M/S. Maha Hotel Projects Private ... vs State Governemnt Of Telangana And ...
2023 Latest Caselaw 1836 Tel

               HON'BLE SRI JUSTICE J. SREENIVAS RAO

                    WRIT PETITION No.17129 OF 2020

ORDER:

This writ petition is filed for the following relief:

".... to issue a Writ of Mandamus declaring the action of respondent No.1 in considering the request to replace the 'Lead Developer' i.e. the petitioner as the Shareholders of Golden Jubilee Hotels Private Limited, who holds 84% shares as being in violation of the provisions of the A.P. Infrastructure Development Enabling Act, 2001 (as adopted by State of Telangana vide Notification G.O.Ms.No.45, Law (F) Department, dated 01.06.2016, as arbitrary, illegal and unconstitutional and consequently desist the respondent No.1 from replacing the petitioner as Lead Developer holding 84% shares in Respondent No.1 Company i.e. Golden Jubilee Hotels Private Limited".

2. Heard Sri Vanaparthi Vaishali, learned counsel for the petitioner,

learned Advocate General appearing for respondent Nos.1 and 4, Sri N.

Narasimha Sharma, learned counsel representing Sri Y. Suryanarayana,

learned counsel for respondent No.2 and Sri Srinivas Chitturu, learned

counsel appearing for respondent No.3.

Brief facts of the case:

3. It is stated that petitioner is a Company registered under the Indian

Companies Act, 1956, engaged in the business for executing, developing

and maintaining projects in the Hospitality Sector. Respondent No.1 is

the Department of Youth Advancement, Tourism & Culture, Government

of Telangana, which is responsible for the advancement of Tourism and

Culture in the State of Telangana.

3.1. The erstwhile Andhra Pradesh Government issued G.O.Ms.No.5,

Youth Advancement, Culture & Tourism (T) Department dated

03.01.2001 constituting an Empowered Committee of Ministers

comprising of (i) Minister for Finance, (ii) Minister for Home affairs and

(iii) Minister for Tourism, to look after the proposals of Tourism Projects

under privatization mode and placed before the Board even where

financial issues are involved, the recommendation thereon shall be

placed before the Empowered Committee of Ministers for examination

and taking final decision. The Committee is empowered to take final

decision for grant of lease to the private party based on the merits of the

project by duly examining case by case. The erstwhile Government of

Andhra Pradesh proposed to set up a Five Star Hotel Project in an extent

of Ac.4.33 guntas situated in the premises of Shilparam at Madhapur,

Hyderabad on build, operate and transfer basis under Public Private

Partnership Mode(PPP mode). On 04.03.2005 respondent No.1 issued

advertisement in pursuance of the said proposal, in the first instance,

Expression of Interest was invited in the newspapers for short listing the

prospective bidders for Request For Proposal (RFP) containing the

detailed terms and conditions for selection of the bidder under

competition bidding process. It is further stated that pre-bid meeting on

08.07.2005 was held and 12 bidders were attended. As per the minutes

of the said meeting and the statement of clarifications to the queries and

the changes made to the RFP, including the information as

communicated to the bidders on 22.07.2005 which forms part of RPF of

submission of bids. On 23.07.2005 Memorandum of Understanding was

made. The Empowered Committee of Ministers in its meeting held on

26.11.2005 approved the bid of M/s. Golden Jubilee Hotels Private

Limited/respondent No.2 consortium and the Letter of Intent (LOI) was

issued on 20.03.2006. The said LOI contained the basic market value as

mentioned in the RPF i.e. Rs.4,000/- per square yard instead of fixing the

rate as on the date of LOI and the same amount continued to be

incorporated in the Agreements.

3.2. It is further stated that the LOI also incorporated the project

components given in the bid and accepted by the YAT & C (PMU)

Department and stipulated that all other terms and conditions of RFP

shall apply in terms of the LOI, the bidder had submitted a Detailed

Project Report (DPR). The consultant had evaluated the DPR, which was

found in conformity with the RFP and the business proposals submitted

by the bidder except the project cost which was increased to Rs.237.29

crores from Rs.214.00 crores due to mandatory payments to be made to

the YAT & C (PMU) Department duly observing that detailed plans and

designs did not accompany the DPR. The same were called for on

21.08.2006. The plans submitted were again only conceptual proposing

to construct upper basement, lower basement, ground floor, podium level

floor, mezzanine floor, seven upper floors of hotel block, 10 upper floors

of service apartment block with a total built up area of 33,7323 sft. The

Government had issued G.O.Ms.No.6 YAT & C (PMU) Department dated

30.03.2007 awarding the project of establishing Five Star hotel to

respondent No.2. It is further submitted that as the project site/land

situated in Shilparamam premises belongs to Shilparamam Arts, Crafts

and Culture Society set up by the Government under the administrative

control of the YAT & C Department and the total land transferred to it

and accordingly respondent No.1 issued G.O.Ms.No.8, YAT & C (PMU)

Department dated 01.05.2007 directing the Special Officer of the Society

to hand over the site to the Tourism Department stating that the

revenues accrued out of the project would be shared as mutually agreed.

