Punjab-Haryana High Court
M/S Damcosoft Pvt Ltd & Anr vs Ut Of Chandigarh & Ors on 22 December, 2014
Author: Hemant Gupta
Bench: Hemant Gupta, Hari Pal Verma
1
CWP No.23491 of 2014
IN THE PUNJAB & HARYANA HIGH COURT AT
CHANDIGARH
Date of Decision: 22.12.2014
CWP No.23491 of 2014
M/s Damcosoft Private Limited & another ...Petitioners
Versus
Union Territory, Chandigarh & others ...Respondents
Present: Mr. Nidesh Gupta, Senior Advocate, with
Mr. Ramandeep Singh, Advocate, for the petitioners.
Mr. Sanjeev Sharma, Senior Advocate, with
Mr. Shekhar Verma, Advocate, for the respondents.
CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA
HON'BLE MR. JUSTICE HARI PAL VERMA
HEMANT GUPTA, J.
The petitioners i.e. M/s Damcosoft Private Limited - petitioner No.1, a registered company under the Indian Companies Act, 1956 and Archana Gupta - petitioner No.2 as its Director, claim writ of mandamus directing the respondents to issue the occupation certificate for Built to Suite Site No.13 A, Rajiv Gandhi Chandigarh Technology Park, Phase - I, Chandigarh allotted to the petitioners vide allotment letter dated 16.03.2009 (Annexure P-8). The petitioners have also sought a writ of certiorari for quashing the memos dated 07.07.2014 (Annexure P-17); 08.05.2013 (Annexure P-18) & 18.09.2014 (Annexure P-19).
Chandigarh Administration issued an advertisement (Annexure P-
1) in February, 2008 inviting Expression of Interest for allotment of land in Rajiv Gandhi Chandigarh Technology Park (hereinafter to be referred as 'the IT Park'). In the said advertisement, three categories of plots were carved out VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 2 CWP No.23491 of 2014 i.e. one small campus site measuring 3 acres (approx.) Special Economic Zone (SEZ); three Built to Suit Sites (BTS) ranging from 0.55 acres to 0.66 acres each (SEZ) and BTS Sites in non-SEZ (STP) area for allotment on lease hold basis. The eligibility criteria for the site in question BTS site in Non SEZ area, was that the enterprise should have annual turnover in IT operations of a minimum Rs.10.00 crores or its equivalent in US Dollars per annum in each of the last three years. The relevant conditions read as under:
"Eligibility Criteria for Built to Suit Sites (both for SEZ area and non- SEZ area) The following types of enterprises will be eligible for consideration as applicants for the allotment of Built to Suit Sites for IT Enterprises engaged in Software Development:
(i) Annual turnover in IT operations of a minimum Rs.10.00 crores or its equivalent in US Dollars per annum in each of the last 3 years.
(ii) The Enterprises should have been carrying out IT operations for at least five years before the date of application.
(iii) The Enterprise should have a minimum of 100 employees on its rolls at the time of application.
(iv) Plan of action for establishing the proposed Information Services on the site and to make the required investment in a time bound manner.
xxx xxx"
The application form had the similar conditions, but with a Disclaimer that the prospective applicants are requested to go through the exact provisions of the Allotment of Campus Sites in Chandigarh Technology Park Rules, 2006 (as amended up to date) (hereinafter referred as 'the 2006 Rules') and Chandigarh Estate Rules, 2007 (as amended up to date) (hereinafter referred as 'the 2007 Rules'). Subsequently, the Public Relations Department, Chandigarh Administration issued a Press Release (Annexure P-2) on 23.04.2008 pointing out that four foreign companies namely Damco Solutions;
Silicon Valley Systech; PCC Technology Group and 22nd Century VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 3 CWP No.23491 of 2014 Technologies have got the allotment, which was done through draw of lots as 30 companies had applied for 7 sites available. The relevant extract from the said Press Release is as under:
"Chandigarh, April 23:- The allotment process for Phase - I and Phase
- II of the Rajiv Gandhi Chandigarh Technology Park (RGCTP) got completed on Wednesday with the Administration allotting the remaining 6 Built to Suit (BTS) sites and 1 small Campus site in RGCTP. 3 BTS sites each have been allotted in SEZ and Non-SEZ categories. The allotment was done through a draw of lots scheme as 30 companies had applied for the 7 sites available. More than 100 crores of Investment is expected to be pumped into the IT Park with these allotments.
