Karnataka High Court
Karanataka Industrial Area ... vs M/S Sangamesh Sugars Limited on 4 April, 2025
Author: S G Pandit
Bench: S G Pandit
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NC: 2025:KHC-D:5999-DB
WA No. 100027 of 2022
IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH
DATED THIS THE 4TH DAY OF APRIL, 2025
PRESENT
THE HON'BLE MR. JUSTICE S G PANDIT
AND
THE HON'BLE MR. JUSTICE C.M. POONACHA
WRIT APPEAL NO.100027 OF 2022 (LA-KIADB)
BETWEEN:
1. KARANATAKA INDUSTRIAL AREA DEVELOPMENT
AUTHORITY REPRESENTED BY ITS
CHIEF EXECUTIVE OFFICER AND
EXECUTIVE MEMBER, OFFICE @ # 49,
4 AND 5 FLOOR (EAST WING),
KHANIJA BHAVAN, RACE COURSE ROAD,
BENGALURU-560 001.
2. THE SPECIAL LAND ACQUISITION OFFICER,
KARNATAKA INDUSTRIAL AREA
DEVELOPMENT AUTHORITY,
33/A, LAKAMANAHALLI INDUSTRIAL AREA,
POONA BENGALURU NATIONAL HIGHWAY,
DHARWAD-580 004.
Digitally signed ...APPELLANTS
by V N BADIGER
Location: HIGH (BY SRI BASAVARAJ SABARAD, SENIOR ADVOCATE FOR
COURT OF
KARNATAKA SMT. SHARMILA M.PATIL, ADVOCATE)
AND:
1. M/S. SANGAMESH SUGARS LIMITED,
A COMPANY REGISTERED UNDER
THE COMPANIES ACT, 1956 HAVING ITS
REGISTERED OFFICE AT PK NAGANUR VILLAGE,
TALUK. ATHANI-591240, DISTRICT. BELAGAVI,
REPRESENTED BY ITS DIRECTOR
MR. SHIVAKUMAR S/O. KASHINATH SAVADI,
AGE. 35 YEARS, OCC. BUSINESS,
R/O. NAGANUR PK.
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NC: 2025:KHC-D:5999-DB
WA No. 100027 of 2022
2. THE STATE OF KARNATAKA REPRESENTED
BY THE SECRETARY TO GOVERNMENT,
GOVERNMENT OF KARNATAKA,
DEPARTMENT OF COMMERCE AND INDUSTRIES,
VIKAS SOUDHA, BENGALURU-560 001.
3. KARNATAKA UDYOG MITRA,
3RD FLOOR, KHANIJA BHAVAN (EAST WING),
NO.49, RACE COURSE ROAD,
BENGALURU-560001,
REPRESENTED BY
ITS MANAGING DIRECTOR.
...RESPONDENTS
(BY SRI PRASHANT F.GOUDAR, ADVOCATE FOR R1;
SRI V.S. KALASURMATH, ADDL. GOVERNMENT ADV. FOR R2 AND R3)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT, 1961, PRAYING TO, SET ASIDE THE
SINGLE JUDGE'S ORDER DATED 15.09.2021 PASSED IN W.P.
NO.146875/2020, IN THE INTEREST OF JUSTICE AND EQUITY.
THIS WRIT APPEAL HAVING BEEN HEARD AND RESERVED ON
07.03.2025 AND COMING ON FOR PRONOUNCEMENT OF JUDGMENT
THIS DAY, C.M. POONACHA, J., DELIVERED THE FOLLOWING:
CORAM: THE HON'BLE MR. JUSTICE S G PANDIT
AND
THE HON'BLE MR. JUSTICE C.M. POONACHA
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NC: 2025:KHC-D:5999-DB
WA No. 100027 of 2022
CAV JUDGMENT
(PER: THE HON'BLE MR. JUSTICE C.M. POONACHA) The present intra-Court appeal is filed under Section 4 of the Karnataka High Court Act, 19611, by the appellant No.1/Karnataka Industrial Area Development Authority, challenging the order dated 15.09.2021, passed in W.P No.146875/2020, by the learned Single Judge, whereunder the learned Single Judge has allowed the writ petition filed by respondent No.1/petitioner.
