Karnataka High Court

M/S Sri Laxmi Industries vs The Karnataka Industrial Area ... on 16 October, 2024

Author: S.R.Krishna Kumar

Bench: S.R.Krishna Kumar

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                                                        WP No. 202126 of 2022




                              IN THE HIGH COURT OF KARNATAKA,

                                      KALABURAGI BENCH

                          DATED THIS THE 16TH DAY OF OCTOBER, 2024

                                             BEFORE
                        THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
                        WRIT PETITION NO. 202126 OF 2022 (GM-KIADB)
                   BETWEEN:

                        M/S SRI LAXMI INDUSTRIES,
                        A PARTNERSHIP FIRM,
                        PLOT NO. 91,92,93 AND 94,
                        RAICHUR GROWTH CENTRE,
                        RAICHUR-584101,
                        REPRESENTED BY ITS
                        MANAGING PARTNER
                        MR. P. SANJEEV KUMAR.

                                                                   ...PETITIONER

                   (BY SRI. BRIJESH PATIL, ADVOCATE)

Digitally signed   AND:
by SUMITRA
SHERIGAR
Location: HIGH     1.   THE KARNATAKA INDUSTRIAL AREA DEVELOPMENT
COURT OF                BOARD,
KARNATAKA
                        BY ITS CHIEF EXECUTIVE OFFICER AND EXECUTIVE
                        MEMBER,
                        NO. 49, 4TH AND 5TH FLOOR,
                        KHANIJA BHAVAN,
                        RACE COURSE ROAD,
                        BENGALURU-560001. (BLOCK SECRETARY)

                   2.   EXECUTIVE MEMBER,
                        THE KARNATAKA INDUSTRIAL AREA DEVELOPMENT
                        BOARD, NO. 49, 4TH AND 5TH FLOOR,
                        KHANIJA BHAVAN,
                               -2-
                                          NC: 2024:KHC-K:7697
                                       WP No. 202126 of 2022




     RACE COURSE ROAD,
     BENGALURU-560001.

3.   DEPUTY DEVELOPMENT OFFICER AND ASST. EXECUTIVE
     KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD,
     PLOT NO. 49, RAICHUR INDUSTRIAL AREA,
     HYDERABAD ROAD,
     RAICHUR-584101.


                                               ...RESPONDENTS

(SRI. A.M.NAGRAL, ADV. FOR R1 TO R3)

        THIS WRIT PETITION IS FILED UNDER ARTICLES 226 OF THE
CONSTITUTION OF INDIA, PRAYING TO, A) ISSUE A WRIT OF
CERTIORARI QUASHING THE IMPUGNED ORDER DATED 25.07.2022
PASSED     BY THE FIRST RESPONDENT     IN NO. KIADB/KEM.KA.
HANCHIKE/RGC-108/7298/2022-23 PRODUCED AT ANNEXURE- K,
ETC.,

        THIS PETITION, COMING ON FOR PRL. HEARING IN B GROUP,
THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM:      HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR


                        ORAL ORDER

(PER: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR)

Heard the learned counsel for the petitioner and the

learned counsel for the respondents and perused the

records.

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2. In this petition, the petitioner is seeking for the

following reliefs:

(i) Issue a writ of certiorari quashing the impugned order dated 25.07.2022 passed by the first respondent in No.KIADB/KEM.KA.HANCHIKE/RGC-108/7298/2022-23 produced at Annexure-K.

(ii) Direct the respondents to consider the representations of the petitioner as per Annexures-F, dated 11.10.2021, H dated 25.11.2021 and J dated 29.03.2022 favourably and extend the time to complete the project.

(iii) Issue any other writ or order as this court deems fit in the facts of the case.

3. A perusal of the material on record will indicate

that the petitioner was allotted the subject land with a

lease-cum-sale agreement dated 13.07.2011, which was

proceeded by a possession certificate dated 20.06.2011.