Four foreign firms namely Damco Solutions, Silicon Valley Systech, PCC Technology Group and 22nd Century Technologies and other companies like Compact Disc India Ltd. And Ramtech Software Solutions Pvt. Ltd. have got the allotment. Ten companies based in the USA and UK had applied for setting up their offices in RGCTP. Damco Solutions Ltd. is a UK based Software solutions company, which provides high quality and reliable Software Solutions & Services. Damco has proven expertise across technologies and deep domain knowledge of industry verticals. Damco's global delivery capabilities are well proven and are backed up by ISO 9001:2000 standards.
xx xx With the completion of the current round of allotments, all the sites in Phase - I and Phase - II of the RGCTP have been allotted. The Administration has ambitious plans for the development of the Phase - III which once complete, will provide direct employment to 35000 professionals, thereby increasing the direct employment in RGCTP to 67000. Since every IT job creates 3 indirect jobs, this will translate into 200000 indirect jobs in Chandigarh."
[ On 01.05.2008, a letter of intent (Annexure P-3) was issued to M/s Damco Solutions Ltd. U.K. (hereinafter to be referred as 'the parent company') conveying allotment of Site No.13 A, measuring 0.90 acres with a stipulation that the building on the site will have to be constructed and completed according to the approved plan within the period of three years. One of the VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 4 CWP No.23491 of 2014 conditions was that the site to be allotted is non-transferable and further transfer - re-transfer/resale of the same will not be allowed in favour of any party at any stage. The addressee was required to remit a sum of Rs.33,72,924/- to cover 25% tentative premium and also execute an agreement to sell. In pursuance of the letter of intent, the requisite amount was sent to the Administration on 08.05.2008 through Foreign Draft drawn on ICICI Bank Limited, Mumbai Branch, Mumbai.
Thereafter, a request was made by the parent company to the Director, Information Technology, Chandigarh Administration that to get tax benefits under STPI scheme of Government of India, after registration with Software Technology Park India (STPI) by incorporating a Special Purpose Vehicles (SPV) in the form of 100% wholly owned Indian Subsidiary company as per the RBI guidelines for investment by foreign companies is necessary. The Director, Information Technology addressed a letter to the Finance Secretary, Chandigarh Administration on 28.07.2008 pointing out that the allotments to the parent company as well as other companies have been made in the name of the foreign based IT companies and that if any request for change in the name is to be considered, the same will amount to transfer in ownership as the name of allottee will have to be changed. It was also pointed out that under Rule 14 of the Allotment in Chandigarh Technology Park Rules, 2006, no transfer of ownership is allowed for a period of 15 years, but the competent authority is empowered to allow such transfers in exceptional circumstances. It was noticed that it would be difficult for these foreign based IT companies to start their operations from IT Park as they would not be able to get themselves registered under STPI scheme or SEZ scheme. With this background, the request of the parent company as well as other foreign companies was forwarded to allow them to transfer the plot in the name of their VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 5 CWP No.23491 of 2014 wholly owned Indian subsidiary companies, which are registered in India. The relevant extract from the said letter reads as under:
"In view of this peculiar circumstances, it is requested that these four foreign based IT companies may be allowed to transfer the plot in the name of their wholly owned subsidiary companies which are registered in India and the new allottee would be bound by the same terms and conditions of allotment as envisaged for the parent allottee. In order to ensure that the foreign companies adhere to the bar on transfer of ownership for 15 years as envisaged under rule 14 of CTP Rules, 2006, it would be appropriate to impose the following condition that:-
"The parent foreign allottee company will subscribe to 100% of the share capital of the new subsidiary company to be registered in India and shall not transfer any shares in the wholly owned company in favour of any other company or undertake any other activity which might construe to amount to transfer of ownership in the said allotted BTS site - whether full or partial, for a period of 15 years from the date of original allotment to the parent foreign allottee company. In exceptional circumstances, if the allottee company feels the need to transfer any shares as a result of strategic investment, whether through merger or by acquisition, the same may be allowed only subject to the prior written consent of the Administration"."
It is, thereafter, the parent company communicated to the Finance Secretary, Chandigarh Administration vide communication dated 12.09.2008 (Annexure P-6) that it had incorporated a subsidiary company under the name Damco Soft Pvt. Ltd. i.e. the present petitioner on 09.09.2008 and requested for issuance of allotment letter in the name of the present petitioner. After consulting with the Law Department, a communication was addressed by the Finance Department to the Estate Officer pointing out that it has been decided that a fresh letter of intent offering the allotment of Built to Suit Site in question in favour of the Damco Soft Pvt. Ltd., a wholly owned subsidiary company of Damco Solution U.K. Ltd. - the parent company be issued and that the amount already deposited by the parent company would be adjusted against VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 6 CWP No.23491 of 2014 the demand to be made by the Estate Officer in the fresh letter of intent to be issued in favour of the wholly owned subsidiary company registered in India, with a condition as suggested by the Director, Information Technology.
