Karnataka High Court
M/S Prateek Apparels Pvt Limited vs Karnataka State Small Industries on 21 November, 2024
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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WP No. 34088 of 2011
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 21ST DAY OF NOVEMBER, 2024
BEFORE
THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ
WRIT PETITION NO. 34088 OF 2011 (GM-KSSIDC)
BETWEEN
M/S PRATEEK APPARELS PVT LIMITED
INCORPORATED UNDER THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
113,KRISHNA REDDY INDUSTRIAL AREA,
7TH MILE,KUDLU GATE, HOSUR ROAD,
BANGALORE 68
REP.BY ITS POWER OF ATTORNEY
SRI SRINATH REDDY.
...PETITIONER
(BY SRI. K.G. RAGHAVAN., SR. ADVOCATE FOR
SRI. VENTAKESH MURTHY., ADVOCATES)
AND:
1. KARNATAKA STATE SMALL INDUSTRIES
DEVELOPMENT CORPORATION LTD.,
HAVING ITS REGD. OFFICE AT
Digitally signed
by SHWETHA ADMN. OFFICE BUILDING,
RAGHAVENDRA INDUSTRIAL ESTATE RAJAJINAGAR,
Location: HIGH BANGALORE 44
COURT OF REP.BY ITS MANAGING DIRECTOR.
KARNATAKA
2. KARNATAKA UDYOG MITRA
HAVING ITS REGD. OFFICE AT
3RD FLOOR KHANIJA BHAVAN (SOUTH WING)
NO.49, RACE COURSE ROAD,
BANGALORE 1,
REP.BY ITS MANAGING DIRECTOR.
... RESPONDENTS
(BY SRI. PUTTIGE R. RAMESH SR. ADVOCATE FOR
SMT. LAKSHMI S. HOLLA., ADVOCATE FOR R1;
SMT. SUKRUTA R., ADVOCATE FOR
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SRI. RAKSHITH S., ADVOCATE FOR R2)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
CERTIORARI OR ANY OTHER APPROPRIATE WRIT OR ORDER,
QUASHING THE CANCELLATION LETTER DATED DECEMBER 03, 2009
(ANNEXURE- S) IN RESPECT OF THE PROPERTY, ISSUED BY
RESPONDENT NO.1 AND ETC.
THIS WRIT PETITION COMING ON FOR ORDERS AND HAVING
BEEN RESERVED FOR ORDERS ON 25.10.2024, THIS DAY, THE
COURT PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR JUSTICE SURAJ GOVINDARAJ
CAV ORDER
1. The petitioner is before this Court seeking for the
following reliefs:
i. Issue a writ of Certiorari or any other appropriate
writ or order, quashing the Cancellation Letter
dated December 03, 2009 (Annexure-S) in
respect of the Property, issued by Respondent
No.1;
ii. Issue a writ of Certiorari or any other appropriate
writ or order, quashing the recommendation of
the Single Window Agency (Annexure-Y) in
respect of the Project and the Property, issued by
Respondent No 2;
iii. Issue a writ of Certiorari or any other appropriate
writ or order, quashing the Fresh allotment
(Annexure-ZC) issued by Respondent No.1;
iv. Issue a writ of Mandamus or any other
appropriate writ or order, directing Respondent
No.1 to act upon the Allotment Letter dated June
20, 2007 (Annexure-C);
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v. Issue a writ of Mandamus or any other
appropriate writ or order, directing Respondent
No.1 to act upon the representation dated July
20, 2007 at Annexure-F;
vi. Issue a writ of Mandamus or any other
appropriate writ or order, directing the
Respondent No.1 to extend the time for
implementation of the Project by a period of
twelve (12) months.
2. The petitioner claims to be a company in the
business of manufacture of branded garments for
leading multinational and national companies having
over 6,000 employees and five (5) state-of-the-art
manufacturing facilities in Bangalore and one (1) in
Hubli. The petitioner had made an application on
20.2.2007 to the State-Level Single Window
Clearance Committee (for short hereinafter referred
to as "SLSWCC") to establish a ready-made garment
manufacturing facility at Sira Taluk, Tumkur district.
3. This proposal was cleared by the SLSWCC on
30.3.2007 in pursuance of which the petitioner was
allotted 24.49 acres in Sy.No.251 and Sy.No.252 in
the industrial estate, Yeliyur, Sira Taluk, Tumkur vide
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a allotment later dated 20.6.2007. The petitioner
made payment of sum of Rs.33 lakhs being 90% of
the land cost in pursuance of which a lease-cum-sale
agreement dated 26.6.2007 was executed by
respondent No.1-the Karnataka State Small
Industries Development Corporation Limited for
27.97 acres and a possession certificate came to be
issued on 26.6.2007.
4. The petitioner had approached Canara Bank to
finance the Project but was unable to obtain a firm
commitment since the lease-cum-sale agreement
had not been registered. The petitioner requested for
registering of the document; respondent No.1
requested for the original agreement to be handed
over which was so handed over.
5. While the petitioner was requesting for registration of
the lease-cum-sale agreement, Respondent No.1
issued a letter on 31.12.2008, calling upon the
petitioner as to why the petitioner had not
commenced his business, which is replied to by the
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petitioner on 15.7.2008 that the Project was delayed
due to non-registration of lease-cum-sale agreement.
The same was reiterated in subsequent letters dated
10.11.2008 and 25.1.2009 and again intimating to
respondent No.1 that without the registration, no
financial arrangements are being provided, and as
such, the petitioner is unable to go on with the
Project.
6. Respondent No.1, in the meanwhile, issued a show
cause notice on 6.7.2008 due to the non-
commencement of the Project, which was replied to
by the petitioner on 15.7.2009, attributing the delay
to respondent No.1.
7. Since the petitioner had not implemented the
Project, respondent No.1 issued a cancellation letter
on 3.12.2009 cancelling the allotment of the Property
in favour of the petitioner. The petitioner, on
18.1.2010, once again wrote to respondent No.1
about its interest in implementing the Project and
seeking for an extension for a period of 6 months.
