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Judgment
K. Kannan, J.—Both these matters are connected and relate to a sale by auction of property identified by the Housing Board, Haryana for
utilization for construction of a cinema theater. The civil revision assails the order passed by the Arbitrator as modified in the application for setting
aside the award and order passed in appeal thereon by a Court of competent jurisdiction. The writ petition is filed by the original allottee, who
contends that a sale pursuant to the auction has still not been executed in spite of the fact that the obligations made under the contract have all been
fulfilled. The genesis of the dispute was pursuant to a sale in auction that was held on 27.11.1978. The petitioner bid at the auction for Rs.
11,30,000/-. As per the terms of the auction at the fall of the hammer Rs. 1 lac was required to be given which was paid and out of the balance of
amount 40% of the amount was to be paid within one month from the date of confirmation and the remaining 60% was to be paid in three
installments. 40% of the amount worked out to Rs. 4,52,000/- and according to the petitioner, he was informed with a letter of allotment on
05.12.1978 through Ex. P1 and the amount was Rs. 3,52,000/- representing 40% of the amount including Rs. 1 lac was paid on 11.01.1979 that
is, a little after one month from the date of confirmation. Of the first installment that was required to be paid out of 60% balance, it was to
commence on the first year after the property was taken possession of, which according to the petitioner was given on 26.12.1979. This was
contested by the Housing Board which stated that the property was given possession of on 08.02.1979 itself and the petitioner had prepared plans
and submitted them for approval and all the plans were prepared by the petitioner only after examination of the site and after entrusting the work
with engineers for preparation of the lay out plans but since the petitioner did not pay the amount within time, the Housing Board was making
demands for interest. They demanded interest on the amount of 40% which was required to be paid which had not been paid within time as well as
on the first installment payable on February, 1980 itself, while the petitioner was contending that the liability for the first installment would arise only
on the first year after the date when he took possession in December, 1979. With disputes emanating between the parties as regards both prompt
payments of installment as well as the date of taking possession, in terms of auction conditions, the matter was referred to an Arbitrator. Both
parties had filed their respective claim statements. The award was passed by the Arbitrator on 30.11.1980 that found as follows:--
(i) Rs. 2970/- as interest on Rs. 352,000/- from 21.12.1978 to 11.01.1979.
(ii) the amount of the first yearly installment of Rs. 2,92,035.62 which was due on 8.2.1979 and interest from that date at the rate of 14% to date.
(iii) Rs. 70,000/- as penalty imposed by the State Manager for non-payment of the first yearly installment.
When notice was issued by the Court to which the award was filed, on hearing objections from the petitioner for a modification of the award, the
Civil Court passed an order making the award of Arbitrator the Rule of Court, confirming in toto all the directions given by the Arbitrator. Against
this order passed by the Senior Sub Judge on 09.08.1984, an appeal had been filed to the District Judge at Faridabad by the petitioner which set
aside the decree passed by the Court. The Appellate Court found that the petitioner did not have a full opportunity to state his case and the
Arbitrator had conducted the proceedings in haste"" and the award passed, therefore, was in violation of natural justice and fair play. Against the
order setting aside the award, revision has been filed by the Housing Board assailing the order passed by the District Judge.
It must be noticed that the Appellate Court which set aside the award did not even make any direction that the matter would be consigned to the
Arbitrator again for fresh consideration. I have gone through the proceedings as brought out in the award of the Arbitrator as well as in the order of
the Court of First Instance and I am convinced that the case was really required to be seen from the documents which both parties had relied on
and there was hardly any scope for oral evidence to support their respective pleas. The objection of the petitioner that he did not have a full-
fledged opportunity before the Arbitrator was, therefore, not tenable at all and all the conditions of what the petitioner could have stated were there
already brought through records. The District Judge was not justified in finding that the proceedings had been conducted by the Arbitrator in great
haste. On the other hand, there is inherent limitation for an Arbitrator to leisurely conduct the proceedings in that the Schedule attached to the
Arbitration Act, 1940 specified an outer limit of four months'' before when an arbitration was to be concluded. Therefore, after the receipt of
statements of parties, the Arbitrator had a statutory mandate to conclude his proceedings and if he had decided to rely on the statement of parties
and the documents, the defect in the award could have been pointed out only with reference to the merit of the case in the manner that was
possible to be contended in application to set aside the award. The Appellate Court could have itself examined whether the contention taken by
the petitioner as regards the award on its merits was justified or not since the Appellate Court itself has not considered whether the amount as
determined by the Arbitrator was as per the records and it conformed to the contentions of parties and it ought not to have set aside the award.