Accordingly, the site was handed over to the respondent No.4 on

04.05.2007. The Lease Agreement and Development & Management

Agreements were executed by respondent No.2 in favour of respondent

Nos.1 and 4 on 09.05.2007. Initially, the project period was earlier fixed

for 24 months for execution of the project, since the project involves

around Rs.100.00 crores, most of the bidders expressed their views that

the project needs permissions/approvals from the statutory bodies like

HUDA, CDA, Environmental Impact Assessment (EIA) from GOI, Airport

Authority and other Departments, they requested for extension of the

project period up to 42 months. Respondent Nos.1 and 4 with the

consent of the bidders have taken a decision in pre-bid meeting

extending the project period from 24 months to 30 months.

3.3. The petitioner further submits that respondent No.1 had issued

G.O.Ms.No.06, dated 30.03.2007, awarding of Five Star Hotel Project to

M/s.My Home Construction Private Limited, Hyderabad with Golden

Jubilee Hotels Private Limited developer. The petitioner is the 'Lead

Developer' and the same was accepted by the respondent No.1 by Letter

dated 18.06.2009. Thereafter, respondent No.2 implemented the Hotel

Project in the name of 'Trident Hyderabad' and started its commercial

operations in the month of September, 2013 for construction of the said

hotel. Respondent No.2 availed financial assistance from respondent No.3

Bank as the Lead Banker. As per the Agreements between the respondent

No.2 and consortium Banks all revenue from the Hotel was to be

deposited in a separate Trust Retention Account (for short 'TRA'). The

operator appointed by respondent No.2 for running a hotel obtained from

respondent No.3 Bank for opening and operating a bank account other

than the TRA and had the revenue of the Hotel to be deposited in this

separate account for ten months, due to which account of respondent

No.2 was declared as NPA by the consortium Banks on 31.12.2015 and

the notices were issued from bank declaring the respondent No.2 as NPA.

3.4. On 02.09.2009 respondent No.2 executed loan documents in favour

of respondent No.3 and consortium credit facilities sanctioned and

enhanced from time to time. On 01.10.2009 No Objection Certificate has

been issued by the respondent No.1 for creating mortgage on the leasehold

rights for raising bank finance for development of Five Star Hotel Project.

On 05.11.2019 respondent No.2 created mortgage on leasehold rights of

project in favour of respondent No.3 to secure credit facility. On

28.06.2016 respondent No.3 issued notice under Section 13 (2) of

SARFAESI Act, 2002.

3.5. It is further stated that the promoters offered a One Time Settlement

(for short 'OTS') to all the consortium of Banks, however respondent No.3

Bank filed petition under Section 7 of the Insolvency and Bankruptcy

Code, 2016 (for short 'IBC') and Corporate Insolvency Resolution

Process(for short 'CIRP') was initiated against respondent No.3 before

National Company Law Tribunal, Hyderabad (for short 'NCLT') on

27.02.2018. Further, the management of respondent No.1 was handed

over to the appointed Resolution Professional. A conditional resolution

plan was submitted by one M/s. BREP Asia II Indian Holding Co. II (NQ)

PTE LTD ('Blackstone') and approved by NCLT, Hyderabad on 07.02.2020,

for change of control and restructuring of the company i.e., respondent

No.2, with the consent of the respondent No.1 and as well as respondent

No.4. Therefore, Respondent No.2 has filed an appeal before

NCLAT(National Company Law Appellant Tribunal) against the order

passed by NCLT on 07.02.2020. The NCLAT after considering the same,

passed an interim order dated on 16.07.2020 as "In meantime, no party

will take any coercive steps" and the same is pending.

3.6. On 25.09.2020 the petitioner Company submitted a letter to the

respondent No.1 requesting not to consider the request being made by the

respondent No.2 or by way of Agent of respondent No.2 for replacing the

petitioner as the 'Lead Developer' in respondent No.2 Company as the

same would be contrary to the provisions of Telangana Infrastructure

Development Enabling Act, 2001, Act 36 of 2001 (hereinafter referred to

as 'the Act, 2001'). When the respondent No.1 failed to consider the same,

the petitioner filed the present writ petition.

4. Learned counsel for the petitioner vehemently contended that the

petitioner is one of the shareholders of Golden Jubilee Hotels Private Ltd./

respondent No.2, who holds 84% of shares. The petitioner Company

submitted Letter/Representation dated 25.09.2020 to the respondent No.1

requesting them not to consider the request being made by the respondent

No.2 or the officials and agents of respondent No.2 for replacing the

petitioner as 'Lead Developer' in the respondent Company as the same

would be contrary to the provisions of 'the Act, 2001'. He further

contended that respondent No.1 cannot travel outside the purview of the

Act in taking any decision with respect to the subject hotel project. As per

the provisions of Section 24 (b) of the Act, 2001,The Lead Consortium

Member of a pre-qualified Consortium cannot be replaced except with the

prior permission of the Infrastructure Authority and which permission will

be considered only in case of acquisition or merger of the Lead Consortium

Member Company.

4.1. He further contented that the petitioner is a 'Lead Developer',

respondent No.2 is a 'Developer' and Section 24 (b) of the Act is applicable

as the Project comes within the meaning of 'Real Estate' and the

provisions of the Act 2001 and it is a special enactment and the provisions

of Section 238 of the 'IBC' are not applicable.

