Contractual Forfeiture Clauses Cannot Be Pressed Against Citizen For Authority's Own Failures: J&K&L High Court Pulls Up JDA For Auctioning Encroached Land, Imposes ₹50,000 Cost
Safiya Malik
The High Court of Jammu & Kashmir and Ladakh, Single Bench of Justice Wasim Sadiq Nargal, held that contractual forfeiture clauses cannot be applied mechanically to penalise a citizen where the alleged default is itself attributable to the authority's own failure. The Court found that the Jammu Development Authority had auctioned encumbered land without disclosing its encroached status, accepted substantial deposits from the petitioner, and retained that money for over fifteen years while denying possession — conduct the Court found arbitrary and contrary to the obligations of a public authority acting fairly and transparently toward citizens whose legitimate rights had been established through a valid allotment process.
The petitioner participated in an auction conducted by the Jammu Development Authority (JDA) pursuant to an advertisement dated 24.01.2011 for land measuring 5.38 kanals at Chinor Chowk, Bantalab, Jammu. He was declared the highest bidder at ₹41 lakhs per kanal and deposited ₹5 lakhs as earnest money and ₹20.50 lakhs as the first instalment pursuant to a Letter of Intent dated 11.02.2011. Upon visiting the site, the petitioner alleged that the land was encroached and not fully available. He claimed that he informed the JDA in April 2011 and sought demarcation and removal of encroachment before paying the balance amount.
The respondents contended that the petitioner failed to deposit the revised instalments as per communication dated 12.09.2011, which clarified that ₹41 lakhs per kanal was payable. They maintained that default entitled them to cancel the allotment and forfeit earnest money. The record included internal notings acknowledging encroachment, RTI replies, and affidavits concerning the status of the land.
The Court observed that “once the factum of encroachment over the plot came to the knowledge of the petitioner, he could not be compelled to pay the remaining amount until the encroachment was removed by the respondents.” It further recorded that “the respondents have put to auction an encroached plot on which a pucca structure was existing and thereby induced the petitioner to part with his hard-earned money to the tune of Rs.25,50,000 way back in the year 2011.”
The Court stated that “the specific averment of the petitioner that he had informed the JDA about the encroachment in April 2011 has not been expressly denied in the reply affidavit,” and that “the absence of a categorical denial lends credence to the petitioner’s assertion.” It noted that “the respondents have admitted the factum of encroachment and have even identified the encroacher, but have not disclosed the exact date of encroachment.”
On forfeiture, the Court recorded that “forfeiture clauses, though contractual in nature, cannot be invoked mechanically or arbitrarily, particularly when the alleged default itself is attributable to the authority.” It held that “no fault can be attributed to the petitioner so as to justify forfeiture of his earnest money or denial of allotment.”
The Court further observed that “the respondents–JDA have unjustly enriched itself by retaining the money of the petitioner unauthorizedly for more than fifteen years,” and that “such conduct of JDA cannot be approved which caused grave prejudice to the rights of the petitioner.” It recorded that “there is a deliberate attempt on the part of JDA to mislead this Court by taking contradictory stand.” The Court concluded that “for any inaction or lapse on the part of the JDA in auctioning an encroached plot, the petitioner cannot be penalized.”
The Court directed that “the respondents–JDA shall, within a period of one week from the date of receipt of this order, calculate the total sale consideration in respect of the land originally auctioned in favour of the petitioner measuring 5.38 kanals falling under Khasra Nos. 92 and 94, situated at Chinor Chowk, Bantalab (Chak Changarwan), Jammu, pursuant to advertisement notice dated 24.01.2011 and Letter of Intent No. JDA/Land/8254-62 dated 11.02.2011 read with communication No. JDA/LS/5278-86 dated 12.09.2011, strictly on the basis of the rates and interest component applicable at the relevant time when the allotment process was initiated and culminated in the allotment order, and not on the basis of the presently prevailing rates, as no fault is attributable to the petitioner.”
The respondents shall “prepare separate calculation sheets indicating: (i) the sale consideration payable in respect of the land measuring 5.01 kanals found available and free from encumbrances, and (ii) the sale consideration payable in respect of the remaining land measuring approximately 0.37 kanals or equivalent area, which shall be allotted to the petitioner in the same vicinity or nearest available adjacent area in lieu of the encroached portion, so as to ensure that the petitioner receives the full extent of land originally auctioned in his favour. The said calculation sheets shall clearly reflect the total consideration, the amount already deposited by the petitioner, and the balance amount payable, and shall be communicated to the petitioner through registered post within the aforesaid period.”
“Upon receipt of the aforesaid calculation sheets, the petitioner shall deposit the balance amount so determined by the respondents–JDA, within a period of one month thereafter. Upon receipt of the aforesaid amount and upon completion of all requisite codal formalities, the respondents–JDA shall, within a period of four weeks thereafter, hand over possession of the land measuring 5.01 kanals found free from encumbrances, along with possession of the equivalent land allotted in lieu of the encroached portion measuring approximately 0.37 kanals, free from all encumbrances.”
“Costs of Rs. 25,000/- are imposed upon the respondents–JDA for misleading this Court, which shall be borne by the Officer/s who has/have filed such wrong affidavit or taken contradictory stand with a view to mislead this Court after conducting proper enquiry by respondent No. 1. Further sum of Rs. 25,000/- is imposed for the inordinate delay and unjustified retention of the petitioner’s money. The aforesaid amount, in nutshell to the tune of Rs. 50,000/-, shall be deposited by the respondents–JDA with the Advocates’ Welfare Fund within a period of four weeks from the date of pronouncement of this order. In case the costs imposed by this Court are not deposited by the respondents–JDA within the aforesaid period, the Registry is directed to list this petition after the expiry of aforesaid period of four weeks only for this limited purpose for compliance of this order.”
Advocates Representing the Parties
For the Petitioners: Mr. Himanshu Beotra, Advocate
For the Respondents: Mr. Sachin Dogra, Advocate with Mr. Rahul Parihar, Advocate
Case Title: Changa Ram v. State of J&K & Ors.
Case Number: OWP No. 1386/2016
Bench: Justice Wasim Sadiq Nargal