Since the petitioner did not have the financial capacity to

put up construction and complete the project within the

stipulated period, the petitioner addressed

communications and requested for extension of time which

was granted by the petitioner by the respondents vide

Annexure-E dated 06.08.2016. Subsequently, the

partnership deed of the petitioner having been

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reconstituted, the petitioner submitted additional

representations at Annexures-F, H and J dated

11.10.2021, 25.11.2021 and 29.03.2022, respectively,

requesting further extension of time and for permission to

complete the project after raising necessary funds.

4. In the meanwhile, the respondents got issued a

notice dated 20.09.2018 under Section 34B(1) of the

Karnataka Industrial Areas Development Act (for short

'KIAD Act') to which the petitioner did not submit any

reply. However, the respondents have proceeded to pass

the impugned order without issuing a further notice as

required under Section 34B(2) and have cancelled the

allotment vide impugned order which is assailed in the

present petition.

5. Learned counsel for the petitioner submits that

in view of the requests/representation made by the

petitioner seeking extension of time, the petitioner could

not submit reply to the notice under Section 34B(1) issued

by the respondent, since the petitioner bona fide believed

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that the request for extension of time would be

considered. It is also submitted that the impugned order

stands vitiated on account of non issuance of the

mandatory notice under Section 34 of the KIAD Act which

has not been given by the respondent prior to passing the

impugned order which deserves to be set aside in the light

of the Judgment of this court in the case of M/s. Rishi

Enterprises Vs. The State of Karnataka & others, in

W.P.No.26548/2017 dated 06.07.2022, which was

followed in SBEE Cables (India) Limited Vs. Karnataka

Industrial Areas Development Board and others in

W.P.No.16941/2024 and connected matter.

6. Learned counsel for the petitioner has also filed

a memo along with documents to indicate that loan for the

purpose of putting up construction on the subject land has

been sanctioned in its favour by the HDFC Bank and that

the petitioner has already applied for sanction of building

plan for putting up construction on the subject land. It is

therefore submitted that the impugned order deserves to

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be set aside and the matter is remitted back to the

respondent for reconsideration afresh from the stage of

permitting the petitioner to file reply to the Section 34

notice and to proceed further in accordance with law.

7. Learned counsel for the respondent-KIADB

would reiterate the various contentions urged in the

statement of objections and submits that there is no merit

in the petition and that the same is liable to be dismissed.

It is submitted that the petitioner did not adhered to nor

fulfilled the obligations cast upon him in the lease

agreement and consequently the same was duly

terminated by the respondent by passing the impugned

order which does not warrant interference by this Court in

the present petition.

8. Before adverting to the rival submissions, it is

necessary to extract Section 34B of the KIAD Act, which

reads as under:

34B. Resumption of the possession of premises including the residential tenements on breach of terms and conditions of lease or holding Under these

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circumstances, without expressing any opinion on the merits/demerits of rival contentions, I deem it just and appropriate to dispose of this petition reserving liberty in favour of the parties 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 15 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 authorized 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.

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9. A plain reading of the aforesaid provisions will

indicate that in case of any alleged breach of the terms

and conditions of allotment, the respondent-KIADB is

required to issue a notice calling upon the petitioner to

rectify the breaches within a stipulated time frame as

contemplated under Section 34 of the KIAD Act.

10. In addition there too, in the event an allottee

does not rectify the alleged breaches as required in the

notice to issued under Section 34B(1), it is incumbent

upon the respondent-KIADB to issue one more notice

under Section 34B(2) calling upon the allottee to show

cause as to why the breaches were not remedied by the

allottees and as to why the allotment should not be

cancelled and the land should not be resumed by the

KIADB.

11. In this context, in the case of SBEE Cables

(India) Limited Vs. Karnataka Industrial Areas

Development Board and others, in

W.P.No.16941/2024 and connected matter, this Court

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followed its earlier Judgment in M/s. Rishi Enterprises

and held as under:

"ORDER

In W.P.No.56420/2017, petitioner seeks for the following reliefs:-

"A) Issue a writ of certiorari or any other writ, quashing Letter dated 17/10/2017 bearing Ref: No.IADB/HO/Allot/16059-

Vol-II/10890/17-18 issued by the Respondent No. 2 Vide Annexure-A.