2. The parties will be referred to as per their ranking before the Tribunal, for the sake of convenience.
3. The factual matrix in brief leading to the present appeal are that the petitioner intended to setup a sugar factory at Devlapurhatti village, Raibhag taluk, Belagavi district and pursuant to the request made by the petitioner, the Government of Karnataka2, vide order dated 29.04.2010, granted in principle approval to the project proposal of the petitioner company to setup a 2500 TCD Sugar plant with 12 MW Cogen at Devlapurhatti village of Raibag taluk in Belagavi 1 Hereinafter referred to as the ' Act of 1961' 2 Hereinafter referred to as the 'GOK' -4- NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 district. The G.O.K undertook to acquire an extent of 158 acres of land situated in Devlapurhatti village and allotted the same to petitioner through Karnataka Industrial Areas Development Board3.
4. The petitioner also obtained an Industrial Entrepreneur Memorandum4 as required under the Sugarcane (control) (Amendment) Order 2006 and also furnished a performance bank guarantee of ₹1 crore to the Chief Director (Sugars), New Delhi on 23.07.2010, in pursuance of which, the Union Secretary, passed an order dated 15.12.2010, taking the proposed sugar factory of petitioner on record as a new sugar factory.
5. On 02.05.2012, the petitioner entered into an agreement with the KIADB for the purpose of making available land an extent of 158.06 acres situated across several survey numbers in Devlapurhatti village, Raibhag Taluk, Belagavi district, for the purpose of setting up of the said sugar factory. As per the terms and conditions of the said agreement, the petitioner deposited a sum of ₹1,39,06,200/- on 20.04.2012 3 Hereinafter referred to as the 'KIADB' 4 Hereinafter referred to as the 'IEM' -5- NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 being 40% of the tentative amount quoted and intimated the same to the KIADB vide letter dated 23.04.2012. As per the terms and conditions of the agreement, the KIADB was required to take necessary steps to acquire the said land and thereafter, transfer its right, title and interest and possession in favour of petitioner and issue allotment letter.
6. The IEM dated 06.07.2010 was valid only for a period of two years and petitioner sought for extension of the same. Vide order dated 23.07.2012, the IEM was extended by a period of six months and vide order dated 15.01.2013, it was further extended up to 05.07.2013. The petitioner was informed that in the event the petitioner does not take effective steps by 05.07.2013 and commence commercial production on or before 05.07.2015, the performance guarantee furnished by the petitioner would stand forfeited.
7. Since the KIADB did not take requisite steps to acquire the land and handover possession, the petitioner submitted a representation dated 03.09.2014, to the Chief Director (Sugar), New Delhi, requesting for exclusion of time taken for completing the acquisition of land, while computing -6- NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 the time limit for implementation of the IEM. The petitioner also issued a letter dated 29.01.2015 to the KIADB requesting them to expedite the process of land acquisition. On 04.02.2015, the Directorate of Sugar, issued a show cause notice to the petitioner as to why action should not be taken against the petitioner for non-implementing the IEM, to which, the petitioner sent a detailed reply on 06.04.2015.