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8. The petitioner, along with the said reply, had
enclosed various documents of the works carried out
by the petitioner for implementation of the Project
and claimed that the petitioner had secured credit
facility from Canara Bank and, as such requested
respondent No.1 to provide a current dated lease-
cum-sale agreement, extension letter and a letter
addressed to the Sub-registrar to the Registrar the
lease-cum-sale agreement and if such permission
was granted the petitioner would carry out the work
of implementation of the Project immediately.
9. The petitioner had also applied to the SLSWCC for
extension of time, which was so sanctioned on
2.12.2010. However, the SLSWCC reduced the
extent of land from 33 acres to 15 acres and
recommended the KSSIDC-respondent No.1 to allot
15 acres.
10. The petitioner received an extension letter on
15.6.2011 for 15 acres also calling upon the
petitioner to make payment of the cost of the land at
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the present value. The petitioner replied to the same
on 12.7.2011, stating that there was never ever any
discussion on payment of present value and further
that the initial allotment paying for 33 acres was
reduced to 24.97 acers and now reduced to 15 acres
unilaterally. In the interest of Project, the petitioner
had agreed for such a reduction, however had never
agreed for enhancement of the value, and it is in that
background that the petitioner is before this Court
seeking for the aforesaid reliefs.
11. Sri.K.G.Raghavan., learned Senior counsel appearing
for the petitioner, would submit that;
11.1 The request made by the petitioner being for
extension, such extension being required on
account of non-registration of the lease-cum-
sale agreement, which in turn had resulted in
the financial institution not advancing loans.
The SLSWCC and Respondent No.1 were
required to extend the time period and register
the lease-cum-sale agreement. Instead, the
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area has been reduced from 33 acres to 15
acres and the cost of land is directed to be paid
at the current value while extending the period
of performance by one year. He submits that
this reduction as also the demand for payment
of cost at the present rate is not sustainable
and as such, the recommendation of Single
Window Agency is required to be quashed.
Consequently, the fresh allotment for 15 acres
issued by respondent No.1 is required to be
quashed and a mandamus be issued directing
respondent No.1 to consider the representation
of the petitioner dated 20.7.2007 and register
the lease-cum-sale agreement for the entire
extent.
11.2 His submission is that respondent No.1 is a
Public Limited Company and as such is not a
Statutory Corporation and a Government
Authority and as such, respondent No.1 in its
cancellation letter dated 3.12.2009 while
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cancelling the allotment, could not have
forfeited the amounts nor resumed the land,
without following the due process of law.
11.3 Unless respondent No.1 were to establish that
there was any loss which had been caused to
respondent No.1 the question of forfeiture
would not arise.
11.4 In so far as resumption of land is concerned,
his submission is that such resumption can only
be made in a manner known to law. Lease-
cum-sale agreement had been terminated it
would be for respondent No.1 to initiate
appropriate proceedings for recovery of
possession and as such there cannot be
unilateral dispossession or eviction of the
petitioner.
11.5 In this regard, he relies upon a decision of the
Hon'ble Apex Court in Government of Andhra
Pradesh vs. Thummala Krishna Rao and
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another1, more particularly para 8, 9, and 10
thereof, which are reproduced hereunder for
easy reference;
8. It seems to us clear from these provisions that the
summary remedy for eviction which is provided for by
Section 6 of the Act can be resorted to by the
Government only against persons who are in
unauthorised occupation of any land which is "the
property of the Government". In regard to Property
described in sub-sections (1) and (2) of Section 2,
there can be no doubt, difficulty or dispute as to the
title of the Government and, therefore, in respect of
such Property, the Government would be free to take
recourse to the summary remedy of eviction provided
for in Section 6. A person who occupies a part of a
public road, street, bridge, the bed of the sea and the
like, is in unauthorised occupation of Property which
is declared by Section 2 to be the Property of the
Government and, therefore, it is in public interest to
evict him expeditiously, which can only be done by
resorting to the summary remedy provided by the
Act. But Section 6(1) which confers the power of
summary eviction on the Government limits that
power to cases in which a person is in unauthorised
occupation of a land "for which he is liable to pay
assessment under Section 3". Section 3, in turn,
refers to unauthorised occupation of any land "which
is the property of the Government". If there is a bona
fide dispute regarding the title of the Government to
any property, the Government cannot take a
unilateral decision in its own favour that the Property
belongs to it, and on the basis of such decision take
recourse to the summary remedy provided by Section
6 for evicting the person who is in possession of the
Property under a bona fide claim or title. In the
instant case, there is unquestionably a genuine
dispute between the State Government and the
respondents as to whether the three plots of land
were the subject-matter of acquisition proceedings
1 (1982) 2 SCC 134
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taken by the then Government of Hyderabad and
whether the Osmania University, for whose benefit
the plots are alleged to have been acquired, had lost
title to the Property by operation of the law of
limitation. The suit filed by the University was
dismissed on the ground of limitation, inter alia, since
Nawab Habibuddin was found to have encroached on
the Property more than 12 years before the date of
the suit and the University was not in possession of
the Property at any time within that period. Having
failed in the suit, the University activated the
Government to evict the Nawab and his transferees
summarily, which seems to us impermissible. The
respondents have a bona fide claim to litigate and
they cannot be evicted save by the due process of
law. The summary remedy prescribed by Section 6 is
not the kind of legal process which is suited to an
adjudication of complicated questions of title. That
procedure is, therefore, not the due process of law for
evicting the respondents.
9. The view of the Division Bench that the summary
remedy provided for by Section 6 cannot be resorted
to unless the alleged encroachment is of "a very
recent origin", cannot be stretched too far. That was
also the view taken by the learned Single Judge
himself in another case which is reported in
Meharunnissa Begum v. State of A.P. [(1970) 1 Andh
LT 88] which was affirmed by a Division Bench
[Meherunnissa Begum v. Govt. of A.P.AIR 1971 AP
382 : (1971) 1 Andh LT 292 : ILR 1972 AP 44] . It is
not the duration, short or long, of encroachment that
is conclusive of the question whether the summary
remedy prescribed by the Act can be put into
operation for evicting a person. What is relevant for
the decision of that question is more the nature of the
Property on which the encroachment is alleged to
have been committed and the consideration whether
the claim of the occupant is bona fide. Facts which
raise a bona fide dispute of title between the
Government and the occupant must be adjudicated
upon by the ordinary courts of law. The Government
cannot decide such questions unilaterally in its own
favour and evict any person summarily on the basis
of such decision. But duration of occupation is
relevant in the sense that a person who is in
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occupation of a property openly for an appreciable
length of time can be taken, prima facie, to have a
bona fide claim to the Property requiring an impartial
adjudication according to the established procedure of
law.
