Singh & Ors. Vs. U.T.Chandigarh & ANR.  INSC 96 (9 February 2010)
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION Civil Appeal No.1640 of
2010 (Arising out of S.L.P.(C) No.6795 of 2009) Daljit Singh and others
...Appellants Versus Union Territory Chandigarh through its Chief
Administrator, U.T. Chandigarh and another ...Respondents
Feeling aggrieved by order dated 3.12.2008 passed by the Division
Bench of Punjab and Haryana High Court refusing to quash the proceedings
initiated by the Chandigarh Administration under Rule 7-A(2) of the Chandigarh
(Sale of Sites and Buildings) Rules, 1960 (for short, `the Rules') for recovery
of Rs.3,38,082/- in lieu of the surrender of residential plot sold to them, the
appellants have preferred this appeal.
On the basis of highest bid of Rs.80 lacs given by them in the
open auction conducted by the Chandigarh Administration, residential site
No.1199, Sector 19-B was sold to the appellants subject to the conditions
enumerated in letter dated 3.1.2005 issued by the Estate Officer, Union
Territory, Chandigarh (respondent No.2). The appellants deposited Rs.20 lacs
representing 25% of the bid money. They took physical possession of the site on
25.1.2005 (in the impugned order, the date of delivery of possession has been
mentioned as 22.2.2005) but surrendered the same on 3.3.2005 by stating that
due to unavoidable reasons they were not in a position to retain the site. Upon
receipt of the appellants' request for surrender, respondent No.2 issued letter
dated 24.3.2005 and called upon them to show cause as to why penalty @ 2.5% of
premium may not be imposed and recovered under Rule7-A of the Rules. The
appellants did not contest the notice. Rather, appellant No.1 appeared before
respondent No.2 and pleaded that the request for surrender be accepted subject
to the condition specified in the notice. Thereupon, respondent No.2 passed
order dated 20.4.2005 whereby he accepted the surrender of the site and imposed
penalty in terms of the show cause notice.
After 2 years and 6 months, respondent No.2 issued notice dated
5.11.2007 to the appellants requiring them to deposit Rs.3,38,082/-. This was
done on the premise that inadvertently penalty @ 2% of the premium had been
imposed at the time of acceptance of surrender of the site, though in terms of
Rule 7-A(2) of the Rules, penalty @ 5% of the premium ought to have been
imposed. Appellant No.1 submitted reply dated 16.11.2007 and contested the
demand by asserting that notice had been issued by the concerned officer
without taking cognizance of the fact that surrender had already been accepted.
Simultaneously, he prayed for withdrawal of the request of surrender by stating
that he was ready to deposit 25% premium.
relevant portions of the reply submitted by appellant No.1 are extracted below:
the said memo has wrongly been sent to me as I had surrendered the plot well
within 90 days of the issuance of allotment letter and had been charged penalty
at the rate of 2.5% of the premium as per the relevant rule in this regard. The
present recovery notice has been sent to me without any relevant rule and
application of mind as a penalty of 2.5% had already been charged and stands deposited
from me as per the orders passed by the Estate Officer, U.T. Chandigarh in this
view of the memo dated 5.11.2007 calling upon me to deposit 3,38,082/-, I
hereby withdraw my letter for surrender of the said residential plot and I am
ready to deposit the initial 25% premium as per the auction held in my favour
on 10.12.2004 and also ready to pay any other charges with regard to the same.
may kindly be allowed to take back the surrendered residential plot 1199,
Sector 19-B, Chandigarh which is still vacant and has not been allotted till
date to anybody.
the penalty already paid by me at the rate of 2.5% may also be adjusted against
the said 25% premium. That in view of the submissions made above it is
requested that the above memo No.34422 dated 5.11.2007 be withdrawn immediately
and I may be intimated with regard to the amount which I am required to deposit
on withdrawal of my surrender application with regard to the plot No.1199,
Sector 19-B, Chandigarh."
Respondent No.2 declined to accept the aforementioned request made
by appellant No.1 and again called upon him to deposit penalty amount mentioned
in letter dated 5.11.2007.
The appellants challenged the demand of additional penalty and
rejection of their prayer for withdrawal of the request for surrender of the
site by filing writ petition under Article 226 of the Constitution. The
Division Bench of the High Court opined that the appellants' case is covered by
Rule 7-A(2) of the Rules which provides for imposition of penalty @ 5% of the
premium and Rule 7-A(1) is not attracted in their case because they had applied
for surrender of the site after physical possession thereof had been delivered
Shri P.S. Patwalia, learned senior counsel submitted that the
appellants' case falls within the ambit of Section 7-A(1) because they had
surrendered the site within 180 days of the allotment and the High Court
committed serious error by refusing to quash the demand of additional penalty.
