secretary, )
Industries Department, )
Mantralaya, Mumbai. ) ..Respondents
Mr. Tejpal S. Ingale, advocate for the petitioner.
Ms. Shyamali Gadre with Mr. Abhijit Deshmukh and Mr. Aniket Kulkarni
i/b. M/s.Little and Co., advocates for respondent Nos. 1 and 2.
Ms. Aparna D. Vhatkar, AGP for respondent No.3-State.
CORAM : RANJIT MORE &
ANUJA PRABHUDESSAI, JJ.
DATE : 29th JUNE, 2016.
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WP 10014.14
Oral Judgment : (Per Ranjit More, J.)
Heard Mr. Ingale, learned counsel for the petitioner, Ms.
Gadre, learned counsel for respondent Nos. 1 and 2 and Ms.Vhatkar,
learned AGP for respondent No.3.
2. Rule. Rule is made returnable forthwith. Since the
controversy involved in the petition is short, the petition is taken up for
final hearing by consent of learned counsel for the parties.
3. By this petition under Article 226 of the Constitution of
India, the petitioner seeks to challenge the orders dated 25 th May, 2012
and 20th February, 2013 passed by respondent No.2-Regional Officer,
M.I.D.C., Kolhapur and respondent No.1-Area Manager, Maharashtra
Industrial Development Corporation respectively cancelling the
allotment of plot in favour of the petitioner and forfeiting the earnest
money deposit of Rs.36,75,000/-. The petitioner also seeks directions to
respondent Nos. 1 and 2 to refund the earnest amount of Rs.36,75,000/-
deposited by the petitioner along with interest.
4. The facts giving rise to this petition in brief are as follows:
The petitioner is registered private limited company
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engaged in manufacturing agro based products. Respondent No.3-State
Government issued a Industrial Policy for manufacturing of Neutral
Alcohol and Rectified Spirit Absolute Alcohol items based on grains in
the year-2006. The petitioner intended to install Distillery in Chandgad
Taluka of Kolhapur District. On 23 rd August, 2006, the petitioner applied
to respondent No.2- Regional Officer, M.I.D.C., Kolhapur, for suitable
industrial plot of 1,05,300 square meters' area for construction of the
said unit at MIDC Halkarni, Taluka Chandgad, District Kolhapur.
On 29th August, 2006, ig the petitioner obtained NOC from MPCB for
allotment of plot at MIDC, Halkarni, Taluka Chandgad, District Kolhapur.
On 11th September, 2006, the Maharashtra Industrial Development
Corporation (for short "the MIDC") granted approval for allotment of plot
of land to the petitioner for setting up the said unit and asked it to
furnish NOC from MPCB and State Excise Department for further action
of allotment. The MPCB gave consent letter to the petitioner on
10th November, 2006, to establish the said Distillery on certain terms and
conditions. The petitioner thereafter submitted required NOC to
respondent No.2 for further action of allotment of plot. On
22nd January, 2007, the MIDC informed the petitioner that they have
decided to offer the plot of land @ Rs.70 per square meter and
requested the petitioner to submit "Blue Application" along with
demand draft of Rs. 36,75,000/- towards earnest money. In terms of the
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offer letter by the MIDC, the petitioner obtained environmental
clearance and various NOCs from MPCB and the State Excise
Department. On 28th June, 2007/10th July, 2007, the Excise Department
issued LOI for setting up the said unit on certain terms and conditions.
The validity of the LOI was restricted to two years and it was stated that
the manufacturing of spirit will be started within that period.
In September, 2007, the petitioner also obtained term loan from
Saraswat Co-op.Bank for Rs.2190 lacs, and thereafter, requested time
and again to the MIDC for issuance of allotment order for the plot of
land before expiry of the validity period of LOI granted by the Excise
Department.
Respondent No.2 despite repeated requests of the
petitioner, failed to allot the plot before expiry of the validity period of
LOI granted by the Excise Department and ultimately on 20 th January,
2010 i.e. after expiry of the validity period of the LOI granted by the
Excise Department, sanctioned allotment of plot admeasuring 99,768
square meters to the petitioner for setting up manufacturing unit
subject to payment of premium of Rs.80,31,400/- calculated @ Rs.70/-
per square meter. The MIDC, accordingly, directed the petitioner to pay
the balance amount of Rs. 43,56,400/- within a period of thirty days from
the date of receipt of the order dated 20 th January, 2010, on the terms
and conditions specified in the allotment order.