8. The Special Land Acquisition Officer5 of the KIADB addressed a communication dated 20.08.2015 to the petitioner intimating that the land owners/farmers of an extent of 98 acres 37 guntas of land sought for by the petitioner are objecting to the proposed land acquisition and called upon the petitioner to ascertain and opine as to whether the said land was essential for the project. The petitioner, vide reply dated 21.07.2016, intimated the KIADB that the land was very much essential for the project of petitioner and requested the KIADB to complete acquisition process as expeditiously as possible. Since the KIADB did not take any steps to acquire the land or handover the same to petitioner, left with no option, a communication dated 22.06.2018, was addressed to the Chief 5 Hereinafter referred to as the 'SLAO' -7- NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 Executive Officer6 of the KIADB, seeking for refund of the amount of ₹1,39,06,200/- together with interest due to default and breach committed by the KIADB. The petitioner also issued communications dated 12.11.2018 and 08.01.2019, to the Directorate of Sugar, requesting them to return the Performance Bank Guarantee furnished by the petitioner. The State Government, Department of Industries and Commerce, vide order dated 30.01.2019, approved the request of petitioner to drop the project proposal. Due to non- implementation of the project, the Directorate of Sugar confiscated the Bank Guarantee furnished by the petitioner, consequent to which, W.P No.108330-31/2019 was filed by the petitioner, which was disposed of by this Court on 10.02.2020. The petitioner addressed representations dated 05.02.2019 and 21.06.2019 to the KIADB, seeking for refund of the entire amount of ₹1,39,06,200/- together with interest at 9% per annum. The KIADB refunded a sum of ₹1,11,24,960/- to the petitioner by deducting ₹27,81,240/-. The petitioner addressed a detailed representation dated 16.10.2019 to the KIADB calling upon them to pay balance amount together with 6 Hereinafter referred to as the 'CEO' -8- NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 interest. The KIADB, vide endorsement/communication dated 27.04.2020, refused to pay any further sum. Being aggrieved, the petitioner preferred W.P No.146875/2020 before this Court for a writ of mandamus directing the respondents No.1 and 2/KIADB to make payment of ₹1,19,59,332/- by considering the representations of the petitioner dated 05.02.2019, 21.06.2019 and 16.10.2019.
9. The KIADB opposed the writ petition, contending, inter alia, that by virtue of Clause-8 of the agreement dated 02.05.2011, the KIADB was entitled to forfeit 25% of the amount deposited by the petitioner, if the petitioner abandons the project before issuance of final notification. It was further contended that by virtue of circular dated 31.08.2015, the KIADB was entitled to forfeit the amount deposited by the petitioner.
10. The learned Single Judge, after noticing the material on record, held that the petitioner was always ready and willing to perform its part of the contract and there was no breach or default committed by the petitioner in performing his part of contract. That the KIADB did not take any steps to -9- NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 complete acquisition proceedings and handover the lands to the petitioner and it was the KIADB, which committed breach and default in performing obligations under the agreement dated 03.05.2012. Hence, it was held that the KIADB was not entitled to forfeit/deduct ₹27,81,240/- being 25% of the amount deposited by the petitioner. Hence, the learned Single Judge allowed the writ petition and passed the following order:
"i. The petition is hereby allowed.
ii. The impugned endorsement at Annexure-AK dated 27.04.2020 addressed by the respondent No.2 to the petitioner is hereby quashed.
iii. Respondent No.2/KIDB is directed to refund to the petitioner a sum of ₹1,19,59,332/- together with interest at 9% per annum on the said sum from 16.10.2019 till the date of payment/realization."
11. Being aggrieved, the KIADB has preferred the present appeal.
12. Learned Senior Counsel Sri.Basavaraj Sabarad appearing along with learned counsel Smt.Sharmila Patil for the appellants/KIADB contends that having regard to the circular dated 31.08.2015 and the agreement dated 02.05.2011, the KIADB was entitled to forfeit the amounts which it has
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NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 accordingly done. It is further contended that the learned Single Judge erred in holding that the KIADB was entitled to refund the entire sum of ₹1,19,59,332/- together with interest at 9% per annum on the said sum from 16.10.2019 till the date of payment. It is further contended that various disputed questions of fact has been adjudicated by the learned Single Judge and that the writ petitioner was required to initiate appropriate proceedings in the Civil Court for the purpose of claiming refund of any amount that it may contend that it is entitled to. Hence, the learned counsel seeks for allowing of the above appeal, setting aside the order passed by the learned Single Judge and for dismissing of the writ petition.