Under normal circumstances, I would have remitted the matter to the District Judge himself for consideration of the case on the basis of materials
brought before it, but considering the fact that the decision of the Appellate Court was itself taken on 29.04.1985 and we have allowed nearly
three decades to go past us, I have hastened to examine the records myself and undertake a task which the District Court could have performed.
The first task would be to see whether the conditions as to payment as stipulated under the terms of the auction had been complied with or not
and if it was not, what was the amount which was payable by the petitioner to the Housing Board. The second issue would be the tenability of a
claim to interest as made by the respondent which was contested by the petitioner. Considering the fact that the petitioner had actually paid Rs. 1
lac on the date of auction and considering also the fact that the letter of allotment was issued under Ex. P1 only on 5.12.1978, the condition
regarding payment of 40% of the total amount to be made within one month from the date of confirmation must be understood from the date when
the letter of allotment was issued. I cannot take the date of auction itself as the date when the date must be reckoned since such a course would be
possible only if there was an express condition that 40% amount was to be paid within one month from the date of auction.'' The terms and
conditions of the auction adopts a specific clause regarding the confirmation which under the circumstances cannot be taken as the date when the
auction was held. It could only be taken as the date when the later of allotment was issued on 05.12.1978. If it is so assessed, the amount paid on
11.01.1979 by the petitioner conformed to the condition of payment of 40%. The respondent''s plea that 40% of the amount had not been paid
within time was correct but it is essential to point out that the Board did not choose to cancel the sale on this account.
As regards the plea by the petitioner that the possession was handed over to them only in December, 1979, it must be noticed that the petitioner
has prepared all the plans and submitted them for sanction and all these activities could not have been undertaken without petitioner entering upon
the properties, measuring properties and preparing lay out plans. In none of the communications is there even a reference that the petitioner has not
been delivered possession of the property and therefore, the activities were getting hampered. By the mere fact that sanction came later or there
was an approval issued on 26.12.1979, it could not be taken that possession was handed over to the petitioner only at that time. The Arbitrator
was, therefore, justified in holding that the possession had been handed over even on 08.02.1979 and I uphold the finding rendered by the
Arbitrator. If the date of possession is also to be assessed then the payment of installments must be only seen in the manner in which the terms and
conditions laid down namely that the first installment of the remaining 60% was to be paid on or before 08.02.1980 and the second and third
installments must have been paid by calculating one year for each one of the payment from the previous matured date. Clause 11 of the conditions
laid down that in terms of default or breach or noncompliance of any of the terms and conditions, the Chairman shall have the right to cancel the
bid and forfeit the whole or part of the amount paid by the purchaser. Admittedly, as pointed out in the preceding para, there had been no
cancellation of offer of sale which was made through the auction even on the assumption that the petitioner had not paid the amounts on time. Yet
another condition in the terms and conditions laid down that 60% of the sale price was payable either in lump sum without interest within 60 days
from the date of the acceptance of the bid or in three equal installments with interest at 14%.
If the date of taking possession is known and if it is seen that the installments 1 to 3 fell on particular dates, namely, on 08.02.1980, 08.02.1981
and 08.02.1982, then the payment of interest would arise from the respective dates when the amount was payable.