10. The conspectus of facts in the instant case
justifies the view that the question as to the title to
the three plots cannot appropriately be decided in a
summary enquiry contemplated by Sections 6 and 7
of the Act. The long possession of the respondents
and their predecessors-in-title of these plots raises a
genuine dispute between them and the Government
on the question of title, remembering especially that
the Property, admittedly, belonged originally to the
family of Nawab Habibuddin from whom the
respondents claim to have purchased it. The question
as to whether the title to the Property came to be
vested in the Government as a result of acquisition
and the further question whether the Nawab
encroached upon that Property thereafter and
perfected his title by adverse possession must be
decided in a properly constituted suit. Maybe, that the
Government may succeed in establishing its title to
the Property but, until that is done, the respondents
cannot be evicted summarily.
11.6 In so far as forfeiture is concerned, he submits
that respondent No.1, being a company cannot
adjudicate the dispute between the petitioner
and respondent No.1 and forfeit the amounts.
In this regard, he relies upon the decision of
the Hon'ble Apex Court in State of Karnataka
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v. Shree Rameshwara Rice Mills2, more
particularly para 7 and 8 thereof, which are
reproduced hereunder for easy reference:
7. On a consideration of the matter we find ourselves
unable to accept the contentions of Mr Iyenger. The
terms of clause 12 do not afford scope for a liberal
construction being made regarding the powers of the
Deputy Commissioner to adjudicate upon a disputed
question of breach as well as to assess the damages
arising from the breach. The crucial words in clause 12
are "and for any breach of conditions set forth
hereinbefore, the first party shall be liable to pay
damages to the second party as may be assessed by
the second party". On a plain reading of the words it is
clear that the right of the second party to assess
damages would arise only if the breach of conditions is
admitted or if no issue is made of it. If is was the
intention of the parties that the officer acting on behalf
of the State was also entitled to adjudicate upon a
dispute regarding the breach of conditions the wording
of clause 12 would have been entirely different. It
cannot also be argued that a right to adjudicate upon
an issue relating to a breach of conditions of the
contract would flow from or is inhered in the right
conferred to assess the damages arising from a breach
of conditions. The power to assess damages, as
pointed out by the Full Bench, is a subsidiary and
consequential power and not the primary power. Even
assuming for argument's sake that the terms of clause
12 afford scope for being construed as empowering
the officer of the State to decide upon the question of
breach as well as assess the quantum of damages, we
do not think that adjudication by the officer regarding
the breach of the contract can be sustained under law
because a party to the agreement cannot be an arbiter
in his own cause. Interests of justice and equity
require that where a party to a contract disputes the
committing of any breach of conditions the
adjudication should be by an independent person or
2 (1987) 2 SCC 160
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body and not by the officer party to the contract. The
position will, however, be different where there is no
dispute or there is consensus between the contracting
parties regarding the breach of conditions. In such a
case the officer of the State, even though a party to
the contract will be well within his rights in assessing
the damages occasioned by the breach in view of the
specific terms of clause 12.
8. We are, therefore, in agreement with the view of
the Full Bench that the powers of the State under an
agreement entered into by it with a private person
providing for assessment of damages for breach of
conditions and recovery of the damages will stand
confined only to those cases where the breach of
conditions is admitted or it is not disputed.
11.7 He also relies upon a decision of the Co-
ordinate Bench of this Court, in the case of
Karnataka EMTA Coal Mines Ltd & Another
vs. Karnataka Power Corporation Limited
& Another3, more particularly, para VIII (b
and c) thereof, which are reproduced hereunder
for easy reference;
(b) In STATE OF KARNATAKA vs. SHREE
RAMESHWARA RICE MILLS (1987) 2 SCC 160,
wherein a term of the contract read as under:
"12. In token of the first party's willingness to
abide by the above conditions, the first party has
hereby deposited as security a sum of Five
Hundred Rupees only with the second party and
for any breach of conditions set forth herein-
3 WP No.1517/2012 dated 19.9.2023
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before, the first party shall be liable to pay
damages to the second party as may be assessed
by the second party, in addition to the forfeiture
in part or whole of the amount deposited by him.
Any amount that may become due or payable by
the first party to the second party under any part
of the agreement, shall be deemed to be and may
be recovered from the first party as if they were
arrears of land revenue."
Armed with the text of above clause, the State
itself had adjudged the damages and issued a
certificate of recovery, which the Deputy
Commissioner was coercing as if the amount
comprised therein was an arrears of land
revenue. The Apex Court faltered the same by
observing:
"7. ...The terms of clause 12 do not afford scope
for a liberal construction being made regarding
the powers of the Deputy Commissioner to
adjudicate upon a disputed question of breach as
well as to assess the damages arising from the
breach..."
(c) The ratio in the said decision has been
reiterated by another Three Judge Bench in TULSI
NARAYAN GARG vs. M.P. ROAD DEVELOPMENT
AUTHORITY, (2019) SCC OnLine SC 1158.
Ordinarily, where a party to the contract disputes
alleged breach thereof, the party complaining
cannot adjudge such dispute on its own and
recover damages; it only can sue for damages.
This broad view emanates from JOSHI
TECHNOLOGIES INTERNATIONAL INC vs. UOI
(2015) 7 SCC 728. The contention of Mr.Srinivasa
Raghavan that the fact matrix of these cases
being bit different from the one at hands, the
broad proposition is not invocable, does not much
impress the court. A ratio from a decision has to
be churned out from the facts of the case, is true;
however, that does not mean that the fact matrix
should be mathematically accurate. If no two
things are ever identical, no two cases too, will
not be. Invariably there will be some difference
between the case at hands and the Rulings cited.
