M/S.METAL SEAM CO.OF INDIA (P)LTD. Vs. M/S.AVADH DELICACIES & ORS.

Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 361 of 2016, Judgment Date: Jan 19, 2016

Non-Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 361 OF 2016
(Arising out of SLP (C) No. 10951 of 2014)

M/s Metal Seam Co. of India (P) Ltd. …Appellant

Vs.

M/s Avadh Delicacies & Others …Respondents

J U D G M E N T

Uday U. Lalit, J.

Leave granted.

This appeal challenges the judgment and order dated 28.03.2014 passed by
the High Court of Judicature at Allahabad, Lucknow Bench, Lucknow in Writ
Petition No.1840 of 1998 whereby the High Court was pleased to set-aside
the orders dated 09.06.1998 and 15.06.1998 passed by the General Manager,
District Industries Centre, Lucknow.

The facts in the present matter are as under:-

In 1956, Shed No.B-5 inclusive of appurtenant open space situated in
Talkatora Industrial Estate, Lucknow (hereinafter referred to as the
“concerned shed”) was allotted to M/s Surya Chemicals for establishment of
a factory. Under the Hire Purchase agreement entered into between M/s Surya
Chemicals and the Director of Industries on behalf of the Government of
U.P., it was expressly stipulated in Condition No.4 as under:-

“Not to sell, 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 as such conditions as the Director of Industries, U.P.,
may lay down while granting such permission.”

The present Appellant was allotted the adjoining shed namely B-6 in the
year 1968 and in due course of time it started manufacturing containers and
drums. As the business of the Appellant expanded, it required additional
premises. Around this time M/s Surya Chemicals was in arrears in making
payment of instalments in respect of the concerned shed. At one stage the
allotment in its favour was cancelled but on an assurance that it would
start production, it was given time and the allotment was restored. The
Appellant approached the Joint Director of Industries for allotment of the
concerned shed on payment of entire cost.

Since M/s Surya Chemicals was in default, the Joint Director of Industries
recommended cancellation of allotment of the concerned shed and wrote to
the General Manager to take the appropriate steps after taking legal
opinion in the matter. The General Manager however by his order dated
01.12.1983 recommended transfer of the concerned shed in favour of Avadh
Delicacies, Respondent No.1 herein. Respondent No.1 was a new firm
provisionally registered as a Small Scale Industries unit with the General
Manager. The order was passed on an application moved by M/s Surya
Chemicals for transfer of the concerned shed to Respondent No.1.

d) On 25.02.1984 the Joint Director of Industries accepted the transfer
application moved by M/s Surya Chemicals permitting the transfer of the
concerned shed in favour of Respondent No.1. This led to the filing of Writ
Petition No.1166 of 1984 by the Appellant in the High Court. It was
submitted that the application for transfer ought to have been considered
along with other pending applications and when the application of the
Appellant was pending there was no question of accepting the transfer as
proposed by M/s Surya Chemicals.

e) That writ petition was allowed by the High Court by its judgment and
order dated 04.03.1987. It was observed as under:-
“In the instant case, from the above facts, it is obvious that the
allotment which has been permitted without considering other applications,
is unreasonable and lacks good faith and could not be said to be in public
interest. The order passed by the State Government effecting the order of
transfer in favour of opposite party No.6 is unreasonable and invalid. In
these circumstances, the allotment order passed in favour of opposite party
No.6 cannot be allowed to stand.

The writ petition is accordingly allowed and a writ of certiorari is issued
quashing the order dated 25.02.1984, passed by the Joint Director of
Industries (Annexure-14) and the order dated 23.02.1984, 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 case
of the petitioner and that of opposite party No.6 and in case 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 parties will, so 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.5-B.”

f) Thus the order of transfer in favour of opposite party No.6 i.e.
Respondent No.1 was quashed. The authorities were directed to consider the
merits of the case of the Appellant and Respondent No.1 and in case the
claim of Respondent No.1 was to be accepted, its claim could inter-alia be
considered in respect of any other shed.

g) The aforementioned judgment and order dated 04.03.1987 was challenged
by Respondent No.1 in this Court by filing Civil Appeal No. 3062 of 1987
and during its pendency nothing could be done. It appears that on
25.09.1997 Shed No.C-1 in the very same Industrial Estate came to be
allotted to the Appellant. On 29.09.1997 the aforesaid civil appeal was
dismissed for non-prosecution by this Court and such dismissal has attained
finality.

h) Soon thereafter the matter was taken up for consideration. On
20.03.1998 a notice was issued to the Respondent No.1 to present its case
along with necessary record relating to the concerned shed. A further
notice in that behalf was again issued to Respondent No.1 on 27.03.1998.
Similar notices were also issued to the Appellant and M/s Surya Chemicals.

