Manmohan Kumar Garg And Another vs The Assistant Estate Officer

Manmohan Kumar Garg and another ....Petitioners

Versus

The Assistant Estate Officer, U.T., Chandigarh and others

....Respondents

(ii) CWP No. 23206 of 2010 (O&M)

Ashwani Kumar Garg and another ...Petitioners

Versus

The Assistant Estate Officer, U.T., Chandigarh and others

....Respondents

Present: Shri Akshay Bhan, Advocate, for the petitioners.

Shri Sanjay Kaushal and Ms. Samriti Dhir, Advocate, for the respondents.

(iii) CWP No. 20990 of 2011 (O&M)

Gurdev Singh & another .....Petitioners

Versus

U.T. Administration and others ....Respondents

Present: Shri Ram Lal Gupta, Advocate, for the petitioners.

M/s Sanjay Kaushal and Vishal Suri, Advocates, for the respondents.

(iv) CWP No. 16010 of 2011 (O&M)

Jupinder Singh .....Petitioner

Versus

Union Territory, Chandigarh and others ....Respondents CWP No. 23204 of 2010 (O&M) ( 2

Present: Shri Animesh Sharma, Advocate, for the petitioner.

Shri Sanjay Kaushal, Advocate, for the respondents.

CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE A.N. JINDAL

HEMANT GUPTA, J.

This order shall dispose of the above mentioned four writ petitions,

wherein challenge is made to the order passed by the respondents

cancelling auction in favour of the petitioners and forfeiting 25% of the

amount of auction price paid in terms of Rule 5 of the Chandigarh Estate

Rules, 2007 (for short `the Rules'). The facts in all the cases are identical,

but to facilitate the decision, the facts are taken from CWP No. 23204 of

2010.

The petitioners herein participated in the auction of the residential

plot No. 442, Sector 46-A, Chandigarh, held on 23.10.2008 by the Estate

Office and were declared the highest bidders having offered a sum of

Rs.2.78 crores. 25% of the auction amount was paid at the time of fall of

the hammer i.e. Rs.69.50 lacs. An agreement was executed on the said

date, which contemplated that the balance amount of 75% of the

consideration money shall be paid in 90 days in terms of the provisions

of the Chandigarh Estate Rules, 2007 and failure to deposit 75% of the

consideration money shall result in cancellation of the allotment and

forfeiture of the amount deposited by the purchasers.

The petitioners are said to have made a representation on

14.1.2009 i.e. within a period of 90 days requesting for extension of time

to make payment in the light of the global melt down and depression,

due to which fact, the Banks and the Financial Institutions were not

lending any financial assistance. The respondents, without considering CWP No. 23204 of 2010 (O&M) ( 3

the request for extension, cancelled the allotment on 11.2.2009 and

forfeited 25% of the payment made by the petitioners, relying upon the

Rule 5 of the Rules and Clause (3) of the agreement.

The petitioners challenged the aforesaid order by way of an appeal

before the Chief Administrator. The petitioners in the meantime also

obtained loan from the Indian Overseas Bank. The appeal was dismissed

though an argument was noticed that the petitioners are ready to pay the

outstanding dues. The appeal was dismissed for the reason that the

petitiones failed to deposit the balance dues within the prescribed period

of 90 days and therefore, the order of cancellation of lease and forfeiture

passed is just. The revision before the Advisor to the Administrator was

dismissed though the argument raised that the Chief Administrator can

extend the period of deposit of the amount subject to payment of interest

@ 12% for the period of delayed period, was not accepted. The learned

Advisor relied upon the order passed in Civil appeal No. 4550 of 2007

titled as `Chandigarh Administration vs. Vipan Kumar' to return a

finding that the property was sold in public auction and the petitioners

have failed to deposit 75% of the consideration money and that in terms

of Rules, 25% of the amount deposited is liable to be forfeited on failure

of payment of the 75% of the consideration money and thus, the order

passed by the Estate Officer is justified. Still aggrieved, the petitioners

have challenged the orders passed by the authorities in the present writ

petition. The petitioners have produced a demand draft in the sum of

Rs.2.00 crores along with the writ petition to show their bona-fides to

deposit the balance auction amount.