Accordingly, a letter of intent was issued in favour of petitioner No.1 on 16.03.2009 (Annexure P-8). As per the terms and conditions, the building was to be completed within three years from the date of delivery of possession and that no transfer of the site shall be allowed before the expiry of 15 years from the date of execution of the lease deed. In case of transfer after the expiry of period of 15 years, the lessee company shall be liable to pay unearned increase as per the provisions of the Chandigarh Estate Rules, 2007. The petitioners remitted the balance sum of Rs.1,01,18,771/- towards 75% of the premium of the site in question by way of bank draft drawn on the State Bank of India accepting the said proposal. Thereafter, a lease deed (Annexure P-10) was also executed. The possession of the site in question was handed over to the petitioners on 29.05.2009 and the building plans were sanctioned on 28.05.2012. The petitioners were granted extension to construct side without charging any extension fee up to 21.06.2014 vide communication dated 25.01.2013 (Annexure P-13). In Annexure P-14, the Finance Department noticed that the zoning plan of the site in question was issued only on 22.06.2011 and that there has been inordinate delay in sanction of the approval of the plans much beyond the deemed sanction period of 60 days i.e. from 18.08.2011 to 28.05.2012. Therefore, the period in taking time for sanction was sought to be excluded for computing the period of three years. The Estate Officer vide Annexure P-15 allowed three years period from the date when the building plans were approved, as the petitioners submitted building plans within two months of the receipt of the zoning plan. The petitioners have also produced Damp Proof Coating (DPC) certificate dated 29.01.2013 as required VIMAL KUMAR under the conditions for sanction of the building plans. 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 7 CWP No.23491 of 2014
On 02.06.2014, the petitioners requested for partial occupancy of Ground Floor, Lower and Upper Basement of the site in question as is permissible under the Rules. Pursuant to the said request, communication dated 07.07.2014 (Annexure P-17) was communicated, with only condition checked as condition (n), which reads as under:
"(n) As per letter of Chandigarh Administration vide memo No.31/1/290-UTF1(4)-2013/3292 dated 08.05.2013, the case/matter cannot be proceed further and kept hold pending till the decision taking by the Chandigarh Administration, Chandigarh in the matter."
Annexure P-18 attached with the writ petition is a letter dated 08.05.2013, wherein while considering the case of 22nd Century Technologies, it was decided that two similar situated companies i.e. the present petitioner and S.V.Systech Pvt. Ltd. also require revisiting though the Administrator, UT Chandigarh has conveyed issue of fresh letter of intent in favour of the wholly owned subsidiary companies registered in India. The petitioner sought intervention of the Finance Secretary on 08.10.2014 to issue occupancy certificate and also requested the Secretary, Department of Industrial Policy and Promotion, Ministry of Commerce & Industry, Government of India, Delhi for his intervention so as to enable the petitioners to commence operations. The Secretary, Department of Industrial Policy and Promotion, Government of India, Delhi vide communication dated 11.10.2014 (Annexure P-22) communicated to the following effect:
"At this advanced stage, once investment has been made and the company is ready to start operations, the project has been put on hold. This will send an adverse message to foreign investors and will be a deterrent to FDI, which is the key focus of the Government of India to bring in foreign investment and create more jobs under 'Make in India' global initiative.VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 8 CWP No.23491 of 2014
I request you to kindly re-examine the issue so that there is consistency and predictability of policy regarding foreign investment in India."
In the meantime, on 18.09.2014, the Chandigarh Administration constituted a Committee consisting of (i) Adviser to the Administrator, UT, Chandigarh; (ii) Finance Secretary, Chandigarh Administration; (iii) Chairman, Chandigarh Housing Board, Chandigarh; & (iv) Commissioner, Municipal Corporation, Chandigarh, to consider:-
"(I) First come to the conclusion as to what is the legal position in the issuance of Letter of Intent to M/s Demcosoft Solutions (foreign company) and subsequently namely M/s Damcosoft Pvt. Ltd. and finally letter of allotment to M/s Damcosoft Pvt. Ltd.
(II) Thereafter make its recommendations whether occupation certificate should be issued to M/s Damcosoft Pvt. Ltd. Or not.
If yes, on what terms and conditions and if so, justification for the same may be given.
(III) Also come to the conclusion whether the decision taken in the case of M/s Damcosoft Pvt. Ltd. would have implications on other cases of similar nature and shall further give its opinion and advice as to how to deal with this matter.
(IV) Keep in mind and consider all the options given by the Finance Department."
The petitioners have also pointed out that it has availed financial assistance to the tune of Rs.16 crores from the State Bank of India for setting up the project and has completed the construction. Therefore, the proposal to revisit the allotment is wholly illegal, unwarranted on the plea of promissory estoppel and also that the very basis of revisit are untenable in law.
In a short reply by way of affidavit dated 28.11.2014, reference was made to letter dated 11.08.2014 (Annexure R-1) issued by the Government of India, Ministry of Finance that the Administration should satisfy that before foreign citizens/companies are allowed to purchase property in Chandigarh, VIMAL KUMAR they should be eligible in terms of Foreign Exchange Manage (Acquisition and 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 9 CWP No.23491 of 2014 Transfer of Immovable Property in India) Regulation 21/2000 dated 03.05.2000.