4.2. He further contended that respondent No.1 is bound by the

provisions of the 24 (b) of the Act and they cannot give a decision which

ultra vires the said provisions. He also contended that 'Lead Developer'/

petitioner has been selected by the respondent No.1 after comparison of

the petitioner's Bid and after violation of its credentials in comparison to

all the Bids received. The proposals for comparison of the successful

resolution, applicant giving consent to change in contract restructuring of

GJHPL-respondent No.2, would amount to gross violation of the

constitutional mandate and termination in the matters of contract in the

State.

4.3. He further contended that on 07.02.2020 NCLT has passed detailed

order specifically holding that it has approved the Resolution Plan for

GJHPL, the hotel project which is in the nature of

build/operate/transfer/contract with right to develop and management

for 33 years was awarded to the Consortium Lead by the petitioner, if

information to be transferred to anyone, it can only be transferred to

another Company flouted by the same Consortium and fulfilling the

conditions of the RFP and the Act, 2001. He also contended that hotel

project cannot be transferred to any entitled not selected through the

process of competent bidding for the subject process. He further

contended that the petitioner has driven its capability upon being selected

as the 'Lead Developer' and a Five Star Hotel in the name of hotel 'Trident,

Hyderabad' has been in commercial operation since September, 2013

which is already contributed to the physical and social infrastructure of

the State as is the object of the Act, 2001.

5. In support of his contention, learned counsel for the petitioner

replied upon the following judgments.

(1) In Sooraram Pratap Reddy and Others Vs. District Collector, Ranga Reddy District and Others1,

(2) In Indra Kumar Patodia and Another Vs. Reliance Industries Limited and Others2,

(3) In Municipal Corporation of Greater Mumbai (MCGM) Vs. Abhilash Lal and Others3

5.1. In Sooraram Pratap Reddy and Others(supra), the Hon'ble

Supreme Court held as under:

"84. The Policy laid down guidelines for attracting and facilitating private investment in infrastructure. It provided for infrastructure project implementation in private-public partnership (PPP) requiring government support. The Policy envisaged the need for a special legislation called the Infrastructure Development Act (IDA) supported by rules, guidelines and Sectorial policies. While IDA was to constitute a Special Infrastructure Promotion Authority (IPA) having quasi-judicial functions, the task force was to undertake executive functions outlined in IDA. The intention behind the integrated project was to establish Hyderabad as a major business-cum-leisure tourism infrastructure asset for the State. It was also stated that in the background of "World Tourism Organisation Report on the State of Andhra Pradesh in 2000" and in the light of the "Vision 2000 Document" prepared in mid-1990s highlighting the need for tourism as an important economic driver for the State, the State Government initiated a project

(2008) 9 SCC 552

(2012) 13 SCC 1

(2020) 13 SCC 234

development exercise in 2000-2001 for an international standard convention centre complex integrated with other components.

86. Sub-section (iii) of Section 1 enacts that the Act will apply to all infrastructure projects implemented through public-private partnership in the sectors enumerated in Schedule III of the Act and to such other sectors as may be notified by the Government under the Act from time to time. Detailed provisions have been made for infrastructure project to be undertaken under the Act. It was, therefore, submitted by the learned counsel for the respondents that a policy decision was taken by the State to develop information technology and telecommunications, industrial knowledge, tourism, trade, conventions and exhibition centers, etc. It was also provided that if the government land is not available, Apiic would acquire land for the project".

5.2. In Indra Kumar Patodia and Another (supra)the Hon'ble Supreme

court held as follows:

"12. The word "complaint" has been defined in Section 2(d) of the Code which reads thus:

"Section 2. (d) 'complaint' means any allegation made orally or in writing to a Magistrate, with a view to his taking action under this Code, that some person, whether known or unknown, has committed an offence, but does not include a police report."

Keeping the above definition in mind, let us see the scheme of the statute and the legislative intent in bringing the Act.

18. It is clear that the non obstante clause has to be given restricted meaning and when the section containing the said clause does not refer to any particular provisions which it intends to override but refers to the provisions of the statute generally, it is not permissible to hold that it excludes the whole Act and stands all alone by itself. In other words, there requires to be a determination as to which provision answers the description and which does not. While interpreting the non obstante clause, the Court is required to find out the extent to which the legislature intended to do so and the context in which the non obstante clause is used. We have already referred to the definition of complaint as stated in Section 2(d) of the Code which provides that the same needs to be in oral or in writing. The non obstante clause, when it refers to the Code only excludes the oral part in such definition.