Learned senior counsel then argued that even if Rule 7-A(2) is held applicable
to the appellants' case, the High Court should have quashed the demand because
the same was raised after more than 2 years and 6 months of the acceptance of
the request for surrender of the site. Shri Patwalia emphasized that if the
appellants had been told that penalty @ 5% of the premium would be imposed then
they may not have pressed for acceptance of their request for surrender of the
site. He finally submitted that if the respondents want to invoke Rule 7-A(2)
of the Rules then they should be directed to accept the appellants' prayer for
permission to withdraw the request for surrender of the site.
Ms. Kamini Jaiswal, learned counsel for the respondents supported
the impugned order and argued that respondent No.2 did not commit any
illegality by requiring the appellants to pay penalty @ 5% of the premium
because they had surrendered the site after taking physical possession thereof
and, as such, their case is governed by Rule 7-A(2) of the Rules. Ms.Jaiswal
submitted that the benefit of sub-rule (1) of Rule 7-A can be availed within
180 days of allotment of site and that too before the offer of possession of
the site is made. She pointed out that the appellants had not only been offered
but they had taken physical possession of the site on 25.1.2005 and argued that
the High Court rightly refused to quash the demand for the remaining amount of
We have considered the respective submissions. Rule 7-A of the
Rules which has bearing on the decision of this appeal reads as under:
of site.- (1) A transferee who has already paid at least 25% premium of the
site, may, before he is offered possession of the site by the Estate Officer,
and within 180 days of the allotment of the site, whichever is earlier,
surrender the site on payment of 2.5% of the premium as penalty. In this event,
interest at the rate prescribed in rule 10(1) shall be chargeable on the
balance premium due from the transferee for the period from the date of allotment
upto the date of surrender.
of surrender under these rules shall be the date when intimation by the
transferee to this effect reaches the Estate Officer.
transferee as mentioned in sub-rule (1) above, may surrender the site within two
years of the date of the allotment on payment of 5% of the premium as penalty.
Interest shall be chargeable from the transferee as provided in sub-rule (1)
above. The Estate Officer shall be competent to decide such cases, as also
cases under sub-rule (1).
Chief Administrator, may, in exceptional circumstances for reasons to be
recorded in writing, accept the surrender of site from the transferee as
prescribed in sub-rule (1) above, at any time after two years from the date of
allotment on payment penalty which shall not be less than 5% of the premium.
shall be chargeable from the transferee as prescribed in sub-rule (1) above.
Chief Administrator may, on compassionate grounds, in case of extreme
hardships, for reasons to be recorded in writing, reduce or waive off the
amount of penalty in any case of surrender."
A reading of the plain language of Rule 7-A makes it clear that
sub- rule (1) thereof is attracted if the transferee who has paid 25% of the
premium of the site, surrenders the same within 180 days of the allotment and
that too before possession of the site is offered by the competent authority.
In such a case, the surrender can be accepted by the competent authority
subject to deduction of penalty @ 2.5% of the premium. If the surrender is made
after the possession is offered by the competent authority, penalty @ 5% of the
premium is leviable in terms of sub-rule (2) of Rule 7- A irrespective of the
fact that the surrender is made within 180 days. To put it differently, if a
transferee who has paid 25% of the premium and to whom possession is offered by
the competent authority, surrenders the site then penalty @ 5% of the premium
is leviable and he cannot avoid this consequence only on the premise that the
surrender was made within 180 days of the allotment. Only in exceptional cases
the Chief Administrator can accept surrender after expiry of the period of 2
years subject, of course, to the payment of penalty @ 5% of the premium [Rule
7-A(3)]. Under sub- rule (4) of Rule 7-A, the Chief Administrator can, for
reasons to be recorded in writing, reduce or waive off the penalty leviable in
terms of sub-rules (1) and (2).
It is not in dispute that the appellants' had surrendered the site
after taking possession thereof. Therefore, in principle we agree with the High
Court that sub-rule (2) of Rule 7-A was applicable to their case and respondent
No.2 did not commit any illegality when he called upon them to pay balance
penalty @ 2.5% of the premium. However, keeping in view the fact that the
demand for the balance penalty was made after more than 2 years and 6 months of
the acceptance of surrender of the site and the appellants' legitimate prayer
for withdrawal of the letter of surrender was rejected without any tangible
reason, we feel that the High Court should have quashed the demand raised by
respondent No.2 on the ground of arbitrary exercise of power and violation of
the doctrine of fairness in state action.
In the result, the appeal is allowed. While approving the view
taken by the High Court on the interpretation of Rule 7-A (1) and (2) of the
Rules, we accept the prayer made by the appellants and quash the demand raised
by respondent No.2 vide notices dated 5.11.2007 and 26.12.2007. The parties are
left to bear their own costs.
..............................J.[Asok Kumar Ganguly]
February 9, 2010.