Mehta Furnisher and Another vs Haryana State Industrial Development Corporation Ltd. and Another

G.S. Singhvi, J.—Whether the decision of the Haryana State Industrial Development Corporation (for short ''the Corporation'') to cancel the Letter of Intent issued in favour of the petitioners is legal and justified is the only point which requires adjudication in this petition.

There is no dispute between the parties that the Corporation issued Letter of Intent (L.O.I.) dated 18/23.1.1995 to the petitioner No. 1 in respect of plot No. 119 situated in Industrial Estate, Barwala, for setting up a unit to manufacture furniture with an option to implement the project out of its own resources or by availing term loan from a financial institution. The petitioner No. 1 opted for the second alternative as would appear from the letter Annexure-P.3 dated 20.2.1995 written by its partner Shri O.P. Mehta to the Estate Officer. When the period of nine months stipulated in the letter of intent was going to expire, the Senior Manager of the Corporation wrote letter dated 9/11.10.1995 requiring the petitioners to complete the formalities of L.O.I. on or before 24.10.1995 or seek extension for a maximum period of three months by remitting extension fee @ Rs. 1/- per sq. meter per month. In reply, partner of the petitioner No. 1 wrote letter Annexure-P.5 dated 26.10.1995 and informed the authorities that the funds will be made available from the sources of the partners and there would be no occasion to approach the bank/financial institution. Simultaneously, a request was made for extension of three months. Vide letter dated 28.11.1995 extension of three months time was granted to the petitioners. At the same lime, it was called upon to send loan sanction letter along with 75% cost of the plot on or before 22.1.1996 to enable the Corporation to issue letter of allotment. The petitioner No. 1 was also told that no further extension will be granted. It appears that the partner of the petitioner No. 1 wrote letter Annexure -P.7 reiterating the earlier intimation that funds will be provided from their own resources. However, without passing any order on the request made on behalf of the petitioners for change in the source of finding, the respondent-Corporation cancelled the letter of intent on the ground of non-completion of formalities. The petitioners have challenged the decision of the Corporation on the ground of arbitrariness and non-application of mind. The respondents have justified their action on the ground that the petitioners had opted for term loan.

We have heard Shri Deepak Suri and Shri B.R. Gupta and have perused the record. Paragraphs 2, 3, 4, 5, 6, 7 and 8 of the letter of intent issued by the Corporation read as under :-

"2. We are pleased to inform you that it has been decided to offer you an industrial plot No. 119 measuring 450 Sq. mtrs. in Industrial Estate Barwala. A sum of Rs. 12,600/- towards 10% tentative cost of the plot has already been received from you.

You are requested to remit 15% i.e. Rs. 18,900.00 cost of the plot and convey your option for implementing the project either out of your own resources or by availing term loan from a financial institution within 35 days from the date of issue of L.O.I.

For self-financed projects, adequate proof reading availability of funds to implement the project will have to be given within 3 months from the date of issue of L.O.I.

In case, you propose to raise loan from HFC/banks/All India Financial Institution, you will be required to get the term loan disbursed against the cost of land from the financial institution within a period of 9 months from the date of L.O.I.

In case you are not able to get the term loan disbursed within 9 months from the date of issue of L.O.I., an extension for a period of 3 months can be given after receipt of a nominal fee @ Rs. 1/- per sq. mtr. per month.

You will be required to deposit balance 75% cost of plot with HSIDC at the time of disbursement of loan by the financial institution. On receipt of full payment of plot, HSIDC will issue a Regular Letter of Allotment and will hand over possession of plot after completing the necessary formalities.

For self-financing projects, the balance 75% cost of plot shall be payable within a period of 3 months from the date of issue of LOI.

In the event of non-completion of the formalities within the specified period, the LOI shall stand withdrawn/cancelled and the amount deposited by you will be refunded after deducting 10%."

A look at the conditions of the letter of intent, which have been reproduced above, show that the petitioners had the option to implement the project by self-financing or by availing term loan. Initially the petitioners did opt for the alternative source of funding but later on the partners of the petitioner No. 1 conveyed their intention to finance the project from their own sources. This request is clearly borne out from the letter Annexure P-5. dated 26.10.1995 as well as the letter Annexure-P.7 dated 22.1.1996. However, the Corporation did not accept or reject the request made by the petitioners with regard to the change of the source of funding. Instead, it cancelled the letter of intent without even adverting to the request made on behalf of the petitioners. This lends credibility to the argument of Shri Suri that the decision to cancel the letter of intent was cancelled without application of mind to the records of the case.

Ordinarily, we would have remanded the case to the Corporation for reconsideration but in view of the decision of this Court in Hukam Chand Chauhan Vs. Haryana State Industrial Corporation, , we deem it appropriate to give similar relief to the petitioners. That was a case in which the letter of intent was cancelled in similar circumstances. However, the learned Single Judge accepted the plea of the petitioner and ordered the restoration of letter of intent and handing over of the possession of the industrial shed subject to payment of interest @27% per annum.

For the reasons mentioned above, the writ petition is allowed. The letter An-nexure-P.8 is quashed. The respondent-Corporation is directed to revive the letter of intent subject to the following condition:-

(i) Within two months from today the petitioners shall pay the remaining amount with 27% interest. They shall also furnish proof of their finances for the project.

(ii) If the petitioners take necessary steps, the respondents shall issue allotment letter within next one month. If the petitioners fail to fulfil the conditions mentioned above, the cancellation of letter of intent shall revive without any claim for compensation.