Karnataka High Court
Idbi Bank Limited vs Karnataka Industrial Areas ... on 6 March, 2024
Author: M. Nagaprasanna
Bench: M. Nagaprasanna
1
Reserved on : 21.02.2024
Pronounced on :06.03.2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 06TH DAY OF MARCH, 2024
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.29319 OF 2023 (GM - KIADB)
BETWEEN:
IDBI BANK LIMITED
A COMPANY INCORPORATED AND REGISTERED
UNDER THE COMPANIES ACT, 1956 AND
A BANKING COMPANY WITHIN
THE MEANING OF SECTION 5(C)
OF THE BANKING REGULATION ACT, 1949
AND HAVING ITS REGISTERED OFFICE AT
IDBI TOWER, WTC COMPLEX, CUFFE PARADE
MUMBAI - 400 005.
AND ITS ZONAL OFFICE AT
IDBI HOUSE, 58, MISSION ROAD
BENGALURU - 560 027
REPRESENTED BY ITS
AUTHORISED SIGNATORY
MR.VENUGOPAL N.,
... PETITIONER
(BY SRI K.G.RAGHAVAN, SR.ADVOCATE FOR
SRI SHRIKARA P.K., ADVOCATE)
2
AND:
KARNATAKA INDUSTRIAL AREAS
DEVELOPMENT BOARD
HAVING ITS OFFICE AT 14/3
2ND FLOOR, R.P.BUILDING
NRUPATHUNGA ROAD
BENGALURU - 560 001
REPRESENTED BY ITS
CHIEF EXECUTIVE OFFICER AND
EXECUTIVE MEMBER
MR.MAHESH M., IAS
... RESPONDENT
(BY SRI B.B.PATIL, ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
IMPUGNED LETTER DTD 14.07.2023 BEARING
NO.KIADB/HO/ALLOT/20380/7643/2022-23 ISSUED BY THE
RESPONDENT TO THE PETITIONER ANNEXURE-A; DIRECT THE
RESPONDENT TO EXECUTE A LEASE-CUM-SALE AGREEMENT IN
FAVOUR OF THE PETITIONER IN TERMS OF THE ALLOTMENT
LETTER DTD 15.02.2013 BEARING NO. IADB / HO / JD / BHP /
20380 / 15385 / 2012-13 ANNEXURE-C.
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 21.02.2024, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
3
ORDER
The petitioner/IDBI Bank Limited ('the Bank' for short) is
before this Court calling in question an order dated 14-07-2023 by
which the allotment that stood in the name of the petitioner is
cancelled and further seeks a direction by issuance of a writ of
mandamus directing the respondent to execute lease-cum-sale
agreement in favour of the petitioner in terms of allotment letter
dated 15-02-2013.
2. Facts, in brief, germane are as follows:-
The petitioner is a scheduled Bank promoted by Government
of India and Life Insurance Corporation of India established as
Industrial Development Bank of India primarily for providing
financial services to industrial sectors. It then converted itself into
to a commercial Bank since 2005 and since then it is functioning as
a commercial Bank like any other banking institution. The
respondent is the Karnataka Industrial Areas Development Board
(hereinafter referred to as 'the Board' for short). The Board, in
order to promote rapid and orderly establishment and development
of industries and for providing industrial infrastructural facilities and
other amenities in industrial areas of the State of Karnataka, allots
lands to eligible persons. Likewise, in the year 2012 the Board
issues a notification for sale of lands being developed by
Government of Karnataka at Global Financial District near the
Bengaluru International Airport. The petitioner finding itself eligible
applies to the respondent on 21-04-2012 for purchase of a plot of
land measuring 10 acres for the purpose of utilizing the same for
construction of buildings to accommodate regional processing unit,
currency chest training centre, call centre, staff quarters inter alia.
The petitioner claims to have submitted all the requisite documents
and deposited `50,000/- as a non-refundable process fee.
3. Pursuant to the application so filed by the petitioner, in
terms of law and following necessary procedure, a letter of
allotment comes to be issued to the petitioner on 15-02-2013; not
allotting 10 acres as was sought, but allotting 4.5 acres of land in
plot No.11 of the KIADB Bengaluru Hardware Park. The allotment of
land was to be on lease-cum-sale basis for a period of ten years
and the lease was to be converted into a sale subject to fulfillment
of terms and conditions of allotment.
4. In terms of the letter of allotment, the petitioner pays
`1.80 crores towards tentative price of allotment in terms of the
clauses in the letter of allotment. Later the petitioner makes
payment of `6.30 crores towards the balance amount of the
tentative cost of allotment. Thus, the petitioner fulfills the entire
payment towards the allotment. Pursuant to the payment received
from the hands of the petitioner, the Board issues confirmatory
letter of allotment on 12-08-2014 and further issues a possession
certificate. It is then, correspondences between the Board and the
petitioner commence with regard to draft documents for execution
and registration of lease-cum-agreement in terms of allotment
letter. It is the averment in the petition that despite repeated
requests, the Board did not communicate any draft lease-cum-sale
agreement as was necessary.