i) In the meeting of Zila Udyog Bandhu held on 20.05.1998, the matter
concerning allotment of concerned shed was considered. It was observed
that in the year 1997 Shed No.C-1 was already allotted in favour of the
Appellant. The committee however concluded as under:-

“Having considered the entire facts of the above case and after due
deliberations, the Chairman has taken the decision that Shed No. B-5 was
allotted to M/s Surya Chemicals in the year 1965 and the possession of the
shed was handed over on 01.01.1966 but they have not commenced any work at
their own and transferred Shed No. B-5 to M/s Avadh Delicacies. M/s Surya
Chemicals is not interested in setting up of unit and started production,
therefore, the committee has taken the decision to cancel the allotment of
Shed No. B-5 to M/s Surya Chemicals and make its allotment in favour of M/s
Metal Seam Company of India under the provisions of Government Order No.
1888/18-2-92-25(3)/92 dated 30.4.1992 as per rules.”

j) On 09.06.1998 General Manager, District Industries Centre, Lucknow
issued a letter cancelling the allotment of the concerned shed which was
made in favour of M/s Surya Chemicals and re-claimed the possession of the
concerned shed. Further, by order dated 15.06.1998 the General Manager,
District Industries Centre, Lucknow allotted the concerned shed to the
Appellant. M/s Surya Chemicals did not challenge the order of cancellation
dated 09.06.1998. However, Respondent No.1 challenged the said order by
filing Writ Petition No.1840 of 1998 in the High Court. During the
pendency of the writ petition, there was an order of status quo which
continued till the disposal of the writ petition. It appears that on
10.03.2006 another shed in the same Industrial Estate being Shed No.C-2 was
allotted to the Appellant herein. The Appellant since then has been having
allotment of three sheds, namely, B-6, C-1 and C-2 in its favour.

k) In the aforesaid writ petition a supplementary affidavit was filed by
General Manager, District Industries Centre in January, 2000 stating as
under:

“That this Hon’ble Court on 13.09.1999 (when the instant case was
listed) was pleased to enquire whether the petitioner’s case was considered
or not for allotment of industrial plot in question in view of the judgment
of this Hon’ble Court dated 04.03.1987 passed in Writ Petition No. 1166 of
1984 (MB) (Metal Seams Co. of India v. State of UP & Ors.) in this regard
it is submitted that in paragraph 23 of the counter affidavit filed in the
instant writ petition i.e. Writ Petition No. 1840 of 1998(MB) dated
19.03.1999 it has been specifically asserted that after the dismissal of
the SLP against the judgment and order dated 04.03.1987 the steps were
taken by the Department for the assessment of the comparative need of the
conflicting parties in respect of shed in question. In the said paragraph
it was further stated that all the parties namely (1) M/s Surya Chemicals,
(2) M/s Metal Seams Co. and (3) M/s Avadh Delicacies were called vide
letters dated 20.03.1998 and 27.03.1998 by the committee consisting of (1)
General Manager, District Industries Centre, Lucknow, (2) Director, Central
Design Centre, Lucknow and (3) Project Manager in the office of Joint
Director Industries, Lucknow. The said letters were annexed as annexure
Nos. (A-3 and A-4) to the said counter affidavit.

l) The record placed before us indicates that Respondent No.1 had
initially got registration to manufacture ayurvedic medicines in the year
1987. However, in the year 1992 it had obtained licence to run a Flour
Mill and to deal in and store food grains. On 25.06.1997 Respondent No.1
had written to the Trade Tax Officer, Lucknow as under:

“1. The firm of the applicant is registered with your office under State
Trade Tax Act vide Registration No. LKO-0366347 dated 17.05.1992.

2. That the trader has closed down his business because of the loss in
it.

3. That Form No.15 and 19 are already submitted in the office.

Hence, the applicant urges that the notice of closure may be admitted and
the firm may be permanently closed.”

(m) The aforementioned Writ Petition No.1840 of 1998 came to be allowed
by the High Court by its judgment and order dated 28.03.2014. The High
Court observed that Annexure No.R-16 placed on its record by way of
rejoinder affidavit, disclosed that Respondent No.1 was running an industry
for manufacturing PVC pipes and accessories and its production had also
started. It was further observed that the order of allotment dated
15.06.1998 in favour of the Appellant was passed without giving any
opportunity of hearing or issuing any show cause notice to Respondent No.1
and without complying with the directions in the order dated 04.03.1987.
The High Court also stated that order dated 15.06.1998 was not sustainable
in as much as it was issued without any public auction or inviting tenders.

