Metal Seam Co. of India v. State of U. P. Others — 1984 DIGILAW 196 (ALL)

JUDGMENT U.C. Srivastava, J. - The allotment of shed No. 5B situated in Talkatora Industrial Estate by the Joint Director of Industries, vide order dated 23.2.1984, accepting the transfer application moved by opposite party No. 5 to the writ petition in preference to the petitioner whose application was pending since long is the subject matter of challenge in this petition. The petitioner has not only prayed for issue of a writ of certiorari for quashing the transfer order but has also prayed for cancellation of allotment order in favour of opposite party No. 6. The petitioner has challenged the order of allotment passed in favour of opposite party no. 6 on the ground that the same was passed without application of mind and without cancelling previous allotment in mala fide & arbitrary manner. The petitioner is the allottee of adjoining shed with open area regarding which allotment order was passed in his favour in the year 1968 and after execution of lease deed by the Government, the factory started manufacturing containers and steel drums. The petitioner felt more necessity of land and as back portion of its factory was available an application for allotment of 10,000 Sq. ft. land was moved but the same was allotted in favour of someone else by the allotting authority i.e. the Director of Industries. In 1966, Shed No. 5B including open space which adjoins the petitioner's factory was alloted to opposite party No. 5 for establishment of a drug and chemical factory and under the terms and conditions of the lease deed and the hire purchase agreement the production was to be started within a period of three months but the opposite party no. 5 did not start his factory and he did not deposit even the installments towards payment of cost of the shed and land in time. Under the hire purchase agreement the allotment of shed in favour of opposite party No. 5 became liable to be cancelled. The installments were payable within fifteen years and on 1.1.1982 when the lease was to expire, the respondent no. 5 was allegedly in arrears of amount to the extent of Rs. 60,398.12p. As such, the allotment in favour of opposite party No. 5 was cancelled but on his representation and assurance that he would start production, he was given time and the allotment was restored. On 15.5. 5 was allegedly in arrears of amount to the extent of Rs. 60,398.12p. As such, the allotment in favour of opposite party No. 5 was cancelled but on his representation and assurance that he would start production, he was given time and the allotment was restored. On 15.5. 1978 the petitioner approached the Joint Director of Industries for allotment of Shed No. 5B on payment of entire cost. The petitioner approached the Minister, the Director of Industries and the Secretary, Industry Department Govt. of U.P. in this connection. The Secretary asked for the comments from the Joint Director of Industries and to submit his report. The Joint Director in turn called a report from the General Manager who reported that no production has started and even there was no power connection in the factory since the date of allotment though some packingwork was done. It was also reported that till 4.12.1981 the dues against opposite party No. 5 were to the tune of Rs. 46,901.19 p. The Joint Director of Industries vide order dated 23.12. 1981 directed the General Manager to cancel the allotment in favour of opposite party No. 5 but the General Manager expressed his inability to do so in view of the fact that allotment order was passed by higher authorities. Thereafter the Joint Director of Industries recommended for cancellation of allotment of the said shed No. 5B to the Director of Industries. Again on 11.1.1983 the Joint Director of Industries wrote to the General Manager that he was himself competent to cancel the allotment and he can do so after taking legal opinion which was taken. The General Manager, instead of passing cancellation order vide his order dated 1.12.1983 recommended for transfer of shed in favour of one Avadh Delecacies, the address of which was given that of respondent no. 5 itself. The said Avadh Delecacies was a new firm provisionally registered as Small Scale Industries Unit with the General Manager. This order was passed on an application moved by opposite party No. 5. Even before this transfer could be effected, the Joint Director of Industries recommended that transfer be made in favour of persons whose application may be pending in the department. On 7.1.1984 the Director of Industries pointed out to the Government the breaches committed by opposite party no. This order was passed on an application moved by opposite party No. 5. Even before this transfer could be effected, the Joint Director of Industries recommended that transfer be made in favour of persons whose application may be pending in the department. On 7.1.1984 the Director of Industries pointed out to the Government the breaches committed by opposite party no. 5 and that it was a case of cancellation of allotment and not a ease of transfer. This was done in response to the Government's letter dated 23.2.1984, The Government cancelled the earlier order by which it stayed the transfer which according to it could be done in accordance with the Government order of the year 1976. The Government order of the year 1976 provides that transfer of sheds would be allowed only in favour of allottees for a period of five years on their depositing entire arrears before delivery of possession & on start of industry within six months and on complying with the terms and conditions imposed at the time of initial allotment itself. The Director of Industries vide his letter dated 7.1.1984 sanctioned the transfer. Under the hire purchase agreement entered into between opposite party no. 5 and the Director of Industries on behalf of the Govt. the following conditions were provided for transfer of shed etc.: 4. Not to sells mortgage, assign or otherwise transfer the factory building except with the previous permission in writing of the Director of Industries, U.P., till the price has been fully paid and the transfer as aforesaid shall be on such conditions as the Director of Industries, U. P., may lay down while granting such permission. Under the said Condition previous permission to writing of the Director of Industries is required and the transfer can be effected only after full price has been paid and all terms and conditions have been complied with. 2. On behalf of the petitioner it was contended