5. The Board on 28-03-2016 communicates to the petitioner
enclosing a draft lease-cum-sale agreement to be executed
immediately. The petitioner seeks extension of time for execution
of lease-cum-sale agreement as the draft had to go through several
rungs of checks and balances. The petitioner, on examining the
draft lease-cum-sale agreement, had raised objections to certain
clauses and sought modification of terms of lease in terms of its
communication dated 27-06-2016. No response comes about from
the Board. Years passed by. In the meantime, plethora of
communications are said to have been made by the petitioner
which also go unheeded, as modification in the terms of lease was
not acceded to be changed by the Board.
6. In the year 2017, the Reserve Bank of India issues a
circular declaring a revised 'prompt corrective action frame work'
applicable to Banks, based upon their financial credentials for the
year ending 31-03-2017. As per the prompt corrective action
frame work, the petitioner was under scrutiny of the Reserve Bank
of India and was brought within the said frame work. The Reserve
Bank of India imposed restrictions with regard to capital
expenditure. This restriction continued till the year 2021. Therefore,
it is the case of the petitioner that between the years 2017 and
2021 the petitioner could not incur any capital expenditure on its
account. The Bank was taken out of the prompt corrective action
frame work only in the year 2021 i.e., on 10-03-2021. It is then a
communication begins from the petitioner to the Board on
17-05-2022 requesting execution of lease-cum-sale agreement and
further seeking extension of three years for implementation of the
project. The reason was that the circumstance was beyond the
control of the petitioner. No reply was received and on 09-01-2023
another communication is made by the petitioner seeking execution
of lease-cum-sale agreement. What comes about is the impugned
order cancelling the allotment and certain consequential actions. It
is this that has driven the petitioner to this Court in the subject
petition.
7. Heard Sri K.G. Raghavan, learned senior counsel appearing
for the petitioner and Sri B.B. Patil, learned counsel appearing for
the respondent.
8. The learned senior counsel Sri K.G.Raghavan representing
the petitioner would contend that no notice as required under
Section 34B of the Karnataka Industrial Areas Development Act,
1966 (hereinafter referred to as 'the Act' for short) is issued to the
petitioner prior to cancellation of allotment. It is the case of the
petitioner that it is mandatory for the Board to issue a notice under
Section 34-B of the Act and then pass an order of cancellation of
allotment. The learned senior counsel would submit that initially the
petitioner had objections to a particular clause which required the
Personnel Manager of the Bank to be a Kannadiga. Since the
petitioner is a global Bank this condition was not acceptable, as
appointment of a Personnel Manager was the choice of the Bank. It
is, therefore, the petitioner sought correction in the terms of lease.
The Board did not accede. In the interregnum restriction from
Reserve Bank of India comes. Four years goby, as Reserve Bank of
India restricts the Bank from any capital expenditure. Then, the
petitioner communicates to the Bank. Even then no response
comes about and what comes about is the impugned order
cancelling the allotment itself. He would submit that it is contrary
to law and requires to be quashed and consequent direction to
register lease-cum-sale agreement is to be issued.
9. Per contra, the learned counsel Sri B.B. Patil representing
the Board would vehemently refute the submissions to contend that
it is the botheration of the Board if the allottee has any problems in
his house. Lease-cum-sale agreement is a format that every
allottee has to adhere to. All that the Board sought was
employment of a local/Kannadiga speaking man as its Personnel
Manager for correspondences and communications with the Board,
as the official language of the State is Kannada. He would further
contend that the Reserve Bank of India imposing restriction or of
any other problems of the petitioner cannot mean that an allottee
can go on taking time on his difficulties. He would submit that ten
years have passed by, nothing has happened pursuant to the
allotment. Insofar as applicability of Section 34B of the Act is
concerned, the learned counsel submits that the issue stands
answered by a judgment rendered by this court in M/s
KAMALALAYAA REAL ESTATES LLP v. THE KARNATAKA
INDUSTRIAL AREAS DEVELOPMENT BOARD1.
Writ Petition No.279 of 2024 decided on 12th January, 2024.
10. The learned senior counsel would join issue to contend
that it is not necessary for a lease-cum-sale agreement to be
entered into to declare the petitioner to be a lessee or an allottee.
The Division Bench of this Court in the case of KARNATAKA
INDUSTRIAL AREAS DEVELOPMENT BOARD v.
ELECTROMOBILES (I) LIMITED2, considers this very aspect and
holds that no lease deed to be entered into between the Board and
the Company for the Company to be considered as a lessee. If
possession had been delivered to the Company, a possession
certificate would itself suffice. He would submit that the issue is
answered by the Division Bench and the judgment rendered by this
Court, relied on by the learned counsel for the respondent has no
application, as there is no payment made at all in that case. In the
case at hand clear admission is made about payment. Therefore, it
stands on a different footing. He seeks that the prayer sought be
granted.
2001 SCC OnLine Kar 839
11. I have given my anxious consideration to the submissions
made by the respective learned counsel and have perused the
material on record.
