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TMI Blog2008 (1) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the fact that even before it could go into production, the company became sick company and was referred to BIFR, which ultimately resulted in winding up of the company. In the result, this application is allowed granting permission to APIIC, applicant herein, to cancel allotment of the land admeasuring Acs. 1.22 in survey No. 82/2 situated at Hafeezpet village of Serilingampalli Mandal in Ranga Reddy District. While doing so, APIIC shall consider question of forfeiting/refunding the sale consideration paid by M/s. Ambuja Petro Chemicals Limited (in liquidation). There shall be no order as to costs. - COMPANY APPLICATION NO. 734 OF 2003 IN RCC NO. 4 OF 1997 - - - Dated:- 31-1-2008 - V.V.S. RAO, J. A. Gopala Krishna for the Applicant. R. Subba Rao and M. Anil Kumar for the Respondent. ORDER 1. This application is filed by Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC) under section 446 of the Companies Act, 1956 ( the Act , for brevity) and rule 9 of Companies (Court) Rules, 1959 ( the Rules , for brevity), seeking permission to issue orders cancelling allotment of land and resume possession of land admeasuring Acs. 1.22 gunta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ird parties, who made constructions thereon. 4. Learned Standing Counsel for APIIC submits that clause 14( b ) of the agreement obliges APCL to obtain necessary approvals from statutory authorities and commence construction of factory building and complete within a period of eighteen months. Under the said clause allottee shall have to utilize scheduled land for the purpose for which it was allotted and if it is not utilized, under clauses 18 and 19, APIIC can resume unutilized land or cancel the contract, treating the allottee as trespasser and take possession of scheduled land. He placed strong reliance on the decision of Supreme Court in Indu Kakkar v. Haryana State Industrial Development Corpn. Ltd. AIR 1999 SC 296 1 in support of his contention that such a clause is enforceable in law. Per contra , learned Counsel for OL submits that agreement dated 16-7-1990 between APIIC and APCL cannot be given effect to, as there are material alternations in clause 14( b ), which are not duly attested or acknowledged by the signatory on behalf of APCL. Secondly he submits that notwithstanding clauses 18 and 19, APIIC cannot cancel the agreement when entire sale consideration is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tilized, the Party of the first part shall have a right to resume such portion of the land. 19. If the Party of the second part commits breach of any of the covenants herein contained the allotment stand cancelled and this Agreement shall stand determined without any notice whereupon the party of the second part will be treated as an encroacher and trespasser who will have no right whatsoever in the scheduled property under these presents and it shall be lawful for the party of the first part to resume the possession of the scheduled land in the name of the whole along with the building thereon forfeiting the amounts paid by the party of the second part and the party of the second part shall not be entitled to any compensation/damages for the buildings constructed/loss sustained. In cases where the party of the second part was given permission to raise finance under clause ( 6 ) of this Indenture, a notice giving 90 days time from the date of the notice to remedy the breach of the condition/default under this Agreement, will be given by the party of the first part to the party of the second part/Financial Institutions/Banks to remedy the breach within the time granted, in such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial Development Corporation Ltd. (HIDC) under registered deed of conveyance dated 10-12-1992. The initial allottee was M/s. York Printers, who did not establish the industrial unit. Clause 7 provided that the allottee shall commence construction of building within six months and complete within two years, and complete installation of machinery within three years failing which HIDC is entitled to cancel agreement and resume possession. In exercise of said power, HIDC resumed land on 16-3-1984. A suit was filed by the allottee for declaration that resumption is illegal and void. When the suit was pending, Indu Kakkar purchased property under registered sale deed dated 27-12-1989 and got impleaded in suit. The suit was decreed but the first appellate Court as well as High Court in Second Appeal reversed the Trial Court Judgment. The High Court in its judgment observed that, "no indulgence of any kind can be shown by the Court to claim which is not bona fide nor can the Court come to the aid of a person trying to resile from the express obligation undertaken by him with the State or its Agencies." A Special Leave Petition came to be filed. As a finding of fact, the Apex Court came t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee for non-compliance with the terms of agreement was upheld. It was held that, "... right of resumption by the APIIC for the admitted failure on the part of the company to utilize the land for the purpose for which it was allotted, in our considered opinion, is not vitiated for any reason whatsoever. That once the resumption orders are to be upheld the land reverts to and vests in APIIC". 