13. Per contra, learned counsel Sri.Prashant.F.Goudar, appearing for the respondent No.1/petitioner, justifies the order passed by the learned Single Judge and submits that apart from the KIADB issuing preliminary notification under Section 28(1) of the Karnataka Industrial Areas Development Act, 19667, the KIADB has not taken any further steps for completion of acquisition process. It is further contended that the learned Single Judge was justified in recording the finding 7 Hereinafter referred to as the 'KIAD Act 1966'
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NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 that the KIADB was solely responsible in causing the delay and it was further justified in ordering for refund of the amount together with interest.
14. The submissions of both the learned counsels have been considered and material on record have been perused. The question that arises for consideration is 'whether the order passed by the learned Single Judge is erroneous and liable to be interfered with?'
15. The relevant factual matrix is undisputed in as much as the petitioner and the KIADB entered into between an agreement dated 02.05.2011, whereunder the KIADB consented to cause the provisions of the KIAD Act 1966, to be put in force to acquire and make available the land as sought for by the petitioner. It is further undisputed that the petitioner deposited a sum of ₹1,39,06,200/- being 40% of the cost of the land including service charges on 20.04.2012. The remaining 60% of the cost of land (₹2,08,59,300/-) was required to be paid by the petitioner, before the draft final notification under Section 28(4) of the KIAD Act, was sent by the KIADB to the Government within 15 days from the date of
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NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 notification of the board. The petitioner was also required to pay 10% as service charge of the board, in addition to the cost of land. It is further undisputed that consequent to the agreement entered into between the petitioner and the KIADB, the preliminary notification under Section 28(1) of the KIAD Act was issued on 11.06.2012.
16. It is relevant to note that the petitioner has also obtained a necessary approval under the Sugarcane (control) (Amendment) Order 2006 for setting up of sugar factory. The said permission was periodically been renewed. The SLAO, vide letter dated 23.05.2016 (Annexure-R to the writ petition), intimated the petitioner that there is opposition from the farmers with respect to 98 acres 37 guntas of land situated in Devlapurhatti village, Raibhag taluk, Belagavi district and sought for opinion of the petitioner as to whether the land was required for the project being setup by the company. The same was replied, vide letter dated 21.07.2016 (Annexure-S to the writ petition), wherein the petitioner intimated that the said lands are very much essential for the project of petitioner and it was requested that objections of land owners be heard and the acquisition process be completed at the earliest, so as to enable
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NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 commencement of construction of the sugar project and implementation of the IEM.
17. The petitioner has placed on record various communications made to the KIADB with regard to the acquisition of land as well as communication to the Director of Sugar with regard to implementation of the IEM. Vide letter dated 22.06.2018, written by the petitioner to the CEO of KIADB, it was intimated that the notifications under Sections 1(3), 3(1) and 28(1) of the KIAD Act, 1966 was issued by the State Government on 11.06.2012 and thereafter, despite several reminders, the final notification under Section 28(4) of the KIAD Act, 1966 has not been issued. It was further intimated that the time limit for implementing the IEM has expired, resulting in de-recognition of the IEM of the petitioner and hence, the very purpose of which, the acquisition of land by the KIADB does not survive. Hence, the petitioner sought for refund of the sum of ₹1,39,06,200/- together with interest at 9% per annum. The petitioner also addressed letter to the Managing Director, Karnataka Udyoga Mitra, Bengaluru, for withdrawal of the approval of project proposal and to drop the acquisition process. The G.O.K, vide G.O. dated 30.01.2019,
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NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 approved the request of petitioner to drop the project proposal accorded vide G.O. dated 29.04.2010. The KIADB refunded a sum of ₹1,11,24,960/- on 03.08.2019. Subsequently, the petitioner, vide letter dated 16.10.2019 (Annexure-AJ to the writ petition), sought for the balance amount of ₹1,19,59,332/. The said request of the petitioner was rejected.