In this case, the dispute has been with reference to the calculation of interest. While the Board would seek for interest @ 14% compounded
quarterly, the petitioner will contend that such payment has to be made as simple interest only. If the terms themselves are not very clear as to the
nature of interest to be loaded, it could be seen whether there is any specific statutory provision governing the contracts that dictate a particular
manner of collection of interest. The Arbitrator himself has calculated the amount only as 14% simple interest and he has determined the yearly
installment as having accrued to the tune of Rs. 2,92,035.62 with interest at 14%. It works out to the remaining 60% to be spread over in three
parts. I will approve of the award as passed, except for a modification that it became due not on 08.02.1979 as found but the installment fell due
only on 08.02.1980. The second and the third installment would also be calculated from one year after each one of the earlier payments. The
Arbitrator has also provided for penalty of Rs. 70,000/- as imposed by the Estate Officer for non-payment of the first yearly installment. In this
case I find that the first payment that has been made purporting to be for the first installment was made on 24.03.1982 that is more than two years
after first installment. Any provision for penalty must be in terms of the contract itself and the Estate Officer had to only resort to any of the
provisions of auction for levy of penalty. I have observed that Clause 8 only provides for interest at 14% for delayed payment and I find that if the
Board did not choose to enforce a condition of cancellation of allotment and when it was making a demand for realization of the balance, its own
entitlement ought to be only in terms of Clause 8 of the terms and conditions of sale. Although there are no stipulations regarding payment of
penalty in the terms and conditions of the auction, at the time when a letter of allotment was issued under Ex. P1, there was a reference also to a
penalty not exceeding 25% of the amount that was due. This amount has been quantified by the Arbitrator. The amount demanded by the Estate
Officer has been in some way accepted by the Arbitrator and he has imposed a penalty of Rs. 70,000/-. I will make no interference also thereto.
Consequently, the award of the Arbitrator which was made the Rule of Court would require to be accepted on the whole except for a condition
regarding the calculation of interest which was to take effect from 08.02.1979 by the order of the Arbitrator as confirmed by the Civil Court which
would stand modified as the first installment would be payable w.e.f. 08.02.1980, second installment on 08.02.1981 and third installment on
08.02.1982. The amount will have to be reworked on that basis after giving due credit to the amount which was paid over a period of time by the
petitioner.
Learned counsel appearing on behalf of the Board would give memo of calculation that has provided for compound interest at the rate of 14%
and makes out a case that as on 31.03.2013, an amount of Rs. 2,20,71,901.35 is due and payable. I will not allow for the manner of calculation
on the basis of compound interest and the amount will have to be reworked with interest and penalty as assessed already. The component of
penalty is an amount ascertained by the Arbitrator, which fell due at the time when it was made the decree of Court and interest will also become
payable on the said sum but at the rate of 9%.
The award of the Arbitrator would stand modified and a decree passed already will stand also corrected in the manner referred to above. The
Board shall calculate the amounts in the above manner and communicate it to the petitioner within a period of four weeks from the date of receipt
of the copy of the order. If the amount is paid then the sale deed shall also be executed in terms of the auction held. The civil revision in C.R. No.
2285 of 1985 is disposed of as above.
A direction for sale in the manner which I have referred to above would actually dispose of the case in C.W.P. No. 2914 of 2008 as well but
the most contentious issue between the parties has been the restrictive use which the respondent demands that the property will be put to. The
petitioner himself has made representations during the course of proceedings that the property which had been taken for the purpose of
constructing a cinema theatre cannot be put to use as such but seeking for use for residential and other needs. This plea for a change of user of the
property has been declined by the respondents and in communication issued on 29.09.2006 the respondents- have stated that the petitioner was at
liberty to receive back the money which he had paid if the petitioner was not prepared to put the property to the use for which it was assigned. I
had directed the parties to argue on how it was possible to impose any restrictions for sale of the property when there is a statutory interdict u/s 11
of the Transfer of Property Act for imposition of condition which would detract from the absolute transfer of ownership over the property. Section
11 of the Transfer of Property Act reads thus:--
Restriction repugnant to interest created- Where, on a transfer of property, an interest therein is created absolutely in favour of any person, but
the terms of the transfer direct that such interest shall be applied or enjoyed by him in a particular manner, he shall be entitled to receive and
dispose of such interest as if there were no such direction. Where any such direction has been made in respect of one piece of immovable property
for the purpose of securing the beneficial enjoyment of another piece of such property, nothing in this section shall be deemed to affect any right
which the transferor may have to enforce such direction or any remedy which he may have in respect of a breach thereof..