19. According to us, the non obstante clause in Section 142(a) is restricted to exclude two things only from the Code i.e. (a) exclusion of oral complaints, and (b) exclusion of cognizance on complaint by anybody other than the payee or the holder in due course. Section 190 of the Code provides that a Magistrate can take cognizance on a complaint which constitutes such an offence

irrespective of who had made such complaint or on a police report or upon receiving information from any person other than a police officer or upon his own knowledge. Non obstante clause, when it refers to the core, restricts the power of the Magistrate to take cognizance only on a complaint by a payee or the holder in due course and excludes the rest of Section 190 of the Code. In other words, none of the other provisions of the Code are excluded by the said non obstante clause, hence, the Magistrate is therefore required to follow the procedure under Section 200 of the Code once he has taken the complaint of the payee/holder in due course and recorded statement of the complainant and such other witnesses as present at the said date. Here, the Code specifically provides that the same is required to be signed by the complainant as well as the witnesses making the statement. Section 200 of the Code reads thus:

"Section: 200. Examination of complainant.--A Magistrate taking cognizance of an offence on complaint shall examine upon oath the complainant and the witnesses present, if any, and the substance of such examination shall be reduced to writing and shall be signed by the complainant and the witnesses, and also by the Magistrate:

Provided that, when the complaint is made in writing, the Magistrate need not examine the complainant and the witnesses--

(a) if a public servant acting or purporting to act in the discharge of his official duties or a court has made the complaint; or

(b) if the Magistrate makes over the case for inquiry or trial to another Magistrate under Section 192:

Provided further that if the Magistrate makes over the case to another Magistrate under Section 192 after examining the complainant and the witnesses, the latter Magistrate need not re- examine them."

Mere presentation of the complaint is only the first step and no action can be taken unless the process of verification is complete and, thereafter, the Magistrate has to consider the statement on oath, that is, the verification statement under Section 200 and the statement of any witness, and the Magistrate has to decide whether there is sufficient ground to proceed. It is also relevant to note Section 203 of the Code which reads as follows:

"Section 203. Dismissal of complaint.--If, after considering the statements on oath (if any) of the complainant and of the witnesses and the result of the inquiry or investigation (if any) under Section 202, the Magistrate is of opinion that there is no sufficient ground for proceeding, he shall dismiss the complaint, and in every such case he shall briefly record his reasons for so doing."

It is also clear that a person could be called upon to answer a charge of false complaint/perjury only on such verification statement and not merely on the presentation of the complaint as the same is not on oath and, therefore, need to obtain the

signature of the person. Apart from the above section, the legislative intent becomes clear that "writing" does not presuppose that the same has to be signed. Various sections in the Code when contrasted with Section 2(d) clarify that the legislature was clearly of the intent that a written complaint need not be signed. For example, Sections 61, 70, 154, 164 and 281 are reproduced below:

"61. Form of summons.--Every summons issued by a court under this Code shall be in writing, in duplicate, signed by the presiding officer of such court or by such other officer as the High Court may, from time to time, by rule direct, and shall bear the seal of the court.

70. Form of warrant of arrest and duration.--(1) Every warrant of arrest issued by a court under this Code shall be in writing, signed by the presiding officer of such court and shall bear the seal of the court.

(2) Every such warrant shall remain in force until it is cancelled by the court which issued it, or until it is executed.

154. Information in cognizable cases.--(1) Every information relating to the commission of a cognizable offence, if given orally to an officer in charge of a police station, shall be reduced to writing by him or under his direction, and be read over to the informant; and every such information, whether given in writing or reduced to writing as aforesaid, shall be signed by the person giving it, and the substance thereof shall be entered in a book to be kept by such officer in such form as the State Government may prescribe in this behalf.

164. Recording of confessions and statements.--(1)-(3)

(4) Any such confession shall be recorded in the manner provided in Section 281 for recording the examination of an accused person and shall be signed by the person making the confession; and the Magistrate shall make a memorandum at the foot of such record to the following effect--

281. Record of examination of accused.--(1) Whenever the accused is examined by a Metropolitan Magistrate, the Magistrate shall make a memorandum of the substance of the examination of the accused in the language of the court and such memorandum shall be signed by the Magistrate and shall form part of the record."

A perusal of the above shows that the legislature has made it clear that wherever it required a written document to be signed, it should be mentioned specifically in the section itself, which is missing both from Section 2(d) as well as Section 142".

5.3. In Municipal Corporation of Greater Mumbai (MCGM) (supra),the

Hon'ble Supreme court held as follows:

"42. Now, this Court proposes to deal with the contention that the provisions of the Code override all other laws and hence, that the resolution plan approved by NCLT acquires primacy over all other legal provisions. Facially, this argument appears merited. Section 238 enacts that:

"238. Provisions of this Code to override other laws.-- The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law."

45. In Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd. [Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd., (2018) 2 SCC 674 : (2018) 2 SCC (Civ) 288] , one of the issues was the interplay between Section 9 of the Code and provisions of the Advocates Act. It was argued that a demand notice issued through an advocate was not permissible and that the provisions of the Code overrode all other laws. This Court negative the contention, holding that it is only in the case of inconsistency, that by reason of Section 238 of the Code would its provisions prevail. On a harmonious construction of the seemingly inconsistent provisions, if the court could give effect to both, it would do so.

46. Dharani Sugars & Chemicals Ltd. v. Union of India [Dharani Sugars & Chemicals Ltd. v. Union of India, (2019) 5 SCC 480] is a relevant recent decision of this Court. The question which arose in that case was the legality and constitutionality of directions issued by Reserve Bank of India, through a Circular of 12-2-2018 regulating resolution of stressed assets of debtors. This Court elaborately dealt with provisions of the Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934 and held that the power to issue directions regarding initiation of insolvency proceedings vested in RBI, subject to the approval of the Central Government. The Court significantly held that the power was contained "within the four corners" of Section 35-AA and observed as follows : (SCC pp. 523-24, paras 53-55)

53. "A conspectus of all these provisions shows that the Banking Regulation Act specifies that the Central Government is either to exercise powers along with RBI or by itself. The role assigned, therefore, by Section 35-AA, when it comes to initiating the insolvency resolution process under the Insolvency Code, is thus, important. Without authorisation of the Central Government, obviously, no such directions can be issued.