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What one has to see is the relevance of such
difference to the proposition pressed into service.
Such a relevance is not substantiated from the
side of KPCL to repel the invocation of the above
Rulings pressed into service by the petitioners.
11.8 He submits that a lease is exclusively governed
by the Transfer of Property Act, 1882, 1882 and
could be cancelled only by filing a Civil Suit for
its cancellation or for a declaration that it is
illegal, null and void and for consequential relief
of delivery back of possession and as such, until
and unless a valid decree in this regard is
passed by a Competent Court, the lease would
continue to be effective and binding.
11.9 In this regard, he relies upon the decision of
the Hon'ble Apex Court in ITC Ltd. vs. State
of U.P.4, more particularly para 30 thereof,
which is reproduced hereunder for easy
reference;
30. A lease governed exclusively by the
provisions of the Transfer of Property Act, 1882,
1882 ("the TP Act", for short) could be cancelled
4 (2011) 7 SCC 493
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only by filing a civil suit for its cancellation or for
a declaration that it is illegal, null and void and
for the consequential relief of delivery back of
possession. Unless and until a court of competent
jurisdiction grants such a decree, the lease will
continue to be effective and binding. Unilateral
cancellation of a registered lease deed by the
lessor will neither terminate the lease nor entitle
a lessor to seek possession. This is the position
under private law. But where the grant of lease is
governed by a statute or statutory regulations,
and if such statute expressly reserves the power
of cancellation or revocation to the lessor, it will
be permissible for an authority, as the lessor, to
cancel a duly executed and registered lease deed,
even if possession has been delivered, on the
specific grounds of cancellation provided in the
statute.
11.10 He also relies upon the decision of a Division
Bench of this Court in Karnataka Industrial
Areas Development Board, Reptd, by its
Executive Member vs. Electromobiles (I)
Ltd., Reptd. By the Official Liquidator
(2001) SCC Online Karnataka 839, more
particularly para 7, 9 and 10 thereof, which are
reproduced hereunder for easy reference;
7. The Board contends that no lease deed was
entered between the Board and the Company and
therefore the Company cannot be considered as a
Lessee. But the fact remains that the Board had
allotted the land to the Company on lease-cum-
sale basis and had delivered possession of the
land to the Company under a Possession
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Certificate. Thus even if a lease-cum-sale
agreement is not executed, the possession of the
Company in pursuance of the Possession
certificate issued by the Board is that of a lessee.
Therefore by purporting to cancel the allotment,
the Board cannot resume possession of the
allotted land. It has to resume possession only in
accordance with law. It is not dispute that as on
the date of winding up viz., 9-4-1987, the
Company was, and even now continues is be in
possession of the land. Merely because the Board
had sent a communication stating that the
allotment was cancelled, the Board doesnot
become entitled to dispossess the Company
otherwise than in accordance with law. Having
regard to the provisions of Section 456(2) of the
Companies Act, 1956, the Property of the
Company shall be deemed to be in the custody of
the Court as from the date of winding up order.
9. The order of cancellation was passed on 30-1-
1987 prior to the order of winding up on 9-4-
1987. It may not be possible for the Official
Liquidator to contend that the Board had no
power to terminate the lease prior to the order of
winding up. But, as noticed above, the order
dated 30-1-1987 is not a termination of lease but
cancellation of 'allotment'. When the allotment is
on lease-cum-sale basis and possession is
delivered to the allottee in pursuance of the
allotment, the allotted becomes a lease
irrespective of the fact whether a lease deed is
executed or not. Hence, the Board could not have
attempted to resume possession by merely
canceling the allotment, without either
terminating the lease or initiating action in
accordance with law for possession. Hence, we
affirm the order of the learned Company holding
that the order of cancellation dated 30-1-1987 is
unsustainable but on different grounds.
10. The remedy of the Board is to terminate the
lease and apply to the Company Court for
appropriate relief in regard to the land. If and
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when such application is filed by the Board
seeking permission to initiate legal action for
taking back possession or seeking delivery of the
land from the Court, the Company Court will
consider the validity of the action of the Board.
Alternatively if the official liquidator makes
application seeking a direction to the Board to
execute a sale deed, the Board may resist the
same, by putting forht its case.
11.11 Based on all the above, Sri.K.G.Raghavan.,
learned Senior counsel submits that the above
petition is required to be allowed and the reliefs
sought for granted.
12. Sri. Puttige R. Ramesh., learned senior counsel
appearing for Respondent No.1 submits that;
12.1 The petitioner's Project was approved in terms
of the Karnataka Industries (Facilitation) Act,
2002 (hereinafter referred to as the "Facilitation
Act"). In terms of the Facilitation Act, an
authority would be a local authority or any
Statutory Board, Corporation or other authority
established by the State Government, and as
such he contends that respondent No.1-KSSIDC
is also an authority.
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12.2 The clearance committee, having taken a
decision on approving the Project of the
petitioner, granted the approval for 15 acres at
the current value. The petitioner, if aggrieved
has an alternative efficacios remedy in terms of
Section 18 of the Facilitation Act, the said
Section 18 is reproduced hereunder for easy
reference:
18. Appeal.
(1)Any person aggrieved by the decision of the State
High Level Clearance Committee, State Level Single
Window Clearance Committee District Level Single
Window Clearance Committee disapproving the
Project may within thirty days from the date of
receipt of communication of the decision of the
Committee appeal to the Appellate Authority as may
be prescribed and different appellate authorities may
be prescribed in respect of appeals against the
decision of different level of committees.
(2)The Appellate Authority shall after following such
procedure as may be prescribed dispose off the
appeal within a period of one month from the date of
its receipt.