12. The afore-narrated facts are not in dispute and as such
they would not require any reiteration. The application of the
petitioner comes about on 21-04-2012 for allotment of 10 acres of
land for the purpose as observed hereinabove. This is placed before
the Karnataka Udyog Mitra, a single window clearance agency
under the Act. This results in issuance of an allotment letter on
15-02-2013. Certain conditions of allotment are germane to be
notice and they read as follows:
".... .... ....
7. Soon after receipt of the payment of 100% tentative cost
of land and on your acceptance of all the terms and
conditions indicated herein before and also those
mentioned hereinafter, the possession of land will be
handed over within 30 days from the date of payment
and at the time of taking over possession you should
produce the original receipt, issued for the payment made
to the Engineer in-charge of the area.
8(a) On taking possession of land, you shall adhere to the time
schedule indicated in the standard conditions appended
hereto.
8(b) It shall be mandatory for the lessee to obtain clearance
for the project from Karnataka State Pollution Control
Board before commencement of approved project.
9. Your failure to fulfill any of the standard terms and
conditions and also to take over possession of land within
30 days from the date of payment of the land cost shall
result in cancellation of allotment and forfeiture of 25% of
the amount paid towards the tentative cost of land and
E.M.D. deposited shall stand forfeited.
10. The cancelled allotments or the resumed plots shall be
restored, only at the rates prevailing at the time of
considering such requests provided the request in writing
for such restoration is received within one month from the
date of cancellation of allotment or resumption. Any
requests received after expiry of 30 days from the date of
cancellation/resumption of land will be rejected.
11. Extension of time will be granted only on the directions
from High Court/Injunction order/orders from competent
judicial forum relating to acquisition proceedings and
taking over possession of plot."
Clause-7 depicts that soon after receipt of payment of 100%
tentative cost of the land and on the acceptance of terms and
conditions, possession of land will be handed over within 30 days.
Schedule was also appended to the allotment letter. The Schedule
reads as follows:
"The time schedule prescribed for various
activities subsequent to payment of the tentative
price.
a) For taking over 30 days from the date
possession of land. of full payment towards
tentative cost of land.
b) For execution of Lease- 30 days from the date
cum-sale agreement. of receipt of Possession
Certificate.
c) For commencement of 24 months from the
Production date of taking
possession of land."
(Emphasis added)
Since the petitioner had made payment in its entirety, a
confirmatory letter of allotment was issued on 12-08-2014. It reads
as follows:
"CONFIRMATORY LETTER OF ALLOTMENT
Sub: Allotment of 4-50 acres of land in Plot No.11 at
Bengaluru Hardware Park near BIAL.
Ref:1.This Office allotment letter No.KIADB/HO/JD/
BHP/20380/15385/2012-13 dated 15-02-2013.
2. Your letter dated 28-09-2013.
Please refer to this office letter cited under reference
above. On your payment of Rs.1,80,00,000=00 vide receipt
No.31630 dated 13-08-2012 and Rs.6,30,00,000=00 vide Rt.
No.33655 dated 30-09-2013, towards land cost, the allotment
of 4-50 acres of land in Plot No.11 at Bengaluru Hardware Park
near BIAL, is hereby confirmed.
You are hereby advised to adhere to the time schedule
prescribed in the standard conditions attached to Allotment
Letter cited under reference above. Please contact Sri M.Rama,
Development Officer & Executive Engineer, KIADB, Zonal Office,
Aravinda Bhavan, Nrupathunga Road, Bengaluru-560 001,
Mobile No. 9845029319, and take over the possession of land
within one month.
Yours faithfully,
Sd/-
Joint Director."
A possession certificate was also issued on 27-12-2014. Then
begin communications between the two for execution of lease-cum-
sale agreement. The petitioner communicates on 08-01-2015 and
28-01-2015 and up to 15-03-2016 seeking draft of the lease-cum-
sale agreement. The Board responds on 23-03-2016 enclosing
draft of the lease-cum-sale agreement. The communication reads
as follows:
"No.KIADB/HO/JD/Allot/20380/17974/2015-16
Dated 23-03-2016
The Deputy General Manager,
IDBI Bank,
IDBI House, No.58,
Mission Road, Post Bag No.27015,
Bengaluru-560 027.
Sirs,
Sub: Execution of Lease-cum-Sale Agreement in
respect of Plot No.11 of Bengaluru Hardware
Park near BIAL, Devanahalli.
----
Please find herewith enclosed draft lease-cum-sale
agreement in respect of 18210.77 sq.mtrs., of land in Plot No.11
of Bengaluru Hardware Park. You are requested to prepare the
lease deed papers in document sheets. The lease-cum-sale
agreement papers duly signed by the authorized signatory on all
the pages where marked as "X" along with Board Resolution
copy for authorizing to sign by the signatory and also copy of
the pan card may please be furnished to this office for
completion execution and return.
Yours faithfully,
Sd/-
Secretary."
Certain clauses of lease-cum-sale agreement are germane to be
noticed. Clauses 5.1 and 5.2 read as follows:
"5.1 The lessee shall not construct any building or erect any
structure on any portion of the Schedule Property without
getting the building plans duly approved by the lessor in
accordance with the prevailing building regulations of the Board.
