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A.P. Industrial Infrastructural Corporation Ltd. & Anr. v. M/s. Shivani Engineering Industries

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 2426 of 2015)Decided 25 Feb 2015
Civil Appeal No. 2426 of 2015
Justice V. Gopala Gowda · Justice R. Banumathi

Background

The appellant Corporation had allotted an industrial plot to the respondent for a manufacturing unit, with conditions requiring timely payment and implementation of the project within two years. After the respondent defaulted on payment and the allotment was cancelled, the Corporation later restored it on payment of the cost plus a 10% penalty, and separately allowed the respondent to change its manufacturing activity. When the respondent still did not implement the revised project within the extended timeline, the Corporation demanded a further 3% "condonation of delay" fee before registering the sale deed. The respondent challenged this fee in the High Court, which (through a Single Judge and then a Division Bench) ruled in its favour and directed registration without the fee, prompting the Corporation's appeal.

Decision Breakdown

The Supreme Court held that once the respondent had violated the conditions of the allotment letter and sale agreement (including the Section 18/18A/18B implementation conditions), the Corporation's only lawful options were either to enforce the conditions as agreed or to cancel the allotment and resume the land for reallotment through public auction, not to invent and levy an ad hoc "condonation fee" with no basis in the governing documents. The Court found the Corporation itself had acted arbitrarily and set aside the High Court's judgments directing a sale deed, while granting the Corporation liberty to proceed to cancel the allotment and resume the land. Noting a pattern where the Corporation routinely extended time to similarly placed allottees without consistent fee demands, the Court also directed the State's Crime Investigation Department to probe the conduct of the Corporation's officers in handling such allotments.

Lesson Learnt

A public body cannot invent new financial demands (like an ad hoc "condonation fee") outside the terms of its own allotment contract: its remedies for a party's breach are limited to those the contract and governing rules actually provide, and courts will strike down extra-contractual demands even while recognising the underlying breach.

Official source (sci.gov.in)View Judgment (PDF)

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