1998 (12) TMI 479 - SC - Companies Law

Whether the assignee has a legal right to claim performance of any part from the allottor? Held that - Appeal dismissed. Here the agreement was entered into between the Corporation and the allottee, as a sequel to the request made by the allottee to give him an industrial plot for the purpose of setting up an industry. Corporation reciprocated to the request on being satisfied that the allottee was able to carry out the obligations so as to accomplish the purpose of allotment thus f the allottee evacuates from the scene after inducting someone else into the plot without consent of the Corporation, it is not legally permissible for the inductee to compel the Corporation to recog- nise him as the allottee. Thus in agreement with the conclusion of the High Court that the petitioner has no locus standi to question the validity of the order of resumption.

Issues Involved:
1. Validity of the resumption order by the Corporation.
2. Locus standi of the petitioner to challenge the resumption order.
3. Applicability of Section 52 of the Transfer of Property Act, 1882.
4. Enforceability of Clause 7 of the agreement between the Corporation and the allottee.

Detailed Analysis:

1. Validity of the Resumption Order by the Corporation:
The Corporation issued a notice to the original allottee (York Printers) on 6-1-1984, calling upon them to show cause why the plot should not be resumed due to the failure to establish the industrial unit within the stipulated time. The Corporation was not satisfied with the allottee's response and resumed the plot on 16-3-1984. The trial court initially declared the resumption order as "manifestly illegal and beyond jurisdiction," but the first appellate court reversed this decision, holding that the Corporation was within its rights to resume the plot as per the terms of the allotment.

2. Locus Standi of the Petitioner to Challenge the Resumption Order:
The petitioner, who purchased the rights from the original allottee during the pendency of the suit, was impleaded as the second plaintiff. The High Court held that the petitioner had no locus standi to question the resumption order, as there was no privity of contract between the petitioner and the Corporation. The contract was between the original allottee and the Corporation, and the allottee had failed to fulfill the terms and conditions of the allotment. Consequently, upon resumption, the plot became the absolute property of the Corporation, leaving the allottee with no transferable rights.

3. Applicability of Section 52 of the Transfer of Property Act, 1882:
The High Court agreed with the petitioner that Section 52, which deals with the doctrine of lis pendens, was not a bar against transferring property during litigation. However, the core issue was whether the second plaintiff had any legal standing to challenge the resumption order, which was ultimately found lacking.

4. Enforceability of Clause 7 of the Agreement:
Clause 7 of the agreement required the allottee to start construction within six months and complete it within two years from the date of the allotment letter, with the provision that the plot could be resumed by the Corporation if these conditions were not met. The High Court and the Supreme Court found this clause enforceable and binding. The petitioner's argument that the Corporation had no power of resumption was rejected, as the agreement clearly outlined the conditions under which the plot could be resumed. Furthermore, the petitioner's claim that the inability to establish the industrial unit was due to reasons beyond the allottee's control was not substantiated with sufficient evidence.

Conclusion:
The Supreme Court upheld the High Court's judgment, concluding that the petitioner had no locus standi to challenge the resumption order and that the resumption was in accordance with the terms of the agreement. The special leave petition was dismissed, affirming the enforceability of Clause 7 and the Corporation's right to resume the plot due to non-compliance by the original allottee.

← Previous Next →