Aman Electric Works Pvt Ltd vs Delhi State Industrial And ...
2012 Latest Caselaw 1587 Del

21

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

+                            Date of Decision: 06.03.2012

%                   W.P.(C) 3792/2011 and C.M. No. 7921/2011

        AMAN ELECTRIC WORKS PVT LTD            ..... Petitioner
                    Through: Mr. L.B. Rai, Advocate

                         versus

        DELHI STATE INDUSTRIAL AND INFRASTRUCTURE
        DEVELOPMENT CORPORATION LTD AND ANR ..... Respondents
                      Through: Ms. Renuka Arora & Ms. Raashi Beri,
                               Advocates for the respondent No.
                               1/DSIIDC.

        CORAM:
        HON'BLE MR. JUSTICE VIPIN SANGHI


VIPIN SANGHI, J. (Oral)

1. By this writ petition under Article 226 of the Constitution of India, the

petitioner seeks a writ of certiorari to quash and set aside the cancellation of

the industrial plot allotted to the petitioner, vide cancellation letter dated

09.03.2005. The allotment of Plot No. 43, Pocket-J, Sector-2, Bawana

Industrial Area had been conveyed to the petitioner vide letter dated

23.10.2000. The petitioner also seeks a mandamus to the respondents,

directing the respondents to allot the said plot to the petitioner, as originally

allotted to the petitioner, or in the alternative, the petitioner seeks allotment

of any other industrial plot at the rate prevalent in the year 2000.

2. The case of the petitioner is that one of the Directors of the petitioner

company, namely, Smt. Ram Shree Bhati was running her business as a

proprietary concern under the name & style of "M/s Aman Electric Works"

in a non-confirming area. Under the orders of the Supreme Court, the said

works of the said director had to be closed down. She was entitled, under

the relocation scheme, for allotment of an industrial plot in Bawana

Industrial Estate. Accordingly, she made an application on 26.12.1996 for

an industrial plot to the respondent. Before the allotment was made in

favour of the petitioner or Smt. Ram Shree Bhati, she had already made a

deposit of Rs.2,25,600/-. The allotment of the aforesaid plot was made in the

name of M/s Aman Electric Works vide allotment letter dated 23.10.2000.

The cost of the plot indicated in the allotment letter was Rs.10,50,000/-. 50%

of the estimated cost, i.e. Rs.5,25,000/- was required to be deposited

initially. The date for making the said deposit was extended by the Supreme

Court up to 31.03.2001. The remaining amount had to be paid in

installments.

3. The case of the petitioner is that, in the meantime, the said proprietary

business was taken over by the petitioner company, i.e. M/s Aman Electric

Works Private Limited on 07.04.1997. The initial directors of the said

company were Smt. Ram Shree Bhati and Sh. Mahesh Prakash Bhati, who

are mother and son respectively.

4. The petitioner company applied for obtaining a loan from the Delhi

Financial Corporation (DFC) on 15.12.2000 to make payment of the amount

payable against the allotment of the aforesaid plot. The said loan was

provisionally sanctioned for Rs.7,37,000/- vide letter dated 26.02.2001. In

the meantime, the petitioner applied to the respondent No. 1/DSIIDC for

change of constitution of the firm from a proprietary concern to a private

limited company as also for issuance of a „No Objection Certificate‟ (NOC)

to that effect as a mandatory condition of sanction letter by DFC, on

28.03.2001. The respondent allowed the said change vide letter dated

14.05.2001 from a proprietary firm to the private limited company aforesaid,

of which Smt. Ram Shree Bhati and Sh. Mahesh Prakash Bhati were the two

directors.

5. Upon scrutiny of the records of the petitioner company by the DFC, it

transpired that there were, in fact, three directors in the petitioner company,

namely Sh. Mahesh Prakash Bhati, Smt. Ram Shree Bhati and Sh. Naresh

Chand Bhati. Since Sh. Naresh Chand Bhati was also a Director in the

petitioner company and his name had not been disclosed earlier, the

petitioner was required to obtain a No Objection Certificate (NOC) from the

respondent No. 1/DSIIDC.

6. The petitioner, accordingly, applied to the respondent No.1/DSIIDC

on 10.08.2001 to add the name of Sh. Naresh Chand Bhati in the NOC. The

petitioners have explained that the omission to mention the name of Sh.

