DALJIT SINGH AND OTHERSversusUNION TERRITORY CHANDIGARH THROUGH ITS CHIEF ADMINISTRATOR, U.T. CHANDIGARH AND ANOTHER

                     [2010] 2 S.C.R. 536


A                 DALJIT SINGH AND OTHERS
                                 v.
    UNION TERRITORY CHANDIGARH THROUGH ITS CHIEF
     ADMINISTRATOR, U.T. CHANDIGARH AND ANOTHER
              (Civil Appeal No.1640 of 2010)
B                     FEBRUARY 09, 2010.
      [G.S. SIN.GHVI AND ASOK KUMAR GANGULY, JJ.]

        Chandigarh (Sale of Sites & Buildings) Rules, 1960 - r.
C 7-A(2) - Purchase of site in auction - Payment of 25% of bid
  money - Taking of physical possession of site - Surrender
  of site within 36 days of allotment - Acceptance of surrender
  by competent authority- Demand of penalty@ 2.5% of the
  premium ulr 7-A - After 2 Y2 years, demand of additional 2. 5%
D of premium amount as penalty u/r. 7-A(2) - Legality of- Held:
  If surrender is made after possession is offered by competent
  authority, ·penalty @ 5% of the premium is leviable in terms
  of r. 7~A(2) even if surrender is made within 180 days -
  Transferee surrendered the site after taking possession thus.
E comp_etent authority did not commit any illegality by
  demanding the balance penalty - However, the said demand
  having been raised after 2 Y2 years of acceptance of surrender
  of site, was arbitrary exercise of power and violation. of
  doctrine of fairness in state action - Thus, demand of
F additional penalty quashed and order of High Court set aside.
       Appellants purchased a residential site in an auction.
  They deposited 25% of the bid money and took physical
  possession of. the site. After one month they surrendered
  the site. Respondent no. 2 accepted the surrender of the
G site and imposed penalty @ 2.5% of the premium under
  Rule7-A of the Chandigarh (Sale of ·Sites and Buildings)
  Rules, 1960. After 2 % years, respondent no.2 issued
  notice to the appellants requiring them to deposit

H                              536
DALJIT SINGH v. UNION TERRITORY CHANDIGARH THROUGH ITS 537
          CHIEF ADMINISTRATOR, U.T CHANDIGARH

Rs.3,38,082/-, which was 2.5% of the premium as penalty      A
because in terms of Rule 7-A(2), penalty@ 5% of the
premium ought to have been imposed. The appellants
challenged the demand of additional amount and prayed
for withdrawal of the request of surrender. Respondent
no.2 rejected the same. The appellants then filed writ       B
petition. The Division Bench of the High Court dismissed
the petition. Hence the present appeal.

    Allowing the appeal, the Court

      HELD: 1.1. A reading of the plain language of Rule C
7-A of the Chandigarh (Sale of Sites and Buildings) Rules,
1960 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 D
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 possession is offered by the
competent authority, penalty @ 5% of the premium is E
leviable in terms of Rule 7-A(2) 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 the~ penalty @ 5% of the premium is F
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 G
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). [Para 1O]
[543-C-G]
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         538      SUPREME COURT REPORTS               [2010] 2 S.C.R.


A      1.2. The appellants had surrendered the site after
  taking possession thereof. Therefol'Ef, in principle the
  order of 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
B balance penalty @ 2.5% of the premium is accepted.
  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
c of surrender was rejected without any tangible reason,
  the High Court should have quashed the demand raised
  by respondent no.2 on the ground of arbitrary exercise ·
  of power and violation qf the doctrine of fairness in state .
  action. [Para 11] (.643-G-~; 544-A-B]
D             1.3. Wl)ile approving th~ view.taken by the High
         Court on the interpretation of Rule 7-A (1) and (2) of the
         Rules, the prayer made by the appellants is accepted and
         the demand raised by respondent no.2 vide notices dated
         5.11.2007 and 26.12.2007 is quashed. (Para 12] (544-C-D]
E
    <,        CIVIL APPELLATE JURISDICTION: Civil AppealNo. 1640
         0f 2010.

             From the Judgment & Order dated 3.12.2008 of the' High
F        Court of Punjab & Haryana at Chandigarh in Civil Writ Petition
         No. 2964 of 2008.

              P .S. Patwalia, Pragati Neekhra , Suryanaryana and
         S:onika for the Appellants.

G              Kamini Jaiswal for the Respondents.                 •
               The Judgment of the Court was delivered by

               G.S. SINGHVl, J. 1. Leave granted.

H
  DAWIT SINGH v. UNION TERRITORY CHANDIGARH THROUGH ITS 539
   CHIEF ADMINISTRATOR, U.T. CHANDIGARH [GS. SINGHVI, J.]

      2. Feeling aggrieved by order dated 3.12.2008 passed by        A
 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   B
 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     C
  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           D
  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          E
  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      F
  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         G
  notice dated 5.11.2007 tt> 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      H
    540       SUPREME COURT REPORTS                  [201 O] 2 S.C.R.


A 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
s 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
c         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
D         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
E         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
F         residential plot 1199, Sector 19-8, 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 view of the submis~ions made above it is
G         reque_sted 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 19-8, Chandigarh."
H
 DALJIT SINGH v. UNION TERRITORY CHANDIGARH THROUGH ITS 541
  CHIEF ADMINISTRATOR, U.T. CHANDIGARH [GS. SINGHVI, J.]

     5. Respondent No.2 declined to accept the                        A
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           8
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 @          C
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)   D
 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       E
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 emphasiz~d that if the
appellants had been told that penalty @ 5% of the premium
would be imposed then they may not have pressed for                   F
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 wittidraw the request for surrender of
the site.
                                                                      G
     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
appellan_ts to pay penalty @ 5% of the premium because they
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    542      SUPREME COURT REPORTS                    [2010] 2 S.C.R.


A   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.
s   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 penalty.

C      · 9. We have considered the respective submissions. Rule
    7-A of ths 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
D         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
E         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
F         surrender the site within twg 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 Esta~e Officer shall be
          competent to decide such cases, as also cases under
G         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
H         prescribed in sub-rule ( 1) above, at anytime after two years
 DALJIT SINGH v. UNION TERRITORY CHANDIGARH THROUGH ITS 543
  CHIEF ADMINISTRATOR, l).T. CHANDIGARH [GS. SINGHVI, J.]

     from the date of allotment on payment penalty which shall        A
     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 Adminis~rator may, on compa~sionate                8
     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."

      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   C
 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         D
 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                E
 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                  F
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).
                                                                      G
     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
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    544     SUPREME COURT REPORTS                  [2010] 2 S.C.R.


A 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
B 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
C 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.
D
    N.J.                                          Appeal allowed.