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2018 (4) TMI 487 - SC - Companies LawCancelling the allotment or demanding payment of 50% of the prevailing market value - Operation of transfer - Held that - 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 It is to be borne in mind, as rightly held by the High Court, that the appellant-Corporation had withdrawn the action of cancellation of the plots.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 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.
Issues Involved:
1. Whether the appellant-Corporation had the authority to cancel the allotments or demand 50% of the prevailing market value after executing the sale deeds. 2. Applicability of the doctrine of proportionality. 3. Relevance of conditions in the allotment letter post-execution of sale deeds. 4. Interpretation of the Transfer of Property Act and Indian Contract Act in the context of the sale deeds. Detailed Analysis: Issue 1: Authority to Cancel Allotments or Demand Additional Payment The appellant-Corporation allotted industrial plots to the respondents with the condition that units must be established within two years. Despite executing sale deeds and transferring ownership, the Corporation issued show-cause notices for cancellation due to non-compliance. The respondents argued that the Corporation lacked authority to cancel the allotments or demand additional payment after executing the sale deeds. The High Court agreed, stating that post-sale deed execution, the Corporation had no right to enforce conditions from the allotment letter. The Supreme Court upheld this, emphasizing that the sale deeds did not include the two-year completion condition, thus nullifying the Corporation's authority to impose such demands. Issue 2: Doctrine of Proportionality The High Court applied the doctrine of proportionality, questioning whether the Corporation's harsh action of cancelling allotments was justified. It concluded negatively, noting that the respondents had paid the full consideration and the Corporation had sanctioned building plans. The Supreme Court agreed, stating that the doctrine of proportionality involves balancing penalties and rights, and found the Corporation's actions disproportionate. Issue 3: Conditions in the Allotment Letter Post-Execution of Sale Deeds The High Court held that once the sale deeds were executed, the conditions in the allotment letter ceased to have any effect. The Supreme Court affirmed this, referencing Sections 5, 8, 10, and 11 of the Transfer of Property Act, which emphasize the sanctity of transfer and conveyance of property. The Court noted that the sale deeds did not include the condition of completing construction within two years, thus rendering the allotment letter conditions unenforceable post-sale. Issue 4: Interpretation of Transfer of Property Act and Indian Contract Act The High Court referred to various sections of the Transfer of Property Act and Indian Contract Act to cement its conclusion. It highlighted that the sale deed execution concluded the contract, and any further obligations would be governed by these Acts. The Supreme Court reiterated that once the sale deed is executed, the seller cannot unilaterally cancel the conveyance or impose additional conditions, as it would violate the principles laid out in these Acts. Conclusion: The Supreme Court dismissed the appeals, affirming the High Court's judgment that the appellant-Corporation had no authority to cancel the allotments or demand additional payment post-execution of sale deeds. The Court upheld the application of the doctrine of proportionality and emphasized the sanctity of the sale deed under the Transfer of Property Act and Indian Contract Act. The conditions in the allotment letter were deemed unenforceable after the sale deed execution, solidifying the respondents' absolute ownership of the plots.
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