54. The corollary of this is that prior to the enactment of Section 35-AA, it may have been possible to say that when it comes to RBI issuing directions to a banking company to initiate insolvency resolution process under the Insolvency Code, it could have issued such directions under Sections 21 and 35-A. But after Section 35-AA, it may do so only within the four corners of Section 35-AA.

55. The matter can be looked at from a slightly different angle. If a statute confers power to do a particular act and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any manner other than that which has been prescribed. This is the well-known rule in Taylor v. Taylor [Taylor v. Taylor, (1875) LR 1 Ch D 426] , which has been repeatedly followed by this Court. Thus, in State of U.P. v. Singhara Singh [State of U.P. v. Singhara Singh, AIR 1964 SC 358 : (1964) 1 Cri LJ 263 (2)] , this Court held : (AIR p. 361, para 8)

'8. The rule adopted in Taylor v. Taylor [Taylor v. Taylor, (1875) LR 1 Ch D 426] Ch D at p. 431 is well recognised and is founded on sound principle. Its result is that if a statute has conferred a power to do an act and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any other manner than that which has been prescribed. The principle behind the rule is that if this were not so, the statutory provision might as well not have been enacted. A Magistrate, therefore, cannot in the course of investigation record a confession except in the manner laid down in Section 164. The power to record the confession had obviously been given so that the confession might be proved by the record of it made in the manner laid down. If proof of the confession by other means was permissible, the whole provision of Section 164 including the safeguards contained in it for the protection of accused persons would be rendered nugatory. The section, therefore, by conferring on Magistrates the power to record statements or confessions, by necessary implication, prohibited a Magistrate from giving oral evidence of the statements or confessions made to him.' (at SCR pp. 490-91)

Following this principle, therefore, it is clear that RBI can only direct banking institutions to move under the Insolvency Code if two conditions precedent are specified, namely, (i) that there is a Central Government authorization to do so; and (ii) that it should be in respect of specific defaults. The section, therefore, by necessary implication, prohibits this power from being exercised in any manner other than the manner set out in Section 35-AA."

47. In the opinion of this Court, Section 238 cannot be read as overriding MCGM's right--indeed its public duty--to control and regulate how its properties are to be dealt with. That exists in Sections 92 and 92-A of the MMC Act. This Court is of the opinion that Section 238 could be of importance when the properties and assets are of a debtor and not when a third party like MCGM is involved. Therefore, in the absence of approval in terms of Sections 92 and 92-A of the MMC Act, the adjudicating authority could not have overridden MCGM's objections and enabled the creation of a fresh interest in respect of its properties and lands. No doubt, the resolution plans talk of seeking MCGM's approval; they also acknowledge the liabilities of the corporate debtor; equally, however, there are proposals which envision the creation of charge or securities in respect of MCGM's properties. Nevertheless, the authorities under the Code could not have precluded the control that MCGM undoubtedly has, under law, to

deal with its properties and the land in question, which undeniably are public properties. The resolution plan, therefore, would be a serious impediment to MCGM's independent plans to ensure that public health amenities are developed in the manner it chooses, and for which fresh approval under the MMC Act may be forthcoming for a separate scheme formulated by that corporation (MCGM)".

6. Learned Advocate General appearing for respondent Nos.1 and 4

contended that the petitioner is not one of the shareholders of respondent

No.2 Company and he is not entitled to invoke the jurisdiction of this

Court under Article 226 of Constitution of India and the writ filed by the

petitioner is not maintainable under the law and the same is liable to be

dismissed. The nature of dispute is purely a contractual dispute and the

activity comes within the definition of 'Hospitality Sector' and the

provisions of Section 24 (b) and Section 30 of the Act, 2001 are not

applicable to the present case and the petitioner is not entitled the relief

sought in the writ petition.

6.1. He further contended that as per the Request proposal of YAT & C

(PMU) D in Clause 6.4, it clearly envisages that in the event of default of

payment, the lender should have right to substitute the selected bidder, in

consultation with YAT &C (PMU) D. The Bank has initiated the proceeding

before NCLT invoking the provisions of 'IBC' and NCLT has approved the

Resolution Plan and passed order on 07.02.2020. As the respondent No.2

was already declared as NPA on 31.12.2015 and after considering the

objections of the respective parties, respondent No.2 further filed an

appeal before NCLAT and the same is pending. He further contended that

respondent No.2 committed default and an amount of more than Rs.800

crores (Rupees Eight Hundred Crores only) is liable to be paid to the

respondent Nos.1 and 4, as the said amount is public money.