18. It is forthcoming from the aforementioned factual matrix that although the notifications under Sections 1(3), 3(1) and the preliminary notification under Section 28(1) of the KIAD Act, 1966, was issued on 11.06.2012, there was no progress in the matter of completing the acquisition process and the KIADB has also not issued the final notification under Section 28(4) of the KIAD Act, 1966. In this context, it is relevant to note the agreement dated 02.05.2011, entered into between the petitioner and the KIADB with regard to acquisition of land in terms of the requirement of petitioner. The Clause 8 and 9 of the said agreement is extracted here under for ready reference:
"8. 25% of the cost of the said land paid by the Company to the Board shall be forfeited to the Board, in the event Company abandons acquisition
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NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 during the course of acquisition proceedings and before the issue of final declaration under Section 28(4) of the said Act. In addition to this, the Company shall also liable to pay compensation for damages sustained by the land owners if any to the property during taking levels, to dig or bore into the sub-soil, to do all other acts necessary to ascertain whether the land is adapted for such purpose, to set out boundaries of the land, to mark such levels, boundaries and line by placing marks and cutting nenches etc.
9. 100% of the cost of the said land paid by the Company to the Board shall be forfeited to the Board in the event the Company abandons the acquisition after the issue of final notification under Section 28(4) of the said Act."
(emphasis supplied)
19. The KIADB has placed reliance on the circular dated 31.08.2015, with regard to its entitlement to forfeit the amount. Clause-II of the said circular pertains to acquisition and allotment of lands in favour of Single Unit Complexes8. The Clause-II (a to e) of the same reads as under:
"a) If the acquisition proceedings are dropped in case of SUCs due to omissions and commissions of the Board/Govt., including delay in issue of 8 Hereinafter referred to as the 'SUCs'
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NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 notification u/s 28(1) or 28(4) of the KIAD Act, the entire amount or land cost deposited by the company is to be refunded.
b) If the acquisition proceedings are dropped due to various reasons at the instance of the beneficiary company before issue of notification u/s 28(1), the forfeiture is limited to 10% of the amount paid towards the cost of acquisition.
c) If the acquisition proceedings are dropped at the instance of beneficiary company after issue of preliminary notification under Section 28(1) and before issue of final Notification under Sec.28(4) of the KIAD Act, 20% of the amount shall be forfeited out of the amount remitted by the company towards 40% cost of acquisition.
d) If the acquisition proceedings are dropped due to various reasons at the instance of the beneficiary company after issue of final notification u/s 28(4), the forfeiture is limited to 20% of the amount paid towards the cost of acquisition. But the balance 80% amount remitted by the company could be refunded only after allotment of the said land to any other industries and on realization of the cost of land.
e) If any change is required in individual case, such proposals be examined based on the merits of each case and grounds of equity and such proposals shall be placed before the Board for consideration."
(emphasis supplied)
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NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022
20. It is forthcoming that as per Clause-8 of the agreement dated 02.05.2011, the KIADB was to forfeit 25% of the cost of land in the event the company abandons the acquisition after issuance of the preliminary notification under Section 28(1) of the KIAD Act and before the issuance of final notification under Section 28(4) of the KIAD Act, 1966. As per Clause-II(a) of the circular dated 31.08.2015, if the acquisition proceedings are dropped due to omissions and commissions of the board/Govt., including delay in the issuance of notification under Sections 28(1) or 28(4) of the KIAD Act, 1966, the entire amount of land cost deposited by the company is to be refunded.