that the defaulter who was not entitled to any indulgence and who has set up Avadh Delecaeies which is evident from the fact that address is same, this transfer could not have been effected and a defaulter forfeits his rights and has no right to transfer or ask for it. 2. On behalf of the petitioner it was contended that the defaulter who was not entitled to any indulgence and who has set up Avadh Delecaeies which is evident from the fact that address is same, this transfer could not have been effected and a defaulter forfeits his rights and has no right to transfer or ask for it. It was also contended that the order passed by the Director of Industries and the earlier recommendation of the Joint Director of Industries for consideration of pending applications of other aspirants may be considered, yet the petitioners application was not considered, this transfer which was malafide transfer and was not permissible was allowed, the act ion of opposite parties is illegal, arbitrary and not sustainable. In the affidavit filed on behalf of the. petitioner it has been, stated that there is no electric connection in the shed and no production is carried on in the same. 3. After conclusion of arguments, on behalf of opposite party no. 5 as permitted, a supplementary affidavit was filed stating that opposite party no. 6 applied for transfer of 5 H.P. electric connection but it was not given as transfer in its favour had not been given effect to and no sale deed had been executed in view of the interim order passed by this court and as such on the application of opposite party no. 5 electric connection was sanctioned and the same is being used by opposite party no. 5 and that the opposite party no. 6 is manufacturing certain Ayurvedic drugs and is supplying the same to various wholesellers and has been paying sales tax. Although the opposite party has not stated any year or date but from the bill a copy of which has been filed, it appears that the same was granted during the pendency of writ petition and that too in later part of 1986 and in any case not before 1985. The papers pertaining to payment of sales tax are of the month of October, 1985. The subsequent grant of electric connection in favour of opposite party no. 5 and the use of the same by opposite party no. 6 itself indicates that the socalled transfer was a sham transaction and by introducing some other person and changing the name of the electric connection has been granted for practical purposes continues to be allottee in person. The subsequent grant of electric connection in favour of opposite party no. 5 and the use of the same by opposite party no. 6 itself indicates that the socalled transfer was a sham transaction and by introducing some other person and changing the name of the electric connection has been granted for practical purposes continues to be allottee in person. The terms and conditions of the lease were broken by opposite party no. 5 and his agreement became liable for cancellation. The transfer which was so permitted is obviously against the own recommendation of the Director of Industries or the Joint Director of Industries. Even if it be said that the Joint Director had powers to do so, he could have only right to transfer the premises and nothing more. A person having a clear title can ask or effect transfer and the allotment order in favour of opposite party no. 5 in view of terms of agreement became liable for cancellation and as such no transfer could have been affected. The application for transfer, that is, allotment of shed in favour of opposite party no. 6 could have been considered alongwith other applications. When the application of the petitioner was pending from before, there was no question of transferring possession but the opposite parties did not consider the application of the petitioner on merit and allowed the transfer. The action of the opposite parties was arbitrary as has been observed in M/S. Kasturi Lal Lakshmi Reddi v. State of J&K. and others 1980 (4) SCC I: AIR 1980 SC 1992 ), where it has been held that the Government is not free to act as it likes in granting licences such as awarding a contract or selling or leasing out its property. Whatever be its activity, the government is still the Government and is subject to restraints in its working in democratic society. The Constitutional power conferred on the Government cannot be construed by it arbitrarily or capriciously of in an unprincipled manner, it has to be exercised for the public good. Every activity of the Govt. has a public element in it and must, therefore, be informed with reasons and it if does, its action would be liable to be invalidated. The Constitutional power conferred on the Government cannot be construed by it arbitrarily or capriciously of in an unprincipled manner, it has to be exercised for the public good. Every activity of the Govt. has a public element in it and must, therefore, be informed with reasons and it if does, its action would be liable to be invalidated. If the Government awards a contract or leases out or otherwise deals With the property or grants any other largess, it would be liable to be tested for its validity an the touchstone of reasonableness and public interest and if it fails to satisfy the test, it would be unconstitutional and invalid. 4, In the instant case, from the above facts, it is obvious that the allotment which has been permitted without considering other application, is unreasonable and lacks good faith and could not be said to be in public interest. The order passed by the State Govt. affecting the order of transfer in favour of opposite party No. 5 is unreasonable and invalid. In these circumstances, the allotment order passed in favour of opposite party DO. 5 cannot be allowed to stand. 5. The writ petition is, accordingly, allowed and a writ of certiorari is issued quashing the order dated 25.2.1984,, passed by the Joint Director of Industries (annexure 14) and the order dated 23.2.1984, passed by the State Government contained in Annexure 13 to the writ petition. However, it will be open to the opposite parties to consider the merits of the ease of the petitioner and that of opposite party no. 6 and in ease the opposite party no. 6 in fact has started any production regarding which there is dispute and doubt, his claim would be given due consideration and in any view the opposite partieswill, as far as possible, allot any other shed to opposite party no. 6 if circumstances warrant that he should not get and keep possession over shed no, 5B. 6. No order as to costs.