7. Sri Y. Suryanarayana, learned counsel appearing for the respondent

No.2 vehemently contended that the provisions of IBC shall have

overriding effect on the Act, 2001. He also contended that NCLT after

following the provisions of Sections 29, 30, and 31 of 'IBC', approved the

Resolution Plan and rejected the objections filed by the petitioner in

respect of Resolution Plan approval by giving cogent reasons. He further

contented that Mr. Laxmi Naryana Sharma, who is suspended director of

respondent No.2 has filed an appeal before NCLAT against the order

passed by NCLT dated 07.02.2020 and the NCLAT has passed interim

order on 16.07.2020 not to take any coercive steps and the same is still

pending. He further contented that in spite of the existing orders passed

by NCLAT, the petitioner has taken coercive steps and the same is illegal

and against the law. He further contended that the allegations made by

the petitioner that he is having 84% of share in the respondent No.2

Company, is not true and correct and the petitioner is not a shareholder of

the respondent No.2 Company. Thus, he does not have any locus standi

to file the writ petition.

8. In support of his contention the learned counsel relied upon the

following Judgements.

(1) Solidaire India Ltd., Vs. Fair growth Financial Services Ltd., and Others4

(2) Swiss Ribbons Private Limited and Another Vs. Union of India and Others5,

(3) Innoventive Industries Limited Vs. ICICI Bank and Another6

(4) K. Sashidhar Vs. Indian Overseas Bank and Others7

(5) Principal Commissioner of Income Tax Vs. Monnet Ispat and Energy Limited8

9. Sri Srinivas Chitturu, learned counsel appearing for respondent

No.3 submits that the recitals of the Lease Agreement entered by the

respondent No.2 and respondent No.1 on 09.05.2007 clearly envisages

that YAT & C (PMU) D is a mandate to execute the construction,

development and management of tourism related Projects in the State of

Andhra Pradesh and invited prospective investors to develop specific

projects in the 'Hospitality Sector'. Hence, the provisions of Section 24

(b) of the Act are not applicable to the present case. He also submits that

similarly, in view of the contract executed in favour of respondent No.2,

was already terminated by the respondent No.1, as such the provisions of

the Act are not applicable.

(2001) 3 SCC 71

(2019) 4 SCC 17

(2018) 1 SCC 407

(2019) (12) SCC 150

(2018) 18 SCC 786

10. Having considered the rival submissions made by the respective

parties and upon perusal of the record, the following points would arise for

consideration:

1. Whether the provisions of Section 24 (b) of Telangana Infrastructure Development Enabling Act, 2001 is applicable to the facts and circumstances of the present case?"

2. Whether the provisions of Section 238 of IBC,2016 have an overriding effect on Section 24(b) Telangana Infrastructure Development Enabling Act, 2001?

3. Whether the writ petition filed by the petitioner under Article 226 of Constitution of India is maintainable under law, when the matter is ceased by the competent Tribunal i.e. NCLAT?

4. Whether the petitioner is entitled for the relief sought in the writ petition?

11. It is undisputed fact that erstwhile Government of Andhra Pradesh

proposed to set up a Five Star Hotel Project in an extent of Ac.4.33

guntas situated in the premises of Shilparam at Madhapur, Hyderabad

on build, operate and transfer basis under Public Private Partnership.

On 04.03.2005 respondent No.1 gave an advertisement inviting

applications from prospective bidders for Request For Proposal (RFP) and

after following the procedure approved the bid of respondent No.2

consortium and the Letter of Intent (LOI) was issued on 20.03.2006. The

Government had issued G.O.Ms.No.6 YAT & C (PMU) Department dated

30.03.2007 awarding the project of establishing Five Star hotel Project to

M/s. My Home Construction Private Limited, Hyderabad with Golden

Jubilee Hotels Private Limited as a Developer. Thereafter, respondent

No.1 issued G.O.Ms.No.8, YAT & C (PMU) Department dated 01.05.2007

directing the Special Officer of the Shilparamam Arts, Crafts and Culture

Society to hand over the site to the Tourism Department stating that the

revenues accrued out of the project would be shared as mutually agreed.

Accordingly, the site was handed over to respondent No.4 on 04.05.2007.

The Lease Agreement and Development & Management Agreements were

executed by respondent No.2 in favour of respondent Nos.1 and 4 on

09.05.2007. Initially, the period was fixed for 24 months for execution of

the project and basing upon the request made by the concerned parties

the above said period was extended upto 30 months. Thereafter,

petitioner stated that the respondent No.2 implemented the Hotel Project

and the hotel in the name of 'Trident Hyderabad' and started its

commercial operations in the month of September, 2013.

11.1. It further reveals from the records that Respondent No.2 availed

financial assistance from respondent No.3 Bank as the Lead Banker. Due

to default of payments, the Consortium Banks declared the respondent

No.2 as NPA on 31.12.2015 and respondent No.3 had issued notice dated

28.06.2016 under Section 13 (2) of SARFAESI Act, 2002. Thereafter

respondent No.3 Bank filed petition under Section 7 of the IBC before

NCLT for seeking Corporate Insolvency Resolution Process('CIRP') and the

same was allowed on 27.02.2018 wherein specially held that the

respondent No.2 as a Corporate Debtor to CIRP and CoC (Committee of

Creditors) having approved the Resolution Plan was submitted by one

M/s. BREP Asia II Indian Holding Co. II (NQ) PTE LTD ('Blackstone') and

approved by NCLT, Hyderabad on 07.02.2020 with the consent of the

respondent No.1 and as well as respondent No.4 for change of control and

restructuring of the company i.e respondent No.2. Thereafter, Mr. Laxmi

Narayana Sharma, who is suspended director of respondent No. 2 has

filed an appeal before NCLAT against the order passed by NCLT dated

07.02.2020 and the Appellant Tribunal has passed interim order on

16.07.2020 stating that no party will take any precipitate coercive steps

and the same is pending. He further contented that in spite of the existing

orders passed by NCLAT, the petitioner has taken coercive steps and the

same is illegal and against under the law. At that stage, petitioner

Company submitted a letter on 25.09.2020 to the respondent No.1

requesting not to consider the request being made by the respondent No.2

or by way of Agent of respondent No.2 for replacing the petitioner as the

Lead Developer in respondent No.2 Company.