In the written statement filed, it is alleged that in terms of the

statutory Rules, an agreement was entered upon and as per the Rules

and the agreement, 25% of the amount deposited is liable to be forfeited

for failure of the petitioners to deposit the balance 75% of the amount

within 90 days.

CWP No. 23204 of 2010 (O&M) ( 4

Before we consider the respective arguments, some of the

statutory provisions of the Capital of Punjab (Development and

Regulation) Act, 1952 (for short `The Act') and The Chandigarh Estate

Rules, 2007 ( for short the Rules) need to be extracted:-

"Capital of Punjab (Development and Regulation) Act, 1952

2. Definitions - In this Act, unless the context otherwise requires,-

xx xx xx (k) "transferee" means a person (including a firm or other body

of individuals, whether incorporated or not) to whom a site or building is transferred in any manner whatsoever, under this Act and includes his successors and assigns.

xx xx xx

3. Power of Central Government in respect of transfer of land and building in Chandigarh - (1) Subject to the provisions of this section, the Central Government may sell, lease or otherwise transfer, whether by auction, allotment or otherwise, any land or building belonging to the Government in Chandigarh on such terms and conditions as it may, subject to any rules that may be made under this Act, think fit to impose. (2) The consideration money for any transfer under sub-section (1) shall be paid to the Central Government in such manner and in such instalments and at such rate of interest as may be prescribed.

(3) Notwithstanding anything contained in any other law for the time being in force, until the entire consideration money together with interest or any other amount, if any, due to the Central Government on account of the transfer of any site or building, or both, under sub-section (1) is paid, such site or building, or both, as the case may be, shall continue to belong to the Central Government.

xx xx xx

8. Imposition of penalty and mode of recovery of arrears.- (1) Where any transferee makes any default in the payment of any rent due in respect of any lease or any site or building or both, as the case may be, under section 3, or where any transferee or occupier makes any default in the payment of any fee or tax levied under section 7, the Estate Officer may direct that in addition to the amount of arrears, a sum not exceeding CWP No. 23204 of 2010 (O&M) ( 5

that amount shall be recovered from the transferee or occupier, as the case may be, by way of penalty;

Provided that no such direction shall be made unless the person affected thereby has been given a reasonable opportunity of being heard in the matter.

(2) Where any person makes any default in the payment of any amount, being the arrears and penalty directed to be paid under sub-section (1), such amount may be recovered from the transferee or occupier, as the case may be, in the same manner as an arrears of land revenue.

8-A. Resumption and forfeiture for breach of conditions off transfer - (1) If any transferee has failed to pay the consideration money or any instalment thereof on account of the sale of any site or building or both, under Section 3 or has committed a breach of any other conditions of such sale, the Estate Officer may, be notice in writing, call upon the transferee to show cause why an order of resumption of the site or building, or both, as the case may be, and forfeiture of the whole or any part of the money, if any, paid in respect thereof which in no case shall exceed ten per cent of the total amount of the consideration money, interest and other dues payable in respect of the sale of the site or building, or both should not be made.

(2) After considering the cause, if any, shows by the transferee in pursuance of a notice under sub-Section (1) and any evidence he may produce in support of the same and after giving him a reasonable, opportunity of being heard in the matter, the Estate Officer may, for reasons to be recorded in writing, make an order resuming the site or building or both, as the case may be, so sold and directing the forfeiture as provided in sub-section (1) of the whole or any part of the money paid in respect of such sale.

xx xx xx

22. Power to make rules.- (1) The Central Government may, by notification in the official Gazette, make rules for carrying out the purposes of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely-

(a) the terms and conditions on which any land or building may be transferred by the Central Government under this Act;

(b) the manner in which consideration money for any transfer may be paid;

CWP No. 23204 of 2010 (O&M) ( 6

(c) the rate of interest payable, and the procedure for payment

of instalments, interest, fees, rents or other dues payable under this Act;

(d) the terms and conditions under which the transfer of any right in any site or building may be permitted."

"Chandigarh Estate Rules, 2007.

Rule 5. Sale/Lease by Auction.