Naresh Chand Bhati initially, when the change in the constitution of the firm

was sought from the respondent was accidental, as he was a director who

was drawing salary from the petitioner company, and the petitioners were

under the impression that his name need not be included. According to the

petitioner, the said Sh. Naresh Chand Bhati had been the director of the

petitioner company since as early as 01.01.1999, i.e. even prior to the

issuance of the allotment letter.

7. On this request for addition of Sh. Naresh Chand Bhati‟s name in the

NOC, no action was taken by the respondent despite repeated reminders sent

on 03.11.2001, 23.11.2001, 12.04.2002 & 22.04.2002. The petitioner

submits that upon a personal visit to the office of the DSIIDC, it transpired

from the records of the DSIIDC that purportedly a communication dated

23.08.2001 had been sent to the petitioner requiring the petitioner to submit

documents in respect of the request for addition of name of Sh. Naresh

Chand Bhati. The petitioner submits that this communication was never sent

to the petitioner or received by the petitioner, and a copy thereof was

received for the first time on 25.07.2002. Since the respondents have chosen

not to file the counter-affidavit, this averment of the petitioner goes

unrebutted and there is no reason to disbelieve the same.

8. The petitioner further submits that vide letter dated 29.07.2002, the

applicant provided the documents required by the petitioner, namely Form-

32 acknowledgement, Ration Card of Sh. Naresh Chand Bhati and the

affidavit from the Director and the newly appointed Director. The petitioner

again did not hear from the respondent and, consequently, the petitioner vide

communication dated 27.07.2004 enquired from the DSIIDC as to how

much amount is payable by them. At that stage, the petitioner was informed

vide impugned letter dated 09.03.2005 that since the petitioner had failed to

make 50% payment, the allotment of the aforesaid plot had been cancelled.

9. The petitioner thereafter sought reconsideration of its case by the

respondent but to no avail. The petitioner made various representations

before filing this petition. Consequently, this petition has been preferred.

10. The submission of learned counsel for the petitioner is that under the

relevant policy of the respondent, with regard to the induction of directors in

an applicant company, contained in an order dated 14.09.2001 issued under

the instructions of the Hon‟ble Lieutenant Governor, in relation to the

substitution/addition of the Director in the private limited company, it is

provided that "Conversions of proprietorship concern on (or) (sic)

partnership firm into Pvt. Ltd. co. or a Public Ltd. Co. may not be permitted.

Hence substitution/addition or deletion in the names of directors may be

allowed only among the family members. (Emphasis supplied).

11. Learned counsel for the petitioner submits that Sh. Naresh Chand

Bhati is, in fact, the brother of Sh. Mahesh Prakash Bhati and the son of Smt.

Ram Shree Bhati. He is, therefore, a family member of the existing directors

of the petitioner company. Consequently, addition of his name was

permissible under the policy of the respondent. He submits that upon a

perusal of the file notings of the respondent, which the petitioner has

obtained under the Right to Information Act, it appears that the case of the

petitioner has not been considered by application of mind. Learned counsel

submits that in the file noting dated 10.08.2002, the concerned officer has

taken note of the fact that Sh. Naresh Chand Bhati and Sh. Mahesh Prakash

Bhati are the sons of Smt. Ram Shree Bhati. It also appears that the

necessary recommendation had been made at page C-29 of the file.

However, the file noting dated 03.02.2005 shows that the said

recommendation has not been accepted by merely stating that as per

guideline date 14.09.2001, conversion of proprietary concern or partnership

concern into a private limited company is not permitted. It is argued by the

petitioner that the factum that Sh. Naresh Chand Bhati was a family member

has been ignored and that part of the policy, which permits the addition of a

family member as a Director in the converted company has been ignored.

12. The submission of learned counsel for the petitioner is that the

petitioner has already made payment of Rs.2,25,600/- before the allotment of

the said plot, including the earnest money deposit. The inability of the

petitioner to make payment of the balance amount arose from the fact that

the respondent did not properly consider the application of the petitioner to

grant NOC in respect of addition of Sh. Naresh Chand Bhati as one of the

Directors of the petitioner company. It is also submitted that the

cancellation has come about after over seven months from the time the

petitioner offered to make payment of the outstanding amount vide letter

dated 27.07.2004. Learned counsel further submits that the petitioner is

even now ready & willing to make payment of the outstanding amount with

interest, as may be decided by the Court.

