Karnataka High Court
M/S K V Forgings Pvt.Ltd., vs Karnataka Industrial Area Development ... on 7 June, 2012
Author: Huluvadi G.Ramesh
Bench: Huluvadi G Ramesh
1
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
Dated this the 7th day of June, 2012
Before
THE HON'BLE MR JUSTICE HULUVADI G RAMESH
Regular Second Appeal 1789 / 2009
Between:
M/s K V Forgings Pvt Ltd
# 198/1, Link Road, Seshadripuram
Bangalore - by its Managing Director
Sri K Vittal Rao, 77 years
S/o Krishnaji Rao Appellant
(By Sri K Suman, Adv.)
And:
1 Karnataka Industrial Area Development Board
# 14/3, 2nd Floor, Rashtrothana Parishat Bldg.
Nrupathunga Road, Bangalore
By its Executive Member
2 Executive Member
Karnataka Industrial Area Development Board
# 14/3, 2nd Floor, Rashtrothana Parishat Bldg.
Nrupathunga Road, Bangalore Respondents
(By Sri I Gopalakrishna, Adv.)
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This Appeal is filed under S.100, CPC praying to set aside the
judgment dated 15.9.2009 in RA 31/2009 by the Prl. District Judge,
Bangalore Rural District and the judgment dated 20.10.2008 in OS
154/2006 by the Civil Judge (Sr.Dvn.), Anekal.
This Appeal having been reserved for Orders on 18 th April,
2012 the Court delivered the following:
JUDGMENT
The plaintiff Company represented by its Managing Director is in second appeal against the dismissal of the suit by the Civil Judge (Sr.Dvn.), Anekal in OS 154/2006 on 20.12.2003 and confirmed in appeal before the Prl. District Judge, Bangalore Rural District in RA 31/2009 on 15.09.2009.
Plaintiff filed a suit for declaration that the order dated 13.3.1997 by the defendants / Karnataka Industrial Area Development Board is illegal, without any jurisdiction or authority and to direct the defendants to execute and register absolute sale 3 deed in respect of the suit schedule property in plaintiff's favour and for a permanent injunction. In the plaint it is stated, plaintiff, a company incorporated under the Companies Act, is in possession and enjoyment of industrial plot Nos.10 & 11 in Sy.Nos.44, 51, 50, 45, 39, 51, 64, 63 and 38 in Attibele Industrial Area, Anekal measuring 48360 sq. mts for the purpose of manufacturing and processing of alloy steel forging. On the initiative of the State Government to encourage successful kannadigas living outside the State to invest and earn in Bangalore, the Managing Director of the plaintiff one Mr K Vittal Rao was invited to start an industry in Bangalore. In this background, the said K Vittal Rao made an application to the defendant / Board for allotment of industrial land and such application was in the name and styled as M/s K V Corporation. The schedule property was allotted to K V Corporation in the year 1982 and it was put in possession of the suit property on 15.7.1982 as per the possession certificate issued by the 1 st defendant.