8. Learned Counsel for OL relies on an unreported judgment of this Court in APIIC v. Teamasia Lakhi Semiconductors Ltd. [CA Nos. 474 and 1801 of 2006 in CP No. 178 of 2003, dated 28-6-2007] ( Teamasia Lakhi , for brevity). In this case, Justice Ananda Reddy (as His Lordship then was) was dealing with an application filed by APIIC seeking leave of Court to cancel allotment of Acs. 12.05 guntas in IDA, Patancheru, which was allotted to Team Asia. Initially, APIIC allotted the land on 31-8-1998. For non-compliance with the conditions of agreement regarding grounding the industrial unit, the allotment was cancelled. In February, 2000, Team Asia again requested for allotment. By proceedings, dated 13-3-2000, the same land was allotted on outright sale basis for a provisional sale consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cancelling the allotment and ordering resumption. The appeal was dismissed by Chief Administrator, Union Territory of Chandigarh, which was confirmed by Punjab and Haryana High Court. The case, therefore, landed in Apex Court. Supreme Court did not consider the question whether such a clause is enforceable or such a clause is unconscionable in case of absolute alienation. What was considered by Supreme Court was the question whether the Estate Officer must invoke the drastic power of resumption and forfeiture while initiating proceedings under Clause 8A. It was also a question before Supreme Court whether applying doctrine of proportionality, the action of Estate Officer can be sustained when the allottee paid interest for delayed payment. Keeping this background of the case in view, Supreme Court disposed of the allottee s appeal granting time for payment within stipulated time. Supreme Court also observed as below: "57. We may, however, hasten to add that we do not intend to lay down a law that the statutory right conferring the right of the respondent should never be resorted to. We have merely laid down the principle giving some illustrations where it may not be used. There c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of land as per clauses 18 and 19. Indeed a reading of clause 19 would show that there need not be any separate order for cancellation. The moment there is a breach of clauses 14 and 18, clause 19 springs into action. The result would be, "the allotments stand cancelled and agreement shall stand determined without any notice". Upon such event happening, the allottee shall be treated as trespasser/encroacher and APIIC can take necessary action for eviction and resumption of land allotted. 12. From November, 1990, the concerned officials of APIIC went on sending reminders to the company to take necessary steps for implementing the project in the land allotted to them duly furnishing documentary proof to APIIC. Ultimately, in August, 1994, company addressed a letter, dated 25-8-1994, informing that due to severe financial problems they could not implement project and that they would require six months time to respond to communication of APIIC. A year thereafter the company again addressed APIIC saying that company has been declared as sick unit under Sick Industrial Companies (Special Provisions) Act, 1986 (SICA) and referred to Board for Industrial and Financial Reconstruction (B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed format of agreement, allottee was required to commence construction within six months. Whatever be reason, instead of six months it was made three months. This was never disputed by the company, as lacking mutual agreement. Nextly clause 14( b ) does not enable APIIC to take action for cancellation or resumption. Such power is contained in clauses 18 and 19 to which a reference is already made. When land is not utilized, agreement stands cancelled automatically and the allottee is treated as a trespasser or encroacher. Clauses 18 and 19, in the opinion of this Court, operate even if clause 14( b ) or a clause requiring the allottee to make construction within a stipulated time is not part of the agreement. 15. In Polymat India (P.) Ltd. s case ( supra ), appellant took two fire policies in respect of building, machinery, accessories and furniture of National Insurance Company Limited (NICL). Insured requested insurer to amend the policies by making certain corrections. This was not done. A claim was made for insurance amount with reference to a fire accident on 13-1-1993 in which entire building, furniture, fixtures and fittings, stocks-in-process lying outside fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by single witness produced by the Insurance Company before National Forum. In this connection, our attention was invited to decision of this Court in the case of United India Insurance Co. Ltd. v. M.K.J. Corpn. (1996) 6 SCC 428 wherein it was observed as under: AIR 1997 SC 408 : 1996 AIR SCW 3787, Para 7 ... After the completion of the contract, no material alteration can be made in its terms except by mutual consent . Therefore, in the present case when the proposal was sought to be amended and it was only agreed to by the Insurance Company to the extent substituting the Bank i.e., Allahabad Bank and the other amendments were not agreed by the Insurance Company, the complainant had a choice to repudiate the insurance policy or to obtain a proper declaration. But the complainant did not pursue the matter further, it is to be blamed itself for this." 16. Applying the above principle any handwriting in clause 14( b ) cannot be treated as material alteration. If there was such an amendment effected by APIIC unilaterally nothing prevented the company to raise such objection. Secondly applying the principle that a contract has to be interpreted strictly as understood by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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