On 28.11.2014, when this Court noticed the argument raised by the learned counsel for the petitioners that all the payments to the Chandigarh Administration towards the cost of the plot have been made through the banking channels permitted under the Foreign Exchange Management Act, 1999 and the Regulations framed thereunder, the counsel for the respondents sought some time to enable the Chandigarh Administration to take a final decision.
On 10.12.2014, when the matter came up for hearing again, an affidavit dated 09.12.2014 has been filed on behalf of the Estate Officer pointing out that the Building Branch informed that in view of the communication dated 08.05.2013 received from the Finance Department, Chandigarh, the application of the petitioner could not be processed. However, on 29.11.2014, the site in question was inspected by a team comprising of Assistant Estate Officer, Sub Divisional Officer (Building) and two Junior Engineers, who vide its inspection report (Annexure R-1) found the following deficiencies:
"a. Stack parking as approved in the building plans, is yet to be installed;
b. Circulation Area not paved till date;
c. Railing of all staircases leading to both basements has not been
provided; &
d. Completion plan has not been submitted by th petitioner. In
absence of completion plan, site inspection cannot be effectively carried out."
It is also averred that the plots were not put to auction and therefore, there was no competitive bidding, rather, the plots were allotted through a draw of lots on the fixed prices. It is admitted that in the advertisement it is not clear that as to whether a foreign company could apply, VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 10 CWP No.23491 of 2014 but it goes without saying that the compliance of the laws of land including Special Economic Zone Act, 2005, RBI Guidelines and provisions of Foreign Exchange Management Act, 1999 are required to be complied with. The Foreign Exchange Regulation Nos.21/2000-RB and 22/2000-RB both dated 03.05.2000 specifically bar the transfer of immovable property to foreign nationals except as per the procedure prescribed. It is also pointed out that out of 29 applicants, 18 were eligible. After draw, 6 companies were allotted sites out of which 2 were Indian companies, whereas 4 were foreign companies. It is also pointed out that foreign companies incorporated Indian companies as a Special Purpose Vehicle (SPV) in order to obtain necessary approvals from various departments including Software Technology Parks of India and RBI. Thereafter, the Companies requested for transfer of letter of allotment in favour of Indian companies, which was barred as per the terms of the letter of allotment as well as 2006 Rules and 2007 Rules. The newly incorporated companies did not have either the turn-over or experience. It is pointed out that it appears that such action may not have been proper. It was pointed out that on 22.02.2013, while considering the request of 22nd Century Technologies in the name of Indian subsidiary, the issuance of letter of intent itself in favour of foreign companies was doubted resulting in a decision taken to revisit the entire allotment process in the case of foreign companies. Reference was made to the communication from Government of India dated 11.08.2014.
We have heard learned counsel for the parties at length and found that the entire action of the respondents in revisiting the allotment of site to the petitioner is not only hit by the doctrine of promissory estoppel, but is also wholly illegal and unwarranted. The issue needs to be examined is that whether the allotment made to the petitioner is in terms of 2006 Rules and/or 2007 Rules. Rule 4 of the 2006 Rules contemplates the eligibility criteria for VIMAL KUMAR allotment of main campus site. Rule 6 provides for eligibility for the allotment 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 11 CWP No.23491 of 2014 of small campus site. The relevant Rule in respect of the site in question is Rule 8, which reads as under:
"8. Eligibility for allotment of Build-to-Suit Sites Ranging from 0.75 acres to 1.0 Acre for IT/ITES/BPO Enterprises - The following types of enterprises will be eligible for consideration as applicants for the allotment of Build-to-Suit Sites for IT/ITES/BPO Enterprises:-
(i) Annual turnover in IT/ITES/BPO operations of a minimum Rs.10.00 crores or its equivalent in US Dollars per annum in each of the last 3 years.
(ii) The Enterprises should have been carrying out IT/ITES/BPO operations for at least five years before the date of application.
(iii) Th Enterprise should have a minimum of 100 employees on its rolls at the time of application.
(iv) The Administration may allot/auction such sites under the Chandigarh Estate Rules, 2007 as amended from time to time framed under the Capital of Punjab (Development & Regulation) Act, 1952 or on such terms and conditions, as it deems fit.
(v) The intending lessee shall make an application to the Estate Officer in Form 'A' together with an affidavit attested by an Oath Commissioner or the Magistrate Ist Class, affirming all facts which make him eligible for allotment of a site.
