Sova Solar Limited And Another vs The State Of West Bengal And Others
2021 Latest Caselaw 185 Cal/2

                        In The High Court at Calcutta
                       Constitutional Writ Jurisdiction
                                Original Side

The Hon'ble Justice Sabyasachi Bhattacharyya

                               WPO No. 437 of 2019
                        Sova Solar Limited and another
                                      Vs.
                      The State of West Bengal and others

For the petitioners        :     Mr. Anirban Ray,
                                 Mr. Arindam Guha

For the State              :     Mr. Abhratosh Majumdar, Ld. AAG
                                 Mr. Soumitra Mukhrjee,
                                 Mr. Debasish Ghosh

For the respondent

nos. 2 & 3                 :     Mr. Talay Masood Sidddiqui

Hearing concluded on      :      04.02.2021

Judgment on               :      23.02.2021

The Court:

1. The petitioners have challenged an order dated March 26, 2019,

passed by the West Bengal Industrial Development Corporation

(WBIDC), being respondent no.2 herein, whereby the petitioners'

request for release of a sum of Rs.2.96 crore under the West Bengal

State Support for Industry Scheme, 2008 (WBSSIS - 2008) was turned

down.

2. The petitioners claimed such sum under three different heads,

namely, Fixed Capital Investment Subsidy, Interest Subsidy and

Electricity Duty.

3. Learned counsel for the petitioners argues that the petitioner no.1 is

entitled to all the incentives as claimed under the said Scheme.

Previously, the petitioners had availed of credit facilities from

respondent no.2, the latter having acted as a Financial Institution as

contemplated in Clause 3.2.1 of the said Scheme. Respondent no.2

subsequently restructured the term loan given to the petitioner no.1

upon such request being made by the petitioners. Ultimately, an One-

Time Settlement (OTS) Scheme was offered for a sum of

Rs.10,98,72,913.25p, with Rs.8,48,00,000/- as principal and

Rs.2,50,72,913.25p as interest. Such scheme was accepted by the

petitioners and respondent no.2 issued a 'No Dues' Certificate on

December 1, 2017, upon payment of the total sum to the petitioners,

certifying that payment obligations of the petitioners had been fulfilled

with regard to the term loan.

4. It is submitted by learned counsel for the petitioners that, as per

Clause 16 of the 2008 Scheme, the only pre-condition of disbursal of

the fixed capital investment subsidy and interest subsidy is the

regular payment of the Value Added Tax under the Value Added Tax

Act, 2003 and the Central Sales Tax Act, 1956 without any default

being committed by the assessee. Clause 16.9 of the Scheme

stipulates that, in the event a unit is exempted from paying VAT/CST,

payment towards the subsidy will be made by the respondent no.2 to

the unit by way of account payee cheque. The petitioners claim to fall

under the exempted category. Annexure P-8 at page 146 of the writ

petition is relied on to show that the petitioner no.1 was exempted

from payment of VAT by a notification dated January 7, 2016. The

entire Scheme, according to the petitioners, does not lay down any

provision for withholding payment of the subsidies if the concerned

industrial unit has paid VAT/CST and interest. The fixed capital

investment subsidy and interest subsidy amounts are, thus, payable

to the petitioners in view of certification of payment of interest by the

concerned Financial Institution, being respondent no.2. That apart,

no penal interest was charged, as evidenced from the affidavit affirmed

by respondent nos. 2 and 3 on December 18, 2020. The OTS Scheme

was, thus, entered into upon due consideration of interest being paid

by the petitioners.

5. However, the respondents withheld the payment of such

incentives/subsidies, compelling the petitioners to move a writ

petition, which culminated in an order dated February 18, 2019 for

considering the claim of the petitioners and passing a reasoned order.

6. However, such direction was followed by the order dated March 26,

2019, rejecting the claim of the petitioners illegally and in a vague

manner, which is impugned in the present writ petition.

7. In the impugned order, it was observed that the principal amount was

not paid and that respondent no.2 had sacrificed the same, leading to

a double benefit in favour of the petitioners. However, respondent

nos. 2 and 3 have admitted in their affidavit dated December 18, 2020

that the entire principal amount was required to be paid under the

OTS. After issuing the No Dues Certificate, the respondents could not

allege that the term loan had not been paid in full by the petitioners.

The pre-condition for payment of the fixed capital investment subsidy

under the Scheme is payment of VAT/CST by the concerned unit. The

petitioners have paid such amount till the petitioner no.1 became

exempted from paying the sum, as acknowledged by the respondents.

Disbursement of such subsidy is not dependent on payment of

interest or certification thereof by respondent nos.2 and 3.