12.3 By relying on the Facilitation Act, he further
submits that Respondent No.1 being an
authority, can always adjudicate the dues of
Respondent No.1 from the petitioner as also
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resume the land. In this regard, he also relies
upon the Karnataka State Small Industries
Development Corporation Limited Allotment
Rules, 2004 and submits that the allotment is
made, in terms of said Allotment Rules an
industrial estate having been formed in terms
of the said rules. The allotment committee
would decide on the allotment or otherwise, as
well as the reallotment of sheds and plots that
have been cancelled or seized. Thus, he
submits respondent No.1 is authorized to and
entitled to both adjudicate the claims of
respondent No.1 as also to resume possession
of the Property.
12.4 He relies upon the decision of the Hon'ble Apex
Court in Karnataka State Industrial
Investment & Development Corpn. Ltd. v.
Cavalet India Ltd5 more particularly para 19
5 (2005) 4 SCC 456
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thereof, which is reproduced hereunder for easy
reference;
19. From the aforesaid, the legal principles that
emerge are:
(i) The High Court while exercising its jurisdiction
under Article 226 of the Constitution does not sit as an
appellate authority over the acts and deeds of the
Financial Corporation and seek to correct them. The
doctrine of fairness does not convert the writ courts
into appellate authorities over administrative
authorities.
(ii) In a matter between the Corporation and its
debtor, a writ court has no say except in two
situations:
(a) there is a statutory violation on the part of the
Corporation, or
(b) where the Corporation acts unfairly i.e.
unreasonably.
(iii) In commercial matters, the courts should not risk
their judgments for the judgments of the bodies to
which that task is assigned.
(iv) Unless the action of the Financial Corporation is
mala fide, even a wrong decision taken by it is not
open to challenge. It is not for the courts or a third
party to substitute its decision, however, more
prudent, commercial or businesslike it may be, for the
decision of the Financial Corporation. Hence, whatever
the wisdom (or the lack of it) of the conduct of the
Corporation, the same cannot be assailed for making
the Corporation liable.
(v) In the matter of sale of public Property, the
dominant consideration is to secure the best price for
the Property to be sold and this could be achieved only
when there is maximum public participation in the
process of sale and everybody has an opportunity of
making an offer.
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(vi) Public auction is not the only mode to secure the
best price by inviting maximum public participation,
tender and negotiation could also be adopted.
(vii) The Financial Corporation is always expected to
try and realise the maximum sale price by selling the
assets by following a procedure which is transparent
and acceptable, after due publicity, wherever possible
and if any reason is indicated or cause shown for the
default, the same has to be considered in its proper
perspective and a conscious decision has to be taken
as to whether action under Section 29 of the Act is
called for. Thereafter, the modalities for disposal of
the seized unit have to be worked out.
(viii) Fairness cannot be a one-way street. The
fairness required of the Financial Corporations cannot
be carried to the extent of disabling them from
recovering what is due to them. While not insisting
upon the borrower to honour the commitments
undertaken by him, the Financial Corporation alone
cannot be shackled hand and foot in the name of
fairness.
(ix) Reasonableness is to be tested against the
dominant consideration to secure the best price.
12.5 By relying on Cavalet India Ltd's case, he
submits that this Court cannot, while exercising
jurisdiction under Article 226, sit as an
Appellate Authority over the acts of the
financial Corporation and seek to correct them.
The authority having taken its decision, on the
basis of the material available before it, the
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said decision would be binding on the
petitioner.
12.6 He relies upon the decision of the Hon'ble Apex
Court in Orissa Industrial Infrastructure
Development Corporation vs. Mesco
Kalinga Steel Limited and Others6, more
particularly para 2, 4, 6, 7, 13, 22, 26 and 27
thereof, which are reproduce hereunder for
easy reference;
2. The factual matrix discloses that Mesco Kalinga
Steel Ltd. (in short "Mesco") had applied to IDCO
for allotment of 2500 acres of land on 30-6-1994
and IDCO in turn, requested the Government of
Orissa to issue necessary orders to process the
allotment. On 28-10-1994 the State Government
conveyed in principle approval for allotment of
2500 acres of land on the terms and conditions laid
down in the policy decision of the State
Government as revised on 25-1-1995 for
establishment of steel plant.
4. On 27-10-1997, IDCO requested Mesco to
submit draft deed of lease agreement for execution
within 15 days, failing which steps will be taken for
cancellation of allotment and resumption of land.
IDCO again requested on 26-11-1997 to submit the
draft deed of agreement for execution. However
Mesco kept quiet and failed to get the lease deed
executed. Thereafter, for more than 5½ years
nothing happened. No steps were taken by Mesco
to get the lease deed executed. Thereafter, IDCO
6 (2017) 5 SCC 86
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gave final notice to Mesco on 4-7-2003 to deposit
the balance defaulted amount of Rs 22.44 crores
along with statutory dues and to execute the lease
deed by 19-7-2003 failing which it was intimated
that the said land shall be resumed at their cost
and the amount paid shall be adjusted towards
compensation for use and occupation of the land;
apart from that, Mesco shall also be liable for
damages. Ultimately on 25-7-2003 on failure to get
the lease deed executed, land was resumed and
possession letter of 1756.29 acres of land was
cancelled by IDCO. The amount of Rs 1.25 crores
deposited by Mesco was forfeited and adjusted
towards compensation for use and occupation of
the land and damages.
6. A representation was submitted by Mesco on 20-
8-2003 questioning resumption in which Mesco
submitted its own terms and conditions for
payment. The said representation was rejected on
26-9-2003 by IDCO. The first round of litigation in
the form of WP (C) No. 12857 of 2003 was filed by
Mesco questioning the cancellation and resumption
of land. The High Court disposed of the said writ
petition on 15-1-2004 [Mesco Kalinga Steel Ltd. v.
Orissa Industrial Infrastructure Development
Corpn., WP (C) No. 12857 of 2003, order dated 15-
1-2004 (Ori)] . Pursuant thereto, representation
dated 20-1-2004 submitted to IDCO had been
rejected on 25-2-2004. Thereafter, in the second
round of litigation in WP (C) No. 2453 of 2005,
during its pendency, Mesco came up with another
representation dated 22-8-2005 to IDCO which was
rejected on 7-10-2005 on the ground that it was
highly unsatisfactory, unconvincing and completely
unacceptable. Mesco amended the writ petition to
question the rejection order dated 7-10-2005. On
11-4-2007 and 12-4-2007, the High Court again
asked IDCO whether it was willing to lease out the
remaining land to Mesco. As IDCO was unable to
do so, the High Court allowed the writ application
to lease out 825.68 acres of land. Aggrieved
thereby, the appellants are before us.