5.2(i) The Lessee shall submit the comprehensive plans for land
utilization, buildings, sheds etc., in triplicate, for prior approval
within one month from the date of this agreement.
5.2(ii) The lessee shall commence civil construction works within
three months from the date of approval of building plan and
after obtaining license from the Chief Inspector of factories and
Boilers of Karnataka State and or from any other authority as
required under law.
5.2(iii) The lessee shall complete civil construction
works, erect machineries and commence production
within twenty four months from the date of taking
possession of the Schedule Property, that is the Twenty
Seventh day of December month Two Thousand Fourteen,
after obtaining necessary licences/clearances/approvals
from the concerned such as Government of India, State
Government Local Bodies, Statutory Bodies etc.,
wherever it is required."
(Emphasis added)
The aforesaid clauses indicated that civil work should be completed
within 24 months from the date of taking possession of the
schedule property. Therefore, physical possession of the property
was yet to be taken. Clause-20(b) reads as follows:
"20(b) The lessee, in the industrial units to be
established in the schedule property shall employ only
Kannadigas for the post of Personnel Officer."
(Emphasis added)
This is the clause that becomes the fly in the ointment, as the
petitioner did not wanted to employ a Kannadiga for the post of
Personnel Officer, as according to the submission of the learned
senior counsel, the petitioner is a pan India Bank or even a global
Bank and this clause was objectionable.
13. The clause mandates only Kannadiga should be appointed
to the post of Personnel Officer. The learned counsel Sri B.B. Patil
for the Board submits that this clause is there in every letter of
allotment. The purpose is indicated hereinabove. It is to be noticed
that the Board do not ask employment of Kannadigas only in the
petitioner/Bank but only one post of Personnel officer to be given to
Kannadiga for the purpose of correspondence and communication.
This objection was sought to be rectified along with other objections
in terms of the lease-cum-sale agreement. This was communicated
by the petitioner that it has to tweak the lease deed according to its
wish. The wish was, apart from what is stated hereinabove, the
change in Clause 5.2(iii) and Clause 10.1(a). The changes sought
read as follows:
"Existing "Description Proposed clause by Bank
Clause no
The lessee shall complete The lessee shall complete
civil construction works, civil construction works,
erect machineries and erect machineries and
commence production commence production
within twenty four months within sixty months from
from the date of taking the date of registration of
possession of the schedule the schedule property after
property, that is the twenty obtaining necessary
Clause
seventh day of December licenses/
No.5.2(iii)
month two thousand clearances/approvals from
fourteen, after obtaining the concerned such as
necessary/clearance/ Government of India, State
approvals from the Government, Local bodies,
concerned such as Statutory Bodies etc.,
Government of India, State wherever it is required.
Government, Local bodies,
Statutory bodies etc.,
wherever it is required.
12 months without revising 24 months without revising
the tentative price of land the tentative price of land
if the lessee has taken if the lessee has taken
steps to the satisfaction of steps to the satisfaction of
the lessor for the lessor for
Clause
implementation of the implementation of the
No.10.1(a):
project and has started project and has started
civil construction works civil construction works
and has spent at least 25% and has spent at least 15%
of the cost towards civil of the cost towards civil
construction which should construction which should
be evidenced by a be evidenced by a
certificate of investment certificate of investment
issued by financial issued by financial
institution/Bank/Chartered institution/Bank/Chartered
Accountant. Accountant."
(Emphasis added)
The Board does not accede. Communications galore.
14. During the pendency of these communications between
the two, the Reserve Bank of India steps in and brings in the Bank
under the ambit of prompt corrective action frame work and all
capital expenditure was frozen from 13-04-2017 onwards. This was
released by the Reserve Bank of India only on 10-03-2021. The
Bank was taken out of prompt corrective action frame work. It
could now commence capital expenditure. After the Bank coming
out of the purview of the Reserve Bank of India as aforesaid, it
communicates to the Board on 17-05-2022. The relevant paragraph
of the communication reads as follows:
"While IDBI Bank within the PCA framework imposed by
RBI was under strict supervisory restrictions to make any sort of
capital investment/expenditure during the period from July 2017
till March 2021, the options available with the Bank also
severely limited its ability to undertake desired development of
the allotted land at KIADB Hardware Park during such period.
The RBI has since removed all financial restrictions
imposed upon IDBI Bank Ltd. Consequent upon which,
the Bank's higher management has decided to pursue the
land developmental works by investing an estimated
project amount of Rs.80.00 - 100.00 Crore and therefore
proceed to execute the lease-cum-sale agreement with
KIADB and seek extension of time. To take forward such
process Bank's higher officials from the corporate office
had called upon your good self in your office, whereupon
we have been advised to obtain 03 year extension of time
under SLSWCC for implementing the project works.
In view of the foregoing and the facts presented above,
we would like to reiterate our desire to develop the land on
immediate basis for Bank's use and therefore seek your
guidance and consideration in grating the three year extension
of time to implement the project works".