(i) In case of sale/lease by auction, the interested bidders will have to deposit an earnest money of Rupees two lakhs, in cash or by means of demand draft drawn on any Scheduled Bank situated at Chandigarh in favour of Estate Officer, U.T., Chandigarh with the Estate Officer, U.T., Chandigarh in order to become eligible for participating in the auction.

(ii) On the acceptance of the highest bid, twenty five per cent of the bid accepted by the auctioning officer shall be paid at the fall of the hammer by the highest auction purchaser by means of demand draft drawn in favour of Estate Officer U.T., Chandigarh.

(iii) If the auction purchaser fails to pay the amount of 25% of the auction price at the fall of hammer, the earnest money deposited under sub-rule (i) above shall be forfeited.

(iv) Thereafter, an agreement to sell shall be executed between the Estate Officer, U.T., Chandigarh and the auction purchaser in the prescribed form as at Form B or Form B-1, as the case may be, with a stipulation that in case of default in making timely payment of the remaining balance of 75% within the stipulated time period, the amount of 25% paid by the auction purchaser shall be forfeited. However, in case the Chandigarh Administration fails to fulfil its obligation to allot/lease out the property for any reason or in public interest, the Administration shall return the amount of 25% so paid by the auction purchaser and the intending purchaser shall have no claim to any damages.

(v) The remaining 75% of the consideration money shall be deposited by the intending purchaser in lump sum within 90 days of the date of the auction by ay of the prescribed mode of payment failing which the offer of allotment shall be deemed to have been cancelled and the payment made under sub-rule (ii) shall be forfeited and the intending purchaser shall have no claim to any damages:

Provided further that in case of allotments to Government(s) or semi Government or autonomous bodies/organizations, the period for the above said payment may be extended by the Chief Administrator on a written request by the CWP No. 23204 of 2010 (O&M) ( 7

organization/Department justifying the delay to the satisfaction of the Chief Administrator, subject to payment of interest @ 12% per annum for the period of delayed payment, provided that such delay shall in no case exceed one year or 12 months in the whole."

xx xx xx

14. Breach of terms and conditions of allotment.

(i) Notwithstanding anything contained in these rules, the Estate Officer may, by notice in writing, cancel the allotment/lease and forfeit whole or any part of money, if any, paid in respect thereof which in no case shall exceed 10% of the consideration money, ground rent, interest and other dues payable in respect of the sale/lease of the site or building or both, on the ground of default, breach or non-compliance of any terms and conditions of allotment or for furnishing in writing incorrect information under explanation II of Rule 5.

Learned counsel for the petitioners has argued:-

i) that The Chandigarh Estate Rules, 2007 have been framed by

the Administrator, whereas in terms of Section 22, the Rules

can be framed only by the Central Government, therefore, the

Rules framed are beyond the legislative competence of the

Administrator.

ii) Rule 5(v) of the Rules is in direct conflict with Section 8-A of the

Act, which provides for an opportunity of hearing before

resumption of a plot. There cannot be any deemed cancellation

of the lease for failure to deposit 75% of the amount within 90

days. The said Rule contemplating the deemed cancellation, is

harsh, unreasonable and contravenes the principles of natural

justice as were the reasons to strike down Section 9 of the Act,

as originally enacted. Therefore, such Rule is illegal.

iii) Rules 5 and 14 of the Rules contradicts each other. Rule 5(v)

provides for deemed cancellation on account of the failure to

deposit the balance sale consideration within 90 days; whereas

Rule 14 contemplates forfeiture of the amount deposited, in no

case, shall exceed 10% of the consideration money, ground CWP No. 23204 of 2010 (O&M) ( 8

rent, interest and other dues payable in respect of the

sale/lease of the site or building or both, and that no order of

cancellation of lease/allotment/ forfeiture shall be made unless

the lessee is given a reasonable opportunity of hearing heard.

Since Rule 14 has been given overriding effect over all other

rules, therefore, there cannot be any deemed cancellation

without giving a reasonable opportunity of being heard in

terms of Rule 14 and Section 8-A of the Act.