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WP 10014.14
On 4th February, 2010, the petitioner made representation
to respondent No.2 for extension of time for payment of balance
amount as the petitioner was required to apply to the State Excise
Department for extension of the period of LOI. On 5 th February, 2010,
the petitioner applied to the State Excise Department(Government of
Maharashtra) for extension of the LOI granted earlier. Despite repeated
requests, the extension of LOI was not granted by the State Excise
Department to the petitioner.
Meanwhile, respondent No.2 and respondent No.1 by the
impugned orders dated 25th May, 2012 and 20th February, 2013
respectively cancelled the plot allotment order and forfeited the earnest
amount of Rs.36,75,000/- deposited by the petitioner. The petitioner,
thereafter, made various representations to respondent No.2 to
consider their case sympathetically and refund the earnest amount.
Respondent No.2, however, refused to do so and, therefore, the
petitioner is constrained to approach this Court by way of the aforesaid
writ petition.
5. Mr. Ingale, learned counsel for the petitioner took us
through the volumnous correspondence between the petitioner and
respondent No.2 as well as the Excise Department and submitted that
the petitioner is not at fault. He also submitted that earlier to
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WP 10014.14
cancellation of allotment and forfeiture of the earnest money,
respondent No.2 by letter dated 13th December, 2010, had agreed for
refund of earnest amount. He submitted that in similar circumstances,
respondent No.2 refunded the amount to other allottees. Mr. Ingale
relied upon Circular of MIDC dated 19 th November, 1996 and submitted
that respondent No.2 is duty bound to refund the earnest amount. He
also relied upon the decisions of the Apex Court in Teri Oat Estates (P)
Ltd. versus U.T.Chandigarh and ors. (2004) 2 SCC 130 and Jagmohan
Singh versus State of Punjab and ors. (2008)7 SCC 38.
6. Ms.Gadre, learned counsel for respondent Nos. 1 and 2
opposed the petition vehemently. She submitted that the cancellation of
allotment and forfeiture of earnest amount is done as per the terms and
conditions of the allotment order of the plot to the petitioner. She
stated that action of respondent No.2 is in consonance with the Circular
dated 22nd January, 2014 of the MIDC. She also relied upon the decision
of the Apex Court in Shri Hanuman Cotton Mills and ors. versus Tata
Air Craft Limited (1970) 3 SCR 127.
7. Having considered the rival submissions and having gone
through the petition along with annexures thereto and the ratios of
decisions cited at Bar, we find merit in the petition.
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WP 10014.14
Respondent No.2, in principle, agreed to allot the plot in
question to the petitioner by its letter dated 11 th September, 2006.
Respondent No.2 by its letter dated 22nd January, 2007 decided to offer
the plot of land to the petitioner with request to submit the "Blue
Application" and Demand Draft of Rs.36,75,000/- towards earnest
money. Respondent No.2 also directed the petitioner to obtain NOCs
from various departments. The petitioner, accordingly, deposited the
earnest amount of Rs.36,75,000/- on 22 nd February, 2007 and also
obtained NOCs from the Ministry of Environment and Forest on
6th March, 2007, and permission from the State Excise Department on
28th June, 2007/10th July, 2007, and, thereafter LOI of the State Excise
Department. It is worth to mention that the period of LOI granted by the
State Excise Department was for two years and the Excise Department
made it clear that the petitioner will not be given any extension. Under
the LOI, the petitioner was duty bound to start manufacturing of spirit
within the validity period of LOI. Thus, the petitioner, under this LOI,
was required to begin manufacturing of spirit before June-2009.
Despite deposit of 50% of the earnest amount and time
and again requests by the petitioner, respondent No.2, for the reasons
best known to them, failed to allot the land to the petitioner within the
validity period of the LOI granted by the Excise Department. Learned
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WP 10014.14
counsel for respondent Nos. 1 and 2 also could not point out any reason
as to why the petitioner was not alloted the said plot of land before the
expiry of the validity period of LOI granted by the Excise Department.