13. On the other hand, learned counsel for the respondent submits that the

change in the constitution of the proprietary firm into a private limited

company had taken place in the year 1997 itself. Yet this position was not

informed to the respondent and NOC was not obtained by the petitioner.

The respondent was, much later, called upon to grant its no objection to

conversion of the proprietary firm into a private limited company which it

did vide a communication dated 14.05.2001. Learned counsel submits that

since the petitioner failed to make payment of 50% of the amount by

31.03.2001, the petitioner did not have the right to stake its claim to the plot,

allotment whereof stood cancelled. It was for the petitioner to have arranged

the money for making payment of the 50% amount by 31.03.2001 from

whichever source, and if the loan from DFC did not materialize, the said

failure could not be to the respondent‟s account. Learned counsel further

submits that the DFC issued a communication dated 01.06.2002 to the

petitioner informing it that though the loan was provisionally sanctioned on

26.02.2001, for more than a year thereafter, nothing was heard from the

petitioner of the said loan. It is submitted that the failure to mention the

name of the third director was that of the petitioner. If the said failure

resulted in the delay in the disbursement of the loan to the petitioner by the

DFC, the terms of allotment cannot be changed and the allotment is liable to

be cancelled as 50% amount was not paid by 31.03.2001. Learned counsel

has also placed reliance on a decision of this Court in P.K. Jain Vs.

Government of National Capital Territory of Delhi, L.P.A. No.615/2010

and a batch of other L.P.A.s decided by a Division Bench of this Court.

14. Having heard learned counsel for the parties, perused the record and

the decisions cited before me, I am inclined to allow this petition. There are

two aspects which arise for consideration in this case. One is with regard to

the addition of the name of Sh. Naresh Chand Bhati as one of the Directors

of the petitioner company in the records of the respondent, and the manner

in which the said request has been dealt with by the respondent. The second

is with regard to the delay in the payment of the balance amount out of the

50% amount which was payable by 31.03.2010.

15. So far as the aspect of inclusion of the name of Sh. Naresh Chand

Bhati in the records of the respondent as a director of the petitioner company

is concerned, it is clear that the action of the respondents in rejecting the said

request of the petitioner (as is evident from the office notings obtained by

the petitioner under the RTI Act) is wholly mindless. As noticed above, the

conversion of the business from a proprietary concern of Smt. Ram Shree

Bhati into a private limited company, i.e. the petitioner took place on

07.04.1997. Smt. Ram Shree Bhati and Mahesh Prakash Bhati were the two

initial directors of the company from the very inception. Subsequently, Sh.

Naresh Chand Bhati was also inducted as a director with effect from

01.01.1999. This was even prior to the allotment of the plot in question on

23.10.2000. Not only Sh. Naresh Chand Bhati is a blood relation of the two

existing directors, being the son and brother of Smt. Ram Shree Bhati and

Sh. Mahesh Prakash Bhati respectively, the factum of his being so inducted

in the year 1999 itself is evidenced by the fact that Form 32 was filed

contemporaneously. In fact, this cannot even be said to be a case of

induction of a fresh director subsequently. This is a case of an omission or a

slip on the part of the petitioners in failing to mention the name of Sh.

Naresh Chand Bhati as a director of the petitioner company when they

initially sought the conversion from a proprietary concern to the petitioner

private limited company.

16. The case of the petitioner, therefore, stood on an even higher pedestal

than the case where subsequent to allotment, a fresh director is introduced in

the allottee company. The purpose of not permitting addition/substitution of

fresh directors in the allottee company only appears to be to prevent

speculation and trading of the allotted plots by the allottee to third parties by

resort to transfer of the shareholding and change of management of the

allottee company. It is for this reason that the policy dated 14.09.2001

permits substitution/addition or deletion in the names of the directors only

among family members.

17. The failure on the part of the respondent in including the name of Sh.

Naresh Chand Bhati as a director of the petitioner company in its records

and granting its no objection is, therefore, wholly mindless and

unsustainable. It is clear that the officer who did not accept the

recommendation made in favour of the petitioner to include the name of Sh.