(vi) Copies of balance sheet, documentary evidence of number and categories of staff employed and turnover be enclosed"
The terms and conditions of the allotment are contained in Rule 11 i.e. the sale of sites/buildings by allotment on leasehold basis shall be governed by the provisions as laid down under the Chandigarh Estate Rules, 2007. Rule 14 of 2006 Rules deals with the transfer of campus site. Rule 14 reads as under:
"14. Transfer of Campus Sites - (a) Transfer of campus sites by the lessee shall be regulated as per provisions of Rule 7 of the Chandigarh Estate Rules, 2007.VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 12 CWP No.23491 of 2014
(b) In the event of the lessee company being merged with another company or in the event of a split of the lessee company, or the selling up of a subsidiary by the lessee company, in accordance with statutory provisions and with the permission of the concerned regulatory authorities, the consequent substitution of name of the lessee may be allowed prior to the expiry of the period mentioned in sub rule (a) above, for the reasons to be recorded in writing.
(c) In all cases of transfers or substitution the transferee, the new entity must satisfy in every respect the conditions of eligibility for allotment of the site in question as on the date of the application for transfer or substitution.
(d) Permission for transfer may be granted on payment of transfer charges as determined from time to time."
A perusal of the conditions in the advertisement as well as 2006 Rules contemplate that annual turnover can be in Rupees or in equivalent US dollars. Meaning thereby, that foreign companies could also participate, who have turn over in dollars. However, Rule 3 of the 2007 Rules provides sale/lease by auction or allotment, whereas the procedure for allotment by sale/lease is contained in Rule 4. The procedure for sale/lease by auction is detailed in Rule 5. Rule 7 prohibits transfer of site before expiry of 15 years and in case of transfer after the period of 15 years, the payment of unearned increase.
Though there is reference of violation of 2006 Rules in the written statement filed, as the site was not auctioned but allotted, but the fact remains that 2006 Rules contemplate allotment of site as well. Even the 2007 Rules contemplate allotment of site by auction and/or allotment. Since the Administration has decided to adopt the procedure of allotment by issuing advertisement giving wide publicity and considering the persons eligible for allotment, we do not find that the process of allotment suffers from any illegality or irregularity. Such allotment is in terms of the principles laid down VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 13 CWP No.23491 of 2014 in Akhil Bhartiya Upbhokta Congress Vs. State of Madhya Pradesh & others (2011) 5 SCC 29, wherein it has been held to the following effect:
"65. What needs to be emphasized is that the State and/or its agencies/instrumentalities cannot give largesse to any person according to the sweet will and whims of the political entities and/or officers of the State. Every action/decision of the State and/or its agencies/instrumentalities to give largesse or confer benefit must be founded on a sound, transparent, discernible and well defined policy, which shall be made known to the public by publication in the Official Gazette and other recognized modes of publicity and such policy must be implemented/executed by adopting a nondiscriminatory and non- arbitrary method irrespective of the class or category of persons proposed to be benefitted by the policy. The distribution of largesse like allotment of land, grant of quota, permit licence etc. by the State and its agencies/instrumentalities should always be done in a fair and equitable manner and the element of favoritism or nepotism shall not influence the exercise of discretion, if any, conferred upon the particular functionary or officer of the State.
66. We may add that there cannot be any policy, much less, a rational policy of allotting land on the basis of applications made by individuals, bodies, organizations or institutions de hors an invitation or advertisement by the State or its agency/instrumentality. By entertaining applications made by individuals, organisations or institutions for allotment of land or for grant of any other type of largesse the State cannot exclude other eligible persons from lodging competing claim. Any allotment of land or grant of other form of largesse by the State or its agencies/instrumentalities by treating the exercise as a private venture is liable to be treated as arbitrary, discriminatory and an act of favoritism and/or nepotism violating the soul of the equality clause embodied in Article 14 of the Constitution."
In another recent order of the Hon'ble Supreme Court, the allotment made to an Institute in Chandigarh was set aside for the reason that the site was allotted without any advertisement and public notice. However, no such circumstance exits in the present case. The Hon'ble Supreme Court in Civil Appeal No.2143 of 2007 titled 'Institute of Law & others Vs. Neeraj Sharma & others' decided on 19.09.2014 held as under:
VIMAL KUMAR2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 14 CWP No.23491 of 2014
"33. Further, on a careful evaluation of the statutory object behind clause 18 of the "Allotment of Land to Educational Institutions (Schools)Rules Etc. on Lease Hold basis in Chandigarh Scheme, 1996"
no systematic exercise has been undertaken by the Administration of Chandigarh to identify the needs of different kinds of professional institutions required to be established in Chandigarh. We thus concur with the reasoning of the High Court in the impugned orders that the Screening Committee comprising of senior and responsible functionaries allotted the institutional sites in favour of the allottee without following any objective criteria and policy. The Screening Committee acted in a manner which is contrary to the principles laid down by this Court in the judgments cited above in allotting the land in question in favour of the first appellant. We, therefore, conclude that the High Court has rightly held that the policy followed by the Chandigarh Administration where the allotment of land was done in favour of the appellant-Institute without giving any public notice and in the absence of a transparent policy based upon objective criteria and without even examining the fact that the Union Territory of Chandigarh is already under extreme pressure of over population and even in the case of allotment of school sites by making no attempt to enforce clause 18 of the Scheme, 1996, thereby confining the said provision merely to the statute book, is arbitrary, unreasonable and unjust and is opposed to the provisions of Article 14 of the Constitution of India. The issue of eligibility of the parent company or issuance of letter of allotment to the Indian Company is required to be examined as to whether, the Chandigarh Administration in terms of Circular dated 11.08.2014 is permitted to revisit the allotment made to Indian Company or whether there is any illegality or irregularity in making the allotments and who is the competent authority i.e. Chandigarh Administration or Reserve Bank to examine the violations of the FEMA or the Regulations framed thereunder.