Respondent No.2, only on 20th January, 2010, made allotment of plot of
land to the petitioner on certain terms and conditions. Condition No.1
was about payment of balance amount of Rs. 43,56,400/- within period
of 30 days from the allotment order. Condition No.2 was that if the
balance payment is not made within the stipulated time, the allotment is
liable to be cancelled and condition No.3 was, in the event of allotment
being cancelled as aforesaid, respondent No.2 will be entitled to forfeit
the whole of earnest amount. The petitioner, thereafter, made written
representation to the MIDC on 4 th February, 2010 and requested for
extension of time to pay the balance amount in order to enable it to
obtain extension of validity period of the LOI from the Excise
Department. Despite the best efforts made by the petitioner, it could
not get extension of the validity of period of LOI from the Excise
Department, nor respondent No.2 granted extension for payment of
balance amount. In the absence of extension of the validity period of
LOI from Excise Department, the allotment of plot of land by respondent
No.2 to the petitioner was of no use, as the petitioner could not have
established its manufacturing unit. Had respondent No.2 allotted the
land immediately on petitioner obtaining NOCs from various
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WP 10014.14
departments and LOI from the Excise Department, the petitioner would
have been able to install distillery and start manufacturing spirit. We
find that the petitioner was not at fault and it was because of inaction on
the part of respondent No.2 that the petitioner could not comply with
the condition of LOI of the State Excise Department.
8. Mr. Ingale, learned counsel for the petitioner strongly
relied upon the circular dated 19 th November, 1996 of respondent No.1
and, in our view, rightly so. ig The circular is about refund of earnest
money/occupancy price-land premium. As respondent No.1 received
several representations regarding refund of earnest money of the
allottees of land, certain guidelines are issued under the circular. Clause
(2) of the circular has bearing to the subject matter of the present
petition and it reads as follows:
"2. When the party fails to pay the balance 50% of the
premium within time limit of one month or after grant of
extension for another 5 months from the date of
allotment order, the same is required to be cancelled
immediately on completion of the specified time limit. In
such cases along with order of cancellation the allotment
order, the refund order should also be necessarily issued.
Concerned Area Manager should process such cases
within 3 days. If the allottee before processing case for
cancellation, applies for reallotment, the case should be
processed within 7 days."
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WP 10014.14
Reading of this clause makes it abundantly clear that, in
the event, a party fails to deposit the balance premium amount of
allotment of land within stipulated time, the allotment order is required
to be cancelled and along with cancellation of the allotment order, the
refund order should also be issued by the concerned area manager. This
circular is binding on respondent No.2 and, therefore, in our considered
view, respondent No.2 could not have forfeited the earnest amount
deposited by the petitioner towards allotment of the plot of land in
question.
9. The correspondence annexed to the petition makes it clear that
respondent No.2 was aware about the said circular. As a matter of fact,
respondent No.2 wrote a letter to the petitioner on 13 th December, 2010,
and informed that the land allotment order is automatically cancelled on
account of failure on the part of the petitioner to deposit the balance
amount within 30 days. This letter also mentioned that an action is being
taken to refund the earnest amount to the petitioner after making
necessary deductions. Respondent No.2, having agreed to refund the
earnest amount to the petitioner by letter dated 13 th December, 2010,
could not have forfeited the same at later point of time. The petitioner
has annexed the order dated 26 th October, 2010, of respondent No.2 at
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page 65 of the petition. This order reveals that one Dattu Jyotiba Jadhav
was issued allotment letter for plot No.PAP-9 on 4 th December, 2009.
The said Jadhav had paid earnest money of Rs.1800/-. However, he
failed to pay the balance amount of premium of Rs.1700/- within the
stipulated time. The order also further discloses that respondent No.2
cancelled the said allotment order and directed refund of earnest
amount to the said Dattu Jyotiba Jadhav. The case of the petitioner is
similarly situated with that of Shri Dattu Jyotiba Jadhav. Respondent
No.2-being statutory authority is expected to treat the parties similarly
situated equally. The order of forfeiting the petitioner's earnest
amount, in our view, is therefore discriminatory.