We do not find any merit in the first argument that the

Administrator was not competent to frame the Rules in terms of Section

22 of the Act. Section 22 of the Act empowers the Central Government

to frame the Rules for carrying out the purposes of the Act. Similar

argument was raised before a Division Bench of this Court in Punjab

Financial Corporation, Chandigarh. v. The Union Territory Chandigarh

and others, (1991)1 ILR (P&H) 140. It has been held that wherever the

expression "State Government" is used in relation to the Union Territory,

the Central Government would be the State Government. The

Administrator exercises the powers of the Central Government in relation

to the Union Territory of Chandigarh. The relevant extracts from the said

judgment read as under:-

"(3) So far as the first aspect of the matter as highlighted by the learned counsel for the petitioners is concerned, the same, to my mind, stands conclusively answered by the latest pronouncement of the Supreme Court, reported as Goa Sampling Employees' Association v. General Superintendent Co. of India Pvt. And others, AIR 1985 SC

357. While examining the arguments that in relation to a Union Territory there is no State Government and the Central Government, if at all can be said to be one, is the only Government and in the absence of a State Government, the Central Government will also have all the powers of the State Government, and therefore, the Central Government would be the appropriate Government for the purpose of CWP No. 23204 of 2010 (O&M) ( 9

making reference, their Lordships, after analysing the various provisions of the Constitution, posed the question":

"Would it be constitutionally correct to describe the Administration of a Union Territory as State Government?"

and answered it in the following manner. It clearly transpires that the concept of the State Government is foreign to the administration of Union Territory and Article 239 provides that every Union Territory is to be administered by the President. The President may act through an Administrator appointed by him. Administrator is the delegatee of the President. His position is wholly different from that of a Governor of a State. Therefore, at any rate the Administrator of a Union Territory does not qualify for the description of a State Government. Wherever the expression "State Government" is used in relation to the Union Territory, the Central Government would be the State Government. Therefore, the Central Government is the appropriate Government Clause (f) of Rule 2 of 1957 Rules framed under the Act further takes the matter beyond the pale of controversy when it says in relation to an industrial dispute in a Union Territory for which the appropriate Government is the Central Government reference to the Central Government or the Government of India shall be construed as reference to the Administrator of the Territory. It is thus abundantly clear that for purposes of these references, the Central Government was the State Government and in view of Section 8(b)(iii) of the General Clauses Act, the Administrator of the Union Territory has to be taken to be the Central Government if his action was otherwise within the authority given to him." (Emphasis supplied)"

Section 22 of the Act empowers the Central Government to frame

rules to give effect to the purposes of the Act. The rules have been framed

and notified by the Administrator appointed under Article 239 of the

Constitution as an appointee of the Hon'ble President and acting as

delegatee of the Central Government. This is apparent from the

notification promulgated while publishing the rules. Thus, such Rules

have been validly framed by the Administrator.

CWP No. 23204 of 2010 (O&M) ( 1

The argument of the learned counsel for the petitioner that Rule

5(v) of the Rules is illegal, contrary to the statutory provision contained

in Section 8-A of the Act merits acceptance. The brief legislative history

would be relevant to appreciate the arguments raised. Section 9 of the

Act, as originally enacted, contemplated resumption of site or building

and forfeiture of the whole or any part of the money paid for breach of

the condition of the sale. The said Section, before its repeal, reads as

under:-

"9. Forfeiture for breach of condition of transfer.- In the case of non payment of consideration money or any instalment thereof on account of the transfer of any site or building under Section 3 or of any rent due in respect of the lease of any such site or building or in case of the breach of any other conditions as such transfer or breach of any rules made under this Act, the Estate Officer may, if he thinks fit, resume the site or building so transferred and may further forfeit the whole or any part of the money, if any paid in respect thereof."

