REPORTABLE

IN THE 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

J U D G M E N T

G.S. Singhvi,  J.

1. Leave granted.

2. 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.

3. 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.

4. 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  

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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.  

The relevant portions of the reply submitted by appellant No.1 are extracted  

below:

“That  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  regard.

That in 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.

That  I  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.  Moreover, the penalty already paid by me at the rate of 2.5%  may also be adjusted against the said 25% premium. That in  

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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.”

5. 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.

6. 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 to them.

7. 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  

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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.   

8. 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  

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25.1.2005  and  argued  that  the  High  Court  rightly  refused  to  quash  the  

demand for the remaining amount of penalty.

9. We have  considered  the  respective  submissions.   Rule  7-A of  the  

Rules which has bearing on the decision of this appeal reads as under:

“Surrender 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.  The date of surrender under these rules shall be the date when  intimation  by  the  transferee  to  this  effect  reaches  the  Estate  Officer.

(2)  A  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).   

(3) The 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  anytime after two years from the date of allotment on payment  penalty  which  shall  not  be  less  than  5%  of  the  premium.  Interest shall be chargeable from the transferee as prescribed in  sub-rule (1) above.

(4) The 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.”

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10. 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).

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11. 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.

12. 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.

[G.S. Singhvi]

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…..…..………………..J. [Asok Kumar Ganguly]

New Delhi February 9, 2010.

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