Learned counsel appearing on behalf of the respondent-Board would point out that the provisions of the Transfer of Property Act and the
imposition of condition cannot apply since the Housing Board is a statutory body created under the Housing Board Act, 1971. The Act empowers
the Board to frame rules to give effect to the objects for which the Board was created and the Board has also a power to issue regulations with
concurrence of the State and such Regulations have provided for the manner of the user of the property. The property was handed over by the
State to the Board for development of Sector 22 and the place which was sold in auction was identified and demarcated for utilization as a cinema
site. The counsel would take me to Section 73 of the 1971 Act that contains, inter alia:--
Powers to make rules 73(1) The State Government may, by notification and subject to the condition of previous publication, make rules for
carrying out the purposes of this Act.
xxxx xxxx xxxx
(g) the procedure to be followed in taking possession of any Board premises u/s 51;
xxxx xxxx xxxx
(j) the conditions subject to which the Board may borrow any sum u/s 60;
xxxx xxxx xxxx
(o) specifying the bye-laws contravention of any of which shall be an offence;
xxxx xxxx xxxx
The power to issue Regulations is dealt with by a distinct Section u/s 74 that allows for the Board to issue regulations on the following:--
The Board may, from time to time with the previous sanction of the State Government by notification, make regulations consistent with this Act and
with any rules made thereunder:
(a) for the management and use of buildings constructed under any housing scheme;
(b) the principles to be followed in allotment of tenements and premises; and
(c) for regulating its procedure and the disposal of its business;
I do not find anything from the provision for framing of rules that provide for imposition of any condition in the manner urged. I have not been
shown through any particular bye-taws that regulate the user in a particular manner as prescribed to the petitioner. If we may, therefore, see that
there is a power to regulate the user in some way it should stay confined to what is provide u/s 74 that allows for management and the use of the
building under the Housing Scheme. If we must give an expansive meaning to the formulation of scheme for establishing Sector 22 and if we see
that the management and use of the buildings could also be regulated, then it should be seen whether there has been any particular regulation that
brings a particular manner of user. The regulations have come subsequently through Housing Board, Haryana (Allotment, Management and Sale of
Tenements) Regulation 1972. Of the several modes of uses prescribed, Regulation 11 contemplates general liability of allottees. The counsel would
refer me to Clause (3) of Regulation 11 that reads as under:--
(3) The hirer shall make full and regular payment of all the dues that are required to be made by him in pursuance of these presents or the
Regulations. If any such payment is delayed, he shall be liable to pay penalty not exceeding twenty five per cent of the amount due. If it has reason
to believe that person liable to pay the amount has willfully failed to pay the same. In case of defaults of more than two months, the tenancy shall
stand determined and the hirer shall be liable to be evicted. All the outstanding dues of the owner shall be recoverable as arrears of land revenue.
The proceedings of eviction shall be governed by the provisions of Chapter VI of the Act:
Provided further that in the case of eviction, the amount already deposited by the hirer shall be utilized for recovering all dues whatsoever, of the
owner as the first charge and all the dues of the public bodies as the second charge and only the remainder shall be refunded to the hirer on his
demand.
I find that the provision makes possible a claim by the Board for levy of penalty which we have already examined. There is no provision for the
manner of user or the restriction of user for the property. Regulation 14 refers to use and maintenance of tenements which reads as follows:--
Use and Maintenance of tenement--(1) No allottee shall have more than one cooking arrangement in the tenement.
(2) No allottee shall use the tenement for purpose other than residence:
(3) Not allottee shall sublet the whole or any part of the tenement without the express permission of the Board.