B) Issue a writ of mandamus directing the Respondents to consider the case of the petitioner for extension of time to complete the project in accordance with law;

C) To issue any other suitable writ or order or direction which the Hon'ble Court deems fit in the circumstances of the case, in the interest of justice."

In W.P.No.16941/2024, petitioner seeks for the following reliefs:-

" A) Issue a writ of mandamus, directing the Respondents to execute a sale deed in favour of the petitioner in pursuance of the Lease-cum-Sale deed dated 26.10.2011 vide Annexure-B.

B) To issue any other suitable writ or order or direction which the Hon'ble Court deems fit in the circumstances of the case, in the interest of justice."

2. The common petitioner in both the petitions was allotted the subject property on 23.10.2009, pursuant to which, the 2nd respondent issued the Possession Certificate dated 23.06.2011 and executed the Lease- cum-Sale Agreement dated 26.10.2011 in favour of the petitioner. Subsequently, there were several correspondence exchanged between the petitioner and the respondents during the period from 2011 till 2017, when the 2nd respondent issued the impugned communication / letter dated 17.10.2017 informing that the respondents were agreeable for grant of extension of time in favour of the petitioner for implementation of the project subject to payment of Rs.19,73,56,883/- within a period of 30 days from the date of receipt of the letter /

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communication by the petitioner and the same is assailed / impugned by the petitioner in W.P.No.56420/2017 supra, in which, there is an interim order of stay passed by this Court in 15.12.2017, which is in force till today.

3. Subsequently, the petitioner has preferred W.P.No.16941/2024 for a direction to execute a Sale Deed in favour of the petitioner since the period of 10 years stipulated in the Lease-cum-Sale Agreement dated 26.10.2011 had expired and that the petitioner was entitled to obtain a Sale Deed from the respondents. Since common questions of law and fact arise for consideration in both the petitions, they are taken up together and disposed of by this common order.

4. Heard learned counsel for the petitioner and learned counsel for the respondents -KIADB as well as learned AGA for State and perused the material on record.

5. Learned counsel for the petitioner invited my attention to Clause-10 of the Lease-cum-Sale Agreement dated 26.10.2011 in order to point out that the mandatory procedure prescribed under Clause-10 of the said agreement which mandated following the procedure under Section 34B(1) and 34B(2) of the Karnataka Industrial Areas Development Act, 1966 (for short 'the KIAD Act') had not been followed by the respondents before issuing the impugned communication / letter dated 17.10.2017 and consequently, the same deserves to be set aside. Learned counsel also submitted that the period of Lease-cum-Sale Agreement having come to an end, the respondents are duty bound to execute the Sale Deed in favour of the petitioner. In support of his submissions, learned counsel for the petitioner has placed reliance upon the judgment of this Court in the case of M/s.Rishi Enterprises vs. The State of Karnataka & others in W.P.No.26548/2017 dated 06.07.2022, wherein it is held as under:-

"6. Having heard the learned counsel for both the parties and on perusal of the writ petition papers, I am of the view, that the

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impugned order dated 20.03.2017 resuming the industrial plot allotted to the petitioner, requires to be set aside for the reason that the petitioner was not issued notice under Section 34-B(2) of the Act.

7. Section 34-B(1) of the Act requires the Board to issue notice pointing out the deficiencies or defects and on receiving such notice, it is for the allottee to comply those deficiencies or defects. If the allottee fails to comply with the deficiencies or defects, the respondent-Board is then expected to issue notice, which is mandatory under Section 34-B(2) of the Act, calling upon the allottee to submit his reply as to why the order of resumption should not be passed for non-compliance of the notice issued under Section 34-B(1) of the Act.