The legality of such provision came up for consideration in a

judgment reported as M/s Jagdish Chand Radhey Shyam v. The State of

Punjab (1973)3 SCC 428. The Hon'ble Supreme Court held in view of the

then existing provision contained in Section 3 of the Act that the unpaid

consideration money will be first charge on the site or building, as the

Government after sale does not remain owner. Such charge is

enforceable under the Transfer of Property Act, and also Punjab Public

Premises and Land (Eviction and Rent Recovery) Act, 1959. It was also

held that the Government may choose and discriminate to initiate one

proceedings against one person in one particular manner and against

another person in another manner for recovery of money and resumption

of land and building. It was held by the Court to the following effect:-

"15. Section 9 of the 1952 Act empowers the Government to forfeit the whole or any part of the money in case of non-payment of consideration money or instalments or other dues for breach of covenants. Under the ordinary CWP No. 23204 of 2010 (O&M) ( 1

law of the land there is relief against forfeiture for breach of covenant or provisions. Section 9 does not offer any relief against forfeiture. This feature that the Government can proceed either under the ordinary law of the land or under the 1952 Act shows that there is discrimination. There is nothing in the statute to guide the exercise of power by the Government as to when and how one of the methods will be chosen.

16. Section 9 confers power to resume site. There is a charge on the land for the unpaid consideration money. This charge can be enforced by instituting a suit in a court of law. The owner will have the opportunity of paying the money and clearing the property of the charge. On the other hand when the Government proceeds under Section 9 of the Act to resume the land or building the Government proceeds under the Punjab Public Premises and Land (Eviction and Rent Recovery) Act, 1959. There is no guidance in the Act as to when the, Government will resort to either of the remedies."

After the aforesaid judgment, the Act has undergone amendments

with the enactment of "The Capital of Punjab (Development and

Regulation) (Amendment) Act, 1973". Vide the aforesaid statute, Sections

3 and 8 were substituted; Section 8-A in the Act was inserted and

Section 9 of the Act was repealed. The Rules have been framed and

notified on 7th November, 2007 in terms of the powers conferred by

Section 3 read with Section 22 of the Act and by repealing "The

Chandigarh (Sale of Sites and Buildings) Rules 1960" and "The

Chandigarh Leasehold of Sites & Buildings Rules, 1973".

Section 3, as amended, provides that until the entire

consideration together with interest and other amounts is paid, the site

or building or both as the case may be, shall continue to belong to the

Central Government. It empowers the Central Government to sell, lease

or transfer whether by auction or allotment any land or building subject

to such Rules as may be made. Sub Section (2) of Section 3 of the Act, CWP No. 23204 of 2010 (O&M) ( 1

contemplates that the consideration money shall be paid in such manner

and in such instalments and at such rate of interest as may be

prescribed. Therefore, the Act contemplates payment of the consideration

money in instalments and of interest on delayed payment at such rate

as may be prescribed.

Section 8 of the Act, empowers the Estate Officer to recover

the amount of any rent due whereas Section 8-A of the Act, empowers

the Estate Officer to resume any site or building, if the transferee has

failed to pay the consideration money or any instalment thereof on

account of sale of any site or building or both, or has committed a breach

of any other conditions of such sale. Section 8-A provides for resumption

and forfeiture for breach of conditions of the transfer; an opportunity of

show cause against the proposed action; limit on the amount of forfeiture

and the remedy of appeal and revision against the orders of resumption

and forfeiture.

Thus, Section 3 of the Act deals with the conditions of sale and the

terms and conditions of the payment of the sale consideration. On the

other hand, Section 8-A of the Act deals with the consequences of default

in making the payments, whether the transfer is by allotment or auction.

Section 8-A of the Act provides for the consequences on failure of a

transferee to pay the consideration money or any instalment thereof on

account of sale of any site or building in terms of Section 3 of the Act.

The constitutional validity of Section 8-A of the Act has been

upheld by a Full Bench of this Court in Ram Puri Vs. The Chief

Commissioner & others ILR (1982) 1 P&H 559, wherein it has been held

that in-built guarantees and safeguards provided in section 8-A itself by

ensuring a reasonable opportunity to show cause against any proposed

resumption or forfeiture and limitation that forfeiture in no case shall

exceed 10 per cent of the total amount of consideration negates the

argument that Section 8-A suffers from the vice of discrimination or in CWP No. 23204 of 2010 (O&M) ( 1

any way violates the equality clause under Article 14 of the Constitution.