8. In the impugned order, the respondents have also alleged that the

OTS was pursuant to waiver of interest, which is contrary to the

records. In view of the interest paid certificate having been issued by

the Financial Institution (here, respondent no.2) with regard to the

interest incurred by the unit, there was no bar in granting interest

subsidy to the petitioners. It is evident from the documents annexed

to the affidavit dated December, 18, 2020 by respondent nos. 2 and 3

that huge interest of approximately Rupees Seven crore had been paid

by the petitioners.

9. The consideration, that the petitioners have already derived benefit on

account of term loan given by respondent no.2, is beyond the scope of

consideration by respondent no.2 as an agent under the Scheme. If

the term loan had been given by any other commercial bank and not

respondent no.2, the consideration by respondent no.2 for the grant of

subsidy would have been strictly limited to the Scheme and the

interest certificates issued by such Financial Institutions. The

petitioners argue that by coincidence, respondent no.2 itself was the

financial institution for the petitioners in the present case, but the

same reasoning should apply.

10. There is no specific allegation in the affidavit-in-opposition affirmed by

respondent nos. 2 and 3 that the petitioners have not complied with

the Scheme. The quantum of subsidy as claimed in paragraph 40 has

also not been denied or disputed in the opposition. Vide letter dated

February 23, 2018, respondent no.2 accepted that the fixed capital

investment subsidy was admitted and also acknowledged that

respondent no.2 received certificates from the Commissioner,

Commercial Taxes certifying that the unit had not defaulted in the

matter of payment of VAT duties. Issuance of interest paid certificate

by respondent no.2 was also admitted in the opposition. Although the

relevant letter was couched in a manner that the term loan was

settled at a principal amount of Rs.8,48,00,000/-, the figure has been

portrayed erroneously as a reduction in the principal amount.

However, from the supplementary affidavit dated December 18, 2020

filed by respondent no.2, it would be evident that the petitioners had

already paid a principal sum of Rs.1,92,00,000/-. Thus, the principal

as well as interest had been paid pursuant to the OTS Scheme.

Learned Counsel for the petitioners argues that it is de hors the law

for the respondents to defend the impugned order on the basis of

documents and correspondences beyond the consideration of

respondent no.2 while passing the impugned order. It is settled law

that an authority cannot supplement its order by relying on

documents or reasoning not reflected from the order itself.

11. After issuance of a No Dues Certificate, the respondents are estopped

from contending that there was waiver of interest. The allegation that

interests were required to be paid in full to the financial institution as

a pre-condition is also not in terms of the Scheme. Such requirement,

at best, was directory and not mandatory. Clause 9 of the Scheme

clearly indicates that any additional interest paid for delayed payment

would not be acceptable for subsidy purpose. Hence, the 2008

Scheme also contemplates payments of interest beyond the due date.

Respondent no.2, it is argued, admitted that it has received

certification of payment of interest on time and that VAT was paid on

time. Thus, till the time VAT was being paid by the petitioners, they

were entitled to reimbursement of the VAT amount.

12. The No Dues Certificate issued by respondent no.2, it is argued,

indicates that nothing was due and payable by the petitioners with

regard to any term loan or interest. Thus, no claim can be made in

that regard against the petitioners. The contention of the petitioners

deriving double interest in the event of subsidy being given is an

afterthought and an arbitrary action to prevent the payment of

subsidy under the 2008 Scheme. The delay on the part of the

respondent in restructuring financial package and in adhering to the

terms thereof also led to the delay in repayment of the entire amount

to the respondents. The contractual relationship and agreement

between respondent no.2 as a lender and the petitioners as borrowers

is of no consequence in considering entitlement of subsidy under the

2008 Scheme.

13. The OTS did not indicate that its acceptance by the petitioners would

disentitle the petitioners to subsidy under the 2008 Scheme. Since

such a condition is not mentioned in the Offer Letter of the OTS or the

OTS No Dues Certificate, respondent no.2 is estopped from

contending to the contrary. The relevant package provides that

interest would be aligned with the State Bank of India rates, thus

precluding respondent no.2 from claiming interest at a higher rate

than that, leading to a conclusion that there has been a waiver of

Rs.2.5 crore as interest. The restructuring letter at page 181 of the

writ petition shows an agreement that the interest rate would be one

per cent above the SBI base rate. However, the interest calculated for

the purpose of concluding that there was a waiver, was on a much

higher rate.

14. That apart, the petitioners argue, the respondents' action was

arbitrary and an afterthought. The State ought to act in a manner so

as to permit industry and to adhere to its promise to investors. There

is no dispute that the petitioners, as investors, paid huge amounts of

money to respondent no.2. The respondents cannot take advantage of

their own wrong in refusing to pay the dues under the 2008 Scheme.