The stand of the Administration is that in terms of letter dated 11.08.2014, it has been mandated to examine the allotments already made. At this stage, we find that such letter was not made basis to withhold the occupation certificate, as the Administration has refused to approve the VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 15 CWP No.23491 of 2014 building plans on 07.07.2014 on the basis of letter dated 08.05.2013 i.e. even before the letter of 11.08.2014 was received by the Administration. The fact remains that letter dated 11.08.2014 deals with a problem of foreign natural coming to India and staying beyond 182 days on a tourist visa and illegal acquisition of immovable property by them. Firstly, the parent company is a person resident outside India, but it is not a foreign natural person. The question of stay beyond 182 days is in respect of natural person and not the juristic person. Therefore, the context in which the said letter was issued deals with a natural person staying beyond 182 days and purchasing immovable property and not that of a juristic person purchasing property in India. The parent company does not come within any of the suspicious categories enumerated in the communication dated 11.08.2014. Still, the issue, whether there is any violation of any of the provisions of the FEMA Act, is required to be examined by the Reserve Bank or the authorities constituted by it. The respondents have sought to revisit the allotment letters in terms of the letter dated 11.08.2014, which does not deal with the concluded transactions, as it enjoins a caution to be exercised by all concerned authorities to be extra vigilant and to satisfy themselves about the eligibility under the Act 'before' registering transfer of properties by foreign nationals. The relevant extract from the letter dated 11.08.2014 reads as under:
"4. In view of the above, I would request you to kindly issue appropriate instructions to all concerned authorities under your control to be extra vigilant in such matters and satisfy themselves about the eligibility under FEMA before registering transfer of properties by foreign nationals and seek necessary declarations/verify travel document such nature of visa from intending buyer who are on visit to India or seller on their eligibility under FEMA. Wherever appropriate, the authorities concerned may consider reviewing registration of sale/purchase already made to determine their compliance with legal requirements."VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 16 CWP No.23491 of 2014
Therefore, the concluded transaction of allotment cannot be permitted to be disputed by the Chandigarh Administration on the strength of letter dated 11.08.2014. However, if advised, the Reserve Bank or its authorities can examine the nature of transaction between the parent Compnay and the Petitioner in accordance with law. We may notice that no doubt was raised that parent company could not establish Indian subsidiary company.
The petitioner has requested for allotment on the basis of letter of intent issued to parent company to avail benefits under STPI scheme. Such request was endorsed by the Director, Information Technology and accepted by the Administration, when the fresh letter of allotment was issued in the year 2009. In the letter of intent, there was a condition that no transfer shall be permitted. The site is not being transferred after the issuance of letter of allotment to the petitioner. Once a decision has been taken to allot the site to the parent company and a letter of allotment was issued in favour of the present petitioner, the respondents cannot be permitted to say that their action in making the allotment to the petitioner requires revisiting. It was an action taken at the highest level by the Administration and in consultation with the Law Department. Once a decision has been taken to allot a site to the Indian subsidiary of the parent company, the same cannot be open to doubt. Once the experience of the parent company has been noticed and allotment made to the Indian Company, the respondents are bound in law not to dispute the allotment already made.
M/s 22nd Century Technologies Inc., another foreign company, has filed a writ petition bearing CWP No.3038 of 2014 before this Court claiming allotment of plot in pursuance of the advertisement issued. The Estate Officer passed an order on 11.11.2013, impugned in the said writ petition, wherein it has been categorically stated that the decision taken in the case of the petitioner VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 17 CWP No.23491 of 2014 is also being revisited and any further action in respect of the petitioner has been kept on holding till further orders.
We find that the mechanism of constituting a Committee to consider the claim of the petitioner for grant of occupation certificate is with pre-conceived mind. In the light of the order passed by the Estate Officer on 11.11.2013 stipulating that allotment in the case of the petitioner is being revisited, shows the direction in which the decision making process is being directed. The Administration is taking shelter behind the communication dated 11.08.2014 though such letter does not empower the Administration to reopen the concluded contracts.