(Emphasis added)
The Bank projected its desire to develop the land on immediate
basis for Bank's use and, therefore, sought three years extension to
implement the project work. The Board did not accede to it and on
09-01-2023 the Bank reiterates its request. What comes about is
the impugned order on 14-07-2023. The impugned order reads as
follows:
"No.KIADB/HO/Allot/20380/7643/2022-23
Date:20-12-2022
& 14-07-2023
M/s. IDBI Bank Limited,
Zonal Office, South-II,
IDBI House, 58,
Mission Road,
Bengaluru-560 027.
Sir,
Sub: Cancellation of allotment of 18210.77 Sq.Mtrs. of
land in Plot No.11 of (Hardware Sector) Hitech,
Defence & Aerospace park, Bengaluru.
Ref: 1. This office allotment letter No.IADB/HO/
/JD/BHP/20380/15385/2012-13 dated
15-02-2013.
2. This office confirmatory letter of allotment
No.IADB/HO/Allot/AS/20380/ 6626, 2014-15
dated 28-07-2014.
3. Possession Certificate dated 27-12-2014.
4. This office letter No.KIADB/HO/JD/Allot/
20380/17974/2015-16 dated 23-03-2016
5. This office letter No.KIADB/HO/Allot/ Secy-
1/20380/16571/2017-18 dated 27-01-2018.
6. This office letter No.KIADB/HO/Allot/ Secy-
1/20380/7774/2018-19 dated 03-09-2018.
7. This office letter No.KIADB/HO/Allot/
20380/258/2020-21 dated 07-05-2020.
8. This office letter No.KIADB/HO/Allot/
20380/12874/2021-22 dated 28-12-2021
9. Your email dated 25-04-2022.
---
As you are aware, you were allotted an extent of 4.50
acres of land in Plot No.11 of (Hardware Sector) of Hitech,
Defence & Aerospace Park, Bengaluru at tentative allotment rate
of Rs.1.80 crore per acre to set up a unit for establishing a
facility for Banking vide allotment letter dated 15-02-2013 cited
under ref.(1) above, prescribing time schedule for payment of
balance tentative cost of land and for subsequent activities.
After payment of tentative cost of land, the
possession certificate for an extent of 18210.77 Sq.mtrs.
of land has been issued on 27-12-2014 and the draft
lease cum sale agreement has been issued on 23-03-
2016. The Bank instead of executing the lease cum sale
agreement, requested for certain modifications of clauses
in the draft lease cum sale agreement. After verification
of your request, it was informed that, the said
modifications could not be considered vide this office
letter dated 27-01-2018. As per the terms and conditions
of allotment letter you were required to execute the lease
cum sale agreement and implement the project within 2
years.
In the meantime you had requested for grant of 3
years extension of time for registration of the lease cum
sale agreement and implementation of the project. In this
regard, your request was placed before the KIAD Board
meeting held on 18-08-2018 and as per the decision of
the KIAD Board meeting you were informed to obtain
approval from SLSWCC for 3 years extension of time in
respect of land in Plot No.11 of (Hardware Sector) Hitech,
Defence & Aerospace Park, Bengaluru vide this office
letter dated 03-09-2018.
Instead of approaching SLSWCC for obtaining
extension of time, the Bank sought further clarifications
regarding the amount to be foregone if the Bank decides
to back out and whether the Bank can sell the land either
fully or partially in future. In response, a communication
was sent vide this office letter dated 07-05-2020 by
enclosing office order regarding amount to be forfeited if
bank voluntary surrenders the land also that there is no
provision for selling of the land. This shows that, the
Bank was not willing to take up the project.
Again vide this office letter dated 28-12-2021, you were
informed to obtain approval from SLSWCC for grant of 3 years
extension of time for implementation of the project in respect of
the above said land.
As stated above, in spite of giving several
opportunities, you have failed to obtain extension of time
from SLSWCC and execute the lease cum sale agreement
in respect of land in Plot No.11 of (Hardware Sector) of
Hitech, Defence & Aerospace Park, Bengaluru.
This act on your part shows your lack of
earnestness and interest in taking up the project and also
violation of the terms and conditions of allotment. This
in-ordinate delay in executing the lease cum sale
agreement has resulted in keeping the land idle without
utilizing and deprivation of opportunity to other
entrepreneurs seeking allotment of land for establishing
industry which is contrary to the object of allotment as
well as the objects of the KIAD Act, 1966, i.e. systematic
and rapid industrial growth.
Therefore, in view of the above, the allotment of
18210.77 Sqmtrs in Plot No.11 of (Hardware Sector) Hitech,
Defence & Aerospace Park, Bengaluru is hereby cancelled, due
to non-adherence of time schedule of terms and conditions of
allotment by not executing the lease cum sale agreement and
implementing the project thereafter.
Further, you are hereby requested to surrender original
allotment letter dated 15-02-2013, possession certificate dated
27-12-2014 and original receipts of payments made towards
allotment of land, to enable us to refund the amount deposited
after effecting necessary forfeiture.
