Karnataka High Court
M/S Shrishma Fine Chemicals And vs State Of Karnataka on 17 March, 2023
Bench: Krishna S.Dixit
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WP No. 14961 of 2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 17TH DAY OF MARCH, 2023
BEFORE
THE HON'BLE MR JUSTICE KRISHNA S DIXIT
WRIT PETITION NO. 14961 OF 2021 (GM-KIADB)
BETWEEN:
M/S SHRISHMA FINE CHEMICALS AND
PHARMACEUTICALS (KARNATAKA) LIMITED
A PUBLIC LIMITED COMPANY INCORPORATED
UNDER THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
PLOT NO.30, INDUSTRIAL AREA,
VEERAPURA POST, DODDBALLAPUR,
BENGALURU - 561 203.
REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE
SRI.S VASU.
... PETITIONER
(BY SRI.ASHOK HARANAHALLI, SENIOR COUNSEL A/W
SRI.SAMMITH S, ADVOCATE)
Digitally signed AND:
by SHARADA
VANI B
Location:
1. STATE OF KARNATAKA,
HIGH COURT REPRESENTED BY ITS PRINCIPAL SECRETARY,
OF COMMERCE AND INDUSTIRES DEPARTMENT,
KARNATAKA
M S BUILDING, BENGALURU - 560 001.
2. KARNATAKA INDUSTRIAL AREAS
DEVELOPMENT BOARD,
REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER,
#49, 4TH & 5TH FLOOR, EAST WING,
KHANIJA BHAVAN, RACE COURSE ROAD,
BENGALURU - 560 001.
... RESPONDENTS
(BY SRI. SRIDHAR HEGDE, AGA FOR R1;
SRI. B B PATIL, ADVOCATE FOR R2)
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THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO
QUASH THE IMPUGNED ORDER DATED 15.07.2021 VIDE ANNX-
AL PASSED BY THE R2 REJECTING THE REQUEST MADE BY THE
PETITIONER TO EXECUTE THE SALE DEEDS IN FAVOUR OF THE
PETITIONER IN RESPECT OF THE SCHEDULE A,B,C AND D
PROPERTY AND ETC.,
THIS PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDER, THIS DAY, THE COURT PRONOUNCED THE
FOLLOWING:
ORDER
Petitioner, an incorporated Company under the
provisions of erstwhile Companies Act, 1956 inter alia
carrying on the business of import & export of chemicals,
is invoking the writ jurisdiction of this Court for assailing
the order dated 15.07.2021 issued by the 2nd Respondent
- KIADB (Annexure-L) whereby, its request for the
execution of a full form conveyance in respect of Petition
properties, has been negatived and therefore, it has
sought for a Writ of Mandamus to the KIADB to execute
one, in terms of policy assurance as reflected in KIADB
Letter dated 12.06.2001 (Annexure-J).
2. After service of notice, the 1st Respondent-
State has entered appearance through the learned AGA;
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the 2nd Respondent-KIADB represented by its Sr. Panel
Counsel has filed its Statement of Objections resisting the
Writ Petition. The Panel Counsel makes vehement
submission in justification of the impugned order and
opposing the petition claim.
3. FACTS OF THE CASE EMERGING FROM THE
RECORDS:
(a) The respondent-KIADB is established under the
provisions of Karnataka Industrial Areas Development Act,
1966 inter alia for establishing industrial areas and to
facilitate establishment of industries in the State. For that
purpose, the State acquires private lands in terms of the
scheme envisaged u/ss. 28 & 29 and allots it to the
KIADB, this being preceded by declaring certain areas as
'industrial areas' u/s 3 of the Act. Allotment of lands &
sites is made to the aspiring entrepreneurs on the
remittance of prescribed costs/prices in terms of extant
policy & precedent. During the period between 1983-1989,
petitioner-Company secured allotment of scheduled
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properties in terms of subject Lease-cum-Sale
Agreements, one of them being principal instruments
dated 29.5.1984 & 18.7.1989.
(b) Petitioner-Company was before the BIFR vide
Reference No.152/1988. In Co.P.No.55/1997 &
Co.P.No.147/1998, filed by the creditors u/s 433(e) of the
erstwhile Companies Act, 1956, it suffered Winding Up
Orders at the hands of a Coordinate Bench on 27.7.2006.