In view thereof, we find that the action of the respondents in even threatening to revisit the allotment puts the entire investment of the petitioner at risk having availed financial assistance from the public sector bank and changing its position. The rule of promissory estoppel clearly debars the Administration from changing its position after making allotment to the petitioner sanctioning building plans and allowing the building to be completed. At this stage, the respondents cannot be permitted even to threaten the revisiting of the allotment made.
A Division Bench of this Court in a judgment reported as Geeta Devi Vs. Chandigarh Administration, (1999) 1 PLR 88 applied the principles of promissory estoppel, when after allotment of a plot the same was sought to be cancelled after the building was constructed. The Court held as follows:
"34. The question whether the respondents are estopped from cancelling the lease granted to the petitioners deserves to be examined in the backdrop of the admitted facts that the residential plots were allotted to the petitioners in the years 1991 and 1992 after scrutiny of the applications submitted by them. The petitioners neither misled the authorities of the Chandigarh Administration nor did they conceal any fact from them. They took possession of the plots after paying 25% of the total price. Later on, they constructed buildings after obtaining VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 18 CWP No.23491 of 2014 sanction of their plans from the competent authority. They were also granted occupation certificates by the competent authority. Each one of them spent lakhs of rupees for construction of the residential houses. After all this had happened, someone in the Estate Office appears to have initiated action for cancellation of the lease on the ground that the petitioners were not eligible to be allotted plots under the 1972 Scheme because their land was acquired for development of third phase of Chandigarh city and not the second phase. The Finance Secretary, Chandigarh, to whom reference was made by the Estate Officer approved the proposal for cancellation of leases without giving notice to the petitioners and thereafter the Assistant Estate Officer enacted a farcical show of compliance of the principles of natural justice. In our opinion, the allotment of plots made to the petitioners by the competent authority will have to be treated as a valid promise made to them that they may raise construction and enjoy the property on payment of price indicated in the letters of allotment. The petitioners acted on this promise and raised construction after obtaining sanction of the building plans and they have been residing in the houses constructed between the years 1992 to 1994. This is sufficient to invoke the doctrine of promissory and equitable estoppel for nullifying the orders of cancellation of the leases passed by the respondents. The administration of the Union Territory, in our considered view, cannot back out from the promise made to the petitioners about their entitlement to hold the property and deprive them of the houses after each of them spent lakhs of rupees for construction. In support of this, we may usefully refer to the decisions of the Supreme Court in Motilal Padampat Sugar Mills Co. (P) Ltd. v. The State of U.P., (1979) 2 SCC 409: The Gujarat State Financial Corporation v. Lotus Hotels Private Ltd., (1983) 3 SCC 379:
and Union of India v. Godfrey Philips India Ltd., (1985) 4 SCC 369: and a decision of this Court in Nestle India Ltd. v. State of Punjab, (C.W.P. No. 9974 of 1997) decided on 18.5.1998."
The Supreme Court reviewed all the precedents in respect of doctrine of promissory estoppels in Sharma Transport Vs. Govt. of A.P. & others, (2002) 2 SCC 188, and held as follows:
"21. Lord Denning approved the decision of Dixon, J. (supra) in Central Newbury Car Auctions Ltd. v. Unity Finance Ltd. (1956) 3 All ER 905 (CA). Apart from propounding the above principle on judicial VIMAL KUMAR side, Lord Denning wrote out an article, a classic in legal literature, on 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 19 CWP No.23491 of 2014 "Recent Developments in the Doctrine of Consideration", Modern Law Review, Vol. 15, in which he expressed as under:
"A man should keep his word. All the more so when the promise is not a bare promise but is made with the intention that the other party should act upon it. Just as contract is different from tort and from estoppel, so also in the sphere now under discussion promises may give rise to a different equity from other conduct.
The difference may, lie in the necessity of showing 'detriment'. Where one party deliberately promises to waive, modify or discharge his strict legal rights, intending the other party to act on the faith of promise, and the other party actually does act on it, then it is contrary, not only to equity but also to good faith, to allow the promisor to go back on his promise. It should not be necessary for the other party to show that he acted to his detriment in reliance on the promise. It should be sufficient that he acted on it."
This principle has been evolved by equity to avoid injustice. It is neither in the realm of contract nor in the realm of estoppel. Its object is to interpose equity shorn of its form to mitigate the rigour of strict law. In Union of India v. Anglo Afghan Agencies AIR 1968 SC 718 it was inter alia observed as follows:
"We are unable to accede to the contention that the executive necessity releases the Government from honouring its solemn promises relying on which citizens have acted to their detriment. Under our constitutional set-up, no person may be deprived of his right or liberty except in due course of and by authority of law: if a member of the executive seeks to deprive a citizen of his right or liberty otherwise than in exercise of power derived from the law -- common or statute
-- the courts will be competent to, and indeed would be bound to, protect the rights of the aggrieved citizens."
