Karnataka High Court
M/S Gopalan Enterprises vs State Of Karnataka on 3 November, 2017
Author: A.S.Bopanna
Bench: A S Bopanna
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 3RD DAY OF NOVEMBER 2017
BEFORE
THE HON'BLE MR. JUSTICE A S BOPANNA
WRIT PETITON Nos.63395-63399/2016 &
63400-63404/2016 (GM-KIADB)
BETWEEN:
M/S. GOPALAN ENTERPRISES
A PARTNERSHIP FIRM
NO.5, RICHMOND ROAD
BANGALORE-560 005
BY ITS MANAGING PARTNER
SRI C GOPALAN
... PETITIONER
(BY SRI G KRISHNAMURTHY, SR.ADV. FOR
SRI R PURUSHOTHAM R, ADV.)
AND:
1. STATE OF KARNATAKA
DEPARTMENT OF COMMERCE
AND INDUSTRIES
VIKASA SOUDHA
BANGALORE-560 001
REPRESENTED BY ITS
PRINCIPAL SECREATARY
2. KARNATAKA INDUSTRIAL AREAS
DEVELOPMENT BOARD
NRUPATHUNGA ROAD
BANGALORE-560 009
REPRESENTED BY ITS
CHIEF EXECUTIVE OFFICER
3. THE DEVELOPMENT OFFICER
KARNATAKA INDUSTRIAL AREAS
DEVELOPMENT BOARD
2
ZONAL OFFICE
METAGALLI ROAD
MYSORE-570 016
4. ASSISTANT SECRETARY
KARNATAKA INDUSTRIAL AREAS
DEVELOPMENT BOARD
OFFICE OF DEVELOPMENT OFFICER
KARNATAKA INDUSTRIAL AREAS
DEVELOPMENT BOARD
ZONAL OFFICE, METAGALLI ROAD
MYSORE-570 016
... RESPONDENTS
(BY SRI DILDAR SHIRALLI, HCGP. FOR R1
SRI ASHOK N NAYAK, ADV. FOR R2-4)
THESE PETITIONS ARE FILED UNDER ARTICLE 226
OF THE CONSTITUTION OF INDIA, WITH A PRAYER TO
QUASH THE IMPUGNED ORDER DTD.26.11.2016 VIDE
ANNEX-M, PASSED BY THE R-4.
THESE WRIT PETITIONS HAVING BEEN RESERVED
FOR ORDERS ON 31.10.2017, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT PRONOUNCED
THE FOLLOWING :
ORDER
The petitioner is before this Court assailing the order dated 26.11.2016 passed by respondent No. 4 as at Annexure -M to the petition. By the order impugned, the Lease agreement dated 26.11.2008 and 28.07.2010 are terminated and resumption of the land allotted in favour of the petitioner was decided.
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2. The undisputed facts in this case is that the petitioner establishment applied to respondent No.2 - KIADB for allotment of land for the purpose of setting up of a Special Economic Zone ('SEZ' for short) electronic software and hardware park at Mysuru. Accordingly, after consideration of the proposal, respondent No.2 allotted the Industrial Plot No.1 of Koorgally Industrial Area, Yelwala Hobli, Mysuru District, through the allotment letter dated 26.06.2008. The lease deed in respect of Item No.1 property was executed on 30.06.2008, while the lease deed in respect of the Item No. 2 property was executed on 28.07.2010. In so far as the allotment made by respondent No.2, the terms and conditions were regulated as agreed under the lease deed. In that background having secured the allotment of land, the petitioner commenced the process of setting up the SEZ IT Park. As required under the procedure as contemplated under The Special Economic Zones Act,2005 ('SEZ Act' for short) respondent No.1 granted the approval on 14.07.2010, which was forwarded to the Government of India, Ministry of 4 Commerce and Industries, whereafter the proposal was to be considered and the approval was to be granted by the competent authority. In the said process correspondence was exchanged and the approval was ultimately granted to the petitioner on 06.04. 2016.
3. Though time was spent in such manner relating to the approval, since according to respondent No.2 the construction activity and the completion of the project was to be done by the petitioner within the time period agreed under the lease deed, the respondents addressed letters calling upon the petitioner to complete the project. The petitioner no doubt through their reply have given the justification relating to the process taken for seeking approval and had therefore sought for extension of time. However, respondent No.4 has ultimately by the impugned order dated 26.11.2016 cancelled the lease deed and withdrew the allotment. It is in that light the petitioner being aggrieved is before this Court assailing such action of respondents No.2 to 4.
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4. Respondents No. 2 to 4 have filed their objection statement seeking to justify their action. The facts relating to the allotment and the process for setting up the SEZ IT Park is not disputed. However, the contention essentially is that the time period for implementation of the project is prescribed under the lease deed inter se between the petitioner and respondent No.2 and as such, violation of the same will entail cancellation of allotment which has accordingly been done. It is their contention that the approval from the competent authority under the SEZ Act is only for the tax benefits and the completion of the project is not dependent on the same. In that view, they seek to justify their action and seek dismissal of the petition.
5. In the backdrop of the rival contentions, I have heard Sri. G. Krishnamurthy, learned senior counsel on behalf of Sri. R. Purushotham, learned counsel for the petitioner, Sri. Dildar Shiralli, learned Government Advocate for respondent No.1, Sri. Ashok N. Nayak, learned counsel for respondents No. 2 to 4 and perused the petition papers.