This clause would seem that the reference to maintenance of tenements which contemplates only the use of the property for residence. Admittedly,
the property that was let out was not for a residential purpose. I find, therefore, that the terms and conditions providing for a restriction of user of
the property for cinema does not find expressly approved by any of the particular provisions. Regulation 10 refers to the powers of the Estate
Manager to issue an allotment letter informing the allottee to take possession of tenancy, within a period specified. The other provisions relating to
Regulation 10 talks about situations where a hire purchase tenancy agreement could be executed. The allotment of tenements or conditions of
allotment deal with user for residential purposes. A sale of the property for commercial use does not come through any of the Regulations. While
acceding to plea that there could be a particular enactment which could restrict the manner of user and such an enactment could eclipse the
provisions of Section 11 of Transfer of Property Act, I find that none of the provisions of the Housing Board Act or the Regulations allow for
imposition of condition for enforcement in the manner sought to be done now. If the property was originally earmarked for construction as a
cinema site, it was fair enough that in the manner of allotment to various class of persons, the Board allows the allottee to use the property for the
purpose for which it was originally conceived of. In a situation where the auction takes place in the year 1978 and where the party was prepared
to abide by the condition and take a purchase and indeed it seems that there had been also applications submitted for construction of cinema
talkies and construction had also come up, the Board could not have had any problem for the execution of the sale deed if the other conditions
regarding the payment had been complied with. In this case, the intervention through judicial proceedings have dragged on for several decades and
that has put spokes on the wheel of development of the property in the manner that the parties conceived.
The approach to whether there could be a restriction on the user of the property could be seen from the perspective of whether there is any
particular legal mandate for enforcement of that condition. If a mere acceptance of offer for abiding a condition and breach within the period had
driven the Housing Board to a situation considering cancellation, then it should have become possible to consider whether the allottee was at liberty
to defy the condition imposed. When we are now examining the situation at a time when the sale is already to be executed on payment of the
balance amount that was payable then the question of allowing for a condition to be imposed on sale deed must be seen whether such condition is
approved by law.
It cannot be merely a contract between the parties of whether the purchaser is prepared to fetter himself by the obligation to use of the
property only for particular purpose. Indeed he had not paid the same within the stipulated time when the property was allotted. A plea for change
of user has come about only subsequently after several decades after the turn of the century. I do not think that the Board must adopt an unrealistic
stand that the property shall be used only for the purpose of cinema. The proper exploitation of a place and orderly development of a new let out is
always a desired object and at the time of allotment, the user as contemplated in particular fashion for entertainment of the people who were going
to be the allottees of several housing plots was establishing a cinema theatre. The entertainment that is possible at home theatre through DVDs and
internet has undergone a sea-change over a period of time. Keeping in with changing public preference for multiplexes and malls, it shall be
appropriate that the restriction of use shall be guided by the zoning requirements that exists for the particular location of the property. The sale shall
be made with a specific condition that the property shall be used subject to the zoning requirements but I may add that even without such a clause,
I can not understand how any transaction could be read. A sale of even freehold land would ultimately dictate a person, who wants to make
development of the property to conform to the building and zoning requirements brought through law. Consequently, any transaction of sale in any
town or village, even if it is without condition, could still be subject to a restriction of user depending on the municipal laws regarding the manner of
user of the property. What would govern in normal situation of sale by private individuals would surely govern the rights of parties in this case as
well. The imposition of condition regarding the user of the property as per zoning requirement could, therefore, be seen even superfluous. I would
borrow from the principle laid down in trust that when a public or charitable trust fails for any reason, the doctrine of Cypres could be applied even
for a use which is not totally inconsistent with scheme of trust. I would make that restriction here as well that site for a use of cinema theatre could
be applied for use for similar such purposes for entertainment. The State or Municipal Authorities are not without a power to secure appropriate
user of the property for which it was made previously. If it was restricted for cinema use, it shall be for such other use that will enure to the benefit
of the public. The writ petition is allowed and there shall be a direction of sale of the property but in the manner referred to above. The parties shall
bear their respective costs.