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It is stated, since the manufacturing activity and the turn over of alloy steel forging was considerably large, the Managing Director K Vittal Rao incorporated a company in the name and style - M/s K V Forgings (Pvt) Ltd i.e., the plaintiff and the possession of the schedule property was handed over by the defendants in favour of the plaintiff company. There is also an endorsement to that effect on the reverse of the possession certificate on 4.10.1983. The defendant thereafter, executed a lease-cum-sale agreement on 12.10.1983 in respect of the suit property in favour fo the plaintiff company and is registered in the Sub-Registrar's office at Anekal. As per the lease agreement, the lease is for a period of eleven years computed 12 th July, 1982 which comes to an end on 12th July, 1993. As per clause 7(a) of the deed, at the end of eleven years, the total amount of rend paid by the lessee/plaintiff for the period of lease shall be adjusted towards the value of the property as fixed by the lessor / 1 st defendant. Clause 7(b) stipulates, as soon as it will be convenient, the 1st defendant will fix the price of the schedule property at which 5 it will be sold to the lessee and the lessee shall pay the balance value of the property if any, after adjusting the premium and the total amount of rent paid by the lessee. If on the other hand, any sum is determined as payable by the lessor to the lessee after the adjustment, the same shall be refunded to the lessee before the date of execution of the sale deed. It is stated, plaintiff by the date of lease, had paid advance/premium of Rs.1,21,440/- and he had also been paying the annual rent fixed promptly and correctly. The cost of the schedule property has been fixed at Rs.6,04,669/- and plaintiff has made total payment of Rs.8,31,517/- on various dates and this has been reflected in the statement of accounts furnished by the Controller of Finance / Accounts Officer of the 1 st defendant Board. After obtaining the lease deed, plaintiff proceeded to put up construction as per the approved plain and has put up huge industrial sheds in the schedule property with a height of 40 - 50 feet as required for steel alloy forging manufacturing activities. It is stated, the said manufacturing activity involves huge noise pollution and the 6 laws regarding prevention/control of noise pollution and environmental protection stipulates the manufacturing activity of steel alloy forging have to be done in an industry which has considerable vacant space around it. This mandatory requirement is enforced as manufacturing activity of steel alloy forging involves production of high decibels of sound on account of the hammer striking the forging. That apart, the striking of the hammer creates heavy vibrations and the buildings, if any, will be affected by the vibrations and therefore, it is necessary that considerable vacant space be maintained in and around the industrial shed where the manufacturing activity takes place. Accordingly, the plaintiff had maintained the required vacant space. As there was some delay in the production activity which arose only account of the defendant's not providing water supply to the plaintiff's industrial unit and the KEB was not providing the required continuous power supply, the plaintiff's investments in the project was lying locked without any returns. The plaintiff company had raised loans for its project from 7 the Karnataka State Financial Corporation and for this purpose, had deposited the original lease deed and the possession certificate and other documents to KSFC towards collateral security. The plaintiff was unable to repay the loans in view of the fact that production/manufacturing activity in the factory commenced only during December 1987 though the construction of the unit was completed in October 1985. With great difficulty, the plaintiff managed to run the unit from 1987 up to 1994 and on 15.2.1994, the KSFC sized the schedule property an the industrial shed invoking the provisions of S.29 of the Sate Financial Corporations Act. Thus, the production of the unit also came to a grinding halt and plaintiff was unable to do anything till they repaid the entire loan / settle the liabilities of KSFC. However, despite financial hardship, plaintiff was able to raise loans from private sources and by selling the personal assets of the Managing Director, repaid the entire dues to the KSFC and thereafter, KSFC handed over possession of the schedule property to the plaintiff around February 1996 and plaintiff 8 is yet to recoup its financial position so as to recommence its production activity. The plaintiff has managed to pay the entire installment due to the 1st defendant towards rent/adjustable land value together with interest thereon and the plaintiff has not willfully or otherwise, violated any of the terms and conditions of allotment/lease deed dated 12.10.1983. It is stated, defendants despite being aware of these aspects, have resorted to troubling and harassing the plaintiff by unilaterally and arbitrarily demanding certain amounts towards arrears of rent and later on, by falsely stating that there is alleged violation of the terms and conditions of the lease agreement and, for the first time on 2/5.8.1994, the defendants wrote to the plaintiff falsely stating that plaintiff has constructed only the factory shed and that there was no production and called upon the plaintiff to furnish the certificate of investment issued by a Chartered Accountant. It is averred, the defendants had no authority whatsoever to issue any such letter after the expiry of lease period i.e., 12.7.1993 and the defendants were duty bound to 9 execute the sale deed by collecting the land value, if any, that remained after adjustment of final installment paid by the plaintiff. Plaintiff had already paid the land value which was fixed/valued at Rs.6,04,669/-. In stead of executing the sale deed, the defendants arbitrarily and illegally called upon the plaintiff to furnish certain details which were neither factually warranted nor legally required. The plaintiff was always ready and willing to perform its obligations under the lease deed. However, the defendants mechanically made false and inconsistent allegations against the plaintiff and they had no authority whatsoever to charge any penal interest and whatever penal interest was there has been duly paid. On 6/8.1.1997, a notice was received by the plaintiff wherein referring to clause 2(p) (1) (i) to (iii) of the lease deed, it was alleged there has been non-utilization of certain extent of area in the schedule property which tantamount to violation of the terms and conditions of the lease-cum-sale agreement and called upon the plaintiff to show cause why the defendants should not determine the land in accordance with clause 10 4 of the agreement. Even before plaintiff could reply to that notice, another letter dated 16.1.1997 calling upon the plaintiff to meet the 2nd defendant on 23.1.1997. However, plaintiff immediately replied to the said letter that they had met the 2nd defendant many times and have explained everything to him and that therefore it is not necessary for them to meet on 23 rd January. Further, a reply dated 29.1.1997 was also sent to the defendants.