It was further held in its summing up thus:
"23. Under our jurisprudence the Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim to be the Judge of VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 20 CWP No.23491 of 2014 its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation has arisen."
xx xx
24. It is equally settled law that the promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is prohibited by law or which was devoid of the authority or power of the officer of the Government or the public authority to make. Doctrine of promissory estoppel being an equitable doctrine, it must yield place to the equity, if larger public interest so requires, and if it can be shown by the Government or public authority for having regard to the facts as they have transpired that it would be inequitable to hold the Government or public authority to the promise or representation made by it. The court on satisfaction would not, in those circumstances raise the equity in favour of the persons to whom a promise or representation is made and enforce the promise or representation against the Government or the public authority. These aspects were highlighted by this Court in Vasantkumar Radhakisan Vora v. Board of Trustees of the Port of Bombay (1991) 1 SCC 761, STO v. Shree Durga Oil Mills (1998) 1 SCC 572 and Ashok Kumar Maheshwari (Dr) v. State of U.P. (1998) 2 SCC 502. Above being the position, the plea relating to promissory estoppel has no substance."
Recently, in another judgment reported as Monnet Ispat & Energy Ltd. Vs. Union of India, (2012) 11 SCC 1, the Supreme Court delineated the principles where an issue of applicability of promissory estoppel arises. It enumerated the following:
"182.1. Where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is, in fact, so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective of whether there is any pre- existing relationship between the parties or not. 182.2. The doctrine of promissory estoppel may be applied against the Government where the interest of justice, morality and common VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 21 CWP No.23491 of 2014 fairness dictate such a course. The doctrine is applicable against the State even in its governmental, public or sovereign capacity where it is necessary to prevent fraud or manifest injustice. However, the Government or even a private party under the doctrine of promissory estoppel cannot be asked to do an act prohibited in law. The nature and function which the Government discharges is not very relevant. The Government is subject to the rule of promissory estoppel and if the essential ingredients of this doctrine are satisfied, the Government can be compelled to carry out the promise made by it.
182.3. The doctrine of promissory estoppel is not limited in its application only to defence but it can also furnish a cause of action. In other words, the doctrine of promissory estoppel can by itself be the basis of action.
182.4. For invocation of the doctrine of promissory estoppel, it is necessary for the promisee to show that by acting on promise made by the other party, he altered his position. The alteration of position by the promisee is a sine qua non for the applicability of the doctrine. However, it is not necessary for him to prove any damage, detriment or prejudice because of alteration of such promise. 182.5. In no case, the doctrine of promissory estoppel can be pressed into aid to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. No promise can be enforced which is statutorily prohibited or is against public policy.
182.6. It is necessary for invocation of the doctrine of promissory estoppel that a clear, sound and positive foundation is laid in the petition. Bald assertions, averments or allegations without any supporting material are not sufficient to press into aid the doctrine of promissory estoppel.
182.7. The doctrine of promissory estoppel cannot be invoked in abstract. When it is sought to be invoked, the court must consider all aspects including the result sought to be achieved and the public good at large. The fundamental principle of equity must forever be present to the mind of the court. Absence of it must not hold the Government or the public authority to its promise, assurance or representation."
The allotment of the plot is not in violation of either the 2006 Rules and/or 2007 Rules. It was only letter of intent, which was issued to the VIMAL KUMAR 2014.12.23 11:26 I attest to the accuracy and integrity of this document Chandigarh 22 CWP No.23491 of 2014 parent company, whereas the letter of allotment has been issued to the petitioner after granting approval for transfer. Rule 14 of the 2007 Rules would not be applicable, as it is not a case of transfer after allotment was made to the petitioner. It is a case of transfer even before letter of allotment was issued. The issuance of letter of allotment to the petitioner by taking into consideration the eligibility of the parent company is not in violation of any Statute, Rules or Instructions. The petitioner has not misrepresented at any stage in respect of status of the parent company or that of the incorporation of Indian subsidiary. The Administration has issued letter of allotment keeping in view the facts disclosed by the petitioner.
Consequently, we find that the communication dated 07.07.2014 based upon communication dated 08.05.2013 and the constitution of Committee on 18.09.2014 to revisit the allotment qua the petitioner is wholly unjustified. The same are accordingly set aside.
As per the petitioner, it has removed or will remove the deficiencies pointed out in the inspection report dated 29.11.2014. Subject to the compliance of the objections, the respondents shall issue partial occupation certificate to the petitioners forthwith.
With the aforesaid discussion and directions, the present writ petition stands disposed of.
(HEMANT GUPTA)
JUDGE
22.12.2014 (HARI PAL VERMA)
Vimal JUDGE
VIMAL KUMAR
2014.12.23 11:26
I attest to the accuracy and
integrity of this document
Chandigarh