It was held to the following effect:

"(9) Now apart from the above the subsequent amendments introduced in sections 3 and 8 as also the deletion of section 9 altogether and its substitution by section 8-A of the Act was designed to and has undoubtedly cured the infirmities which their Lordships had discerned in the previous provisions in Jagdish Chand-Radhey Shyam Vs. The State of Punjab & others AIR 1972 SC 2587. By these legislative changes the charge on the transferred site has been abolished and similarly the clog on the transfer to the third party stands removed. Further there are now in-

built guarantees and safeguards provided in section 8-A itself by ensuring a reasonable opportunity to show cause against any proposed resumption or forfeiture. A further limitation that forfeiture in no case shall exceed 10 per cent of the total amount of consideration money has been itself laid down therein. The Estate Officer is obliged to record his reasons after giving adequate opportunity including the right to lead evidence to the transferee before passing an order adverse to his interest. Further the statute and the rules thereunder provide for an appeal and revision against such orders. Therefore, it is now vain to contend that section 8-A suffers from the vice of discrimination or in any way violates the equality clause under Article 14 of the Constitution.

xx xx xx (22) Adverting specifically to Section 8-A the restrictions for the exercise of the powers vested thereby exist not only in the express provision thereof, but are equally discernable from the larger purpose of the Act, its pre-amble as also the other Sections thereof when read with the statutory rules framed thereunder. The larger purpose of the planned development and regulation of the new capital city, as spelled out in the preamble of the Act, is the fixed polestar to which the ultimate exercise of the power of resumption under Section 8-A is hitched. What deserves highlighting herein is that this power of resumption under section 8-A is merely a discretionary and an enabling power. The statute does not lay down any mandate that it must necessarily be exercised in a particular situation. In sub-section (1) thereof it is first in the discretion of the Estate Officer that he may CWP No. 23204 of 2010 (O&M) ( 1

issue a notice to show cause why an order of resumption of site or building may not be made. Equally under sub- section (2) after considering the cause shown against such a notice it is optional for the Estate Officer to order such resumption or not the word used in both the sub-sections is 'may' and not 'shall'. Mr. Anand Swaoop rightly pointed out that this power of resumption is indeed the last arrow in the quiver of a number of sanctions to enforce the planned development and the regulation of the capital and to be only resorted to in a situation commensurate with its necessary exercise. To put it in plain language it is not mandatory for the authority to order resumption, but only in extreme cases it enables it to do so when the other powers and sanctions to enforce the purpose of the Act have failed, or in the circumstances it is the only remedial power which can be applied. Therefore, it is farcical and imaginary to assume that the authority would necessarily use this power arbitrarily and whimsically and that they will use this hammer to swat a fly. As Section 8-A now stands (in sharp distinction to the deleted section 9) it mandatory requires a notice to show cause to the person concerned whenever the exercise of this power is contemplated. Not only is such a person entitled to have a reasonable opportunity of contesting such a notice, but the law in terms confers on him the power to lead evidence in support of his stand. The mandate as laid on the Estate Officer is to record his reason in case he orders resumption. Apart from these in built safeguards under section 8-A, it is the statutory rules which provide for an appeal against the order of resumption by the Estate Officer, to the Chief Administrator. It is thereafter that the rules zealously provide for a revision to the Chief Commissioner, who is the executive head of the Union Territory. Obviously in a proper case the right to approach the Court under Article 226 of the Constitution of India is equally open.

(23) Reference must also be made to the provisions of Sections 4, 5, 6, 13 and 15 of the Act, which provide a variegated armoury of sanctions and penalties against the violation of the Act rules or the conditions of allotment. It seems to, be rather writ large in the statute itself that normally resort would be made to these provisions before applying the, ultimate sanction spelled out in Section 8-

A............."(Emphasis Supplied) CWP No. 23204 of 2010 (O&M) ( 1

Coming to the rules, the condition of sale in the Rules is that the

failure of the transferee to deposit the balance 75% within 90 days

results into forfeiture of the 25% of the amount and that too without

providing any opportunity of hearing. Section 8-A of the Act empowers

the Estate Officer, to resume the land or building or initiate proceedings

for the forfeiture of any part of the consideration money not exceeding

10% of the total consideration, but after giving a show cause notice. Rule

5(v) of the Rules, thus, contravenes Section 8-A of the Act, which

contemplates a show cause notice before resumption of the site or a

building or for that matter forfeiture of the amount for non payment of

whole or any part of the money or breach of any other conditions of sale.