Yours faithfully,
Sd/-
Chief Executive Officer,
& Executive Member."
(Emphasis added)
The order clearly indicates that 11 years have passed by; there is
no lease-cum-sale agreement entered into and the project had to
be completed within two years in terms of the allotment letter and
on breach of conditions of allotment, the allotment letter stood
cancelled. It also states that the petitioner was held entitled for
certain refund from the hands of the Board.
15. The submissions qua Section 34B of Act is also
unacceptable as Section 34B of the Act is a procedure that is to be
followed after execution of the lease-cum-sale agreement and not
in a circumstance of a period before it. This Court has considered
the very issue as to when Section 34B of the Act would kick in, in
the aforesaid judgment in M/S KAMALALAYYA REAL ESTATES
LLP'S case (supra). It is held therein as follows:
"..... ..... .....
13. The learned counsel for the petitioner has strenuously
contended that an allottee has a right to be heard by issuance of
a show cause notice in the least. The submission does not merit
acceptance, particularly in the light of the order passed by the
learned single Judge in the case of M/S IMPERIAL
CONSTRAFIN PRIVATE LIMITED v. CHIEF EXECUTIVE
OFFICER AND EXECUTIVE MEMBER, KIADB3 wherein the co-
ordinate Bench of this Court rejects the petition on the following
grounds:
".... .... ....
7. Shri. Vijaykumar is right in his submission that
failure to make payment as required in clause 3(a)(ii)
before the time stipulated therein entails automatic
cancellation. This happens by default on the part of the
petitioner, which occurred on December 5, 2017.
However, cancellation of allotment has been
communicated in July 2019. Thus, it is clear that
petitioner has defaulted in making the payment.
8. Since allotment has stood automatically cancelled,
the contention with regard to the signature by the CEO
and the issuance of notice under Section 34B of the Act
W.P.No.33257 of 2019 disposed on 17-03-2021
are irrelevant. Approval of projects by High Level
Clearance Committee is accorded to entrepreneurs to
provide facilities under one roof. By petitioner's default,
some other prospective entrepreneur has lost his chance
to set-up an Industry. Such defaults will have cascading
effect not only on the entrepreneurs but also on the
Industrial development in the State."
(Emphasis supplied)
The order of the learned single Judge is tossed by the
petitioner therein before the Division Bench. The Division Bench
while affirming the order of the learned single Judge in the said
case of M/S IMPERIAL CONSTRAFIN PRIVATE LIMITED4,
which was a challenge to the clause in allotment that if entire
payment is not made within 90 days, without even issuance of
notice the allotment can be cancelled, the Division Bench has
held as follows:
"2. The appellant submitted an online application for
approval of his project. The 1st respondent vide
communication dated 28.4.2017 allotted industrial plot
No.12P-IC measuring 4.09 acres in Hitech Defence Aero
Space ParK, Bengaluru, at a tentative allotment rate of
Rs.250 lakhs per acre. The appellant deposited 30% of
the allotment amount within 30 days from the date of
allotment. The appellant failed to deposit balance
premium amount of Rs.8,57,50,000/- within a period of
90 days from the date of allotment. The 1st respondent
sent a communication letter dated 12.7.2019 intimating
the appellant in regard to cancellation of allotment.
3. The appellant questioned the said communication
letter dated 12.7.2019 issued by the 1st respondent
before the learned Single Judge. The learned Single Judge
having examined clause 3(a)(ii) of the allotment letter
held that as per the said clause, failure to make payment
of balance premium amount within 90 days from the date
of allotment would entail automatic cancellation. The
learned Single Judge negatived the contention raised by
the appellant herein in regard to authority of the Chief
W.A.No.533 of 2021 decided on 19th August 2021
Executive Officer of the 2nd respondent. The learned
Single Judge was of the view that since clause 3(a)(ii)
contemplates automatic cancellation and therefore, the
appellant cannot raise objection that the cancellation was
done by the Chief Executive Officer and not by the Board.
On this set of reasoning, the learned Single Judge has
dismissed the writ petition.
4. The learned counsel appearing for the appellant
would vehemently argue and contend before this Court
that no notice was issued by 1st respondent intimating the
cancellation of allotment and therefore, the cancellation of
allotment is arbitrary and warrants interference at the
hands of this Court. Further, placing reliance on the
judgment rendered by this Court in the case of Abhaya
Technologies Private Limited, Bengaluru .vs. State
of Karnataka and others1, the learned counsel
appearing for the appellant would contend that it is only
the Board which is vested with the power and that this
Court in an identical case has set aside the impugned
communication sent by the CEO and the matter was
remitted back to the Board for fresh consideration. The
learned counsel would further submit to this Court that
the appellant is made to suffer on account of laxness on
the part of respondent No.4-Bank as well as the 2nd
respondent-Board.
5. Per contra, learned counsel appearing for
respondents 1 and 2 would however submit that 2nd
respondent has allotted the site to a third party and
therefore, since there is a breach on the part of the
appellant in not depositing the balance premium amount
within the stipulated time, no relief can be granted to the
appellant herein.