In OSA No.34/2006 & OSA No.35/2006 filed by employees
of the Company, these orders came to be set at naught by
the Division Bench on 4.10.2007 and matter was
remanded for consideration afresh. On reconsideration,
same orders came to be reiterated on 20.3.2012 by
another Coordinate Bench. Subsequently, C.A.Nos.321 of
2010 and 2064 of 2013 filed by the assignee of the
secured creditors u/ss. 391 to 394 of the 1956 Act came
to be allowed vide order dated 19.11.2013 and approval to
the Scheme of Arrangement was accorded. That was
followed by filing of Co.P.No.34/2014 that came to be
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allowed by reviving the Company vide order dated
23.6.2015 which came to be implemented by the Official
Liquidator vide Possession Memo dated 8.7.2015.
(c) Petitioner vide letter dated 1.9.2015 requested
the respondents to execute a registered Sale Deed in
respect of the scheduled lands. The respondent-KIADB
vide reply dated 16.12.2015 asked the petitioner to remit
a sum of Rs.4,80,13,080-00/-. Petitioner remitted in all
Rs.3,27,79,970/- stating that it is not liable to pay the
remainder of the demand i.e., Rs.1,52,33,110/- being the
water charges since it was declared to be a SICK industry
by the BIFR vide order 7.4.1999 and it was not using any
water at all since then. However, it had agreed to remit
Rs.24,40,000/- towards the actual water supply charges
including interest that had accrued due before the
declaration of sickness. This it conveyed to the KIADB vide
a long letter dated 2.4.2018 and had sought for execution
of the regular Sale Deed, by waiving the untenable
demand. The KIADB vide reply dated 23.7.2018
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substantially agreed with the proposal and asked the
petitioner to remit only Rs.26,38,831/- which came to be
remitted on 23.7.2018 followed by a letter dated
24.7.2018 reiterating the request for execution of the Sale
Deed. Nothing happened and therefore, several reminders
were sent; again nothing happened. Petitioner moved
W.P.Nos.18929-937/2019 and a Coordinate Bench of this
Court vide judgment dated 5.9.2019 directed the
respondent-KIADB to take a call on the representation of
the petitioner within a period of two months.
(d) Petitioner made a detailed representation dated
23.9.2019 again requesting for the execution &
registration of the Sale Deed comprising the subject
properties with all supportive documents including balance
sheets, bank assurances, etc. The respondent-KIADB vide
order dated 15.7.2021 rejected the claim, during the
pendency of petitioner's W.P.No.9922/2021 which
eventually came to be withdrawn with liberty to challenge
the said order.
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4. Having heard the learned counsel for the parties
and having perused the Petition Papers, this Court is
inclined to grant indulgence in the matter as under and for
the following reasons:
(A) The subject lands were allotted to the Company
by multiple Lease-cum-Sale Deeds during the period
between 1983 & 1989. Subsequently, higher amount was
extracted than the agreed prices vide letter dated
19.2.2001 inter alia stating that the land owners have got
the enhanced compensation and that there were other
expenses. In the said letter, it was specifically promised
stating '...On your payment of the difference in the land
cost, over-due instalment and interest, sale-deed in
respect of the land allotted to you will be executed in your
favour, provided you have satisfactorily complied with all
other terms and conditions of lease and there is no
violation of terms of agreement...'. By another letter dated
6.12.2005, the KIADB had stated "After detailed
discussions, it was decided to execute sale deed, as per
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the terms and conditions of the lease-cum-sale
agreement, subject to the following:
1. The final price of the Industrial Area
should have been fixed and dues should be
settled to the Board. 2. The lease period should
have been expired. 3. The project should have
been implemented and the land should have
been utilized to an extent of 50% effectively, as
per the terms of the lease agreement."
(B) The Executive Engineer of the KIADB vide
report dated 28.4.2001 had specifically stated as under:
"With reference to the above, the above said
plots were visited on 20/4/2001 and the details of
utilization is as follows:
(i) The extent of land occupied by the
allottee is 79445 Sq Mtrs (in plot no.30, 31, & 40)
plus 92,069 sq. (in S.U.C bearing Sy. No. 54P,
58(P), 103, 105 & 106(P) of Majira Hosahalli) and
a total extent of 1,71,514 Sq Mtrs which is in
accordance with the possession certificate issued.