Naresh Chand Bhati in the no objection certificate, failed to even take notice

of the fact that he was a family member of the two original directors of the

petitioner company, and that he was a director from the date even prior to

issuance of the allotment letter. He also ignored a relevant aspect of the said

policy contained in the order dated 14.09.2011 which has been highlighted

above.

18. Now I turn to the second issue with regard to the failure of the

petitioner to make payment of the balance amount, and the consequence

thereof. It is seen from the record that the petitioner has made payment of

an amount of Rs.2,25,600/-. The petitioner, without delay, applied to the

DFC to obtain the requisite loan as early as on 15.12.2000. This loan was

also sanctioned before the expiry of 31.03.2001 for an amount of

Rs.7,37,000/-, which would have been sufficient to cover practically the

entire costs of the plot, if one were to take into account the amount already

paid.

19. Pertinently, even though, according to the respondent the last date for

making payment of 50% of the amount was 31.03.2001, the respondent

continued to entertain and deal with the petitioner. The respondent granted

its no objection certificate for conversion from a proprietary firm to the

private limited company on 14.05.2001. The petitioners application for the

said purpose had been made on 28.03.2001, i.e. prior to 31.03.2001.

20. Even thereafter, when the petitioner sought inclusion of the name of

Sh. Naresh Chand Bhati in the no objection certificate vide letter dated

10.08.2001 (i.e. after 31.03.2001), the respondent did not get back to the

petitioner to say that since the 50% amount had not been paid by

31.03.2001, the allotment stood cancelled and therefore there was no

purpose for adding the name of Sh. Naresh Chand Bhati in the no objection

certificate.

21. Even when the petitioner issue reminders on 03.11.2001, 23.11.2001,

12.04.2002 and 22.04.2002, the respondent did not send any response and

maintained sphinx like silence.

22. Pertinently, form the respondents records, it appears that the

respondents indeed acted on the said requests of the petitioner and

purportedly prepared the communication dated 23.08.2001 requiring the

petitioner to submit various documents. The petitioner, it appears, did not

receive this communication and was given a copy only on 25.07.2002 on a

personal visit. Till then, the respondent did not claim that the allotment of

the petitioner had been cancelled due to non payment of 50% of the amount

by 31.03.2001. When the petitioner sent the letter dated 29.07.2002,

providing the requisite information, then too, the respondent did not inform

the petitioner that the allotment of the plot in question stood cancelled.

23. Only when the petitioner enquired from the respondent as to how

much amount is payable vide letter dated 27.07.2004, after a lapse of seven

months thereafter, the impugned communication was issued stating since the

petitioner had failed to deposit the first 50% payment by 31.03.2001, the

allotment of the plot had been cancelled.

24. The effect of this belated cancellation and of keeping the petitioner

engaged in undertaking correspondence and providing documents has been

that the petitioner has been kept waiting and given a legitimate hope and

expectation that the petitioner would be able to secure the said plot once the

formalities and hurdles are cleared and payment received from the petitioner.

25. If, according to the respondents, the petitioner became disentitled

from receiving the allotment upon failure to make payment of 50% of the

amount by 31.03.2001, the respondent should have communicated the

cancellation and refunded the amount received by it from the petitioner soon

after 31.03.2001, or within a reasonable time thereafter. In that eventuality,

the petitioner would have known its position and status with regard to the

allotment of the plot in question, and would have had the funds already

invested by it in its hands to look for another appropriate place. By keeping

the hopes of the petitioner alive and by retaining its moneys to the tune of

Rs.2.25 lacs from 2000 to 2005 (and probably even thereafter, as it is not

disclosed whether the amount has been offered for refund or refunded, even

today), the respondent has seriously prejudiced the petitioner, by its own

conduct.

26. In Reliable Laboratories (P) Ltd. & Anr. v. Delhi Development

Authority & Anr., 43 (1991) DLT 312, the petitioner participated in an

auction for purchase of an industrial plot. The petitioner deposited 25% of

the bid amount as a part of the sale price. The petitioner was called upon to

make deposit of the balance amount. The petitioner moved an application

for extension of time. The petitioner was issued a show cause notice to

show cause as to why the petitioners bid may not be cancelled for breach of

the terms and conditions in making the payment. Only thereafter, the

petitioner made payment of the balance amount. Since the petitioner could

not get possession of the plot, the petitioner served a notice on the

respondent claiming damages besides seeking possession. Thereafter the

impugned communication was issued by the respondent stating that as the

amount had not been received within the stipulated period, the

allotment/auction bid was cancelled. Consequently, the petitioner preferred

the said writ petition. The Court allowed the writ petition on the basis that

in several other cases, the time for payment had been extended. The Court

observed that there was no valid explanation furnished by the respondents as

to why the balance amount was accepted from the petitioners, and the bid

was cancelled only after the petitioners had served a notice on the

respondents, in which damages were also claimed.