8. Admittedly in the instant case, no notice under Section 34- B(2) of the Act was issued for non- compliance of the deficiencies or defects calling upon the petitioner to explain as to why the resumption order should not be passed. Moreover, learned counsel for the petitioner submits that as on this day, the project is completed / implemented and the same is brought to the notice of the respondents 2 to 4.

9. In the above circumstances, for non- issuance of notice under Section 34-B(2) of the Act, the impugned order (Annexure-N) dated 20.03.2017 requires to be set aside with liberty to the respondent- Board to proceed further, from the stage where the illegality had occurred. It is for the petitioner to bring to the notice of the Board the fact of construction of industrial building / project and if the Board is convinced with regard to implementation of the project, the respondent-Board shall pass appropriate order in accordance with law.

10. Hence the following order:-

a. The writ petition is allowed;

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b. Annexure-N bearing No.KIADB/HO/ALLOT/336/ 19154/16-17 dated 20.03.2017 is set aside.

c. The respondent-Board is at liberty to proceed further from the stage, where the illegality occurred by issuing notice under Section 34-B(2) of the Act, hear the petitioner and pass appropriate order in accordance with law.

d. All contentions on merits are left open."

6. Per contra, learned counsel for the respondents would oppose the said submissions and submit that there is no merit in both the petitions and the same are liable to be dismissed. It is also submitted that right of the petitioner to obtain the Sale Deed would be dependent on the petitioner complying with the terms and conditions of the Lease-cum-Sale Agreement and other provisions of the KIAD Act and consequently, the petitioner is not entitled to any reliefs as sought for in the present petitions.

7. Before adverting to the rival contentions, it would be necessary to extract Clause(10) of the lease-cum- sale agreement, which reads as under:-

"10(1) The Lessor may at its discretion extend the time for completion of civil construction works, erection of machineries and commencement of production after issue of 90 days notice in terms of Se. 34-b (i) & 30 days notice in terms of 34-b (ii) of the KIAD Act 1966 and after consideration of the reply furnished by the lessee to such notice, the Lessor may extend the time for a further period of:

10(1) (a) 12 months without revising the tentative satisfaction of the Lessor for implementation of the project and has started Civil construction works and has spent at least 25& of the cost towards civil construction which should be evidenced by a certificate of investment issued by Financial Institution/Bank/Charted Accountant.

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10 (1) (b) At the end of the third year, a further extension of six months time by levying an amount equivalent to 25% of the prevailing allotment price for the land at the time of such extension after being satisfied that the lessee has invested a minimum 25% of the project cost (excluding the land cost) which should be evidenced by a certificate of investment from the financial institutions/ banks/ chartered Accountant.

10 (1) (c) Further extension of six months time by levying an amount equivalent to 25% of the prevailing allotment price for the land at the time of such extension after being satisfied that the Lessee has invested a minimum of 50% of the project cost (excluding the land cost) which should be evidenced by a certificate of invest from the financial institutions/banks/chartered Accountant.

10 (1) (d) No further extension shall be granted beyond a total period of four years from the date of lease- cum-sale agreement or possession certificate whichever is later, provided the opportunity for remedying the breach as afforded in terms of Clause-34-b(i) & (ii) of KIAD Act. This agreement shall automatically stand terminated, if the lessee has not completed the civil construction work, erected machinery and commenced production at the end of the period of four years.

10(1) (e) In the event lessee fails to take one of the effective steps as indicated at (a), extension of time for implementing the project will be granted only on payment of difference in land cost between the tentative cost of land at The allotted rate and cost of land prevailing at the time of grant of extension of time. If there is no upward revision in the tentative cost of land at the allotted rate, extension of time will be granted by levying a penalty of 10% of the cost of land at the allotted rate. Failure to fulfill any of the conditions (a) to (c) mentioned above shall result in allotment being cancelled and agreement being

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terminated under clause 14. The refund of amount and forfeiture shall be in accordance with the provisions contained in the Clause 15 of this agreement.