11.2. Learned Advocate General and learned counsel appearing for the

respondent Nos.2 and 3 have rightly contended that the provisions of 24

(b) of the Act, 2001 is not applicable to the present case, on the ground

that the Project will not come within the definition of the "Real estate" as

defined under Schedule-III of Sec.2 (nn) of the Act, 2001. The nature of

activity comes within the definition of "Hospitality Sector". Hence, the

provisions of 'The Telangana Infrastructure Development Enabling Act,

2001' (Act No.36 of 2001) is not applicable to the case and also the

provisions of Section 238 of IBC have an overriding effect on the Act,

2001.

11.3. In Section 2 (r) of 'the Act, 2001' defines 'Infrastructure'. Schedule

III Section 2 (nn) defines 'Sectors' as the subject matter pertaining to the

construction, development and infrastructure of the Hotel and the same

do not come within the definition of Section 2 (nn) of 14 of 'the Act 2001'

i.e. 'Real Estate'.

11.4. It is very much relevant to extract the provisions of Section 24 (b),

and Section 30 of the Act, 2001 and also provisions of Section 238 of IBC,

2016.

Section 24(b) reads as under:

Sec 24 (b) The Lead Consortium Member of a pre-qualified consortium cannot be replaced except with the prior permission of the Infrastructure Authority and which permission will be considered only in case of acquisition or merger of the Lead Consortium Member Company. Further, after a Bidding Consortium is selected to implement any Project, the Lead Consortium Member shall maintain a minimum equity stake of 26% for a period of time, as specified in the Sector Policy or the Concession Agreement".

Section 30 reads as under:

30. RIGHTS OF LENDERS:

"The Lenders will be entitled to recover their dues from the Developer and Project receivables in the form of User Levies and in the event of default by the Developer in completing or implementing a Project, the Lenders will have the right to substitute the Developer with the consent of the Government and subject to the approval of such substituted Developer by the Government Agency or the Local Authority and by the Infrastructure Authority, on the same terms 22 APIDEA and conditions as applicable to the previous Developer or with such modifications as may be specifically approved by the Infrastructure Authority".

The provisions of Section 238 of 'IBC' reads as under:

238 .Provisions of this Code to override other laws:

"The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the

time being in force or any instrument having effect by virtue of any such law".

12. In Solidaire India Ltd.,(supra)the Hon'ble Supreme Court held as

follows:

"8. The effect of this provision is that the said Act will have effect notwithstanding anything inconsistent therewith contained in any other law except to the provisions of the Foreign Exchange Regulation Act, 1973 and the Urban Land (Ceiling and Regulation) Act, 1976. A similar non obstante provision is contained in Section 13 of the Special Court Act which reads as follows:

"13. Act to have overriding effect.--The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law, other than this Act, or in any decree or order of any court, tribunal or other authority."

9. It is clear that both these Acts are special Acts. This Court has laid down in no uncertain terms that in such an event it is the later Act which must prevail. The decisions cited in the above context are as follows: Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd. [(1993) 2 SCC 144] ; Sarwan Singh v. Kasturi Lal [(1977) 1 SCC 750 : (1977) 2 SCR 421] ; Allahabad Bank v. Canara Bank [(2000) 4 SCC 406] and Ram Narain v. Simla Banking & Industrial Co. Ltd".

12.1. In Swiss Ribbons Private Limited and Another (supra) the Hon'ble

Supreme Court held as under:

"26. The Preamble of the Code states as follows:

"An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto."

27 As is discernible, the Preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganisation and insolvency resolution of corporate debtors. Unless such reorganisation is effected in a time-bound manner, the value of the assets of such persons will

deplete. Therefore, maximisation of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme--workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximise their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern".

12.2. In Innoventive Industries Limited (supra) the Hon'ble Supreme

Court held as follows:

"13. One of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process. As per the data available with the World Bank in 2016, insolvency resolution in India took 4.3 years on an average, which was much higher when compared with the United Kingdom (1 year), USA (1.5 years) and South Africa (2 years). The World Bank's Ease of Doing Business Index, 2015, ranked India as country number 135 out of 190 countries on the ease of resolving insolvency based on various indicia.