6. Perused the order under challenge. It would be
useful for this Court to refer to the clauses in the
allotment letter which reads as under:
"3(a) The premium of the land shall be paid as follows:
i) A Sum of Rs. NIL being the balance 30% of the tentative
premium of land shall be paid within 30 days from the date of
issue of this letter ie on or before NIL.
ii) A sum of Rs.8,57,50,000-00 being the balance tentative
premium of land shall be paid within 90 days from the date of
issue of this letter ie on or before 05.12.2017.
b) In the event of your furnishing letter of commitment
from KSFC/KSIIDC/Reserve Bank of India approved Financial
Institutions/Corporations/ Companies agreeing to pay the
premium indicated at 3(a)(2) directly to the Board(applicable
only to Medium, Small and Micro Enterprises) the allotment
will be confirmed and documentation will be permitted subject
to payment of Interest @ 10% per annum on amount due
from the date of handing over possession of land to the date
of payment which should be made within 180 days from the
date of execution of lease agreement.
c) You should pay lease rent of Rs.1000/- per acre/per
annum.
d) You should pay maintenance charges as may be fixed by
the Board from time to time.
e) Interest at 10% per annum shall be levied in case the
lease rents are not paid within one month from the date on
which the lease rents fall due every year.
4(a) In case of your failure to pay the amount mentioned at
Para 3(a)(2) before the expiry of the time stipulated therein,
this offer of allotment stands automatically cancelled and the
Earnest Money Deposit and 20% of the amount paid by you
towards premium stands automatically forfeited.
4(b) If the balance premium is not paid within 90 days from
the date of execution of lease agreement in respect of cases
mentioned at Para3(b), the plot would be resumed on expiry
of the time stipulated without issuing any fresh notice."
7. On perusal of 4(a) of the allotment letter, it is quite
evident that on failure to pay the balance premium
amount, the offer of allotment stands automatically
cancelled and under clause 4(b), the plot would
automatically stand restored with the 2nd respondent-
Board. The above said two clauses would clearly indicate
that in the event of breach, the allotment stands
automatically cancelled. Therefore, the contention of the
appellant that he was not notified before communicating
the cancellation cannot be acceded to.
8. We have also examined the statement of objections filed
by respondents 1 and 2. The appellant was required to pay the
balance tentative premium on 5.12.2017. The 2nd respondent
even after expiry of period kept on communicating to the 4th
respondent-Bank to deposit the balance premium of
Rs.8,84,51,712/- along with interest at the rate of 12%. The first
communication was sent on 28.4.2017. The 2nd communication
was sent on 2.3.2018. If 4th respondent-Bank was insisting for
NOC from the 2nd respondent-Board for release of the amount,
then it was incumbent on the part of the appellant to negotiate
and convince his banker to release the amount. The appellant
cannot expect an authority to issue NOC before receiving the
balance premium. Therefore, we are of the view that no fault can
be found with respondents 1 and 2. The learned Single Judge has
dealt with the matter and has rightly dismissed the writ petition.
This Court has taken note of the fact that the authorities were
quite lenient and had extended time even after expiry of the
statutory period prescribed under clause 3(a)(ii) of the allotment
letter. The appellant was not able to deposit the balance premium
amount even in 2018 which is evident from the two
communications dated 28.4.2017 and 2.3.2018. Further, this
Court has also taken note of the fact that respondents 1 and 2
have allotted the site to a 3rd party after cancellation of
allotment in favour of the appellant."
(Emphasis supplied)
The Division Bench considered the very submission that it
would give an arbitrary power to the Board to cancel the
allotment in the event there is non-compliance of payment
within 90 days. The Division Bench affirms the order of the
learned single Judge which had rejected such a contention of
hearing before cancellation of allotment in the event of breach
of allotment. Therefore, the submission of the learned counsel
for the petitioner that a show cause notice ought to have been
issued tumbles down.
14. The other submission of the learned counsel for the
petitioner is that Section 34B of Act has been violated, as prior
to resumption of possession a notice ought to have been issued
to the allottee and, therefore, submits that its breach would lead
to obliteration of the order. This again is sans acceptance.
Section 34B reads as follows:
"34-B. Resumption of the possession of premises
including the residential tenements on breach of terms
and conditions of lease or holding without authority.--(1)
Where the Board is of the opinion that an allottee of any
premises or part thereof or residential tenement in an industrial
area or industrial estate has violated any of the terms or
conditions of allotment or holds it without any authority it may,
without prejudice to section 25 give notice to such allottee and
Banks or Financial Institutions, in whose favour the Board has
permitted the mortgage or leasehold rights of the premises, or
residential tenement specifying the breaches of the terms and
conditions of the allotment calling upon the allottee to remedy
such breaches within a time stipulated in the notice.
(2) If the allottee fails to remedy the breaches within
the time so stipulated, the Board shall serve a notice
upon the allottee under intimation to such Bank or
Financial Institutions to show cause within thirty days
from the date of service of notice, why the possession of
the premises or part thereof or residential tenement
should not be resumed.