10(2) The lessee shall utilize not less than 50% of the schedule property and in accordance with the proposals furnished by the lessee to the lessor in the application for allotment of land and project report submitted to SHLCC/SLSWCC/DLSWCC/Allotment Committee."

Section 34B of the KIAD Act, reads as under:- 34B. 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 15 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.

8. A conjoint reading of Section 34B(1) and 34B(2) of the KIAD Act r/w Clause-10 of the Lease-cum-Sale Agreement and the judgment of this Court in Rishi Enterprises supra, are sufficient to come to the conclusion that before the respondents - Board could take necessary steps in terms of Clause -10 of the Lease-cum-Sale

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Agreement, it was incumbent upon the respondents to follow the procedure prescribed under Clause-10, which includes issuance of notice to the petitioner and providing him an opportunity which has not been done by the respondents; a perusal of the impugned communication will clearly indicate that before issuing the same, the respondents have not issued the mandatory notice as contemplated in Clause-10 of the Lease-cum-Sale Agreement r/w Section 34B(1) and 34B(2) of the KIAD Act and non-following of the mandatory procedure including non-issuance of a notice to the petitioner prior to issuing the impugned communication / order is sufficient to vitiate the same, which has been unilaterally and summarily issued to the petitioner and the same deserves to be quashed. In other words, prior to issuance of the impugned communication / order at Annexure-A dated 17.10.2017 in W.P.No.56420/2017, the mandatory covenants / clauses contained in the Lease-cum-Sale Agreement including the procedure contemplated under Section 34B(1) and 34B(2) having not been followed / exhausted by the respondents, I deem it just and appropriate to quash the impugned communication / letter and direct the respondents to execute a Sale Deed in favour of the petitioner in accordance with law within a stipulated timeframe by reserving liberty in favour of the respondents to proceed further in terms of the covenants of the Lease-cum-Sale Agreement and the provisions contained in Section 34B(1) and 34B(2) of the KIAD Act and in accordance with law.

9. In the result, I pass the following:-

ORDER

(i) W.P.No.56420/2017 is hereby allowed.

(ii)The impugned communication / letter at Annexure-A dated 17.10.2017 in W.P.No.56420/2017 passed/issued by the 2nd respondent is hereby quashed.

(iii)W.P.No.16941/2024 is also hereby allowed.

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(iv)The respondents - KIADB is directed to execute the Sale Deed in favour of the petitioner in relation to the subject property within a period of one month from the date of receipt of a copy of this order, subject to the petitioner complying with all other statutory requirements.

(v) Liberty is however reserved in favour of the respondents to proceed further in terms of the covenants of the Lease-cum-Sale Agreement and the provisions contained in Section 34B(1) and 34B(2) of the KIAD Act and in accordance with law.

12. As held by this Court in the aforesaid

Judgments, it is essential that the respondent-Board

issued a separate notice under Section 34 of the KIAD Act

before proceeding to pass the impugned order cancelling

the allotment in favor of the petitioner; in the instant case,

it is an undisputed fact borne out from the material on

record, that after issuing the aforesaid notice dated

20.09.2018 under Section 34B(1) of the KIAD Act, the

respondent did not issue any notice under Section 34B(2)

as required in law and consequently the impugned

cancellation order deserves to be quashed and the matter

be remitted back to the respondent for reconsideration

afresh to the stage of the petitioner submitting a reply to

the notice dated 20.09.2018 issued by the respondent

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under Section 34B(1) of the KIAD Act and to proceed

further in the matter.

13. In the result, I pass the following:

ORDER

(i) The petition is allowed;

            (ii)      The impugned order at Annexure-K

     dated 25.07.2022 is hereby quashed.


            (iii)    The matter is remitted back to the

respondents for reconsideration afresh to the

stage of the petitioner submitting reply to the

notice dated 20.09.2018 issued by the

respondents under Section 34B(1) of the KIAD

Act.

(iv) Liberty is reserved in favour of the

petitioner to submit a reply along with

documents including the documents produced

along with the memo dated 16.10.2024 to the