7. The High Court has held that since IDCO has not
complied with Clause 18 contained in the policy
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decision dated 25-1-1995 inasmuch as 3 months'
notice has not been given, it was not open to
resume the possession otherwise than in due
course of law. Since Mesco had confined its prayer
to the available land to the aforesaid extent, the
High Court had issued directions to lease out
825.68 acres of land.
13. Aforesaid Condition No. 18 never came into
force and remained inoperative in the facts of the
instant case as lease deed itself had not been
executed. Even otherwise, more than three
months' time was given to Mesco to remedy the
breach inasmuch as notice for resumption was
initially given in 1997 and for more than 5½ years
till resumption in July 2003, breach was not
remedied. In spite of receiving the advance
possession, there was failure on the part of Mesco
to execute the lease deed though draft lease deed
was sent to it in January 1996 for execution. The
relationship of lessor and lessee never came into
being, in the absence of execution of lease deed.
The execution of lease deed was necessary as the
State Government had only accorded in principle
approval and advised IDCO to allot the land that
could only be done by execution of lease deed. As
a matter of fact, IDCO ought not to have handed
over advance possession of the land to Mesco
without execution of lease deed. However, for the
reasons best known to IDCO, advance possession
was given. The allotment letter itself contemplated
the execution of the lease deed as a condition
precedent. As provided in Section 33 of the Orissa
Industrial Infrastructure Development Corporation
Act, 1980 (for short "the Act"), the Corporation can
dispose of the land subject to directions given by
the State Government in such a manner and
subject to such terms and conditions as may be
necessary. The condition precedent was that of
execution of lease deed, and as it was so directed
by the State Government also, in our considered
opinion, no concluded contract came into being and
the transaction became void due to failure on the
part of Mesco to execute a formal lease deed.
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22. In the light of aforesaid decision, when we
consider the overall conduct of Mesco in the instant
case, we are fully satisfied that the High Court has
adventured into an avoidable illegality while
directing execution of lease deed. It is a settled law
that equity follows the rule of common law in
respect of such contracts. Renewal of lease is a
privilege and if a tenant wishes to claim the
privilege, he must do so strictly within the time
limited for the purpose. This Court has further
considered the question where there is no time-
limit, an application may be made within a
reasonable time. If delay is on the part of lessee
for renewal arising out of mere neglect on his part
and which could have been avoided by reasonable
diligence, would not entitle him to claim renewal.
Applying the same principle to the instant case, it
is apparent that the conduct of Mesco was unfair
and unpardonable. The conduct disentitled it from
indulgence by Court in any manner. We are
constrained to observe that a number of times the
High Court had unnecessarily directed the matter
to be reconsidered and on each and every occasion
there was rejection of the representation by the
authorities concerned. Thus, no equitable
consideration was available with Mesco to invoke
the writ jurisdiction for the reliefs sought. Relief
granted is not permissible as per law.
26. In the writ petition, a prayer had been made
for grant of relief of a declaration that Mesco has
acquired full title to hold the Property in question
for a period of 99 years from the date of
possession and IDCO has lost its title to the said
land and has the remedy to recover the balance
amount by filing a suit. The prayer was wholly
misconceived. In the instant case, on the basis of
MoU or allotment letter, no right has accrued to
Mesco, and it having failed to perform its
mandatory part, the MoU/offer became void and
unenforceable. IDCO was fully justified in resuming
the land.
27. The High Court has totally misdirected itself in
directing to lease out the balance land. The High
Court has also ignored that certain intervening
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events have taken place and there was total failure
on the part of Mesco to carry out its obligations.
The High Court could not have issued the direction
more so in the changed situation and in view of the
defaults committed by Mesco. As a matter of fact,
Mesco was never inclined to abide by the terms of
the letter dated 4-7-2003. When resumption was
made on 25-7-2003, a representation was
submitted on 20-8-2003 by Mesco. In that, an
attempt was made to dictate its own terms in the
garb of prayer for payment. As a matter of fact, it
is apparent from the conduct of Mesco that it had
no justification at any point of time not to execute
the lease deed. It was delaying the same for the
reasons best known to it which was wholly
impermissible conduct, particularly after taking
possession. The breach was not remedied for
several years much less for three months in which
it was to be remedied. Thus, the High Court
misadventured into holding the action of IDCO of
resumption of land to be illegal. There was no
equitable or legal consideration in favour of the
respondent herein and a writ is not issued to
perpetuate an illegality. Not only the conduct of
Mesco was unfair, third-party rights had also
intervened. Lawful method had been exercised for
resumption of land and cancellation of letter of
handing over the possession.
12.7 By relying on the above he submits the that the
respondent No.1 is similarly situated as Orissa
Industrial Infrastructure Development
Corporation and as such, it has the power to
resume the land and there could be no direction
which could be issued to respondent No.1 to
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lease the land to the petitioner despite the
defaults committed by the petitioner.
12.8 He relies upon the decision of the Hon'ble Apex
Court in Dulari Exports Ltd. v. H.S.I.D.C.
Ltd.,7 more particularly para 4,5,6,7 and 9
thereof, which are reproduced hereunder for
easy reference;
4. The review petitioners had paid four
instalments. They did not pay the fifth instalment
within the prescribed time. They submitted a
demand draft of Rs. 19,00,253 towards the fifth
instalment.
5. The Corporation by a letter dated 30-1-2004
referring to its earlier order dated 1-1-2004 by
which a show-cause notice was issued to it on
account of non-commencement of construction
within the stipulated period as also the subsequent
reply of the petitioners dated 9-1-2004, stated:
"In this regard, I am again directed to inform you
that as per terms and conditions of allotment, you
were required to start construction of factory
building within a period of one year and six months
from the date of offer of possession, but you have
not started the same even after lapse of more than
two years and six months.