(ii) The extent of land covered by
buildings & flagging works out to 11,277.82 Sq
Mtrs i.e., 6.58% utility.
(iii) The extent of land covered by roads,
drains, sop etc., works out to 9150 SQM i.e.,
5.33% utility.
(iv) The extent of land covered by
Eucalyptus Plantation used for let out of treated
waste water and treated liquid wastes works out
to 92069 Sq Mtrs i.e., 53.68%.
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(v) The total percentage of utilization,
considering eucalyptus plantation works out to
65.58%.
(vi) The line of activity is manufacturing of
bulk drugs & intermediates.
(vii) The unit is running under the name
"M/s Shrishma Fine Chemicals & Pharmaceuticals
(Karnataka) Ltd".
(viii) The unit is not discharging any
effluent outside the premises.
(ix) There is a water supply arrears of Rs.
24,46,508 as on 31st March 2001. The allottee has
dug a borewell in his plot for which permission has
been obtained same had to be verified in the
original file.
For kind perusal & further needful action."
(C) There is force in the submission of learned Sr.
Advocate appearing of the petitioner that the version of
the KIADB that presently, there are no constructed
buildings nor there is any industrial activity nor any ETP
Plant was set up, is unsustainable as a reason for denying
execution of the Sale Deed. It hardly needs to be stated
that on the lands being granted by the KIADB, the same
was utilized admittedly to the extent of 65.58% as is
reflected in the report dated 24.4.2001 submitted by the
jurisdictional Executive Engineer of the KIADB itself with
all break-ups namely 6.5% for building; 5.33% for road,
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sewage works etc; and 53.68% for discharge of treated
liquid waste water to the eucalyptus plantation. The
question of setting up ETP thus would not arise.
(D) There is a grave error apparent on the face of
the record inasmuch as what the KIADB has to look into is
the position that existed as on the date it had promised to
execute the Sale Deed and not what happened after the
Company became a sick industry followed by winding up
orders, there being set aside in appeal of the workmen,
the approval to the Scheme of Arrangement & revival of
the Company followed by the Possession Memo issued by
the Official Liquidator, at the long last. Thus, during a long
dysfunctional period spanning between March 1997 & July
2015 i.e., for about 17 years or so, the industrial empire
of the Company had collapsed and later, it was resurrected
as the phoenix, of course, initially at the intervention of
the BIFR and later, of the Company Court. The fact
remains vouched that earlier to all this, the industry was
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functioning in order with no complaint whatsoever as to
non-compliance.
(E) In fact, the KIADB had also moved the
Company Court in C.A.No.497/2013 in Co.P.No.55/1997
seeking permission to resume the subject lands. The
Coordinate Bench vide order dated 23.6.2015 negatived
the prayer whilst granting approval to the Scheme of
Arrangement facilitating revival of the Company and
directing the Official Liquidator to restore plant,
machinery, registers & property. The contention of learned
Panel Counsel appearing for the KIADB that clause 10 of
the Scheme of Arrangement concerning the allotment of
subject lands was eschewed by the Company Court, would
not make any difference to the right of petitioner to have
the execution of Sale Deeds, since KIADB had agreed to
execute ones even post revival of the Company, having
got remittance of crores of rupees from the petitioner that
too after waiving a part of the demand as well. The
impugned action of the respondent-KIADB is liable to be
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faltered on the ground of estoppel u/s 115 of the Indian
Evidence Act, 1872.
(F) All through, respondent-KIADB which is a
statutory authority by acts, deeds & written words had
agreed to execute the Sale Deed in furtherance of the
limited conveyances earlier done. Even at paragraph 27 of
the impugned order, the KIADB policy is specifically stated
as "However, in the cases of sick units, the KIAD Board in
its meeting held on 06-12-2005 had taken a decision with
a liberal view to execute sale deeds in favour of sick units
where 50% land has been utilized and project was
implemented...". Going by the very report of the KIADB
Engineer, the industry was established, structures were
put up and 65.58% of the land was utilized. During the
long drawn legal battle of winding up proceedings, plant &
machinery became dysfunctional and the structures too
dilapidated, is admitted by the KIADB at para 29 of the
very impugned order.