However, on 15.3.1997, plaintiff received an order dated 13.3.1997 wherein without considering the cause shown by the plaintiff in their letter dated 29.1.1997, defendants had passed an order stating that the lease deed was determined and that they are going to resume the land on 1.4.1997. The order also indicated that if plaintiff was not present at the schedule property, resumption will be done in their absence and thereafter, future clause 4 and 11 of the lease agreement would become operative. Contending that the order of resumption dated 13.3.1997 is arbitrary, illegal and unjust and is 11 liable to be declared as null and void and that the defendants are duty bound to execute the sale deed, plaintiffs filed the suit.
The defendants contested the matter. They have filed written statement denying the plaint averments. It is stated, the suit is liable to be rejected as the same is not properly valued. They have not agreed to sell the suit property at the price of Rs.6,04,669/- and the agreement dated 12.10.1983 relied on by the plaintiff does not state the price at which the suit property would be sold. In fact, clause 7(b) of the agreement states that the price at which the suit property would be sold by the defendants would be determined by the defendants and therefore, the sum of Rs.6,04,669/- is not the consideration for the contract of sale. As such, the valuation of the suit under S.40(a) of the Karnataka Court Fees Act is incorrect. The actual extent of land in occupation of the plaintiff is not 48360 sq.mtrs but 52,093 sq.mts. Mere expiry of eleven years period does not confer any right on the plaintiff to demand execution of sale 12 deed. After thorough scrutiny by the defendants, the plaintiff was found due and therefore, notices were issued. Further, as per the project report and application form submitted by the plaintiff at the time of allotment, plaintiff was to utilize an extent of 47,600 sq.mtrs for its project. However, they had utilised only an extent of 1752.86 sq.mtrs as on 27.8.1994 and this is contrary to clause 2(p), 2(i) &
(iii) of the agreement and therefore, the show cause notice was issued. It is contended, unless the plaintiff utilises the plot as per the representation made in the application form, simply stating that the project is implement, lease has expired, baseless demands are made, etc., would not made its case any better. In fact, the final price as contemplated under clause 7(b) has never been communicated to the plaintiff and therefore, the question of plaintiff being entitled to execution of the sale deed does not arise. It is true that the resumption order dated 13.3.1997 was issued. The said order clearly states, the reasons assigned by the plaintiff for non-utilization is not acceptable and convincing. After the expiry of the lease, 13 transactions between the plaintiff and defendants is one of sale agreement and it is always open to the defendants to refuse execution of sale deed and take possession of the property, according to law. It is stated, action would be taken in accordance with S.34 B of the Karnataka Industrial Areas Development Act, 1966 and that the defendants have the necessary power under the Act to supervise, monitor and promote the growth of industries in the State and the said power includes resumption of land for failure to comply with the terms and conditions of allotment. Thus, contending that the plaintiff is not entitled for any relief, defendants sought for dismissal of the suit with exemplary costs.
Based on the pleadings the trial court raised as many as seven issues. After hearing the arguments, while answering issues 1, 2, 4 to 6 in the negative, holding that the defendants prove that plaintiff has violated the terms and conditions of the lease agreement and is liable to be evicted from the schedule property by virtue of the 14 expiry of lease, the trial court dismissed the suit. Aggrieved by the said order, plaintiff went up in appeal before the Prl. District Judge, Bangalore Rural in RA 31/2009. By his order dated 15 th September, 2009, the Prl. District Judge, while answering the points raised for consideration, dismissed the appeal. Hence, this second appeal.