In view of the above, the reply submitted by you is
not satisfactory and the plot has become liable for
resumption and as such the demand drafts
submitted by you have not yet been accepted. On
7 (2009) 17 SCC 526
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account of above violations though the plot has
become liable for resumption, however, before
resuming the plot, the Corporation has decided to
give you an opportunity of retaining the plot at the
current price of Rs. 2200 per square metre. In case
you are interested in retaining the plot at the
current price of Rs. 2200 per square metre, you
are advised to convey your acceptance, within a
period of 15 days from the date of issue of this
letter, failing which the plot will be resumed
without any further notice in this regard."
The review petitioners did not accept the said offer.
They filed objections thereto.
6. By an order dated 27-6-2005, the said
objections were rejected, stating:
"The objections filed by you have been duly
considered, wherein you have neither disputed the
starting of construction over the plot in question
within the stipulated period, as one of the
conditions of allotment, failure whereof renders the
plot liable to be resumed nor explained any reasons
justifying your failure to comply with the said
condition. Hence the objections filed by you have
no merit and are hereby rejected. Accordingly a
cheque dated 15-6-2005 for Rs. 81,55,203 drawn
on State Bank of India, Industrial Area Branch,
Panchkula is being sent to you on account of refund
of the amount deposited by you after deductions as
per terms and conditions of allotment.
Further, the demand drafts in original bearing Nos.
204383 for Rs. 9,00,000; 204384 for Rs. 9,00,000
and 204385 for Rs. 1,00,253, all dated 9-1-2004
and drawn on Indian Overseas Bank are also
returned to you, which you deposited with the
Corporation towards fifth instalment of the cost of
plot. You are requested to hand over the vacant
possession of the plot to the Estate Manager, IMT,
Manesar within a period of thirty days."
An appeal was preferred thereagainst and the
appellate authority was of the opinion that it was
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merely a proposal for resumption and not an order
of resumption itself. The learned counsel would
contend that it is on the aforementioned premise
he filed a writ petition before the High Court which
was allowed by an order dated 8-5-2006. It was
urged that as the review petitioners during the
pendency of the writ petition had not only
completed the construction of the factory but also
commenced commercial production, this Court
should not have equated the case of theirs with
those of others.
7. Mr Bali pointed out that the current rate on
which the review petitioners were required to
deposit is Rs. 4000 per square metre, but it has all
along been and still is ready and willing to pay Rs.
2200 per square metre as demanded of them
earlier by the Corporation.
9. It may be true that the Corporation did not
expressly use the words "resumption of the plot"
but in effect and substance it must be held to have
done so. In its purported so-called proposal for
resumption, the Corporation categorically stated
that despite the fact that it violated the conditions
of allotment, it was free to offer the current price
for regularisation of the allotment at the rate of Rs.
2200 per square metre. Acceptance of such an
offer was valid only for a period of fifteen days
from the date of issue of the suit notice. No offer
was made within the stipulated period. In fact, the
review petitioners objected thereto.
12.9 By relying on the above he submits that the
lease-cum-sale agreement having been
cancelled as far back as on 3.12.2009.
Subsequently, on a request made by the
petitioner, the Udyog Mitra, issued a fresh
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approval reducing the extent of land from 33
acres to 15 acres and directing the petitioner to
make payment of the market value at the then
existent market value, it was for the petitioner
to have made payment of those amounts. The
petitioner having accepted, the reduction of the
extent from 33 acres to 15 acres cannot now in
a malafide manner seek for the entire 33 acres
without making payment of the current market
value either on 33 acres or 15 acres.
12.10 He thus submits that the conduct on part of the
petitioner is completely malafide, is liable to be
deprecated and the above petition, required to
be dismissed.
13. Ms.Sukruta.R., learned counsel appearing for
respondent No.2- Karnataka Udyog Mitra, adopts the
submission of Sri. Puttige R. Ramesh., learned senior
counsel for respondent No.1 and further submits that
the fresh allotment made by respondent No.2 was at
the instance of the petitioner. The petitioner in the
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meeting had agreed to reduction of the extent of
land from 33 acres to 15 acres as also to make
payment of the current market value. The petitioner
is backtracking on the agreement arrived at, and as
such, the petitioner is not entitled for any equitable
consideration. In the above background, she submits
that the above petition may be kindly dismissed.
14. Heard Sri.K.G.Raghavan., learned Senior counsel
appearing for the petitioner, Sri.Puttige R. Ramesh.,
learned senior counsel appearing for respondent No.1
and Ms.Sukruta.R., learned counsel appearing for
respondent No.2. perused papers.
15. On the basis of submission made by all the counsels,
the points that would arise for consideration are;
1. Whether respondent No.1-KSSIDC can
terminate the lease-cum-sale agreement
entered into by respondent No.1 with the
petitioner on account of defaults
committed by the petitioner?
2. Whether KSSIDC could forfeit the amounts
paid by petitioner to respondent No.1 on
account of violation of the terms of the
lease agreement?
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3. Whether respondent No.1 can unilaterally
take possession of the leased land by itself
without recourse to law?
4. Whether the petitioner would be bound by
the subsequent allotment made by
respondent No.2 or could it still insist the
respondent to comply with terms of the
first allotment?
5. What order?
16. I answer above points as under;
17. Answer to point No.1.: Whether respondent
No.1-KSSIDC can terminate the lease-cum-sale
agreement entered into by respondent No.1
with the petitioner on account of defaults
committed by the petitioner?
17.1 The KSSIDC is a company albeit a government
company as submitted by Sri.K.G.Raghavan.,
learned Senior Counsel. The agreement entered
into between KSSIDC, and the petitioner is a
lease-cum-sale agreement under which KSSIDC
had agreed to lease and on compliance with the
conditions of the lease execute a sale deed.
Thus, essentially the agreement between
KSSIDC and the petitioner is one between
private parties in as much as KSSIDC is not a
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Statutory Authority or a Statutory Corporation.
Thus, an agreement entered between private
parties for lease or otherwise can always be
cancelled or terminated by any of the parties.