The Rule making authority cannot make Rules, which contravenes

specific provisions of a statute contemplating a show cause notice before

cancellation of allotment and also put restrictions on the amount of

forfeiture as well prescribes the procedure before forfeiting any amount.

Section 8-A of the Act empowers the forfeiture of the consideration

amount and also provides for an opportunity of hearing, but on the other

hand sub Rule 5(v) provides for forfeiture of 25% of the earnest money

without granting any opportunity of hearing in the event of default of

payment of the balance auction amount. The transfer by auction, the

terms of payment of the auction amount falls within scope of Section 3 of

the Act. The default in payment of the instalments and consequences

thereof are delineated in Section 8-A of the Act. Therefore, the rules

regarding resumption and forfeiture of the amount can be framed only in

accordance with the statutory provisions contained in Section 8-A of the

Act. Any rule framed in derogation to the provisions of the statute

contained in Section 8-A of the Act would be illegal. Therefore, Rule 5(v)

of the Rules contemplating forfeiture of the 25% of the auction money

without providing the opportunity of hearing and for forfeiting the entire CWP No. 23204 of 2010 (O&M) ( 1

amount of 25% of the auction amount is illegal being contrary to Section

8-A of the Act.

To appreciate the third argument, the relevant extracts from the

Sub Rule 5(v) and Rule 14 of the Rules need to be placed in

juxtaposition, as under:-

Rule 5 Rule 14 Breach of terms and conditions of allotment.

(v) The remaining 75% of the (i) Notwithstanding anything consideration money shall be contained in these rules, the Estate

deposited by the intending purchaser Officer may, by notice in writing, in lump sum within 90 days of the cancel the allotment/lease and forfeit date of the auction by way of the whole or any part of money, if any, prescribed mode of payment failing paid in respect thereof which in no which the offer of allotment shall be case shall exceed 10% of the deemed to have been cancelled and consideration money, ground rent, the payment made under sub-rule (ii) interest and other dues payable in shall be forfeited and the intending respect of the sale/lease of the site or purchaser shall have no claim to any building or both, on the ground of damages: default, breach or non-compliance of Provided further that in case of any terms and conditions of allotments to Government(s) or semi allotment or for furnishing in writing Government or autonomous incorrect information under bodies/organizations, the period for explanation II of Rule 5. the above said payment may be Provided that no order regarding extended by the Chief Administrator cancellation of lease/ allotment/ on a written request by the forfeiture under this rule shall be organization/Department justifying made unless the lessee/transferee has the delay to the satisfaction of the been given a reasonable opportunity of Chief Administrator, subject to being heard.

payment of interest @ 12% per annum for the period of delayed payment, provided that such delay shall in no case exceed one year or 12 months in the whole."

Rule 5(iv) of the Rules contemplates of execution of an agreement

that if 75% of the consideration money is not deposited in lump sum

within 90 days, the allotment shall be deemed to have been cancelled CWP No. 23204 of 2010 (O&M) ( 1

and the payment of 25% made by the auction purchaser shall be

forfeited. The sub Rule (v) is to give effect to such condition in the

agreement that if the balance 75% is not deposited, the amount

deposited in terms of sub Rule (ii) i.e. 25% of the total auction price shall

be forfeited. Rule 14 on the other hand provides for the maximum

amount of forfeiture which is 10% of the amount deposited. In fact such

condition in Rule 14 is in accordance with the provisions of Section 8-A

of the Act. Still further Rule 5 contemplates deemed cancellation

whereas, Rule 14 provides for the manner of a show cause notice and

opportunity of hearing before cancellation of an allotment. Thus, two

provisions in the same rules cannot be reconciled.

Rule 14 of the Rules, starts with a non-obstante clause. It

overrides all other rules contained in the Rules. Rule 14 provides that the

Estate Officer may cancel allotment or lease and forfeit whole or any part

of the money which in no case shall exceed 10% of the consideration

amount. The effect of the cancellation of lease or the allotment of the

land or building is the resumption of such site or the building. Still

further, the upper limit of the amount of forfeiture to 10% of the

consideration is the amount of auction or sale consideration. Since Rule

14 overrides all other Rules, including rule of deemed cancellation

contained in Rule 5(v) of the Rules, therefore, it is Rule 14 of the Rules,

which will override Rule 5(v) else, Rule 14 becomes otiose, which is and

cannot be the intention of the Rule making authority.