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(G) On what basis the government unilaterally
could have declined the request for execution of the Sale
Deed remains to be a riddle wrapped in enigma. In fact, it
was the KIADB which should take a decision on its own
and not under the dictation of the government which can
issue general directions and not in species. The Apex Court
in BAR COUNCIL OF DELHI vs. SURJEET SINGH, AIR 1980
SC 1612, has faltered actions of the statutory authorities
done at the dictation of the other agencies, when the
scheme of the Act does not assign role to them. It hardly
needs to be stated that the governmental functionaries
also happen to be the constituent members of the KIAD
Board. Therefore, the other reason namely intervention of
the government in the matter on which the impugned
order is structured cannot be legally sustained.
(H) Petitioner-Company on being eschewed from
liquidation, has secured acceptance of its proposal for
sanction of a term loan of Rs.2,00,00,000/- at the hands
of Federal Bank for the purpose of warehousing project
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subject to the condition of vouching absolute title to the
property. A series of representations were made by the
petitioner post revival of the Company as well, seeking
execution & registration of the Sale Deeds specifically
pointing out the remittance of amounts made, as directed.
The stony silence of the KIADB drove the petitioner to
move the Writ Court twice earlier, the one at hands makes
it thrice. The stand of the KIADB militates against the
'doctrine of promissory estoppel' vide Apex Court decision
in M/S MOTILAL PADAMPAT SUGAR MILLS CO. (P.) LTD.
vs. STATE OF UTTAR PRADESH 1979 SCR (2) 641,
wherein at para 5, it is observed as under:
"5. The true principle of promissory estoppel
is that where one party has by his words or
conduct made to the other a clear and
unequivocal promise which is intended to create
legal relationship effect a legal relationship to
arise in the future, knowing or intending that it
would be acted upon by the other party to whom
the promise is made and it is in fact so acted upon
by the other party, the promise would be binding
on the party making it and he would not be
entitled to go back upon it, if it would be
inequitable to allow him to do so having regard to
the dealings which have taken place between the
parties, and this would be so irrespective whether
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there is any pre-existing relationship between the
parties or not. Equity will in a given case where
justice and fairness demand, prevent a person
from insisting on strict legal rights even where
they arise, not under any contract, but on his
own title deeds or under statute..."
The observations come to the aid of the Petitoenr more
than otherwise since his rights are structured on the basis
of pre-existing legal arrangement giving raise to justiciable
rights.
(I) Learned Sr. Counsel appearing for the petitioner
is more than justified in highlighting the 'doctrine of
promissory estoppel' by placing reliance on UNION OF
INDIA vs INDO AFGHAN AGENCIES, AIR 1968 SC 718.
Enormity of importance that our system attaches to this
doctrine, can be seen by the stand taken by India in
Bhopal Gas Tragedy Case that was launched in the District
Court of New York i.e., "Un IN RE: UNION CARBIDE
CORPORATION GAS LEAK DISASTER AT BHOPAL, INDIA,
IN DECEMBER 1984". The tort-feasor company was
pressing for adjudication of the claims of injured Indians
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only in the American Court alleging that Indian Courts
were inadequate to handle a case of the kind. A great
jurist of yester decades Mr. N.A. Palkhivala in his
personal Affidavit dated 18.12.1985 filed in the said court
extolled the efficacy & greatness of our Judiciary, inter alia
referring to 'doctrine of promissory estoppel' as under:
"In Motilal Padampat Sagar Mills v. Uttar
Pradesh (AIR 1979 SC 621) the Supreme Court
took the doctrine of Promissory estoppel
(which estops the government from pleading
executive necessity and going back on its
earlier promise) an important step further, and
held that it was not merely available as a
defence but could supply a cause of action for
institution of legal proceedings."
("Mass Disasters and Multinational Liability" by Prof.
Upendra Baxi and Thomas Paul, Indian Law Institute,
pages 223-225)
In the above circumstances, this Writ Petition
succeeds; a Writ of Certiorari issues quashing the
impugned order; a Writ of Mandamus issues directing the
respondent-KIADB to execute & register Sale Deeds in
favour of & at the cost of petitioner, within an outer limit
of eight weeks, failing which, the present CEO of the
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KIADB shall personally pay to the petitioner a sum of
Rs.10,000/- for delay of each day for the first thirty days
and Rs.25,000/- for the days next following.
Now, reluctantly costs are made easy.
Sd/-
JUDGE
Bsv