Heard the counsel representing the parties.
On 13.1.2010, this Court raised the following substantial questions of law for consideration ::: The trial court having found that the term of lease had expired without the defendant having raised any question of violation of terms of lease-cum-sale agreement, whether the trial court was justified in negating the plaintiff's suit and whether the first appellate court was justified in affirming the finding of the trial court.
According to the appellant's counsel, as per Ex.P2, the price 15 is fixed as per clause (2). At the end of lease period i.e., the lease expires on 22.2.1992, the complete figure indicated is about Rs.8,31,517/- and that has been paid. Several correspondence depict that after the expiry of the lease, automatically the appellant is entitled for execution of the sale deed and several documents at Ex.P8 and P12 are the correspondence in this regard and there is no violation or breach of conditions of lease.
According to the appellant's counsel, in compliance with the Pollution Control Board's specification, space is left. However, according to the respondents, after allotment space has not been utilised and that has come in the way of continuation of lease and confirmation of the lease cum sale. Thus, the stand of the respondent-authority is contrary to the various regulations that prevented the appellant from developing the property which was leased to the entire extent. Referring to clause 7(b), respondent's counsel, on the contrary, has argued that the sale price is not fixed 16 and there is violation of the lease condition. The lessee has not utilised the full space as per the terms and conditions of lease and the lessor while fixing the price of the demised premises at which it will be sold to the lessee would communicate it to the lessee. The decision of the lessor in this regard will be final and binding on the lessee. The lessee shall pay the balance of the value of the property if any, after adjusting the premium.
In the reply to the letter dated 8.1.1997, it is intimated to the respondent authority that the entire amount due has been paid to them and also sought for execution of the sale deed. It is also specifically stated they have no right whatsoever to enter upon the unutilised portion of the schedule land and there is no unutilised portion and that they are in possession of the land in question for more than fourteen years and they became the owners of the suit land and the respondent has no right making allegation of non- utilization of the land after the lease period is over. The respondent is 17 once again imposing a condition which the appellant is not ready to comply.
Further, in the alternative, it is argued as per Ex.D4 & Ex.P8, amount paid is about Rs.8,31,517/- and the order dated 6.1.1997 at Ex.P17 is not by the Executive Member and also it is not preceded by any resolution and no action had been taken during the lease period. Subsequently the defendant is disabled from taking any action and also it is agreed that appellant is ready to pay Rs.75 lakhs + 6 lakhs towards land cost and penalty and the difficulty faced by the appellant is, though the lease is of the year 1982, production commenced only in October 1997. Meanwhile, there is financial crisis and KSFC had taken over the premises in 1984 and later it was taken back during 1996 and due to shortage of water and power, second phase was not completed and without notice the respondents have taken possession and accordingly, he has sought for allowing the appeal. In support of his argument, appellant's counsel has 18 relied upon the following decisions::
AIR 1971 SC 1071 - Century Spinning & Mfg. Co. Vs Ullasnagar Municipality AIR 1986 SC 806 - Union of India Vs Godfrey Philips India Ltd 1984 (1) SCC 125 - Mansaram Vs S P Pathak 2000(1) SCC 434 - Eshwardas Jain Vs Sohan Lal ILR 2006 KAR 697 - Manjanna Vs R Shivanna ILR 2009 KAR 60 - Nanjappa Vs Nanjappa 1979(4) SCC 393 - Prakash Chandra Vs Angadlal ILR 2003 KAR 1622 - M/s Prakash Dal Mill Vs Govt. of Karnataka Counsel for the respondents submitted, in a concurrent finding both the courts below have declined the prayer of the appellant/plaintiff which order does not call for interference. In support of his argument, counsel has relied upon the following decisions::
2005 (4) KCCR SN 288 - M/s Sage Enterprises Vs KIADB & Anr. 2006 (3) Kar.LJ 484 - Serendipity Apparels (P) Ltd., Bangalore Vs 19 KIADB, Bangalore ILR 2007 KAR 1362 - M/s Electro Anil Ltd Vs State of Karnataka & Ors In the case of M/s Sage Enterprises, cited above, this Court has observed, for non-utilisation of the land allotted and failure to carry out construction activity in the plot within the time frame prescribed and failure to perform the obligations under the lease, the respondent is entitled to resume the land/plot and for breach of lease conditions.