21. In the present case, although the notifications under Sections 3(1), 1(3) and the preliminary notification under Section 28(1) under the KIAD Act, 1966, was issued on 11.06.2012, despite the laps of nearly six years, final notifications were not issued. Thereafter, the petitioner, vide letter dated 22.06.2018 (Annexure-W to the writ petition), intimated the KIADB that due to the enormous delay, the purpose of acquisition of lands by the KIADB does not survive and hence, sought for refund of ₹1,39,06,200/- together with
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NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 interest at the rate of 9% per annum. The KIADB refunded a sum of ₹1,11,24,960/- on 03.08.2019.
22. It is clear from the aforementioned that the petitioner sought for refund of the amount deposited only due to the delay of KIADB in completing the acquisition process. Under Clause-8 of the agreement dated 02.05.2011, The KIADB was entitled to forfeit 25% of the cost, in the event, the company abandons acquisition before issuance of final notification to be issued under Section 21(4) of the KIAD Act, 1966. Further, even under Clause-II(a) of the circular dated 31.08.2015, the KIADB was required to refund the entire amount of the land cost deposited by the company due to omissions and commissions of the board/govt., including delay in issuance of the notification/s under Sections 28(1) or 28(4) of the KIAD Act, 1966.
23. In the present case, the company has sought for refund of amount deposited by it vide the letter dated 22.06.2018, only due to the delay in issuance of the final notification under Section 28(4) of the KIAD Act, 1966 and delay in completing the acquisition process. Clause-II(c) of the
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NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 circular dated 31.08.2015, entitles the KIADB to forfeit/deduct 20% of the amount, in the event, the acquisition proceedings are dropped at the instance of company after issuance of the preliminary notification under Section 28(1) of the KIAD Act, 1966 and before issuance of the final notification under Section 28(4) of the KIAD Act, 1966. As per Clause-8 of the agreement dated 02.05.2011, the board/govt., was entitled to forfeit/deduct 25% of the land cost, in the event, the company abandons the acquisition before issuance of the final notification under Section 28(4) of the KIAD Act, 1966. Under the facts and circumstances of the present case, the KIDB is not entitled to rely upon either paragraph No.II(c) of the circular dated 31.08.2015 or Clause-8 of the agreement dated 02.05.2011, in view of the admitted position that the petitioner has sought for refund of the amount only due to delay in the KIADB completing the acquisition process.
24. The learned Single Judge was justified in recording a finding that it cannot be said that the petitioner has abandoned the project. However, the learned Single Judge has directed the KIADB to refund the petitioner a sum of ₹1,19,59,332/- together with interest at the rate of 9% per
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NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022 annum from 16.10.2019 till the date of payment/realization. The petitioner, vide the communication dated 16.10.2019 (Annexure-AJ to the writ petition), has sought refund of the sum of ₹1,19,59,332/-. While arriving at the said amount, the petitioner has claimed interest at 9% per annum from the date of deposit i.e., 20.04.2012 till 03.08.2019 i.e., for a period of seven years and four months. The petitioner is not entitled for interest during the said period, since admittedly various steps were being taken by the KIADB (although delayed) with regard to the acquisition process. Hence, it is just and proper that the petitioner be entitled to interest at the rate of 9% per annum from the date on which the KIADB has refused to refund the entire amount and has refunded only a part of the amount. It is just and proper that the KIADB will be directed to pay interest on the amount forfeited by it i.e., the sum of (₹1,39,06,200 - ₹1,11,24,960) ₹27,81,240/-. Hence, question framed for consideration is answered in the partly affirmative.
25. In view of the aforementioned the following:
ORDER
a) The appeal is partly allowed;
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NC: 2025:KHC-D:5999-DB WA No. 100027 of 2022
b) The order dated 15.09.2021, passed in W.P No.146875/2020, by the learned Single Judge, is modified to the extent of directing the KIADB to refund the petitioner a sum of ₹27,81,240/- together with interest at 9% per annum from 03.08.2019 up to the date of payment;
c) No order as to cost.
Sd/-
(S G PANDIT) JUDGE Sd/-
(C.M. POONACHA) JUDGE PMP List No.: 1 Sl No.: 2