Though, we have found that condition of forfeiture of the entire

initial amount is in contravention of the provisions of Section 8-A of the

Act as well Rule 14 of the Rules, but we would like to discuss the legality

and validity of the forfeiture of the 25% of the auction amount in the light

of the judgments as well. Recently, in Teri Oat Estates (P) Ltd. v.

U.T.Chandigarh & others (2004) 2 SCC 130, considering the provisions of

the Act, the Hon'ble Supreme Court held that the doctrine of CWP No. 23204 of 2010 (O&M) ( 1

proportionality has to be kept in view while passing the order of

resumption. It was held to the following effect:

"40. The issue in the light of the decision of the Full Bench of the Punjab and Haryana High Court in Ram Puri v. Chief Commr., Chandigarh case (supra) as affirmed by this Court in Babu Singh Bains v. Union of India(1996) 6 SCC 565 may have to be considered from another angle.

41. By reason of the auction held, the land in question has been sold in favour of the appellant. A letter of allotment has been issued in terms thereof. The appellant has been put in possession of the purchased property. In law he was entitled to raise constructions and in fact he has raised a six-storeyed building. He has paid a part of the first instalment and during pendency of the proceeding before the High Court has paid a substantial amount together with interest @ 12% p.a. as enhanced from time to time.

42. The respondents were entitled to interest on the unpaid amount @ 7% p.a. which in the event of non-payment was to be paid at a penal rate of 12% and subsequently enhanced to 15 per cent and then to 24 per cent, as well as on the amount of penalty to be levied thereupon. The entire amount was recoverable through the process of law. In a situation of this nature, having regard to the rival claims made by the parties, if the default is not absolutely wilful or a dishonest one but occasioned due to a situation which may be beyond one's control, the statutory right of the respondent in resuming the land may not be appropriate, if the entire dues stand discharged.

43. In terms of the provisions of the Act, the respondents are entitled to: (1) resumption of the land, (2) resumption of the building, and (3) forfeiture of the entire amount paid or deposited. Having regard to the extreme hardship which may be faced by the parties, the same shall not ordinarily be resorted to.

44. The situation, thus, in our opinion, warrants application of the doctrine of proportionality.

45. The said doctrine originated as far back as in the 19th century in Russia and was later adopted by Germany, France and other European countries as has been noticed by this Court in Om Kumar v. Union of India (22001) 2 SCC 386. CWP No. 23204 of 2010 (O&M) ( 1

46. By proportionality, it is meant that the question whether while regulating exercise of fundamental rights, the appropriate or least restrictive choice of measures has been made by the legislature or the administrator so as to achieve the object of the legislation or the purpose of the administrative order, as the case may be. Under the principle, the court will see that the legislature and the administrative authority

"maintain a proper balance between the adverse effects which the legislation or the administrative order may have on the rights, liberties or interests of persons keeping in mind the purpose which they were intended to serve".

Therefore, we find that deemed forfeiture of the amount of earnest

money deposited in terms of Rule 5(ii) for failure to deposit 75% of the

consideration amount violates the doctrine of proportionality as well.

Thus the words appearing in Rule 5 (v) "and the payment made under

sub-rule (ii) shall be forfeited" are illegal and consequently, are struck

down. The terms of the agreement to be executed in terms of Rule 5(iv)

would be deemed to be amended to that extent as well.

Coming to the facts of the present cases, the 25% of the auction

amount has been ordered to be forfeited for failure to deposit the balance

75% within 90 days. Since, such provisions have been found to be illegal,

the orders passed on the basis of such Rule, are set aside. The learned

Estate Officer shall be at liberty to consider the question of cancellation

of lease in terms of the provisions of Section 8-A of the Act, in accordance

with law.

With the said direction and liberty, all the writ petitions are

disposed of.

(HEMANT GUPTA) JUDGE

July 02, 2012 (A.N.JINDAL) vimal/ds JUDGE