In the case of Serendipity Apparels, cited supra, it is held on failure of the appellant to commence production and breach of conditions, it cannot be said that respondent has committed any illegality in cancellation of the allotment and that for shortage of power or water, the respondent is not responsible. 20
In the case of Electro Anil Ltd., cited above, this Court has held, referring to S.34 B of the KIADB Act, 2000 that, since there is violation of conditions of allotment, after giving sufficient opportunity to the petitioner, when the respondent authority has determined the lease and proceeded to resume the land, the same cannot be faulted with.
The bone of contention as per the appellant is, the land in question has been utilized as per the specification of the authorities and also the price has been fixed as per the lease-cum-sale agreement and he has paid nearly Rs.8,31,517/-in excess of the amount which is to be payable towards land cost and also the rental. There is also no violation of the conditions and accordingly, counsel has sought for a direction to the respondent authority to execute the sale deed.
Per contra, it is argued, the actual extent of land in 21 occupation of the petitioner, as per the respondent, is 52,093 sq.mtrs. Further according to the respondent, as per the project report at the time of filing the application, plaintiff has agreed to utilize an extent of 47,600 sq.mtrs annd it has utilized 1792.86 sq.mtrs as on 27.8.1994. This according to the respondent, is in violation of the clauses of the agreement. Further, they have also not agreed to sell the suit property for Rs.6,04,669/-. As per clause 7(b) of the agreement, the suit property would be sold by the defendants and price determined by the defendants would be indicated and the sum of Rs.6,08,669/- is not the consideration.
In so far as utilization of the land in concerned, throughout the case of the plaintiff is, since various authorities have posed stringent conditions to leave sufficient set back having regard to the nature of manufacturing activity involved, the same has been complied with. According to them, the manufacturing activity of steel alloy forging involves huge noise and production of high 22 decibles of sound on account of the hammer striking the forging and it is necessary and mandatory that considerable vacant space be maintained in and around the industrial shed if the manufacturing activity takes place. As such, according to the plaintiff, he had maintained the required vacant space.
It appears, all is not well with both the plaintiff and the defendant. For non-utilization of the land, reasons assigned by the respondent is, stipulation has been imposed by various authorities. It is a matter of concern to be assertained in correspondence between the plaintiff and defendants. Further, there appears to be some non- compliance of the terms and conditions but, defendant is shown to have not raised any objection regarding this. As per clause 7(b), even as per the defendants themselves, price of the land would be indicated at the time of completion of the lease period. However, according to the plaintiff, it is a lease cum sale , they have paid sufficient amount and it is for the defendants to execute the sale 23 deed.
Mere not raising objections at the relevant time regarding non-compliance, though does not take away the right of the defendant to exercise its right, plaintiff has also expressed its/his difficult as to non-utilization of the land and various other aspects.
It appears certain explanation of the plaintiff ought to have been considered by the defendant with regard to non-utilization of the land as per specifications. Further, as regards the amount/cost of the land is concerned, might be that it would be determined after the lease period is over as such, it is kept open to be resolved between the parties. While the order passed by the appellate court is set aside, matter is remitted to the lower appellate court to find out the possibility of any settlement between the parties; as to the right to be determined for the purpose of enabling the plaintiff to purchase the property on completion of the lease term; to see that if there 24 isany violation or breach of any terms and conditions, that could be amicably settled ; the land in question has not been utilized for the reaons assigned and if it is acceptable, the same could be accepted. In the event, any price is quoted by the defendant as per clause 7(b) and if the plaintiffs are agreeable, the same be considered to settle the matter, according to law.
In that view of the matter, while answering the substantial question of law accordingly, it is held that the lower appellate court ought to have taken into consideration the above aspects in stead of straight away dismissing the appeal confirming the order of the trial court.
Appeal is allowed. Parties to bear their own costs.
Sd/-
Judge an