10. Justifiability of the forfeiture of the earnest money by the
statutory authorities fell for consideration in the case of Teri Oat
Estates (P) Ltd. (supra) . The Apex Court considered the provisions of
Section 8-A of the Capital of Punjab(Development and Regulation) Act,
1952, under which, the Estate Officer is authorized to allow payment of
instalment/rent with penalty for the delayed period or order cancellation
of lease and forfeit the whole/part of the earnest amount. The Apex
Court held that such powers should be exercised only as a last resort.
The Apex Court further held that application of the said power would
depend upon the factual matrix in each case and no hard and fast rule
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can be laid down. It was also observed that where lessee
defaulted/delayed in payment of instalments of premium, interest
thereon and ground rent in terms of letter of allotment and
default/delay, found not to be wilful or dishonest but occasioned due to
a situation beyond his control, resort to the drastic power of resumption
and forfeiture would amount to a disproportionate action. In similar
circumstances, the Apex Court in Jagmohan Singh (supra) held that the
statutory authority should act in consonance with Article 14 of the
Constitution of India and is bound to consider the subsequent events. In
our considered opinion, these decisions are squarely applicable to the
facts and circumstances of the present case. We have already found that
the petitioner was not at any fault at all. We have also found that
because of the inaction on the part of respondent No.2 to allot the plot
of land in question immediately after the deposit of earnest money, the
petitioner could not begin manufacturing of the spirit within the time
stipulated under the LOI granted by the Excise Department. Respondent
No.2, being the statutory authority, is required to take into
consideration the subsequent events and act reasonably. We find that
the action on the part of respondent No.2 in forfeiting the earnest
deposit of the petitioner is arbitrary and, therefore, violative of Article 14
of the Constitution of India.
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WP 10014.14
11. A reference must be made to the circular and decision of
the Apex Court relied upon by Ms.Gadre, learned counsel for respondent
Nos. 1 and 2. Under the circular dated 22nd January, 2014, respondent
No.1 directed that following conditions should be included in offer letter
and allotment order :
"Condition to be inserted in the offer letter :
"In case, you fail to accept the final allotment after it is
communicated to you or fail to pay the balance of
premium amount or to execute the Agreement to
Lease, the Corporation shall forfeit the entire amount
of Earnest Money."
Condition to be inserted in the allotment letter:
A) "In case the allottee fails to pay the balance amount
of premium within a period mentioned above (period
of 30 days from the date of receipt of allotment order),
the allotment shall be liable to be cancelled without
further notice."
B) "In the event of the allotment being cancelled as
aforesaid the Corporation shall forfeit the whole of the
Earnest Money received with application.""
12. The petitioner was given offer letter on 22 nd January, 2007
and allotment order on 20th January, 2010 respectively, which is prior to
the circular dated 22nd January, 2014. This circular, in our view,
therefore, cannot be made applicable to the petitioner's case
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retrospectively. Be that as it may, respondent No.2 could not point out
that the earlier circular dated 19 th November, 1996 is modified or
cancelled by respondent No.1. So far as the decision of the Apex Court
in Shri Hanuman Cotton Mills and ors. Versus Tata Air Craft Limited
(1970) 3 SCR 127 relied upon by learned counsel for respondent Nos.1
and 2 is concerned, we are of the opinion that the same has no
application to the facts and circumstances of the present case. The Apex
Court, in that case, was considering the issue of breach of contract
between private parties under Sections 64, 73 and 74 of the Indian
Contract Act, 1872. In the present case, the issue is whether the
statutory body can act unreasonably and arbitrary by refusing to refund
the earnest amount despite there being no fault on the part of the
petitioner.
12. In the result, we accordingly make Rule absolute in terms
of prayer clauses (b)(i) and (ii). Respondent Nos. 1 and 2 are directed to
refund to the petitioner the earnest amount of Rs.36,75,000/- along with
interest @6% per annum from the date of cancellation of plot allotment
order dated 25th May, 2012. The writ petition, accordingly, stands
disposed of.
[ANUJA PRABHUDESSAI, J.] [RANJIT MORE, J.]
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