27. In the present case, though the respondent has not accepted any

payment, its conduct in continuing to entertain the petitioners application for

grant of NOC even after 31.03.2001 signifies the clear intent of the

respondent to deal with the petitioner and to process the petitioner‟s case for

allotment of the plot in question.

28. The decision in Reliable (supra) was applied by the Division Bench of

this Court in M/s. Dimpy Fashions (India) v. Delhi Development Authority,

46 (1992) DLT 176 (DB). In this case as well, the auction bidder had failed

to make payment of the balance amount in time after making the initial

deposit of the bid amount. After issuance of the show cause notice, the

allotment was cancelled. The Court permitted the petitioner to make

payment of the balance amount alongwith interest.

29. In Shri Ashok Kumar Kanojia & Anr. v. Delhi Development

Authority & Anr., ILR (2003) I Del 118, the petitioner upon allotment of the

plot deposited 75% of the bid amount within time. A show cause notice was

issued to the petitioner for cancellation of the plot in question on account of

his failure to deposit the balance amount. Only thereafter, the petitioner

deposited the balance amount with interest. After a lapse of 3 ½ years, the

DDA decided to cancel the allotment which was challenged before the

Court. The Court held that what was material and crucial to the case was

that the aspect of condonation of delay and extension of time for depositing

the balance amount was kept pending over a period of 3 ½ years, and only

thereafter the petitioner was informed that extension of time could not be

granted for deposit of the balance amount. The delay in taking the decision

whether or not to grant extension of time itself was a consideration which

should have weighed with the Central Government before whom the case for

extension of time was placed. The Court relied upon the decision in

Reliable (supra) and Dimpy Fashions (supra). The Court held that despite

having made payments in 1993, the petitioners were without a plot for 10

years and had suffered enough, though their suffering was largely self

created, the Court directed the petitioner to make payment of interest @ 18%

p.a. on the delayed payment.

30. The decision in P.K. Jain relied upon by the respondent, in my view,

is distinguishable. In those cases, the DFC had not forwarded the loan

amount to the DSIDC, as, according to the DFC, the appellants/allottees had

not executed all the documents and completed the formalities for issuance of

loan. It appears that the DSIDC, therefore, proceeded to cancel the

allotment. However, in the present case, the DSIDC did not cancel the

allotment soon after 31.03.2001 or within a reasonable time thereafter. It

continued to deal with the petitioner, as aforesaid, by firstly permitting the

conversion from proprietary concern to a private limited company on

14.05.2001 (i.e. after 31.03.2001), and even thereafter, by issuing the

communication dated 23.08.2001 in relation to the addition of name of Sh.

Naresh Chand Bhati (which was not received by the petitioner). The

cancellation came only on 09.03.2005, i.e. seven months after the petitioner

initially enquired of the respondent as to how much amount is payable by the

petitioner vide letter dated 27.07.2004.

31. The respondent, in my view, are, therefore, not entitled to, in equity,

to cancel the allotment made to the petitioner at the belated stage that it did.

The petitioner had paid a substantial amount, and made arrangement to pay

the balance amount by applying for, and getting a provisional approval of

loan from the DFC. At the same time, since the petitioners have not paid the

balance amount, they cannot be permitted to profit from it, and should be

required to make payment of the balance amount of the plot alongwith

adequate interest to compensate the respondent.

32. Accordingly, the respondent is directed to make allotment of a similar

plot to the petitioner by adjusting the amount already paid by the petitioner

and requiring the petitioner to make payment of the balance amount

alongwith 18% p.a. with effect from 01.04.2001 onwards. The petitioner

shall make payment of the balance amount within two months of the

allotment letter being issued. It is made clear that failure on the part of the

petitioner to make payment of the balance amount with interest, as aforesaid,

shall entail cancellation of the plot so allotted.

VIPIN SANGHI, J MARCH 06, 2012 'BSR'/sr