4. This appeal by special leave challenges the judgment and order passed
by the High Court setting aside the order of allotment dated 15.06.1998.
In support of the appeal, Mr. H.P. Raval, learned Senior Advocate submitted
that the notices dated 20.03.1998 and 27.03.1998 clearly indicate that
requisite opportunity was afforded to Respondent No.1, that record
indicated that the cases of all three claimants including that of
Respondent No.1 were considered before letter of cancellation dated
09.06.1998 was issued, that cancellation was never challenged by M/s Surya
Chemicals and that Respondent No.1 had no stateable claim in respect of the
concerned shed. Appearing for Respondent No.1, Mr. Guru Krishna Kumar,
learned Senior Advocate submitted that in keeping with the direction issued
in the judgment and order dated 04.03.1987 the claim of Respondent No.1 was
required to be considered, which is a matter of fact, was not considered at
all and that the requirement of the Appellant stood completely satisfied by
allotment of two sheds namely C-1 and C-2 during the pendency of the
proceedings.

5. We have considered the submissions and gone through the record. The
Appellant is right in its submissions that requisite notices were issued to
Respondent No.1 and that it was afforded adequate opportunity. The
observations of the High Court in that behalf are not quite correct. The
supplementary affidavit filed in January 2000 made the position quite
clear. The petition was therefore wrongly allowed on the ground that no
opportunity was given to Respondent No.1. We have also seen the record and
are satisfied that Respondent No.1 had closed its operation in the year
1997. According to annexure No. R-16 placed along with the rejoinder
affidavit, an inspection report was apparently prepared. That report is a
solitary piece in support of its submissions of having started
manufacturing activity. Nothing has been placed on record, no licence is
adverted to nor is it shown how and in what manner Respondent No.1 started
its activity of manufacturing PVC pipes. Nothing was filed or placed on
record pursuant to notices dated 20.03.1998 and 27.03.1998. We do not find
any merit in the submissions that Respondent No.1 has been conducting any
activity of manufacturing of PVC pipes. The claim of Respondent No.1 must
therefore be rejected. At the same time it is absolutely clear on record
that the Appellant has been having allotment of three sheds namely B-6, C-1
and C-2 in its favour in the same Industrial Estate. No special equities
are in its favour and no case is therefore made out for allotment of
concerned shed to the Appellant. The observation of the High Court that
the order dated 15.06.1998 was issued without any public auction or
inviting tenders and as such was completely unsustainable, in our view is
absolutely correct.

6. In the circumstances we allow the present appeal with following
directions:-

(a) The claim of Respondent No.1 was rightly rejected while cancelling
allotment made in favour of M/s Surya Chemicals vide letter of cancellation
dated 09.06.1998. The order of cancellation dated 09.06.1998 is sustained
and shall be fully operative. Respondent No.1 who has been in wrongful
occupation of the concerned shed must surrender the possession immediately.
The authorities are directed to recover the possession forthwith and report
compliance to this Court.

(b) In view of the change in circumstances namely allotment of sheds C-1
and C-2 in its favour, the Appellant is not entitled to claim any special
equity. The order of allotment dated 15.6.1998 passed in its favour
therefore stands set aside.

(c) The authorities are directed to conduct public auction or invite
tenders for allotment of the concerned shed at the present market value.
Needless to mention that the present Appellant and Respondent No.1 or any
other person is free to participate in such public auction or tender.

7. This appeal thus stands allowed and the judgment of the High Court
under appeal stands modified to the aforesaid extent. No order as to
costs.

……………………………J.
(V. Gopala Gowda)

……..………………..……J.
(Uday Umesh Lalit)
New Delhi,
January 19, 2016

ITEM NO.1E-For Judgment COURT NO.10 SECTION XI

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS

C.A. No.361/2016 @ Petition(s) for Special Leave to Appeal (C) No(s).
10951/2014

M/S.METAL SEAM CO.OF INDIA (P)LTD. Petitioner(s)

VERSUS

M/S.AVADH DELICACIES & ORS. Respondent(s)

Date : 19/01/2016 This appeal was called on for pronouncement of JUDGEMENT
today.

For Petitioner(s)
Mr. Anil Kumar Mishra,Adv.

For Respondent(s)
Mr. Gaurav Dhingra,Adv.

Mr. Akshit Gadhok, Adv.
Mr. Munawwar Naseem,Adv.

Hon'ble Mr. Justice Uday Umesh Lalit pronounced the judgment of the
Bench comprising Hon'ble Mr. Justice V. Gopala Gowda and His Lordship.
Leave granted.
The appeal is allowed in terms of the signed non-reportable judgment.

(Signed Non-Reportable Judgment is placed on the file)

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