17.2 If the lease-cum-sale agreement were to
provide for cancellation or termination on
account of default and the default conditions
have been satisfied, necessarily the non-
defaulting party would have the right to cancel
or terminate the said lease-cum-sale
agreement on the occurring of the said default.
17.3 Be that as it may, even if the termination is not
in terms of the agreement, then the available
remedy for the non-defaulting party would be
to challenge such termination.
17.4 Thus, I answer point No.1 by holding that
respondent No.1-KSSIDC has the power to
cancel/terminate the lease-cum-sale
agreement, entered into by it with the
petitioner, the validity or otherwise would have
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to be adjudicated in an appropriate proceeding,
if challenged.
18. Answer to point No.2: Whether KSSIDC could
forfeit the amounts paid by petitioner to
respondent No.1 on account of violation of the
terms of the lease agreement?
18.1 Under the lease-cum-sale agreement, the
petitioner had deposited certain amounts with
KSSIDC and it is these amounts which are
stated to be forfeited. As held by me in answer
to point No.1, the agreement being between
private parties, the agreement being capable of
cancellation or termination, if there is a
forfeiture Clause available in the agreement,
the amounts deposited could be forfeited on
compliance with the terms of forfeiture.
18.2 The amount being with KSSIDC and KSSIDC
having chosen to forfeit the amounts the
amount would continue to remain with KSSIDC.
Thus, there would be no action as such initiated
by KSSIDC, but to declare the amounts
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forfeited. The forfeiture powers excised by the
KSSIDC cannot be per se questioned. However,
the manner of exercise of such forfeiture
powers and/or whether the amounts can be
forfeited in the circumstances would have to be
adjudicated by an appropriate forum in an
appropriate proceeding, if so challenged by the
petitioner.
19. Answer to point No.3: Whether respondent
No.1 can unilaterally take possession of the
leased land by itself without recourse to law?
19.1 As held by me in answer to point No.1 the
agreement between the parties is a contract of
lease-cum-sale between two contracting
individuals and not, between a statutory
authority or a statutory corporation.
19.2 Thus, any rights that either of the parties were
to exercise, under the said lease-cum-sale
agreement, would be the civil rights. There
being no statutory force and/or authority for
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either the petitioner or respondent No.1 to
exercise under a particular statute.
19.3 The lease-cum-sale agreement being a regular
lease would be governed by the principles
enshrined in the Transfer of Property Act, 1882
and it is therefore required that on cancellation
or termination of a lease agreement, any rights
to be excised would have to be so done by the
concerned party under the relevant provision.
19.4 As held by the Hon'ble Apex Court in
Shree Rameshwara Rice Mills's case, the
parties would have to approach the appropriate
forum having jurisdiction for adjudication of any
right, enforcing of any right or the like. Even in
the Property in question were to be claimed to
be a public property coming under the purview
of the Public Premises (Eviction of Unauthorised
Occupants) Act, 1971. Even then, Respondent
No.1 would have to exercise powers of eviction
and or recovery of possession in terms of
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proceedings to be filed under the Public
Premises (Eviction of Unauthorised Occupants)
Act, 1971.
19.5 Thus, the right to enforce eviction and recover
possession by the Respondent No.1-KSSIDC
would have to be in terms of the Transfer of
Property Act, 1882 or Public Premises (Eviction
of Unauthorised Occupants) Act, 1971.
Respondent No.1 cannot unilaterally, of his own
accord take possession of the Property, it lacks
the statutory power to do so.
19.6 The decision in Cavalet India Ltd's case relied
upon by Sri.Puttige R. Ramesh., learned senior
counsel in this regard would be of no avail. The
said decision only laid down that the writ Court
cannot excise jurisdiction over any action of a
corporation which is unfair.
19.7 The decision in, Mesco Kalinga Steel
Limited's case also would be of no avail, since
in that case the issue involved was a direction
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to authority to execute a lease deed. Whereas
in this case we are concerned with the power of
KSSIDC in resuming possession by taking
physical possession unilaterally.
20.1 In that view of the matter, the only available
option to KSSIDC-respondent No.1 is to initiate
such proceedings under the Transfer of
Property Act, 1882, the Public Premises
(Eviction of Unauthorised Occupants) Act, 1971
and/or the like, as may be advised, Respondent
No.1 cannot unilaterally take possession of the
leased land by itself.
20. Answer to point No.4: Whether the petitioner
would be bound by the subsequent allotment
made by respondent No.2 or could it still insist
the respondent to comply with terms of the
first allotment?
20.2 From the facts, it is clear that in terms of the
lease-cum-sale agreement dated 26.06.2007,
the Project was to be implemented in a
particular time frame, which was not so
implemented. The petitioner had sought for
registration of the lease-cum-sale agreement
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and subsequently for extension of time. Finally,
the proposal of the petitioner was placed before
the SLSWCC which extended the period.
However, reduced the extent of land from 33
acres to 15 acres, which is followed up by an
extension letter on 15.6.2011. The petitioner
vide its letter dated 12.7.2011, only disputed
the additional consideration which was directed
to be paid by the petitioner.
20.3 The petitioner per se did not dispute the
reduction of the land. The petitioner itself,
having sought for extension, having appeared
before the SLSWCC, having accepted the
reduction in the area, cannot now rely upon the
earlier lease-cum-sale agreement to contend
that the petitioner is entitled for a sale deed for
the entire extent.
20.4 The earlier lease-cum-sale agreement dated
26.6.2007 would stand, therefore, superseded
by the SLSWCC's recommendation and the
allotment made in pursuance thereof by the
KSSIDC. The reduction having been agreed
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upon, the petitioner cannot now therefore seek
for reliefs in respect of the entire extent.
20.5 As such, I answer point No.4 by holding the
petitioner would be bound by subsequent
allotment made by respondent No.2 and could
not insist the respondent No.1 to comply with
the lease-cum-sale agreement.
21. Answer to point No.5: What order?
In view of my findings and answers to the
above points, I pass the following;
ORDER
i. The writ petition is partly allowed.
ii. Respondent No.1 is restrained from
dispossessing the petitioner without following
due process of law.
SD/-
(SURAJ GOVINDARAJ)
JUDGE