60. It is clear, therefore, that the earlier State law is repugnant to the later Parliamentary enactment as under the said State law, the State Government may take over the management of the relief undertaking, after which a temporary moratorium in much the same manner as that contained in Sections 13 and 14 of the Code takes place under Section 4 of the Maharashtra Act. There is no doubt that by giving effect to the State law, the aforesaid plan or scheme which may be adopted under the Parliamentary statute will directly be hindered and/or obstructed to that extent in that the management of the relief undertaking, which, if taken over by the State Government, would directly impede or come in the way of the taking over of the management of the corporate body by the interim resolution professional. Also, the moratorium

imposed under Section 4 of the Maharashtra Act would directly clash with the moratorium to be issued under Sections 13 and 14 of the Code. It will be noticed that whereas the moratorium imposed under the Maharashtra Act is discretionary and may relate to one or more of the matters contained in Section 4(1), the moratorium imposed under the Code relates to all matters listed in Section 14 and follows as a matter of course. In the present case, it is clear, therefore, that unless the Maharashtra Act is out of the way, the Parliamentary enactment will be hindered and obstructed in such a manner that it will not be possible to go ahead with the insolvency resolution process outlined in the Code. Further, the non obstante clause contained in Section 4 of the Maharashtra Act cannot possibly be held to apply to the Central enactment, inasmuch as a matter of constitutional law, the later Central enactment being repugnant to the earlier State enactment by virtue of Article 254(1), would operate to render the Maharashtra Act void vis-à-vis action taken under the later Central enactment. Also, Section 238 of the Code reads as under:

"238. Provisions of this Code to override other laws.--The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law."

It is clear that the later non obstante clause of the Parliamentary enactment will also prevail over the limited non obstante clause contained in Section 4 of the Maharashtra Act. For these reasons, we are of the view that the Maharashtra Act cannot stand in the way of the corporate insolvency resolution process under the Code".

12.3. In K. Sashidhar (supra) the Hon'ble Supreme Court held as follows:

"52. As aforesaid, upon receipt of a "rejected" resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of the Sick Industrial Companies Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of CoC has been given paramount status without any judicial intervention, for

ensuring completion of the stated processes within the timelines prescribed by the I&B Code. There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justifiable.

53. In the report of the Bankruptcy Law Reforms Committee of November 2015, primacy has been given to CoC to evaluate the various possibilities and make a decision. It has been observed thus:

"The key economic question in the bankruptcy process

When a firm (referred to as the corporate debtor in the draft law) defaults, the question arises about what is to be done. Many possibilities can be envisioned. One possibility is to take the firm into liquidation. Another possibility is to negotiate a debt restructuring, where the creditors accept a reduction of debt on an NPV basis, and hope that the negotiated value exceeds the liquidation value. Another possibility is to sell the firm as a going concern and use the proceeds to pay creditors. Many hybrid structures of these broad categories can be envisioned.

The Committee believes that there is only one correct forum for evaluating such possibilities, and making a decision : a creditors committee, where all financial creditors have votes in proportion to the magnitude of debt that they hold. In the past, laws in India have brought arms of the Government (legislature, executive or judiciary) into this question. This has been strictly avoided by the Committee. The appropriate disposition of a defaulting firm is a business decision, and only the creditors should make it."

12.4. In Principal Commissioner of Income Tax (supra), the Hon'ble

Supreme Court held as under:

"2. Given Section 238 of the Insolvency and Bankruptcy Code, 2016, it is obvious that the Code will override anything inconsistent in any other enactment, including the Income Tax Act. We may also refer in this connection to Dena Bank Vs. BhikhabhaiPrabhudas Parekh and Co. And its progeny, precedence even over secured creditors, who are private persons".

13. Thus, it can be discernible, that the Hon'ble Supreme Court in

various judgements reiterated and manifested the primacy of Insolvency

and Bankruptcy Code, 2016. The Apex Court has also interpreted the

intent of the legislature while envisaging the non-obstante of Section 238

in its judgements to give it an overriding effect. Therefore, in the present

case and circumstances, in line of the non-obstante of Section 238 of the

IBC, 2016 shall have an overriding effect on the provisions of Telangana

Infrastructure Development Enabling Act, 2001. Hence the writ petition is

not maintainable.

14. The judgments relied upon by the learned counsel for the petitioner

i.e., Sooraram Pratap Reddy and Others (supra), Indra Kumar Patodia

and Another (supra) and Municipal Corporation of Greater Mumbai

(MCGM) (supra), are not applicable to the facts and circumstances of the

case.

15. It is already stated supra that respondent No.3 Bank filed

application under Section 7 of the IBC for Resolution Plan before NCLT

and the same was allowed and approved on 07.02.2022 and further, the

order was challenged before NCLAT by respondent No.2 and thereafter

interim order was granted on 16.07.2020 and the matter is still pending.

16. Admittedly, the petitioner raised several disputed questions of facts

in the writ petition, when the proceedings initiated under the provisions of

IBC was ceased by the Appellant Tribunal i,e., NCLAT, the petitioner is not

entitled to invoke the jurisdiction of this Court under Article 226 of

Constitution of India.

17. In view of the foregoing reasons as well as the law laid down by the

Hon'ble Apex Court, the writ petition is liable to be dismissed. Point Nos.1

to 4 are answered accordingly.

18. The writ petition is dismissed accordingly. No costs.

As a sequel thereto, miscellaneous applications, if any, pending in

this writ petition shall stand closed.

______________________________ JUSTICE J. SREENIVAS RAO 28th April, 2023 Skj

HON'BLE SRI JUSTICE J. SREENIVAS RAO

WRIT PETITION No.17129 OF 2020

Date : 28-04-2023

Skj