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6. The fact that the parties through Clause-10 contained in the lease deed have agreed on a time frame and Clause 10 (1)(d) thereof provides the maximum time period of four years for completion of the project as contended by the learned counsel for respondents No.2 to 4 is no doubt evident. But the said clause also indicates that the opportunity to remedy the breach can be afforded in terms of the provisions contained in the KIADB Act. At the same time, what is also to be taken into consideration in the present circumstance is as to whether there was an intentional breach or as to whether the petitioner as a developer of the project was prevented by any other relevant cause and the magnitude of the project which is also an aspect that should have been kept in view by respondents No. 2 to 4 before a decision was taken to determine the lease and resume the land allotted to the petitioner.
7. Before adverting to further details, as pointed out by the learned senior counsel for the petitioner, this Court while entertaining the petition and directing 7 notice to the respondents had made reference to the fact that the order impugned is passed by the KIADB in ignorance of the order dated 06.04.2016 passed by the Central Government granting approval to the petitioner to develop the SEZ Project. A prima facie opinion was therefore expressed that the KIADB is required to take note of the same. Despite the same the representation made has been rejected by the order dated 15.09.2017 and communicated to the petitioner through the letter dated 20.09.2017 which also does not indicate application of mind to the above noted aspects. The reason assigned therein indicates that, pursuant to the notice under Section 34 -B(1) personal hearing was given on 11.03.2016 and on taking note of the efforts made by the petitioner to obtain approval from Government of India, extension was granted to implement the project within six months from 10.05.2016 which indicates that respondents No. 2 to 4 are aware of the fact that the approval of the Government of India was necessary and the effort was being made in that regard by the petitioner, yet what 8 had been done was to extend the period only by six months without reference to progress if any made and the magnitude of the project.
8. Learned counsel for the respondents No. 2 to 4 would however contend that the approval under the SEZ Act is only for the purpose of availing tax benefits and as such the civil work relating to the project should have been completed. In that regard what is to be noted is that as pointed out by the learned senior counsel, Clause 8 (a) of the lease deed provides that the allotted land is to be used only for the purpose of setting up SEZ Infrastructure for IT and BPO units. Establishing any other industry was permitted only with the approval of KIADB. Further Clause 22 provides that the terms and conditions of the lease agreement is subject to the provision contained in SEZ Act and the Rules as well.
9. In that background a reference to the provisions contained in the SEZ Act will disclose that the establishment of SEZ can be made only after complying the procedure as contemplated under Sections 3 and 4 9 thereof which provides for the approval as envisaged therein. In that circumstance when the present case was not that of an existing SEZ or existing Unit and when the land in question was allotted to the petitioner for setting up SEZ Infrastructure, certainly the petitioner as an entrepreneur or developer would be wary of commencing or implementing the project without the approval of the competent authority under the SEZ Act. In that regard the documents at Annexure-E and G series will indicate that eversince the year 2011, after the approval by respondent No. 1 in 2010 the petitioner has been pursuing the matter with the competent authority relating to the approval of the SEZ. In that regard, the approval was ultimately granted on 06.04.2016 and the notification was issued on 17.10.2016. It is during such interregnum respondents No.2 to 4 have initiated action.
10. The very fact that respondent No.2 had passed the order dated 10.05.2016 (Annexure-R2) extending time by six months and the circumstance taken note will indicate that the respondents were also aware of the 10 effort made by the petitioner to secure approval, but the issue is whether such short extension granted is with reference to the progress if any, and the extent to be completed. Therefore in that circumstance when the Government of India, Ministry of Commerce & Industry (SEZ Section) has issued the approval as recent as on 06.04.2016 and a time frame has been set thereunder to complete the project, the necessary action to consider the grant of extension subject to such terms should have been made by respondents No. 2 to 4, keeping in view the volume of the project, the advancement and progress if any after the earlier extension, instead of the drastic action to terminate the lease.
11. The learned senior counsel for the petitioner has further contended that the impugned order of cancellation dated 26.11.2016 is not sustainable also for the reason that it is passed by an incompetent officer. The circular dated 08.03.2017 produced along with the Memo dated 13.09.2017 is referred to point out that an order of cancellation cannot be issued by the Assistant Secretary as has been done in the present 11 case. On that aspect, I do not find it necessary to advert to the further details since in any event I have arrived at the conclusion that the manner of consideration made including the consideration of the representation made by respondent No.2 during the pendency of this petition is not appropriate. Hence in any event the orders passed by respondents No.2 to 4 are not sustainable and a reconsideration in the background of the circumstances noticed above and the requirement of extension of time for setting up a project of the magnitude envisaged will be necessary to be taken note and a decision be taken afresh.
12. In the result, the following ORDER
(i) The order dated 26.11.2016 (Annexure-M) and the order dated 15.09.2017 are quashed.
(ii) The respondent No.2 is directed to take note of the order dated 06.04.2017 (Annexure-J), keep in view the nature and magnitude of the project and reconsider 12 the request for extension of time on such terms and conditions, in accordance with law.
(iii) The petition stands disposed of in the above terms with no order as to costs.
Sd/-
JUDGE akc/bms