The State, being the contractual party to such incentive Scheme, has

not disputed the payments in accordance with the terms of the

Scheme. The payment of incentives under the Scheme creates a

contractual liability, as indicated in State of West Bengal & Ors. vs.

Emami Biotech Ltd. & Ors., reported at 2014 SCC OnLine Cal 5978. A

Division Bench of this Court held in the said case that, where there

has been clear admission by the principal, its agent cannot

supplement the stand of the principal.

15. Since the principles of the Code of Civil Procedure are applicable to

the writ jurisdiction of this Court, the provisions of Order VIII Rule 5

of the Code ought to be followed, which stipulate that non-denial by

the respondents of the petitioners' averments tantamount to

admission. Thus, the prayers made in the writ petition ought to be

allowed. Re-sending the matter back to the respondents would serve

no purpose, it is argued, since the respondents have made their stand

clear by not making payment of due subsidies to the petitioners under

the Scheme, by reason of frivolous pleas.

16. Learned counsel for the State-respondent submits in reply that the

petitioners could not repay the loan taken from respondent no.2 as

per schedule and applied for restructuring of the loan. The petitioners

also committed that the subsidy may be adjusted against the

outstanding dues. The petitioners further expressed its willingness to

pledge ten percent of its shares. Thereafter, an OTS was arrived at

between the parties, the terms of which have not been disclosed in the

writ petition.

17. Learned counsel further submits that the accumulated interest on the

date of approval of OTS was Rs.9,22,60,868/-, which was reduced to

Rs.5,57,17,588/- on application of the SBI rate. Consequently, the

principal required to be repaid was Rs.8.48 crore and interest was

determined at Rs.2,50,72,913.25p. Thus, the OTS reduced the

interest liability of the petitioner by Rs.67,187,754.75p. The loan for

capital investment was not repaid within due dates, causing loss to

the coffers of respondent no.2, a wholly-owned undertaking of the

State.

18. Learned counsel for the State-respondent argues that the petitioners

are not entitled to interest subsidy. On a conjoint reading of Clauses

9.2.1 and 9.2.2 of the WBSSIS-2008 Scheme, it is argued that the

certificate from the financial institution is a necessity for claiming

interest subsidy. However, no such certificate was issued in favour of

the petitioner. The petitioner did not make out any case that it paid

instalments on due dates as per terms of the loan.

19. It is argued by the respondents that the petitioners obtained the best

possible bargain through the OTS and cannot claim further equitable

relief of capital investment subsidy, making a further dent in the

public exchequer. The petitioners occasioned financial loss to

respondent no.2 and are not entitled to fixed capital investment

subsidy. It is argued that the capital investment, in the present case,

was inextricably connected with the loan granted by respondent no.2,

since the investment could not have been made without loan being

sanctioned by respondent no.2.

20. Thus, it is argued that the writ petition ought to be dismissed.

21. At the outset, it has to be clarified that respondent no.2 cannot mix

up its dual capacity, as a "Financial Institution" under Clause 3.11 of

the 2008 Scheme and as "Authorized Agent" under Clause 3.4, which

defines the WBIDC as an agent specially authorized by the State

Government for operation of the Scheme.

22. It is to be noted that all the categories of subsidies/incentives claimed

by the petitioners are governed by Clause 16 of the Scheme, which

requires clearance of payment of VAT dues.

23. The claims of the petitioners can be divided into three broad heads -

Interest Subsidy, Fixed Capital Investment Subsidy and Waiver of

Electricity Duty.

24. As far as Interest Subsidy is concerned, Clause 9.2.2 specifically

stipulates that such subsidy will be payable annually, subject to

submission of a statement/certificate by the Financial Institution to

prove that the unit paid the interest in full to the Financial Institution

within the due dates. Clause 9.2.4, relied on by the petitioners, is

irrelevant for the present purpose, since the expression "delayed

payment" used therein pertains to any additional interest which may

be charged on such payment of the principal amount, which will not

come under the purview of Interest Subsidy. No question of additional

interest arises in the present case.

25. Although the petitioners obtained sanction in respect of the three

heads of subsidy from respondent no.2, such sanction was subject to

satisfaction of the norms and guidelines stipulated in the scheme and

extant legal provisions. Thus, mere sanction cannot be construed to

be final, binding the respondent no.2 to grant all the incentives to the

petitioners.

26. As far as Interest Subsidy is concerned, it is evident from the loan

related information issued by respondent no.2 in respect of the

petitioner no.1, annexed at page 167 of the writ petition, that the

petitioner no.1 last paid interest up to August 31, 2011. There is

nothing on record to show that any payment of interest was made by

the petitioners thereafter.