(3) After considering the cause, if any, shown by the
allottee and after giving him an opportunity of being
heard, the Board may pass such orders, as it deems fit.
(4) Where the Board passes an order under sub-
section (3), for resuming possession of the premises or
part thereof or residential tenement in the industrial
area it may, by notice in writing, order any allottee to
surrender and deliver possession thereof to the Board or
any person duly authorised in this behalf within the date
specified in the notice.
(5) If any allottee refuses to surrender or deliver the
possession of the premises or part thereof or residential
tenement within the time specified in the notice, the
Board or any officer authorised by it in this behalf may
resume the possession of the premises or part thereof or
residential tenement free from all encumbrances and for
that purpose may use force as may be necessary."
(Emphasis supplied)
Section 34B mandates resumption of possession from the
hands of an allottee. Possession would be handed over to the
allottee only after execution of a lease-cum-sale agreement and
issuance of possession certificate by the Board. Those events
are yet to come about, as the petitioner is yet to make good the
entire amount in terms of allotment letter itself. The entire
Section 34B unequivocally depicts that if the allottee fails to
adhere to the conditions of lease hold rights, possession can be
resumed by the Board. Sub-sections (4) and (5) make it clear
that the allottee shall deliver possession thereafter to the Board
within the date specified in the notice issued under Section 34B.
Therefore, Section 34B operates in a different circumstance. It
would kick only in cases of physical possession being handed
over by the Board to the allottee on certain terms and
conditions and the breach of those terms and conditions in the
lease-cum-sale agreement is violated, which would lead to
revocation of proceedings under Section 34B. Therefore, the
submission that Section 34B ought to have been followed is a
figment of imagination of the learned counsel for the petitioner
and holds no water.
15. Insofar as the judgments relied on by the learned
counsel for the petitioner, they are all distinguishable on the
facts obtaining in the cases therein without much ado. They
were all cases where lease-cum-sale agreements had already
been executed in favour of those allottees and, therefore, the
co-ordinate Benches held that show cause notice prior to
resumption of possession was imperative. Even in the case of
M/S NANJUNDESHWARA TECH PARK v. THE KARNATAKA
INDUSTRIAL AREAS DEVELOPMENT BOARD5, the
respondent Board was directed to consider the representation of
the petitioner in terms of Section 34B of the Act. Therefore, the
judgments so relied on by the learned counsel for the petitioner
would not render any assistance in the light of two factors - one
being, the facts obtaining in those cases and the other being,
the judgment of the Division Bench which upholds the clause in
the allotment letter whereby permitting cancellation of allotment
without even issuance of a notice. Therefore, the contentions so
advanced by the petitioner are unacceptable. The
unacceptability would lead to rejection of the petition."
W.P.No.13304 of 2020 decided on 3-11-2023
In the light of the judgment rendered by this Court interpreting
Section 34B wherein it is clearly held that it would kick in only in
cases where physical possession is handed over by the Board to the
allottee and not prior to it, physical possession would admittedly be
handed over only after execution of lease-cum-sale agreement,
which circumstance is yet to come about in the case at hand.
Therefore, no fault can be found with the impugned action of the
Board, as the petitioner has projected its difficulty for over ten
years in the execution of lease-cum-sale agreement. No doubt the
Board has also delayed in communications, but the last of the
communication from the petitioner to the Board is in the year 2017
and the next of the communication is in the year 2022. For five
years, projecting the difficulty, the petitioner wants the issue to be
held in its favour which is clearly impermissible. More so, in the
light of the fact that the project was cleared by the Karnataka
Udyog Mitra to be completed within two years. Not two, but ten
years have passed by and it has not even begun. Therefore, unless
and until Karnataka Udyog Mitra would extend the term of the
project, no right of the petitioner would flow on the act of issuing
allotment letter.
16. The judgment of the Division Bench relied on by the
learned senior counsel for the petitioner would not lend any
assistance to him, as it was rendered at a point in time when
Section 34B was not even in the statute book. The general principle
would not become applicable after the statute being amended by
bringing in Section 34B into the Act. Therefore, it is distinguishable
without much ado.
17. It is rather surprising that a submission is made by the
learned senior counsel for the petitioner that the Bank had
objection to Clause 15 which mandated the appointment of a
Kannadiga only as a Personnel Officer. It is un-understandable as to
how this could become objectionable, as the official language of the
State is Kannada and the communication or correspondence to be
smooth the Board has this clause in every lease-cum-sale
agreement. If the Board had imposed that only Kannadigas should
be employed in the entire Bank, it was an altogether different
circumstance. What is sought for is only one Officer - a Personnel
Officer to be a Kannadiga. If this is objectionable to operate in the
State of Karnataka, it rather becomes difficult to accept the
contention of the petitioner that it is a global institution or a Pan
India institution and locals cannot be imposed to be appointed even
for one post.
18. For the aforesaid reasons, finding no merit in the petition,
the petition stands rejected. Interim order, if any subsisting, shall
stand dissolved.
Consequently, I.A.No.1 of 2024 also stands disposed.
Sd/-
JUDGE
bkp
CT:MJ