27. The attempt of the petitioners to intertwine the OTS Scheme with the

payment of interest, as contemplated in the 2008 Scheme, cannot be

accepted. Despite the petitioners having cleared all dues in terms of

the OTS between the parties, such clearance does not absolve the

petitioners from the liability under Clause 9.2.2 of the Scheme. Since

the said Clause envisages payment of interest subsidy annually,

subject to submission of statement/certificate by the Financial

Institution to prove that the unit paid the interest in full within the

due dates, the question of such Clause being attracted does not arise

after August 31, 2011 up to which interest was being paid annually by

the petitioners. For the subsequent period, the petitioners were

defaulters in payment of annual interest. Although there was full and

final settlement of all components of dues by the OTS, such

development could not obliterate the past defaults of the petitioners,

to entitle the petitioners to the annual payment of interest

retrospectively, after August 31, 2011.

28. However, as far as Interest Subsidy up to August, 2011 is concerned,

there was no valid ground for the respondents to refuse such subsidy

to the petitioners, in view of the petitioners being eligible on all other

yardsticks stipulated in the 2008 Scheme.

29. As far as Fixed Capital Investment Subsidy (FCIS) is concerned, the

plinth of the arguments advanced by the respondents is that such

subsidy was tied up with the overdue, if any, to the respondent no.2.

30. Clause (i) of the Sanction Letter dated July 31, 2014 issued by

respondent no.2 (Annexure P-6 at page 134A of the writ petition)

stipulates that, at the time of disbursement of the subsidy, overdue

amount to WBIDC, if any, will be adjusted. The said sanction pertains

only to the FCIS and not to the Interest Subsidy or Waiver of

Electricity Duty. However, although the petitioners had been

defaulters prior to the OTS being approved, upon the petitioners

having cleared off all dues in terms of the OTS in full and final

settlement of the claims of respondent no.2 in the latter's capacity as

a Financial Institution, there was no overdue amount to respondent

no.2 at the time of disbursement of the subsidy. As such, Clause (i) of

the sanction dated July 31, 2014 is rendered academic and cannot be

a bar to release such subsidy in favour of the petitioners.

31. Hence, in view of the petitioners having cleared the other hurdles in

terms of the 2008 Scheme, including the payment of VAT, they were

entitled to FCIS in full at the juncture of disbursement of the subsidy.

32. As far as Waiver of Electricity Duty is concerned, the same is governed

by Clause 9.3 of the 2008 Scheme, which contemplates that an

eligible unit for the approved project will be entitled to Waiver of

Electricity Duty on the electricity consumed for its production activity

for a period of five years from the date of commencement of the

commercial production, subject only to the unit having obtained all

kinds of statutory clearance.

33. In the impugned order of refusal of subsidy dated March 26, 2019,

there is no mention of any default on the part of the petitioners in

respect of the statutory clearance of dues, nor any dispute regarding

the quantum of electricity consumed for the production activity of

petitioner no.1, as envisaged in Clause 9.3 of the Scheme.

34. The impugned order cites primarily the principle of double benefit for

refusal of the subsidies to the petitioners. Such ground is de hors the

2008 Scheme itself, which clearly distinguishes between the identities

of respondent no.2 (WBIDC), in its dual capacities as Authorized

Agent of the State Government and as a Financial Institution, defined

respectively in Clauses 3.4 and 3.11 of the Scheme. Thus, it does not

lie in the mouth of respondent no.2 to plead double benefit as a

ground of refusal of subsidy, since, upon full and final settlement of

all claims between the petitioners and respondent no.2 (acting as a

Financial Institution), there could not arise any question of overdue or

previous waiver of interest by the respondent no.2. In the event the

Financial Institution granting loan of the petitioners was some other

entity than respondent no.2, such argument would be meaningless. In

view of segregation of the two capacities of respondent no.2 in the

2008 Scheme itself, the same logic applies to respondent no.2, in its

capacity of a Financial Institution, as well. Thus, double benefit or

waiver of interest could not be a ground for refusal of subsidy by

respondent no.2 in its capacity as an Authorized Agent of the State

Government for operation of the Scheme. Such grounds are alien to

the Scheme itself.

35. In view of the above discussions, WPO No.437 of 2019 is disposed of

by holding that the petitioners are entitled to Interest subsidy under

the WBSSIS-2008 up to August 31, 2011, to Fixed Capital Investment

Subsidy in full, as claimed by the petitioners, and to total Waiver of

Electricity Duty, as stipulated in Clause 9.3 of the WBSSIS-2008.

36. The respondents shall disburse the amounts due to the petitioners by

way of such subsidies at the earliest, latest by 30 days from date.

37. There will be no order as to costs.

38. Urgent certified copies of this order shall be supplied to the parties

applying for the same, upon due compliance of all requisite

formalities.

( Sabyasachi Bhattacharyya, J. )